<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 8, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PAYSYS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
FLORIDA 7371 59-2061461
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
------------------------
<TABLE>
<S> <C>
900 WINDERLEY PLACE WILLIAM J. PEARSON
THE SPECTRUM BUILDING, SUITE 200 CHIEF FINANCIAL OFFICER
MAITLAND, FLORIDA 32751 900 WINDERLEY PLACE
(407) 660-0343 THE SPECTRUM BUILDING, SUITE 200
MAITLAND, FLORIDA 32751
(407) 660-0343
(Address, including zip code, and telephone number, (Name, address, including zip code, and telephone
including area code, of registrant's principal number,
executive offices) including area code, of agent for service)
</TABLE>
------------------------
COPIES TO:
<TABLE>
<S> <C>
WILLIAM H. AVERY, ESQ.
DENNIS J. STOCKWELL, ESQ. ALSTON & BIRD LLP
KILPATRICK STOCKTON LLP ONE ATLANTIC CENTER
1100 PEACHTREE STREET 1201 WEST PEACHTREE STREET
ATLANTA, GEORGIA 30309 ATLANTA, GEORGIA 30309-3424
(404) 815-6500 (404) 881-7000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities on this Form are being offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, as
amended (the "Securities Act") check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE
SECURITIES TO BE REGISTERED OFFERING PRICE(1)(2) AMOUNT OF REGISTRATION FEE
<S> <C> <C>
Common Stock, $.01 par value $49,833,328 $15,101
</TABLE>
(1) Includes 500,000 shares that may be sold by the Company and a Selling
Shareholder upon exercise of the over-allotment option granted to the
Underwriters.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act.
THE COMPANY HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE COMPANY SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 8, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES, IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
SUCH STATE.
<PAGE>
3,333,333 SHARES
[LOGO]
COMMON STOCK
OF THE 3,333,333 SHARES OF COMMON STOCK OFFERED HEREBY, 2,083,333 SHARES ARE
BEING SOLD BY PAYSYS INTERNATIONAL, INC. (THE "COMPANY") AND 1,250,000 SHARES
ARE BEING SOLD BY THE SELLING SHAREHOLDERS. SEE "PRINCIPAL AND SELLING
SHAREHOLDERS." THE COMPANY WILL NOT RECEIVE ANY PROCEEDS FROM THE SALE OF SHARES
BY THE SELLING SHAREHOLDERS.
PRIOR TO THE OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE COMMON STOCK
OF THE COMPANY. IT IS CURRENTLY ESTIMATED THAT THE INITIAL PUBLIC OFFERING PRICE
WILL BE BETWEEN $11.00 AND $13.00 PER SHARE. SEE "UNDERWRITING" FOR A DISCUSSION
OF THE FACTORS CONSIDERED IN DETERMINING THE INITIAL PUBLIC OFFERING PRICE.
APPLICATION WILL BE MADE FOR THE LISTING OF THE COMMON STOCK ON THE NASDAQ
NATIONAL MARKET UNDER THE SYMBOL "PAYS."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNT AND PROCEEDS TO PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2) SELLING SHAREHOLDERS
<S> <C> <C> <C> <C>
PER SHARE................................. $ $ $ $
TOTAL (3)................................. $ $ $ $
</TABLE>
(1) THE COMPANY AND THE SELLING SHAREHOLDERS HAVE AGREED TO INDEMNIFY THE
UNDERWRITERS AS STATED HEREIN (THE "UNDERWRITERS") AGAINST CERTAIN
LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT. SEE
"UNDERWRITING."
(2) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY, ESTIMATED AT $825,000.
(3) THE COMPANY AND ONE OF THE SELLING SHAREHOLDERS HAVE GRANTED TO THE
UNDERWRITERS A THIRTY-DAY OPTION TO PURCHASE UP TO 500,000 ADDITIONAL SHARES
OF COMMON STOCK SOLELY TO COVER OVER-ALLOTMENTS, IF ANY. IF SUCH OPTION IS
EXERCISED IN FULL, THE TOTAL PRICE TO PUBLIC, UNDERWRITING DISCOUNTS AND
COMMISSIONS, PROCEEDS TO COMPANY AND PROCEEDS TO SELLING SHAREHOLDERS WILL
BE $ , $ , $ AND $ , RESPECTIVELY. SEE
"UNDERWRITING."
THE COMMON STOCK IS OFFERED BY THE UNDERWRITERS AS STATED HEREIN, SUBJECT TO
RECEIPT AND ACCEPTANCE BY THEM AND SUBJECT TO THEIR RIGHT TO REJECT ANY ORDER IN
WHOLE OR IN PART. IT IS EXPECTED THAT DELIVERY OF THE SHARES WILL BE MADE
THROUGH THE OFFICES OF NATIONSBANC MONTGOMERY SECURITIES, INC., SAN FRANCISCO,
CALIFORNIA, ON OR ABOUT , 1997.
NATIONSBANC MONTGOMERY SECURITIES, INC.
RAYMOND JAMES & ASSOCIATES, INC.
, 1997
<PAGE>
[INSIDE FRONT COVER]
Illustration of a map of the world having 28 pins indicating customer
locations.
The Company intends to furnish shareholders with annual reports containing
consolidated financial statements audited by its independent certified public
accountants.
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
[INSIDE FRONT COVER GATEFOLD]
Front cover gatefold opens to show a presentation of graphics and text in three
vertical sections with the following caption across the top: PROVIDING SOFTWARE
SOLUTIONS FOR THE CREDIT CARD INDUSTRY
Left vertical section, the text:
INDUSTRY DYNAMICS
WORLDWIDE GROWTH OF BANK AND RETAIL CREDIT CARD USAGE
Down arrow
INCREASED DEMAND FOR CREDIT CARD TRANSACTION PROCESSING SOFTWARE
FINANCIAL INSTITUTIONS AND RETAILERS ARE DRIVEN BY A DESIRE
- TO REDUCE PROCESSING COSTS
- FOR LEADING EDGE TECHNOLOGY INFRASTRUCTURE
- TO RETAIN CONTROL OVER CARD PRODUCTS, OPERATIONS AND DATA
Center vertical section, a graphic with a center disk displaying the words:
ACCOUNTING BILLING surrounded by a fragmented ring with each piece connected to
the center disk by a radial line and each respective piece displaying one of
each of the following word sets:
AUTHORIZATION, TRANSACTION MANAGEMENT, NEW ACCOUNTS, MERCHANT ACQUIRING,
CUSTOMER SERVICE, DISPUTES, COLLECTIONS, FRAUD MANAGEMENT*, DATA WAREHOUSE*.
*UNDER DEVELOPMENT
The entire graphic is encircled by repetitive renditions of the text: PAYSYS
VISIONPLUS
Right vertical section, the text:
THE PAYSYS "VISIONPLUS" SOLUTION
- LEVERAGE PROVEN TRACK RECORD
- OPERATE ON MULTIPLE PLATFORMS
- CREATE FULLY-INTEGRATED PRODUCT SUITE
- UTILIZE FLEXIBLE, OBJECT-ORIENTED COMPONENT ARCHITECTURE
REDUCE CUSTOMER'S PROCESSING COST WHILE INCREASING THEIR CONTROL
THE PAYSYS STRATEGY
- MAINTAIN PRODUCT LEADERSHIP
- EXPAND PRODUCT OFFERINGS
- PENETRATE INTERNATIONAL MARKETS
- BROADEN STRATEGIC RELATIONSHIPS
- INCREASE RECURRING REVENUES
- DEVELOP APPLICATIONS OR NEW SOFTWARE SYSTEMS
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION, INCLUDING "RISK FACTORS" AND CONSOLIDATED FINANCIAL STATEMENTS AND
THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. ALL REFERENCES IN
THIS PROSPECTUS TO SHARE AND PER SHARE DATA HAVE BEEN ADJUSTED TO REFLECT A
FIVE-FOR-ONE STOCK SPLIT EFFECTED IN THE FORM OF A STOCK DIVIDEND IN OCTOBER
1997. UNLESS OTHERWISE INDICATED, THE INFORMATION CONTAINED IN THIS PROSPECTUS
ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION. UNLESS THE
CONTEXT REQUIRES OTHERWISE, AS USED IN THIS PROSPECTUS, "THE COMPANY" MEANS
PAYSYS INTERNATIONAL, INC. AND ITS SUBSIDIARIES, COLLECTIVELY.
The Company is the world's leading supplier of software that performs
mission-critical credit card transaction processing functions. The Company's
current software product, VisionPLUS, is a customizable software system
consisting of a range of integrated application modules for processing both bank
and retail credit card transactions. The Company licenses its software to banks,
finance companies and retailers that process their own credit card transactions
as well as to third-party processors that process such transactions for others.
The services offered by the Company to its customers include product
customization, installation, training, product maintenance and support and
ongoing compliance with bank card association (Visa, MasterCard and Europay)
standards. As of August 31, 1997, the Company was supporting 101 licensees of
VisionPLUS and its other products in 28 countries which, the Company believes,
were collectively processing more than 100 million accounts. The Company's
customers include leading domestic and international banks, finance companies,
retailers and third-party processors such as Citicorp, GE Global Consumer
Finance, Electronic Data Systems, Spiegel's, Neiman Marcus, Toronto Dominion
Bank, Bank of Nova Scotia, ABN Amro Bank, Household International, Beneficial
Finance, The Associates Financial Services and Whirlpool Financial.
The Company believes that its original product, CardPac, is currently the
most widely used product worldwide for processing bank credit card transactions
and that its Vision21 product is the most widely used product worldwide for
processing retail credit card transactions. In 1995, the Company discontinued
granting new licenses for CardPac and Vision21 and introduced VisionPLUS, which
combines the functionality of CardPac and Vision21 for processing both bank
credit card and retail credit card transactions, including transactions
generated by co-branded bank credit cards offering features and benefits similar
to those offered by retail credit cards. VisionPLUS consists of modules for new
account processing, financial transactions and billing, customer service,
transaction authorizations, collection of delinquent accounts, dispute handling,
transaction formatting and mapping, and authorizing transactions from merchants
accepting credit cards.
VisionPLUS is designed to operate on multiple platforms (mainframe, AS/400
and UNIX), which will facilitate customers' migration to other platforms as
their processing needs change. The Company is currently developing a data
warehouse module, fraud management module and a universal message processor for
VisionPLUS to run on all currently supported platforms and on Windows NT. These
new modules are expected to be generally available in 1998.
Worldwide spending in 1995 for software for processing credit card
transactions was estimated to be $1.2 billion according to the Tower Group. In
addition to these software expenditures, $1.9 billion was spent for hardware and
$2.5 billion for information technology services, including outsourcing
contracts, for a total of $5.6 billion in expenditures in 1995 for credit card
processing information technology, which are expected to grow at a compound
annual rate of 9% from 1995 through 2000 according to the same source.
A majority of the spending on software for processing credit card
transactions is for software developed "in-house" by credit card issuers and
third-party processors. In 1995, spending for software and related services for
credit and debit card transaction processing purchased from "outside" vendors,
such as the Company, was estimated by published reports to be $90 million. The
Nilson Report estimates that there were approximately 9,100 issuers of
MasterCard and Visa credit and debit cards worldwide in 1995.
3
<PAGE>
The Company believes that several factors, including costs and overhead,
issuers' desire to offer a variety of products to maintain and expand their
customer base, the complexity of and frequent change to the interchange
standards, emerging new requirements (e.g., year 2000 compliance) and the sheer
volume of transactions, have resulted in many issuers and third-party processors
moving away from internal software development to purchasing software from
outside vendors.
The Company's objective is to leverage its position as the leading supplier
of software for processing credit card transactions to further strengthen its
market position and to expand into software for other payment transactions and
related functions. The Company's strategy to achieve this objective includes
maintaining market-leading products, expanding product offerings to broaden
customer relationships, aggressively pursuing international markets, developing
additional strategic alliances to help generate sales referrals and for joint
marketing programs, increasing the use of pricing methods that produce recurring
revenues, and developing a new software platform to facilitate the introduction
of new products and functions.
The Company has experienced rapid growth in the last three years due to the
introduction of VisionPLUS. The Company's total revenues from licenses and
services were $16.5 million, $21.7 million and $26.9 million in 1994, 1995 and
1996, respectively, representing a compound annual growth rate of 27%. License
revenues during these years were $5.7 million, $8.7 million, and $13.4 million,
respectively, representing a compound annual growth rate of 53%.
The Company was incorporated in Florida in 1981. The Company's executive
offices are located at 900 Winderley Place, The Spectrum Building, Suite 200,
Maitland, Florida 32751, and its telephone number is (407) 660-0343.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.......... 2,083,333 shares
Common Stock offered by the Selling
Shareholders............................... 1,250,000 shares
Common Stock to be outstanding after the
offering................................... 9,213,408 shares (1)
Use of proceeds.............................. Settlement of royalty obligations, repayment
of indebtedness, general corporate purposes,
including capital expenditures and working
capital, and potential acquisitions. See "Use
of Proceeds."
Proposed Nasdaq National Market symbol....... PAYS
</TABLE>
- ------------------------
(1) Does not include (i) an aggregate of 1,500,000 shares of Common Stock
available for future issuance pursuant to the Company's 1995 Stock Incentive
Plan and 1997 Stock Incentive Plan, pursuant to which options to purchase an
aggregate of 1,088,750 shares of Common Stock (having a weighted average
exercise price of $1.35 per share) are presently outstanding and options to
purchase an aggregate of 51,000 shares of Common Stock (having an exercise
price equal to the initial public offering price of the Common Stock) that
will be granted to an executive officer and the Company's three non-employee
directors upon the completion of the offering, (ii) an option to purchase
1,750 shares of Common Stock (having an exercise price of $.002 per share)
which is presently outstanding and (iii) 1,194,445 shares of Common Stock
reserved for issuance pursuant to presently outstanding warrants (having a
weighted average exercise price of $4.46 per share). See
"Management--Executive Compensation," "--Stock Incentive Plans" and Note 7
of Notes to Consolidated Financial Statements.
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The summary consolidated financial data of the Company set forth below for
each of the years ended December 31, 1994, 1995 and 1996 are derived from the
audited Consolidated Financial Statements of the Company for such periods
included elsewhere in this Prospectus. The summary consolidated financial data
for the six months ended June 30, 1996 and 1997 and as of June 30, 1997 are
derived from unaudited financial statements included elsewhere in this
Prospectus, which, in the opinion of the Company reflect all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the financial condition and results of operations. These
historical results are not necessarily indicative of the results that may be
expected in the future. The summary consolidated financial data are qualified by
reference to and should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," the Consolidated
Financial Statements and Notes thereto and other financial data included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA
Revenues
License.................................................. $ 5,749 $ 8,668 $ 13,366 $ 5,496 $ 4,245
Services................................................. 10,720 13,060 13,558 6,260 9,425
--------- --------- --------- --------- ---------
Total revenues......................................... 16,469 21,728 26,924 11,756 13,670
Cost of revenues
License.................................................. 940 1,324 2,935 1,088 1,553
Services................................................. 7,640 9,503 8,956 4,148 6,938
--------- --------- --------- --------- ---------
Total cost of revenues................................. 8,580 10,827 11,891 5,236 8,491
Gross margin............................................... 7,889 10,901 15,033 6,520 5,179
Total operating expenses................................... 7,133 10,679 14,441 5,691 9,489
--------- --------- --------- --------- ---------
Income (loss) from operations.............................. 756 222 592 829 (4,310)
Interest expense, net...................................... 240 338 150 81 35
--------- --------- --------- --------- ---------
Income (loss) before income taxes.......................... 516 (116) 442 748 (4,345)
Income tax expense......................................... 367 356 303 513 277
--------- --------- --------- --------- ---------
Income (loss) from continuing operations................... $ 149 $ (472) $ 139 $ 235 $ (4,622)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Income (loss) per share from continuing operations......... $ 0.02 $ (0.07) $ 0.02 $ 0.03 $ (0.61)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Shares used in per share calculations...................... 5,972 6,620 8,570 8,470 7,553
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
JUNE 30, 1997
--------------------
PRO FORMA
AS ADJUSTED
ACTUAL (1)
--------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA
Cash and cash equivalents.............................................................. $ 1,859 $ 18,885
Working capital........................................................................ (7,738) 11,788
Total assets........................................................................... 15,402 32,428
Long-term obligations, less current portion............................................ 1,291 1,291
Shareholders' equity (deficit)(2)...................................................... (4,451) 14,975
</TABLE>
- ------------------------
(1) Gives effect to the sale of the 2,083,333 shares of Common Stock offered
hereby by the Company at an assumed initial public offering price of $12.00
per share, the application of the net proceeds therefrom and the exercise
subsequent to June 30, 1997 of warrants to purchase an aggregate of 427,605
shares of Common Stock.
(2) Pro forma as adjusted includes the effect of expenses which will be recorded
upon completion of the offering of (i) $2.9 million estimated expense
related to the settlement of obligations to Household International, Inc.
and (ii) $400,000 debt issuance costs (including the value of a warrant)
related to indebtedness to Sirrom Capital Corporation. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Overview."
RISK FACTORS
See "Risk Factors" beginning on page 7 for a discussion of certain factors
that should be considered by prospective purchasers of the shares of Common
Stock offered hereby.
------------------------
PaySys and VisionPLUS are trademarks of the Company. The Company has applied
for federal registration of these marks. All other trademarks and trade names
referred to in this Prospectus are the property of their respective owners.
6
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE
FOLLOWING RISK FACTORS SHOULD BE CAREFULLY CONSIDERED IN EVALUATING THE COMPANY
AND ITS BUSINESS BEFORE PURCHASING THE COMMON STOCK OFFERED HEREBY. THIS
PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS, INCLUDING STATEMENTS REGARDING,
AMONG OTHER ITEMS, THE COMPANY'S ANTICIPATED GROWTH STRATEGIES, PRODUCT
DEVELOPMENT AND ADAPTATION, PRODUCT INTRODUCTIONS, MARKET POSITION, DEVELOPMENTS
IN THE CREDIT CARD TRANSACTION PROCESSING INDUSTRY, NEW ALLIANCES, INTERNATIONAL
MARKETING EFFORTS, CAPABILITIES OF THE COMPANY'S SOFTWARE, EXPENDITURES AND CASH
REQUIREMENTS. THESE FORWARD-LOOKING STATEMENTS ARE BASED LARGELY ON THE
COMPANY'S EXPECTATIONS AND ARE SUBJECT TO A NUMBER OF RISKS AND UNCERTAINTIES,
MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL. ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF, AMONG OTHERS,
THE FACTORS DISCUSSED BELOW AND IN "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS." THERE CAN BE NO ASSURANCE THAT
THE COMPANY'S RESULTS OF OPERATIONS WILL NOT BE ADVERSELY AFFECTED BY ONE OR
MORE OF THESE FACTORS. THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY UPDATE
OR REVISE ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW
INFORMATION, FUTURE EVENTS OR OTHERWISE. IN LIGHT OF THESE RISKS AND
UNCERTAINTIES, THERE CAN BE NO ASSURANCE THAT THE FORWARD-LOOKING INFORMATION
CONTAINED IN THIS PROSPECTUS WILL IN FACT TRANSPIRE.
FLUCTUATIONS IN QUARTERLY RESULTS
The Company has experienced significant fluctuations in its quarterly
operating results and anticipates that such fluctuations will continue for the
foreseeable future. The Company's revenues in any quarter are typically derived
from non-recurring, large license fees and related service fees received from a
relatively small number of customers. In 1996 and for the six months ended June
30, 1997, the Company's five largest customers accounted for 38% and 31%,
respectively, of the Company's total revenues. The Company's most significant
customers generally vary from quarter to quarter. The Company expects that sales
to a limited number of customers will continue to account for a significant
percentage of its revenue in any quarter for the foreseeable future. See
"--Dependence on Single Product; Conversion Risk; Dependence on Financial
Institutions Industry; Customer Concentration" and "Business--Customers." As a
result, at the Company's current revenue level, each sale or failure to make a
sale can have a material effect on the Company. The loss, deferral or
cancellation of a single sale could adversely effect the Company's operating
results in a particular quarter. Conversely, to the extent that a significant
sale occurs earlier than expected, operating results for subsequent quarters may
be adversely affected. The timing of the recognition of license revenues can
also be difficult to predict. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Fees and Revenue Recognition."
Other factors which may lead to fluctuations in the Company's quarterly results
include, the demand for the Company's product, the size and timing of projects,
the mix of revenues between those generated from license fees and those
generated from service fees, lengthy sales cycle, budgeting cycles and competing
capital budget considerations of potential customers, nonrenewals of maintenance
agreements, timing of new product introductions, customer purchase deferrals in
anticipation of enhancements of new products, customer acceptance of new
products, changes in competition, changes in operating expenses, changes in
Company strategy, financial performance of customers, changes in regulations
that affect the competitive environment for the Company's products and services,
extraordinary events such as acquisitions or litigation, changes in foreign
currency exchange rates, the occurrence of unexpected events and general
economic factors. Many of the factors listed above are beyond the control of the
Company. The impact of these and other factors on the Company's operating
results in any future period cannot be forecast with any degree of certainty.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Industry Background."
There can be no assurance that the Company will be able to achieve a level
of revenues or rate of growth in any future period commensurate with its level
of expenses The Company's expense levels are based in part on expectations of
future revenue levels and demands for its software and services and are fixed to
a large extent in the short term. The Company has significantly increased its
expense levels to
7
<PAGE>
support its recent growth. For example, the Company has hired, among others, a
significant number of technical employees who are customizing or installing
systems or training customers. In addition, since the beginning of 1996, the
Company has significantly increased its research and development expenditures
and expects to continue to incur significant research and development expenses.
Further, the Company intends to expand its international sales and marketing
efforts and support capabilities. The Company may be limited in its ability to
reduce spending in a quarter to compensate for an unexpected revenue shortfall
in such a short-term time period. As a result, any significant downward
fluctuation in the Company's revenues could have a material adverse effect on
the Company's business, financial condition and results of operations.
Due to the foregoing factors, the Company believes that period-to-period
comparisons of its results of operations are not necessarily meaningful and
should not be relied upon as indications of future performance. In the event
that the Company's results of operations for a given quarter are below the
expectations of public market analysts and investors, the price of the Common
Stock would likely be materially adversely affected. No assurance can be given
that the Company will be able to achieve or maintain profitability on a
quarterly or annual basis in the future. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Quarterly Results"
and "--Possible Volatility of Market Price."
MANAGEMENT OF GROWTH
The Company has expanded its operations rapidly over the past two years,
placing significant demands on its administrative, operational and financial
personnel and systems. The Company has also experienced rapid growth in its
management and staff, including the addition of three executive officers since
May 1997 (including the Chief Financial Officer and the Executive Vice
President, Operations) and two other executive officers in 1996. As of August
31, 1997, the number of the Company's employees had increased to 346 from 226 as
of August 31, 1996 and the Company expects this growth to continue. The growth
in the size and scope of the Company's business activities and the expansion of
its customer base have placed, and are expected to continue to place, a
significant strain on the Company's management, operations and capital needs and
the Company's ability to maintain customer satisfaction throughout the process
of customizing and installing its software. As of August 31, 1997, the Company
was in the process of customizing or installing VisionPLUS for 34 customers. See
"Business--Products." In order to fulfill these license agreements, related
maintenance and compliance agreements and other such agreements that the Company
must obtain in order to meet its growth objectives, management has been and in
the future will be required to recruit, organize, train and manage substantial
additional technical, administrative and management personnel. The addition and
integration of qualified staff sufficient to fulfill successfully such
agreements must also be timed to coincide with the execution of new agreements
and customer requirements thereunder, the timing of which is often difficult to
predict. Customer dissatisfaction with the Company's customization,
installation, maintenance, compliance or training efforts, particularly by a
major customer, could adversely affect the Company's reputation and the
Company's ability to market its product and, as a result, could have a material
adverse effect on the Company's business, financial condition and results of
operations. The failure of the Company to effectively manage the growth in its
business and to develop the additional personnel, systems, resources, procedures
and controls necessary to support that growth in a timely manner would have a
material adverse effect on the Company's business, financial condition and
results of operations.
HISTORY OF OPERATING LOSSES
As a result of net losses in 1995 and for the six months ended June 30, 1997
of $0.5 million and $4.6 million, respectively, as well as net losses in prior
years, at June 30, 1997, the Company had a negative net worth of $4.5 million
and a working capital deficit of $7.7 million. The Company expects to incur a
net loss in 1997. There can be no assurance that the Company will be able to
achieve profitability for 1998 and
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beyond. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "--Fluctuations in Quarterly Results."
APPLICATION OF PRODUCTS TO NEW PLATFORMS
The Company has historically derived substantially all of its revenues from
mainframe applications of its software products. Currently, all installations of
VisionPLUS software in production use are in mainframe environments. The Company
believes that its products must be adapted to other platforms to achieve growth,
and it has developed versions of VisionPLUS that are being tested both on an
AS/400 platform and on Sun Microsystems' UNIX platform. The Company also plans
to port VisionPLUS to Hewlett-Packard's UNIX platform. However, the Company has
not historically marketed its products for operation on platforms other than
mainframes, and there can be no assurance that the Company's products will be
accepted for operation in open network computing environments. In addition, as
the Company's potential customer base utilizes other platforms, such as Windows
NT or UNIX-based PCs and servers, due to the need to replace obsolete hardware
or due to expansion of the Company's products and services to other financial
transaction and client management applications, and as new platforms are
developed, the Company must adapt its products and services to such platforms
and environments. There can be no assurance that the Company will be able to
successfully adapt its products and services to any of such foregoing platforms
and environments. Additional development costs and delays that may occur as a
result of the need for the Company to adapt its products and services to such
platforms and environments, and inability of the Company to successfully achieve
such adaptations, would have a material adverse effect on the Company's
business, financial condition and results of operations. See
"Business--Products."
TECHNOLOGICAL CHANGE; DEPENDENCE UPON NEW PRODUCTS
The computer software industry and the credit card transaction processing
industry both are characterized by rapid change in computer hardware and
software technology, frequent product introductions, evolving industry standards
and changing customer requirements, and are highly competitive with respect to
timely product innovation. To remain competitive, the Company may be required,
for example, to change and improve its products and services in response to
industry changes in programming tools and computer language technology and to
customer changes in operating systems, application and networking software, and
computer and communications hardware. Accordingly, the Company's future success
will depend in part on its ability to respond to these changes by enhancing its
existing products and services, developing or acquiring new products and
services that address the increasingly sophisticated needs of customers, and
keeping pace with new, competitive product offerings and emerging industry
standards. As a result, the life cycles of the Company's products are difficult
to estimate.
The introduction of products and services embodying new or improved
technologies and the emergence of new industry standards can render existing
products and services obsolete or unmarketable. In addition, potential new
customers may defer purchases of the Company's current products and services
pending the release of new products and services of the Company or others. There
can be no assurance that the Company's product and service developments and
marketing will keep pace with the demands of the marketplace.
The timeliness of product introductions can have a material impact on market
acceptance of the product. Because it is generally not possible to predict the
time required and costs involved in reaching certain research, development and
engineering objectives, estimated product development schedules could require
extensions and actual development costs could exceed budgeted amounts. Further,
there can be no assurance that the Company will not experience difficulties that
could delay or prevent the successful development, introduction and marketing of
such new products and services. If the Company is unable to develop and
introduce new products and services in a timely manner, or if a new release of a
product or service does not achieve market acceptance, the Company's business,
financial condition and results of operations could be materially adversely
affected.
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Acceptable performance upon introduction of a new software product is
materially important to its success in the marketplace. Software products as
complex as those offered by the Company often contain undetected errors or
failures when first introduced or as new versions are released. VisionPLUS, for
example, is a relatively new product, and certain performance criteria with
respect to that product have not yet been demonstrated in the marketplace. There
can be no assurance that, despite pre-release testing by the Company and by
current and potential customers, errors will not be found in new products after
commencement of commercial shipments. The occurrence of such errors could result
in damages or product liability claims by existing customers, cancellation of
product orders and loss of, or delay in, market acceptance of the Company's
products and services, which could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Product Development."
DEPENDENCE ON SINGLE PRODUCT; CONVERSION RISK; DEPENDENCE ON FINANCIAL
INSTITUTIONS INDUSTRY;
CUSTOMER CONCENTRATION
The Company has derived substantially all of its revenues during the past
two years from the licensing of its VisionPLUS product and the provision of
related services, and the Company expects that revenues from such product and
related services sold both to new and to existing customers will continue to
account for a majority of revenues for the foreseeable future. As a result, the
Company's future financial performance will depend in large part on the
continued market acceptance of its VisionPLUS software and services, as well as
the Company's ability to adapt and modify VisionPLUS to meet the evolving needs
of its customers. A significant portion of the Company's future revenues are
expected to result from the conversion to VisionPLUS of existing customers using
the CardPac product. If these customers do not migrate to VisionPLUS to the
extent anticipated by the Company, its growth and financial performance could be
adversely affected to a significant extent. The life cycles of the Company's
products and services are difficult to estimate, due in large measure to
competition and the future effect of product enhancements, including
developments in the hardware and software environments in which the VisionPLUS
product operates. Declines in demand for the Company's products and services or
the failure of VisionPLUS to gain widespread acceptance, whether as a result of
competition, technological change or otherwise, would have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Products."
Approximately 64% and 63% of the Company's total revenues in 1995 and 1996,
respectively, were derived from licenses and services to financial institutions.
The health of that market is affected by the domestic and international economy
generally, and by a variety of specific factors, including global and regional
instability, government policy and regulation, consumer habits and consolidation
in the industry. Adverse developments in the financial institutions industry
could have a material adverse effect on the Company's business, financial
condition and results of operations. The financial institutions industry tends
to be cyclical in nature, which may result in variations in demand for the
Company's products and services. In addition, there has been and continues to be
consolidation in the financial institutions industry, which in some cases has
lengthened the sales cycle and may lead to a smaller number of potential
customers for, and reduced demand for, the Company's products and services,
which would have a material adverse effect on the Company's business, financial
condition and results of operations. As a result, demand for the Company's
products and services could be disproportionately affected by instability or
downturns in the financial institutions market which may cause customers to exit
the industry or delay, cancel or reduce planned expenditures for information
management systems and software products.
The Company's revenues are typically derived from non-recurring license fees
and related service fees from a relatively small number of customers. In 1996
and for the six months ended June 30, 1997, the Company's five largest customers
accounted for 38%, and 31%, respectively, of the Company's total revenues. The
Company's most significant customers generally vary from period to period. Only
one of the
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Company's five largest customers in 1996 was among the Company's five largest
customers in the six months ended June 30, 1997. The Company expects that sales
to a limited number of customers will continue to account for a significant
percentage of its revenues in any period for the foreseeable future and that its
significant customers in future periods will generally be different from its
significant customers in prior periods. There can be no assurance that the
Company will be able to replace revenues generated from former significant
customers in prior periods with revenues generated from new customers in future
periods. Any failure by the Company to develop relationships with significant
new customers would have a material adverse effect on the Company's business,
financial condition and results of operation. See "-- Fluctuations in Quarterly
Results and "Business--Customers."
DEPENDENCE UPON THIRD-PARTY RELATIONSHIPS AND CERTAIN LICENSES
The Company historically has developed some of its software jointly with
other parties, incorporated other parties' software into its products and
marketed other parties' products to increase the range of features included in
the Company's product offerings. The Company's VisionPLUS product was developed
on a joint venture basis with Household International, Inc. who has historically
provided financial support, jointly owns the product and shares in the Company's
license fees from sales of VisionPLUS to third parties. The Company and
Household have agreed that the Company will pay to Household, from the net
proceeds of the sale of shares of Common Stock offered hereby by the Company,
approximately $4.5 million in settlement of all current and future obligations
of the Company to Household pursuant to the Company's agreement with Household
relating to such development of VisionPLUS, following which payment the Company
may acquire Household's interest in VisionPLUS for a nominal amount. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview." The Company is currently developing a fraud management
module for its VisionPLUS product in cooperation with Fair, Isaac and Company,
Incorporated. This module will be jointly owned by the Company and Fair, Isaac.
If material problems develop with such relationships or with respect to the
rights of the Company and the other owners of jointly owned software, they could
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company licenses and incorporates into VisionPLUS
a third-party licensed transaction management system, 'TRAMS," which performs
key functions in the Company's product. In the future, the Company may license
or acquire other software products that perform such functions or that perform
additional functions for the Company's products where the Company considers such
an acquisition preferable to the cost and time required to develop the
functionality internally. If any current or future third-party licensor were to
terminate its relationship with the Company or to materially increase the cost
to the Company for its products, or if a material problem were to arise in
connection with any of the software products licensed from such licensors, the
Company would be required to license an alternative product from another third
party or attempt to internally develop a replacement for the function of the
licensed software. The loss of or inability to maintain any of these technology
licenses could result in interruptions in the availability of the Company's
existing products and delays in the introduction of new products and services
until equivalent technology, if available, is identified, licensed or developed,
and integrated. There can be no assurance that an alternative source of a
suitable product would be available or that the Company would be able to develop
an alternative product in sufficient time and at a reasonable cost. The failure
of the Company to obtain or develop an alternative product on a timely basis and
at a reasonable cost would have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business-- Product
Development" and "--Proprietary Rights."
INTERNATIONAL SALES
The international market for the Company's products is growing rapidly, and
the Company expects an increasing percentage of its revenues to be derived from
export sales. The Company has offices in Dublin, Ireland, Singapore, and
Melbourne, Australia, and intends to add sales and support capabilities in Asia
and Europe which will require significant management attention and financial
resources. The Company
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expects that a significant portion of future international sales will be
generated by sales agents who will act as independent contractors. Such agents
will license the Company's software and pay the Company royalties equal to a
percentage of the sublicense fees received by the agents from their sales of the
Company's software. In order to achieve its targeted international growth, the
Company will have to locate and establish relationships with a number of agents
in international markets. As a result of reliance upon such local sales agents,
the Company's growth will depend to a material degree upon the Company's ability
to recruit, manage, and maintain satisfactory relationships with these agents
and the level of performance achieved by them. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Overview."
The Company's business outside of North America may be subject to unexpected
changes in regulatory requirements and policy, tariff and other trade barriers,
costs of localizing products for other countries, lack of acceptance of
localized products in other countries, longer accounts receivable payment
cycles, difficulties in accounts receivable collections, difficulties in
managing international operations, availability of trained personnel to install
and implement the Company's systems, political instability, potentially adverse
tax obligations, restrictions on the repatriation of earnings and the burdens of
complying with a wide variety of other laws and regulations. In addition, the
laws of some other countries do not protect the Company's intellectual property
rights to the same extent as do the laws of United States. There can be no
assurance that such factors will not have a material adverse effect on the
Company's business, financial condition or results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business--Sales and Marketing" and Note 9 of Notes to Consolidated
Financial Statements.
The Company's international sales are typically denominated in U.S. dollars.
An increase in the value of the United States dollar relative to foreign
currencies would make the Company's products more expensive and may adversely
affect the Company's future sales to international customers. In addition, the
Company's expenses for its foreign offices and operations are generally paid in
the local currencies. If the U.S. dollar weakens in relation to the applicable
international currencies, the Company's expenses may rise and the Company's
revenues may be adversely affected. The impact of future exchange rate
fluctuations on the Company's results of operations cannot be accurately
predicted. To date, the Company has not sought to hedge the risks associated
with fluctuations in exchange rates, but may undertake such transactions in the
future. There can be no assurance that any hedging techniques implemented by the
Company in the future would be successful or that exchange rate fluctuations
would not have a material adverse effect on the Company's business, financial
condition and results of operations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Overview" and "Business--Sales
and Marketing."
LENGTHY SALES CYCLE
Successful operation of software applications such as those licensed by the
Company are critical to the user's business and potential customers may perceive
high risk in connection with adoption of such software. For these and other
reasons, the sales cycles associated with the purchase of the Company's products
and services are typically six to twelve months, but vary significantly, and are
subject to a number of factors, including customers' budgetary constraints and
internal acceptance reviews, over which the Company has little or no control.
The Company has experienced higher revenues historically in the fourth quarter
due to customer buying patterns. The Company believes that these buying patterns
are due to the annual budgeting cycles of many large financial institutions and
the desire by many of its customers to commence the lengthy process of
implementing the Company's software during the first quarter of the year. See
"Business--Sales and Marketing."
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YEAR 2000 RISK
It is possible that some of the Company's products, whether working alone or
in conjunction with other computer systems or software, will not always accept
input of, or store, manipulate and output dates in the year 2000 or thereafter
without error or interruption. Generally, customers now require that the Company
warrant that its products will process dates in 2000 and beyond. Although the
Company believes that its installed and currently-marketed products will
correctly handle date information at all times, there can be no assurance that
unknown problems will not be encountered. The expense of the Company's efforts
to identify and address such problems, or the warranty liability to which the
Company may become subject as a result of such problems, could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "--Product Liability."
DEPENDENCE ON KEY EMPLOYEES; NEED FOR QUALIFIED EMPLOYEES
The future success of the Company is dependent in large part on a number of
key senior management, research and development, and sales and marketing
employees, particularly Stephen B. Grubb, its President and Chief Executive
Officer, and David B. Black, its Chief Technology Officer. The Company does not
have written employment agreements with any key employee nor does the Company
maintain key man life insurance on any of its employees. The loss of one or more
key employees could have a material adverse effect on the business, financial
condition and results of operations of the Company.
The future success of the Company also will depend to a significant extent
on its ability to attract, train, motivate and retain highly qualified
employees. These employees include managerial and sales and marketing personnel,
as well as highly-skilled software development professionals (particularly
project managers), software engineers and other senior technical personnel with
experience in mission-critical software. Customization and other services with
respect to existing software packages require the Company's employment of an
adequate number of employees skilled in COBOL, the programming language used in
the Company's current software products. The availability of skilled personnel
with knowledge and experience in this specific programming language is not high
in the industry, partly because more modern programming languages are the focus
of the younger programming work force and partly because the so-called "year
2000" problem has created an unusual opportunity for such programmers that has
cut significantly into their general availability. The Company believes that
there is a shortage of, and significant competition for, software development
professionals with the advanced technological skills necessary to perform the
services offered by the Company. The Company's ability to maintain and renew
existing customer relationships and to obtain new business depends, in large
part, on its ability to hire and retain technical personnel with the skills
necessary to keep pace with continual changes in information processing
technology, evolving industry standards and changing client preferences. The
Company expects that it will become increasingly difficult to hire additional
personnel with such expertise and experience, because of the limited pool
available and competition from other businesses for those employees. The
inability to hire and retain qualified personnel or the loss of the services of
key personnel could have a material adverse effect upon the Company's business,
financial condition and results of operations. See "Business--Employees" and
"Management."
DEPENDENCE ON PROPRIETARY TECHNOLOGY; RISK OF INFRINGEMENT CLAIMS
The Company relies primarily on a combination of copyright and trademark
laws, trade secrets, confidentiality procedures and contractual provisions to
protect its proprietary technology. For example, the Company licenses, rather
than sells, its software, and generally requires licensees to execute license
agreements that impose certain restrictions on the licensees' rights to use the
software. In addition, the Company seeks to avoid disclosure of its trade
secrets generally by requiring those persons with access to the Company's
proprietary information to execute confidentiality agreements with the Company
and by
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restricting access to the Company's source code. The Company seeks to protect
its software, documentation and other written materials under trade secret and
copyright laws, which afford only limited protection.
Despite the Company's efforts to protect its proprietary rights,
unauthorized parties may attempt to copy aspects of the Company's products or to
obtain and use information that the Company regards as proprietary. Policing
unauthorized use of the Company's products is difficult, and, while the Company
is unable to determine the extent to which piracy of its software products
exists, software piracy can be expected to be a persistent problem. There can be
no assurance that the Company's means of protecting its proprietary rights will
be adequate or that the Company's competitors will not independently develop
similar technology. In addition, the laws of some other countries do not protect
the Company's proprietary rights to the same extent as do the laws of the United
States.
There can be no assurance that third parties will not claim that the
Company's current or future products infringe upon such third party's'
intellectual property rights. The Company expects that software product
developers will increasingly be subject to infringement claims as the number of
products and competitors in the financial transaction processing industry grows
and the functionality of products in different industry segments overlaps. Any
such claims, with or without merit, could be time-consuming, result in costly
litigation, cause product shipment delays or require the Company to enter into
royalty or licensing agreements. Such royalty or licensing agreements, if
required, may not be available on terms acceptable to the Company or available
at all, which could have a material adverse effect upon the Company's business,
financial condition and results of operations. See "Business--Proprietary
Rights."
COMPETITION
The market for financial transaction processing solutions is highly
competitive, highly fragmented and characterized by rapidly changing technology
and evolving standards. The Company faces direct competition from a number of
companies that market software for financial transaction processing and that
target the credit card processing segment of that market. Such competitors vary
in size and in the scope and breadth of the products and services they offer.
The Company's products also compete against software developed in-house by
companies in the financial transaction processing industry and against services
offered by third-party processors, which provide credit card transaction
processing services, although such processors are themselves potential customers
for the Company's products and services. There can be no assurance that
competitors will not develop products and services that are superior to the
Company's products and services or that achieve greater market acceptance than
the Company's products and services. As the Company offers new products and
services, it expects to face competition from both existing and new competitors.
Many of the Company's current competitors are broadening the functionality of
their product and service offerings. Because there are relatively low barriers
to entry in the software market, the Company also expects additional competition
from other established, as well as emerging, companies. Increased competition is
likely to result in price reductions, reduced gross margins and loss of market
share, any of which could have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company believes that competition will continue to intensify as the
market for its products and services develops and competitors focus more clearly
on that market's specific requirements. Many of the Company's current and
potential competitors have significantly greater financial, technical, marketing
and other resources than the Company. As a result, such competitors may be able
to respond more quickly to new or emerging technologies and changes in customer
requirements, or devote greater resources to the development, promotion, sale
and support of their products and services than the Company. In addition,
current and potential competitors have established or may establish in the
future cooperative relations among themselves or with third parties to increase
the ability of their products and services to address the needs of the Company's
prospective customers. Accordingly, it is possible that new competitors,
alliances among competitors or alliances between competitors and third parties
may emerge and rapidly acquire
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significant market share. There can be no assurance that the Company can
maintain its competitive position against current and potential competitors,
especially those with significantly greater financial, marketing, service,
support, technical and other competitive resources, or that competitive
pressures faced by the Company would not have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Competition."
RESTRICTIONS ON COMPETITION
In October 1988, the Company licensed its CardPac software product to The
SEMA Group S.A. in France under an agreement which grants SEMA the exclusive
rights to market that software product, including any derivatives therefrom, in
Western Europe and portions of Asia. Under this Agreement, the Company agreed
not to license CardPac or any product derived from CardPac in such territories
through October 31, 1998. Although the Company no longer sells its CardPac
product, it competes with SEMA for bank card processing customers in those areas
with its VisionPLUS product. The Company believes that offering VisionPLUS in
such territories does not infringe upon SEMA's exclusivity in such territories,
but if the Company were to develop or market a software application or module
that was determined to be a derivative of the CardPac software, then the Company
could be restricted from marketing that application or module in SEMA's
territories through October 1998. In that case, the Company would not be able to
offer its customers in such territories the full range of software applications
that it might otherwise be able to offer, or it would have to develop or find
third-party software to provide the missing functionality. Either such event
could have a material adverse effect on the Company's business, financial
condition and results of operations.
PRODUCT LIABILITY
The software developed and utilized by the Company in providing its products
and services may contain undetected errors. Although the Company engages in
extensive testing of its software prior to introducing the software onto a
customer's system, there can be no assurance that errors will not be found in
such software after the commencement of its use. The Company's license,
maintenance and support, and compliance agreements with its customers, generally
contain provisions designed to limit the Company's exposure to potential product
liability claims, such as disclaimers of warranties and exclusions of liability
for special, consequential and incidental damages. In addition, these agreements
generally limit the amounts recoverable for damages to the amounts paid by the
licensee to the Company for the product or service giving rise to the damages
claims. Although the Company has not experienced any product liability claims to
date, the sale and support of products and services by the Company may result in
the Company being subject to such claims. A successful product liability claim
brought against the Company could have a material adverse effect upon the
Company's business, financial condition and results of operations. See "--Year
2000 Risk."
POTENTIAL FUTURE ACQUISITIONS
The Company may in the future undertake acquisitions that could present
challenges to the Company's management. Acquisitions involve numerous risks,
including difficulties in assimilating new operations and personnel and
implementing new business processes, the need to manage geographically-remote
business units and the diversion of management attention from other business
concerns. Any acquisition, depending upon its size, could result in the use of a
significant portion of the Company's cash, or, if such acquisition is made
utilizing the Company's securities, could result in significant dilution to the
Company's shareholders. Furthermore, there can be no assurance that any acquired
product or service capacity will gain acceptance in the Company's markets.
Should the Company's management fail to respond effectively to such challenges,
it is possible that a future acquisition could have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
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CHANGING REGULATORY ENVIRONMENT
The Company's customers are subject to a number of government regulations
and industry standards with which the Company's products must comply. For
example, the Company's products are affected by Visa and MasterCard electronic
payment standards. Changes to such regulations or standards or the adoption of
new regulations or standards in the credit card processing industry could
require the Company to make changes in its products and services, and could
affect the timing of purchases and acceptance of the Company's products and
services by the marketplace. There can be no assurance that the Company can
respond to such changes in a timely and adequate manner. The dramatic growth in
the availability of credit cards and the expansion of available credit under
such cards to the consuming public has been a matter of concern to U.S. federal
banking regulators and other governmental regulatory authorities. Action by
regulatory authorities to substantially restrict the availability of credit card
credit or other related regulatory developments could materially adversely
affect the Company's customers and the market in general and therefore could
have a material adverse effect on the Company's business, financial condition
and results of operations.
NO PRIOR MARKET FOR COMMON STOCK
Prior to the offering, there has been no public market for the Common Stock,
and there can be no assurance that an active trading market will develop or be
sustained after the offering or that the market price of the Common Stock will
not decline below the initial public offering price. The initial public offering
price has been determined by negotiations between the Company, the Selling
Shareholders and the representatives of the Underwriters, and may not be
indicative of the market price of the Common Stock after the offering. See
"Underwriting."
POSSIBLE VOLATILITY OF MARKET PRICE
From time to time after the offering, there may be significant volatility in
the market price of the Common Stock. The stock market has from time to time
experienced significant price and volume fluctuations, which have particularly
affected the market prices of the stocks of high technology and
telecommunications companies and which may be unrelated to the operating
performance of such companies. Factors such as actual or anticipated operating
results, growth rates, changes in estimates by analysts, market conditions in
the industry, announcements by competitors, regulatory actions and general
economic conditions will vary from period to period. As a result of these
factors, the Company's operating results from time to time may be below the
expectations of public market analysts and investors. Any such event would
likely have a material adverse effect on the market price of the Common Stock.
SUBSTANTIAL CONTROL BY OFFICERS, DIRECTORS AND PRINCIPAL SHAREHOLDERS
After the sale of the shares of Common Stock offered hereby, the Company's
officers and directors (including their affiliates) will retain voting control
of approximately 45% of the Company's outstanding Common Stock (and would hold a
majority of the outstanding Common Stock if outstanding options and warrants
were exercised) and therefore will be able to exercise substantial control over
the Company's affairs. Accordingly, if such persons act together, they may be
able to elect all directors and exercise control over the business policies and
affairs of the Company. See "Management--Directors and Executive Officers" and
"Principal and Selling Shareholders."
IMMEDIATE AND SUBSTANTIAL DILUTION
The purchasers of the shares of Common Stock offered hereby will experience
immediate and substantial dilution in the net tangible book value per share of
Common Stock from the initial public offering price. Based on an assumed initial
offering price of $12.00 per share, as of June 30, 1997, such dilution, on a pro
forma basis, would have been equal to $10.68 per share with respect to shares
purchased
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pursuant to the offering. To the extent that some or all outstanding options and
warrants to purchase Common Stock are exercised, there will be further dilution.
See "Dilution."
ANTI-TAKEOVER MATTERS
The Company's Articles and Bylaws contain certain provisions that could have
the effect of delaying, deferring or preventing a change in control of the
Company. The Board of Directors is authorized to issue one or more series of
Preferred Stock with respect to which the Board, without shareholder approval,
may determine voting, conversion or other rights which could adversely affect
the rights of holders of Common Stock. Only shareholders holding at least 50% of
the outstanding Common Stock have the power to call a special meeting. Directors
of the Company are divided into three classes and are elected to serve staggered
three-year terms. Under the Articles and Bylaws, directors serving staggered
terms can be removed from office only for cause and only upon an affirmative
vote of at least two-thirds of the outstanding voting stock. The Company's
Bylaws require advance notice for shareholder proposals and director
nominations. In addition, the Company has eliminated the right of a majority of
its shareholders to act by unanimous written consent in lieu of a meeting. See
"Description of Capital Stock." One effect of the foregoing provisions would be
to make an acquisition of the Company significantly more difficult to achieve if
not approved by the Board of Directors, even though a majority of shareholders
may favor such action. Potential acquirors may be deterred due to the
anti-takeover provisions implemented by the Company. Such factors could limit
the price that certain acquirors might be willing to pay in the future for
shares of the Company's Common Stock, and there can be no assurance that such
provisions will not have an adverse effect on the market value of the Company's
Common Stock in the future. See "Description of Capital Stock--Certain
Provisions."
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Sales of substantial amounts of shares of Common Stock in the public market
following the offering, or the perception that such sales could occur, could
adversely affect the market price of the Common Stock prevailing from time to
time and could impair the Company's ability to raise capital in the future
through sales of its equity securities. Immediately after completion of the
offering, assuming no exercise of outstanding options or warrants, the Company
will have 9,213,408 shares of Common Stock outstanding, of which the 3,333,333
shares offered hereby will be freely tradable without restriction or further
registration under the Securities Act, except those shares acquired by
"affiliates" of the Company as that term is defined under the Securities Act
which will be subject to the resale limitations (excluding the holding period
requirement of Rule 144 ("Rule 144")) under the Securities Act. The remaining
5,880,075 shares of Common Stock are restricted securities as defined in Rule
144 and may be sold in the public market only if registered under the Securities
Act or if an exemption from registration is available, including the exemptions
contained in Rules 144, 144(k) or 701 under the Securities Act. The Company, its
officers, directors and certain other shareholders, including the Selling
Shareholders, who collectively are the beneficial owners of an aggregate of
5,774,875 shares of Common Stock have agreed with the Underwriters, except with
the prior written consent of NationsBanc Montgomery Securities, Inc., not to
offer, sell, pledge, contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock of the Company or any securities convertible into or
exercisable or exchangeable for Common Stock for a period of 180 days after the
effective date of the Registration Statement of which this Prospectus forms a
part. Upon the expiration of such 180-day period, such holders will, in general,
be entitled to dispose of their shares, although the shares of Common Stock held
by affiliates of the Company will continue to be subject to the restrictions of
Rule 144. In addition, options to purchase an aggregate of 1,090,500 shares of
Common Stock, having a weighted average exercise price of $1.35 per share, are
outstanding and warrants to purchase an aggregate of 1,194,445 shares of Common
Stock, having a weighted average exercise price of $4.46 per share, are
currently outstanding (of which 263,410 shares are subject to options and
warrants held by persons not subject to lock-up agreements). See "Description of
Capital Stock" and "Shares Eligible for Future Sale."
17
<PAGE>
The Company has agreed, subject to certain limitations, to permit Sirrom
Capital Corporation (formerly Sirrom Capital, L.P.), which will own 75,000
shares of Common Stock following the offering, and has a warrant to purchase, at
a minimum, 37,660 additional shares of Common Stock, to sell its shares of
Common Stock, pursuant to a registration statement filed by the Company under
the Securities Act, provided that the registration statement form permits such
secondary sale. If the Company were required to include in a Company-initiated
registration shares held by such holder pursuant to the exercise of such
registration rights, the inclusion of such shares might have an adverse effect
on the Company's ability to raise needed capital in the capital markets at a
time and price favorable to the Company. In addition, the Company has agreed to
register an aggregate of 1,456,280 shares of Common Stock subject to options and
warrants held by affiliates of the Company pursuant to a registration statement
on Form S-8, if such form is available. See "Shares Eligible for Future Sale"
and "Principal and Selling Shareholders."
USE OF PROCEEDS
A substantial portion of the net proceeds to be received by the Company in
connection with the offering is not allocated for any specific purpose, but will
be allocated to general corporate purposes, including capital expenditures and
working capital. A portion of the net proceeds of the offering also may be used
for the acquisitions of companies or technology complementary to those of the
Company; however, the Company is not currently a party to any commitments or
agreements, and is not currently involved in any negotiations, with respect to
any material acquisitions. Accordingly, management will have broad discretion
with respect to the expenditure of such proceeds. Purchasers of shares of Common
Stock offered hereby will be entrusting their funds to the Company's management,
upon whose judgment they must depend, with limited information concerning the
specific purposes to which the funds will ultimately be applied. See "Use of
Proceeds."
18
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the offering are estimated to be
approximately $22.4 million ($25.2 million if the Underwriters' over-allotment
option is exercised in full), at an assumed initial offering price of $12.00 per
share, after deducting underwriting discounts and commissions and estimated
offering expenses payable by the Company. Of such net proceeds, the Company
intends to use (i) up to $5.1 million to pay to Household International, Inc. in
settlement of all current and future obligations of the Company pursuant to a
Software Development Agreement between the Company and Household International,
Inc., and (ii) $4.0 million to prepay outstanding indebtedness to Sirrom Capital
Corporation ("Sirrom") under a term loan agreement dated September 1997,
accruing interest at a rate of 13.5% per annum and maturing in September 2002.
The proceeds of such term loan were used to repay $900,000 outstanding under a
previous loan agreement with Sirrom and $430,000 borrowed from a shareholder in
August 1997 and for working capital purposes. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Certain
Transactions."
The remainder of the net proceeds to the Company from the offering,
approximately $13.2 million, will be used for general corporate purposes,
including capital expenditures and working capital. The Company may also use a
portion of the net proceeds for the acquisition of other companies, technology
or services that complement the business of the Company, although no such
transactions are being planned or negotiated as of the date hereof. See "Risk
Factors--Use of Proceeds." Pending application of the net proceeds as described
above, the Company intends to invest the net proceeds in short-term, investment-
grade securities and interest-bearing securities. The Company will not receive
any of the proceeds from the sale of shares of Common Stock by the Selling
Shareholders.
DIVIDEND POLICY
The Company has not declared or paid any cash dividends on its Common Stock,
and the Board of Directors intends to continue a policy of retaining future
earnings to finance the Company's growth and for general corporate purposes,
and, therefore, it does not anticipate paying any cash dividends in the
foreseeable future.
19
<PAGE>
CAPITALIZATION
The following table sets forth the long-term obligations and capitalization
of the Company as of June 30, 1997, and pro forma as adjusted to reflect the
sale by the Company of 2,083,333 of the shares of Common Stock offered hereby at
an assumed initial public offering price of $12.00 per share, the application of
the net proceeds therefrom as described under the "Use of Proceeds," the
exercise subsequent to June 30, 1997 of warrants to purchase an aggregate of
427,605 shares of Common Stock and certain transactions to occur upon completion
of the offering. This table should be read in conjunction with the Consolidated
Financial Statements of the Company and the related Notes thereto contained
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1997
----------------------
<S> <C> <C>
PRO FORMA
ACTUAL AS ADJUSTED
--------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Current portion of long-term obligations(1)............................................... $ 1,314 $ 414
--------- -----------
--------- -----------
Long-term obligations, less current portion(1)............................................ 1,291 1,291
Shareholders' equity(2):
Preferred Stock, par value $0.01 per share, 10,000,000 shares authorized; no shares issued
and outstanding......................................................................... -- --
Common Stock, par value $0.01 per share, 30,000,000 shares authorized; 6,861,520 shares
issued; 9,372,458 shares issued and outstanding, as adjusted............................ 69 94
Additional paid-in capital(3)............................................................. 2,099 24,800
Deficit earnings(4)....................................................................... (6,061) (9,361)
Cumulative translation adjustments........................................................ (67) (67)
Less 159,050 shares held in treasury, at cost............................................. (491) (491)
--------- -----------
Total shareholders' equity (deficiency)................................................... (4,451) 14,975
--------- -----------
Total capitalization...................................................................... $ (3,160) $ 16,266
--------- -----------
--------- -----------
</TABLE>
- ------------------------
(1) Long term obligations include long-term debt, capital lease obligations and
deferred rent expense. See Note 4 of Notes to Consolidated Financial
Statements for additional information relating to the Company's debt.
(2) Does not include (i) an aggregate of 1,500,000 shares of Common Stock
available for future issuance pursuant to the Company's 1995 Stock Incentive
Plan and 1997 Stock Incentive Plan, pursuant to which options to purchase an
aggregate of 1,088,750 shares of Common Stock (having a weighted average
exercise price of $1.35 per share) are presently outstanding and options to
purchase an aggregate of 51,000 shares of Common Stock (having an exercise
price equal to the initial public offering price of the Common Stock) that
will be granted to an executive officer and the Company's three non-employee
directors upon the completion of the offering, (ii) an option to purchase
1,750 shares of Common Stock (having an exercise price of $.002 per share)
which is presently outstanding and (iii) 1,194,445 shares of Common Stock
reserved for issuance pursuant to presently outstanding warrants (having a
weighted average exercise price of $4.46 per share). See
"Management--Executive Compensation," "--Stock Incentive Plans" and Note 7
of Notes to Consolidated Financial Statements.
(3) Pro forma as adjusted also includes the value of a warrant issued to
purchase 37,660 shares of Common Stock in connection with financing obtained
in September 1997 which will be repaid as described under the "Use of
Proceeds" and "Management's Analysis of Financial Condition and Results of
Operations-- Overview."
(4) Pro forma as adjusted includes the effect of expenses which will be recorded
upon completion of the offering of (i) $2.9 million estimated expense
related to the settlement of obligations to Household International, Inc.
and (ii) $400,000 debt issuance costs (including the value of the warrant
described above in (3)) related to indebtedness to Sirrom Capital
Corporation. See "Use of Proceeds" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Overview."
20
<PAGE>
DILUTION
As of June 30, 1997, the historical net tangible book deficit of the Company
was approximately $(7,271,000), or $(1.06) per share of Common Stock. The pro
forma net tangible book deficit of the Company at June 30, 1997 was
$(10,270,000) or $(1.44) per share. Pro forma net tangible book deficit per
share represents the amount of tangible assets of the Company, less all
liabilities, divided by the number of issued and outstanding shares of Common
Stock as of June 30, 1997 (on a pro forma basis after giving effect to the
exercise subsequent to June 30, 1997 of warrants to purchase an aggregate
427,605 shares of Common Stock, certain of which are being sold by Selling
Shareholders in the offering, and certain transactions to occur upon the
completion of the offering). After giving effect to the sale by the Company of
2,083,333 of the shares of Common Stock offered hereby at an assumed initial
public offering price of $12.00 per share and after deducting estimated offering
expenses payable by the Company and the underwriting discount and commissions,
the pro forma net tangible book value of the Company as of June 30, 1997, would
have been approximately $12,155,000, or $1.32 per share. This represents an
immediate increase in net tangible book value of $2.76 per share to existing
shareholders and an immediate dilution in net tangible book value of $10.68 per
share to purchasers of shares of Common Stock in the offering. The following
table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............................. $ 12.00
---------
Historical net tangible book deficit before the offering.................. $ (1.06)
Decrease per share related to pro forma adjustments....................... $ (0.38)
Increase per share attributable to new shareholders....................... $ 2.76
---------
Pro forma net tangible book value per share after giving effect to the
offering.................................................................. $ 1.32
---------
Dilution per share to new shareholders...................................... $ 10.68
---------
</TABLE>
The following table sets forth, on a pro forma basis as of June 30, 1997,
with respect to the existing shareholders and the new shareholders in the
offering, a comparison of the number of shares of Common Stock acquired from the
Company, the percentage ownership of such shares, the total consideration paid,
the percentage of total cash consideration paid and the average price per share:
<TABLE>
<CAPTION>
SHARES PURCHASED(1) TOTAL CONSIDERATION
----------------------- -------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders.............................. 7,130,075 77% $ 1,678,000 6% $ 0.24
New shareholders................................... 2,083,333 23 25,000,000 94 12.00
---------- --- ------------- ---
Total.......................................... 9,213,408 100% 26,678,000 100% 2.90
---------- --- ------------- ---
---------- --- ------------- ---
</TABLE>
- ------------------------
(1) Sales by the Selling Shareholders in the offering will reduce the number of
shares held by existing shareholders to 5,880,705, or 64%, and will increase
the number of shares held by new shareholders to 3,333,333, or 36%, of the
total shares of Common Stock to be outstanding after the offering. See
"Principal and Selling Shareholders."
Except for the exercise of warrants to purchase an aggregate of 427,605
shares of Common Stock, certain of which are being sold by Selling Shareholders
in the offering, the foregoing table does not take into account the exercise of
outstanding options or warrants to acquire shares of Common Stock. Assuming that
all such options and warrants were exercised and proceeds received therefrom,
dilution per share to new shareholders would be $10.35. See Note 7 of Notes to
Consolidated Financial Statements and "Management--Stock Incentive Plans."
21
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected consolidated financial data of the Company set forth below as
of and for the years ended December 1994, 1995 and 1996 are derived from the
audited Consolidated Financial Statements of the Company for such periods
included elsewhere in this Prospectus. The selected consolidated data as of and
for the year ended January 31, 1993 and the eleven months ended December 31,
1993 are derived from the audited consolidated financial statements of the
Company which are not included herein. The selected consolidated financial data
as of and for the six months ended June 30, 1996 and 1997 are derived from
unaudited financial statements included elsewhere in this Prospectus, which, in
the opinion of the Company reflect all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the financial
condition and results of operations. These historical results are not
necessarily indicative of the results that may be expected in the future. The
selected consolidated financial data are qualified by reference to and should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Consolidated Financial Statements and
Notes thereto and other financial data included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR 11 MONTHS
ENDED ENDED SIX MONTHS ENDED
JANUARY 31, DECEMBER 31, YEAR ENDED DECEMBER 31, JUNE 30,
----------- ------------- ------------------------------- --------------------
1993 1993 1994 1995 1996 1996 1997
----------- ------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
CONSOLIDATED STATEMENT OF OPERATIONS DATA
Revenues
License..................................... $ 7,502 $ 5,047 $ 5,749 $ 8,668 $ 13,366 $ 5,496 $ 4,245
Services.................................... 11,738 10,703 10,720 13,060 13,558 6,260 9,425
----------- ------------- --------- --------- --------- --------- ---------
Total revenues............................ 19,240 15,750 16,469 21,728 26,924 11,756 13,670
Cost of revenues
License..................................... 1,273 1,067 940 1,324 2,935 1,088 1,553
Services.................................... 10,213 7,975 7,640 9,503 8,956 4,148 6,938
----------- ------------- --------- --------- --------- --------- ---------
Total cost of revenues.................... 11,486 9,042 8,580 10,827 11,891 5,236 8,491
Gross margin.............................. 7,754 6,708 7,889 10,901 15,033 6,520 5,179
Operating expenses
Sales and marketing......................... 2,678 2,172 2,481 2,298 3,270 1,350 1,733
Research and development.................... 2,625 2,475 1,612 2,133 6,944 2,757 4,872
General and administrative.................. 2,915 3,618 3,040 4,105 4,227 1,584 2,884
Write-off of capitalized software........... -- -- -- 2,143 -- -- --
----------- ------------- --------- --------- --------- --------- ---------
Total operating expenses...................... 8,218 8,265 7,133 10,679 14,441 5,691 9,489
----------- ------------- --------- --------- --------- --------- ---------
Income (loss) from operations................. (464) (1,557) 756 222 592 829 (4,310)
Interest expense, net......................... 464 123 240 338 150 81 35
----------- ------------- --------- --------- --------- --------- ---------
Income (loss) before income taxes............. (928) (1,680) 516 (116) 442 748 (4,345)
Income tax expense (benefit).................. (183) (698) 367 356 303 513 277
----------- ------------- --------- --------- --------- --------- ---------
Income (loss) from continuing operations...... $ (745) $ (982) $ 149 $ (472) $ 139 $ 235 $ (4,622)
----------- ------------- --------- --------- --------- --------- ---------
----------- ------------- --------- --------- --------- --------- ---------
Income (loss) per share from continuing
operations.................................. $ (0.12) $ (0.16) $ 0.02 $ (0.07) $ 0.02 $ 0.03 $ (0.61)
----------- ------------- --------- --------- --------- --------- ---------
----------- ------------- --------- --------- --------- --------- ---------
Shares used in per share calculations......... 5,972 5,972 5,972 6,620 8,570 8,470 7,553
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1997
JANUARY 31, DECEMBER 31, --------------------------
----------- ------------------------------------------ PRO FORMA
1993 1993 1994 1995 1996 ACTUAL AS ADJUSTED(1)
----------- --------- --------- --------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
BALANCE SHEET DATA
Cash and cash equivalents.................... $ 2,463 $ 2,321 $ 432 $ 1,222 $ 2,037 $ 1,859 $ 18,885
Working capital (deficit).................... (1,239) (1,102) (3,280) (1,550) (2,571) (7,738) 11,788
Total assets................................. 11,873 10,499 10,350 11,507 16,194 15,402 32,428
Long-term obligations........................ 3,252 3,341 2,899 2,582 1,761 1,291 1,291
Shareholder's equity (deficit)(2)............ 246 (859) (760) 12 162 (4,451) 14,975
</TABLE>
- ------------------------------
(1) Gives effect to the sale of the 2,083,333 shares of Common Stock offered
hereby by the Company at an assumed initial public offering price of $12.00
per share, the application of the net proceeds therefrom and the exercise
subsequent to June 30, 1997 of warrants to purchase an aggregate of 427,605
shares of Common Stock.
(2) Pro forma as adjusted includes the effect of expenses which will be recorded
upon completion of the offering of (i) $2.9 million estimated expense
related to settlement of obligations to Household International, Inc. and
(ii) $400,000 debt issuance costs (including the value of a warrant) related
to indebtedness to Sirrom Capital Corporation. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Overview."
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES THERETO AND THE OTHER FINANCIAL INFORMATION INCLUDED
ELSEWHERE IN THIS PROSPECTUS. HISTORICAL RESULTS ARE NOT NECESSARILY INDICATIVE
OF TRENDS IN OPERATING RESULTS FOR ANY FUTURE PERIOD.
OVERVIEW
The Company is the world's leading supplier of software that performs
mission-critical credit card transaction processing functions. The Company's
current software product, VisionPLUS, is a customizable software system
consisting of a range of integrated application modules for processing both bank
and retail credit card transactions. VisionPLUS provides the necessary
functionality for processing credit card transactions from application
processing and transaction authorization requests through billing and
collection. The Company licenses its software to banks, finance companies and
retailers that process their own credit card transactions as well as to
third-party processors that process such transactions for others.
The Company released its original product, CardPac, used to process
traditional bank credit card transactions, in 1983 and its Vision21 product,
used to process retail credit card transactions, in 1987. In 1995, the Company
introduced its current product, VisionPLUS, which combines the functionality of
CardPac and Vision21 for processing both retail credit card and bank credit card
transactions, and discontinued selling new licenses of CardPac and Vision21. The
Company intends to discontinue provision of maintenance and support for CardPac
after 1998 and for Vision21 when the next release of VisionPLUS is delivered in
1998. As of August 31, 1997, the Company had licensed VisionPLUS to 42
customers, 22 of which had installed the software and were in various stages of
implementing it for use in live production and eight of which were using the
product in live production. As of August 31, 1997, the Company was continuing to
support 28 customers using CardPac and 20 customers using Vision21. The Company
is offering its current CardPac users incentives to encourage them to purchase
VisionPLUS and, as of August 31, 1997, 19 CardPac users had migrated or agreed
to migrate to VisionPLUS. Vision21 licensees who are receiving maintenance and
support from the Company will be entitled to receive, for no additional license
fee, those modules of the next release of VisionPLUS affording equivalent
functionality to that of the licensee's current Vision21 software. Through
August 31, 1997, 13 Vision21 customers had migrated or agreed to migrate to
VisionPLUS. See "Business--Products."
The Company derives a substantial portion of its revenues from sales outside
the United States. The Company's export sales were $1.0 million, $8.4 million
and $8.8 million for 1994, 1995 and 1996, respectively, and $2.6 million and
$8.0 million for the six months ended June 30, 1996 and 1997, respectively.
Export sales as a percentage of total revenues were 6%, 39% and 33% for 1994,
1995 and 1996, respectively, and 22% and 59% for the six months ended June 30,
1996 and 1997, respectively. See Note 9 of Notes to Consolidated Financial
Statements for additional financial information concerning the Company's foreign
operations. The Company anticipates that international sales will continue to
account for a significant portion, and may increase as a percentage, of the
Company's total revenues. License and service fees typically are invoiced and
paid by the licensee in U.S. currency. See "Risk Factors-- International Sales."
The Company anticipates that it will incur significant costs in connection with
the expansion of its international sales and marketing efforts, as well as its
support capabilities, during the remainder of 1997 and 1998. The Company intends
to increase its use of agents in connection with sales of the Company's software
and related services in certain areas outside of the United States. Such agents
will license the Company's software and pay the Company royalties equal to a
percentage of the sublicense fees received by such agents from their sales of
the Company's software.
In accordance with generally accepted accounting principles, the Company
capitalizes certain software development costs. Software development costs that
are not capitalized are charged to research and
23
<PAGE>
development expenses. The Company capitalized $2.6 million, $2.3 million and
$1.1 million of software development costs for 1994, 1995 and 1996,
respectively, and $0.5 million and $0.2 million of such costs for the six months
ended June 30, 1996 and 1997, respectively. As of June 30, 1997, the Company had
a $2.8 million net unamortized balance of capitalized software development
costs. The Company records amortization of capitalized software development
costs in an amount equal to the greater of the amount computed using (i) the
ratio that current gross revenues for a product bears to the total of current
and anticipated revenues for that product or (ii) straight line basis over the
estimated useful life of the released product (currently three years).
Amortization expense was $0.9 million, $1.1 million, $1.2 million for 1994, 1995
and 1996, respectively, and $0.6 million and $0.6 million for the six months
ended June 30, 1996 and 1997, respectively. In 1995, the Company also recorded
an expense of $2.1 million due to the write-off of capitalized software costs
related principally to CardPac as a result of the Company's determination to
discontinue licensing such product. The Company anticipates that it will
continue to incur significant research and development expenses, but does not
expect that the amount of such expenses will increase significantly from current
levels.
Pursuant to an agreement dated June 1993, Household International, Inc. paid
the Company an aggregate of $4.6 million ($1.4 million, $3.0 million and $0.2
million in 1994, 1995 and 1996, respectively), which the Company recognized as
revenue, to fund the development of VisionPLUS. In exchange for such payments,
Household acquired joint ownership with the Company in VisionPLUS and a right to
royalties on the sale of any of the VisionPLUS modules, subject to a specified
maximum. Following the payment of the maximum royalties, the Company has the
right to acquire, for a nominal amount, Household's interest in VisionPLUS. Such
royalties are due to Household at the time the Company receives payment of the
license fee. As of June 30, 1997, the Company had paid no royalties to Household
in cash but did provide $582,000 of professional services which amount has been
credited against accrued royalties. As of June 30, 1997, the Company had accrued
royalties of $1.6 million to Household. The Company commenced paying Household
royalties in accordance with the terms of such agreement in July 1997. In
October 1997, the Company and Household agreed that the Company would pay to
Household, from the net proceeds of the sale of shares of Common Stock offered
hereby by the Company, $5.1 million in settlement of all current and future
obligations of the Company to Household pursuant to such agreement less the
amount of royalties paid by the Company to Household pursuant to such agreement
prior to such settlement payment. Following such payment, the Company will
retain its right to acquire Household's interest in VisionPLUS for a nominal
amount. The settlement payment will result in an expense of up to $2.9 million
when paid. In addition, in October 1997, the Company and Household agreed to the
settlement of certain obligations of the Company to Household related to the
development of VisionPLUS. Pursuant to such settlement, the Company agreed to
waive the future payment by Household of fees for services to be provided by the
Company or additional license fees due to the Company up to a maximum aggregate
amount. Such settlement resulted in an expense of $0.3 million related
principally to the Company's estimated cost of providing such services. See Note
12 of Notes to Consolidated Financial Statements.
The Company obtained a second term loan in the principal amount of $4.0
million from Sirrom Capital Corporation in September 1997 in connection with
which the Company paid Sirrom a fee of $80,000 and issued Sirrom a warrant to
purchase 37,660 shares of Common Stock for $.002 per share which were valued at
$0.3 million. The Company intends to prepay such loan from the net proceeds of
the sale of shares of Common Stock offered hereby by the Company which
prepayment will result in an expense of $0.4 million related to such fee payment
and warrant issuance.
The Company entered into an agreement with Ferntree Computer Corporation
Pty. Limited ("Ferntree") dated June 1997, relating to the termination of
Ferntree's status as a sales agent for the Company in Australia, New Zealand and
certain other countries located in the South Pacific. Pursuant to the agreement,
the Company has agreed to pay to Ferntree a commission of 30% of each license
fee resulting from the Company's sales of the existing modules of VisionPLUS in
such areas, up to a maximum
24
<PAGE>
aggregate amount of $1.0 million. Such payments are due following the Company's
receipt of such license fees.
Cost of license revenues consists principally of royalties due to third
parties and the amortization of capitalized software costs. Gross margins on
license revenues have been and will continue to be affected principally by the
level of license revenues, the mix of modules sold, related royalty payments to
third parties and the amortization of capitalized software costs. Cost of
service revenues consists primarily of salaries and benefits of employees and
have been affected primarily by the Company's efficiencies in its use of labor
and the Company's ability to utilize employees on billable projects.
FEES AND REVENUE RECOGNITION
The Company generates revenue from two principal sources: (i) license fees
for its software and (ii) services fees for customization, installation and
training services (professional services) and fees for maintenance and support
and compliance services. License revenues for these years were $5.7 million,
$8.7 million and $13.4 million, respectively, representing a compound annual
growth rate of 53%. The Company's total revenues from license and service fees
were $16.5 million, $21.7 million and $26.9 million in 1994, 1995 and 1996,
respectively, representing a compound annual growth rate of 28%.
The Company's typical license is perpetual, non-exclusive and
non-refundable. VisionPLUS consists of a number of application modules and
interface suites that are priced and can be licensed separately. License fees
for VisionPLUS are based principally upon the application modules and interface
suites included in the system delivered and the number of accounts that the
customer maintains with the system. See "Business--Products" for a discussion of
license fees for VisionPLUS. A significant portion of a license fee typically is
paid upon the execution of the license agreement and the remainder is paid upon
the achievement of specified milestones, usually within one year from such
execution. Generally, additional license fees are due as the number of accounts
processed using the software crosses certain tiers.
The Company generally recognizes license revenues, less deferrals for
maintenance and support and compliance services during an agreed-upon initial
warranty period, which is generally one year from the execution of the license
agreement, upon delivery of the software and related documentation when the (i)
Company does not have any significant remaining obligations under the related
license agreement and the software is not subject to customer acceptance and
(ii) collectibility of the license fee is assessed as probable. If the Company
has significant post-delivery obligations or the software is subject to customer
acceptance, recognition of the license fee is deferred until such obligations
have been met or such acceptance occurred. The deferrals for maintenance and
support and compliance, which are typically 15% of the license fees, are
recognized over such warranty period. Revenues from additional license fees for
increased account processing are recognized when such amounts become due.
License fees paid in advance of recognizing such fees as revenue are recorded as
deferred revenue. License fees which have been recognized as revenue but payment
of which is not yet due according to the terms of the license agreement are
recorded as unbilled accounts receivable until invoiced, generally 30 days prior
to the due date.
Customers may purchase professional services in hourly blocks or on a per
hour basis. Hourly blocks are generally paid in advance and per hour sales are
invoiced monthly in arrears. The Company typically charges an annual fee for
maintenance services equal to a percentage of the license fee, after the
expiration of the initial warranty period. In addition, with respect to
VisionPLUS, the Company currently charges a separate annual fee for compliance
services. The Company generally seeks to obtain a three-to-five year commitment
from the customer for such maintenance and support and compliance services.
After this three-to-five year period, such services are provided, at the request
of the customer, on a year-to-year basis. Historically, maintenance and support
and compliance services were sold as one service; however, for VisionPLUS, the
Company offers compliance as a separately-priced service. Generally, fees for
maintenance and support and compliance services are paid annually in advance.
Revenues from professional services are recognized as the services are
performed. Maintenance and support and compliance
25
<PAGE>
service revenues are recognized over the term of the agreement for such
services. Amounts received for professional services and maintenance and
compliance services in advance of recognizing the related revenue are recorded
as deferred revenue.
RESULTS OF OPERATIONS
The following table sets forth certain items from the Company's consolidated
statements of operations as a percentage of total revenues of the Company for
the periods indicated.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
Revenues
License.................................................... 34.9% 39.9% 49.6% 46.8% 31.1%
Services................................................... 65.1 60.1 50.4 53.2 68.9
--------- --------- --------- --------- ---------
Total revenues........................................... 100.0 100.0 100.0 100.0 100.0
Cost of revenues
License.................................................... 5.7 6.1 10.9 9.3 11.4
Services................................................... 46.4 43.7 33.3 35.3 50.7
--------- --------- --------- --------- ---------
Total cost of revenues................................... 52.1 49.8 44.2 44.6 62.1
Gross margin............................................. 47.9 50.2 55.8 55.4 37.9
Operating expenses
Sales and marketing........................................ 15.1 10.6 12.1 11.5 12.7
Research and development................................... 9.8 9.8 25.8 23.4 35.6
General and administrative................................. 18.5 18.9 15.7 13.4 21.1
Write-off of capitalized software.......................... 0.0 9.9 0.0 0.0 0.0
--------- --------- --------- --------- ---------
Total operating expenses..................................... 43.4 49.2 53.6 48.3 69.4
Income (loss) before interest and taxes.................. 4.5 1.0 2.2 7.1 (31.5)
Interest expense, net........................................ 1.4 1.6 0.6 0.7 0.3
--------- --------- --------- --------- ---------
Income (loss) before income taxes........................ 3.1 (0.6) 1.6 6.4 (31.8)
Income taxes................................................. 2.2 1.6 1.1 4.4 2.0
--------- --------- --------- --------- ---------
Income (loss) from continuing operations................. 0.9% (2.2)% 0.5% 2.0% (33.8)%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
REVENUES. Total revenues increased 16% to $13.7 million for the six months
ended June 30, 1997 from $11.8 million for the six months ended June 30, 1996,
primarily due to increased fees from services. License revenues decreased to
$4.2 million, or 31% of total revenues, for the six months ended June 30, 1997,
compared to $5.5 million, or 47% of total revenues, for the six months ended
June 30, 1996. This decrease was principally due to the timing of revenue
recognition on one large project undertaken during the six months ended June 30,
1997. Service revenues increased 51% to $9.4 million, or 69% of total revenues,
for the six months ended June 30, 1997, as compared to $6.3 million, or 53% of
total revenues, for the six months ended June 30, 1996. This increase reflects
increased demand for professional services (particularly related to the large
number of new licenses agreements in the second half of 1996) as well as an
increase in maintenance and support and compliance fees.
COST OF REVENUES. Total cost of revenues increased 62% to $8.5 million for
the six months ended June 30, 1997 from $5.2 million for the six months ended
June 30, 1996. Cost of license revenues increased 43% to $1.6 million for the
six months ended June 30, 1997 from $1.1 million for the six months ended
26
<PAGE>
June 30, 1996 and as a percentage of license revenues increased to 37% for the
six months ended June 30, 1997 from 20% for the six months ended June 30, 1996.
These increases are due principally to the effect of fixed third-party royalties
payable with respect to each license sold on lower average license fees and to a
lesser extent the effect of lower license revenues and a comparable level of
software amortization expense. Cost of service revenues increased 67% to $6.9
million for the six months ended June 30, 1997 from $4.1 million for the six
months ended June 30, 1996 and as a percentage of service revenues increased to
74% for the six months ended June 30, 1997 from 66% for the six months ended
June 30, 1996. These increases reflect a substantial increase in the number of
employees and independent contractors as well as the opening of foreign offices
in anticipation of higher future service revenues.
SALES AND MARKETING. Sales and marketing expenses increased 28% to $1.7
million for the six months ended June 30, 1997 from $1.4 million for the six
months ended June 30, 1996. Sales and marketing expenses represented 13% and 12%
of total revenues for the six months ended June 30, 1997 and 1996, respectively.
These increases are due principally to the addition of personnel (and related
travel costs) to support increased marketing and sales efforts.
RESEARCH AND DEVELOPMENT. Research and development expenses increased 77%
to $4.9 million for the six months ended June 30, 1997 from $2.8 million for the
six months ended June 30, 1996. Research and development expenses represented
36% and 23% of total revenues for the six months ended June 30, 1997 and 1996,
respectively. These increases are due principally to a significant increase in
the number of personnel involved in developing a new software platform and
application modules. See "Business-- Strategy" and "--Product Development."
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
82% to $2.9 million for the six months ended June 30, 1997 from $1.6 million for
the six months ended June 30, 1996. General and administrative expenses
represented 21% and 13% of total revenues for the six months ended June 30, 1997
and 1996, respectively. These increases are due principally to the addition of
management personnel and the expansion of the Company's facilities in Maitland,
Florida and Atlanta, Georgia and, to a lesser extent, a charge resulting from
the settlement of a lawsuit.
INTEREST EXPENSE, NET. Interest expense, net decreased by 57% to $35,000
for the six months ended June 30, 1997 from $81,000 for the six months ended
June 30, 1996 due to higher interest income resulting from increases in the
average cash and cash equivalents balances.
INCOME TAXES. Income tax expense was $0.3 million for the six months ended
June 30, 1997 and $0.5 million for the six months ended June 30, 1996. The
provisions for income taxes for 1997 and 1996 were based upon the estimated
annual effective tax rate for the year. The difference between the effective
income tax rate for the six months ended June 30, 1997 and the amounts
calculated at the statutory rate was due primarily to an increase in the
valuation allowance provided against deferred tax assets. The difference between
the effective income tax rate for the six months ended June 30, 1996 and the
amount calculated at the statutory rate was due primarily to an increase in the
valuation allowance provided against deferred tax assets, the current generation
of research and development credits and the benefit of foreign tax credits not
previously recognized. See Note 6 of Notes to Consolidated Financial Statements.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
REVENUES. Total revenues increased 24% to $26.9 million for 1996 from $21.7
million for 1995. The increase is principally due to increased license revenues,
which increased 54% to $13.4 million in 1996 from $8.7 million in 1995. The
increase in license revenues reflects delivery of VisionPLUS for the entire year
of 1996 as compared to only one-half of 1995 (VisionPLUS was released in the
second half of 1995) and a 44% increase in average license revenues per sale to
$0.5 million in 1996 from $0.3 million in 1995. The 4% increase in service
revenues to $13.6 million in 1996 from $13.1 million in 1995 is attributable to
27
<PAGE>
an increase in professional service revenues of 10% while maintenance and
support and compliance services were virtually unchanged. Professional service
revenues increased due to increased professional services as a result of
increased license sales in 1996 as compared to 1995.
COST OF REVENUES. Total cost of revenues increased 10% to $11.9 million for
1996 from $10.8 million for 1995. The cost of license revenues increased 122% to
$2.9 million for 1996 from $1.3 million for 1995, and as a percentage of license
revenues increased to 22% for 1996 from 15% for 1995. The increase for 1996 in
the cost of license revenues as a percentage of license revenues is due to
additional third-party royalties resulting from increasing sales of VisionPLUS
modules subject to royalties. The cost of service revenues declined 6% to $9.0
million for 1996 from $9.5 million for 1995, and as a percentage of service
revenues to 66% for 1996 from 73% for 1995. The decline in cost of service
revenues for 1996 as a percent of service revenues is due to increased
utilization of employees on billable projects in 1996.
SALES AND MARKETING. Sales and marketing expenses increased 42% to $3.3
million for 1996 from $2.3 million for 1995 reflecting the addition of personnel
and related travel costs. Sales and marketing expenses represented 12% and 11%
of revenue for 1996 and 1995, respectively.
RESEARCH AND DEVELOPMENT. Research and development expenses increased 226%
to $6.9 million for 1996 from $2.1 million for 1995. As a percentage of total
revenues, research and development expenses increased to 26% for 1996 from 10%
for 1995. In 1996, the Company undertook a new product development initiative
which resulted in a significant increase in the number of development personnel
and related occupancy and support costs.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
3% to $4.2 million for 1996 from $4.1 million for 1995. As a percentage of total
revenues, general and administrative expenses represented 16% and 19% for 1996
and 1995, respectively. The decline in general and administrative expense as a
percentage of total revenues resulted primarily from essentially unchanged
dollar amounts of expense for 1996 as compared to 1995, while total revenues
increased for 1996 as compared to 1995.
INTEREST EXPENSE, NET. Interest expense, net declined by 56% to $0.2
million for 1996 from $0.3 million for 1995 because the average amount of
borrowings was lower in 1996 and because interest income was slightly higher in
1996 as a result of higher average cash balances during that year.
INCOME TAXES. The provision for income taxes was $0.3 million for 1996 as
compared to $0.4 million for 1995. The difference between the 1996 tax expense
calculated at the statutory rate and the amounts recorded in the financial
statements was primarily related to benefits recognized from research and
development and foreign tax credits offset by an increase in the valuation
allowance against deferred tax assets. The difference between the 1995 tax
expense calculated at the statutory rate and the amounts recorded in the
financial statements was related primarily to foreign withholding taxes and
expiring foreign tax credits. See Note 6 of Notes to Consolidated Financial
Statements.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
REVENUES. Total revenues for 1995 increased 32% to $21.7 million from $16.5
million for 1994. The increase was due both to increased license revenues and an
increase in service revenues. License revenues increased 51% to $8.7 million for
1995 from $5.7 million for 1994, while service revenues increased 22% to $13.1
million for 1995 from $10.7 million for 1994. License revenues represented 40%
and 35% of total revenues for 1995 and 1994, respectively. The increase in
license revenues resulted primarily from increased number of licenses sold due
to the release of VisionPLUS in the second half of 1995 and, to a lesser extent,
an increase in the average license fee per sale. The increase in service
revenues resulted primarily from an increase in professional service revenues
and to a lesser extent, from an increase in maintenance revenues. Professional
service revenues increased due to increased professional services as a result of
increased license sales in 1995 as compared to 1994.
28
<PAGE>
COST OF REVENUES. Total cost of revenues increased 26% to $10.8 million for
1995 from $8.6 million for 1994. The cost of license revenues increased 41% to
$1.3 million for 1995 from $0.9 million for 1994, but as a percentage of license
revenues decreased to 15% for 1995 as compared to 16% for 1994. The cost of
license revenues increased due to an increase in the amortization of capitalized
software and to an increase in royalties to third parties. The cost of service
revenues increased 24% to $9.5 million for 1995 from $7.6 million for 1994 and
as a percentage of service revenues to 73% for 1995 as compared to 71% for 1994.
The cost of service revenues increased in absolute dollars due to the increase
in service revenues. The increase in cost of service revenues as a percentage of
service revenues resulted from a decrease in average billing rates and in the
utilization of employees on billable projects.
SALES AND MARKETING. Sales and marketing expenses decreased 7% to $2.3
million for 1995 from $2.5 million for 1994. The decrease was due principally to
a decrease in sales commissions, which occurred because $2.9 million of total
revenues for 1995, as compared to none for 1994, was received as funding from
Household International, Inc. in connection with the development of VisionPLUS
and not subject to such commissions. Sales and marketing expenses represented
11% and 15% of total revenues for 1995 and 1994, respectively.
RESEARCH AND DEVELOPMENT. Research and development expenses increased 32%
to $2.1 million for 1995 as compared to $1.6 million for 1994 as a result of
additional personnel engaged in software development activities. As a percentage
of total revenues, research and development expenses were 10% for both 1995 and
1994.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
35% to $4.1 million for 1995 from $3.0 million for 1994. As a percentage of
total revenues, general and administrative expenses represented 19% and 19% for
1995 and 1994, respectively. The increase in dollars resulted primarily from
salary expense relating to additional personnel as a result of a higher level of
operations.
WRITE-OFF OF CAPITALIZED SOFTWARE. The $2.1 million write-off in 1995 was
due principally to the determination that capitalized software costs related to
the Company's CardPac product were no longer of value. In 1995, the Company
ceased licensing CardPac.
INTEREST EXPENSE, NET. Interest expense, net increased 41% to $0.3 million
for 1995 compared to $0.2 million for 1994 primarily because interest income
decreased $78,000 as a result of lower average cash balances during 1995
compared to 1994.
INCOME TAXES. The provision for income taxes was $0.4 million in both 1995
and 1994. The difference between the 1995 tax expense calculated at the
statutory rate and the amounts recorded in the financial statements was
primarily related to foreign withholding taxes and expiring foreign tax credits.
The difference between the 1994 tax expense calculated at the statutory rate and
the amounts recorded in the financial statements was primarily related to the
tax effect of losses incurred at a foreign subsidiary with no tax benefit.
QUARTERLY RESULTS OF OPERATIONS
The following tables present unaudited quarterly consolidated statements of
operations data for each of the six quarters ended June 30, 1997. This
information has been prepared on the same basis as the audited financial
statements appearing elsewhere in this Prospectus and includes all adjustments,
consisting only of normal recurring adjustments that the Company considers
necessary for a fair presentation of the information when read in conjunction
with the Consolidated Financial Statements and Notes thereto appearing elsewhere
in this Prospectus.
29
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1996 1996 1996 1996 1997 1997
----------- ----------- ----------- ----------- ----------- ---------
<CAPTION>
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA
Revenues
License.............................. $ 1,101 $ 4,395 $ 2,346 $ 5,524 $ 1,138 $ 3,107
Services............................. 2,723 3,537 3,620 3,678 4,363 5,062
----------- ----------- ----------- ----------- ----------- ---------
Total revenues......................... 3,824 7,932 5,966 9,202 5,501 8,169
Cost of revenues
License.............................. 254 834 720 1,127 617 936
Services............................. 2,414 1,734 2,192 2,616 2,992 3,946
----------- ----------- ----------- ----------- ----------- ---------
Total cost of revenues................. 2,668 2,568 2,912 3,743 3,609 4,882
Gross margin........................... 1,156 5,364 3,054 5,459 1,892 3,287
Operating expenses
Sales and marketing.................. 489 862 840 1,079 873 860
Research and development............. 1,120 1,638 1,861 2,325 2,444 2,428
General and administrative........... 680 903 863 1,781 1,191 1,693
----------- ----------- ----------- ----------- ----------- ---------
Total operating expenses............... 2,289 3,403 3,564 5,185 4,508 4,981
----------- ----------- ----------- ----------- ----------- ---------
Income (loss) from operations.......... (1,133) 1,961 (510) 274 (2,616) (1,694)
Interest expense, net.................. 51 29 22 48 15 20
----------- ----------- ----------- ----------- ----------- ---------
Income (loss) before income taxes...... (1,184) 1,932 (532) 226 (2,631) (1,714)
Income tax expense (benefit)........... (812) 1,325 (365) 155 -- 277
----------- ----------- ----------- ----------- ----------- ---------
Net income (loss)...................... $ (372) $ 607 $ (167) $ 71 $ (2,631) $ (1,991)
----------- ----------- ----------- ----------- ----------- ---------
----------- ----------- ----------- ----------- ----------- ---------
PERCENT OF TOTAL REVENUES
Revenues
License.............................. 28.8% 55.4% 39.3% 60.0% 20.7% 38.0%
Services............................. 71.2 44.6 60.7 40.0 79.3 62.0
----------- ----------- ----------- ----------- ----------- ---------
Total revenues......................... 100.0 100.0 100.0 100.0 100.0 100.0
Cost of Revenues
License.............................. 6.6 10.5 12.1 12.3 11.2 11.5
Services............................. 63.2 21.9 36.7 28.4 54.4 48.3
----------- ----------- ----------- ----------- ----------- ---------
Total cost of revenues................. 69.8 32.4 48.8 40.7 65.6 59.8
Gross margin........................... 30.2 67.6 51.2 59.3 34.4 40.2
Operating expenses
Sales and marketing.................. 12.8 10.9 14.1 11.7 15.9 10.5
Research and development............. 29.3 20.6 31.2 25.3 44.4 29.7
General and administrative........... 17.8 11.4 14.5 19.3 21.6 20.7
----------- ----------- ----------- ----------- ----------- ---------
Total operating expenses............... 59.9 42.9 59.8 56.3 81.9 60.9
----------- ----------- ----------- ----------- ----------- ---------
Income (loss) from operations.......... (29.7) 24.7 (8.6) 3.0 (47.5) (20.7)
Interest expense, net.................. 1.3 0.4 0.4 0.5 0.3 0.2
----------- ----------- ----------- ----------- ----------- ---------
Income (loss) before income taxes...... (31.0) 24.3 (9.0) 2.5 (47.8) (20.9)
Income tax expense (benefit)........... (21.3) 16.6 (6.2) 1.7 0.0 3.4
----------- ----------- ----------- ----------- ----------- ---------
Net income (loss)...................... (9.7)% 7.7% (2.8 )% 0.8% (47.8 )% (24.3)%
----------- ----------- ----------- ----------- ----------- ---------
----------- ----------- ----------- ----------- ----------- ---------
</TABLE>
The Company has experienced significant fluctuations in its quarterly
operating results and anticipates that such fluctuations will continue for the
foreseeable future. The Company's revenues in any quarter are typically derived
from non-recurring, large license fees and related service fees received from a
relatively
30
<PAGE>
small number of customers. The Company's most significant customers generally
vary from quarter to quarter. The Company expects that sales to a limited number
of customers will continue to account for a significant percentage of its
revenue in any quarter for the foreseeable future. See "Risk Factors--
Fluctuations in Quarterly Results," "--Dependence on Single Product; Conversion
Risk; Dependence on Financial Institution Industry; Customer Concentration" and
"Business--Customers." As a result, at the Company's current revenue level, each
sale or failure to make a sale can have a material effect on the Company. There
can be no assurance that the Company will be able to achieve a level of revenues
or rate of growth in any future period commensurate with its level of expenses.
The Company's expense levels are based in part on expectations of future revenue
levels and demands for its software and services and are fixed to a large extent
in the short term. As a result, the Company may be limited in its ability to
reduce spending in a quarter to compensate for an unexpected revenue shortfall
in such a short-term time period. See "Risk Factors--Fluctuations in Quarterly
Results" and "--Possible Volatility of Market Price."
LIQUIDITY AND CAPITAL RESOURCES
Since January 1, 1994, the Company has satisfied its cash requirements
principally through cash flows from operations and borrowings from an investment
fund and from an affiliate, Intelligent Systems Corporation ("ISC"). In
addition, the Company issued shares of Common Stock to ISC in exchange for the
cancellation of certain long-term indebtedness and accrued interest and accounts
payable. See "Certain Transactions."
Net cash provided by operating activities was $0.7 million, $3.4 million and
$3.5 million for 1994, 1995 and 1996, respectively, and $2.4 million and $1.2
million for the six months ended June 30, 1996 and 1997, respectively. The $1.2
million decline in net cash provided by operating activities for the six months
ended June 30, 1997 as compared to the six months ended June 30, 1996 resulted
primarily from a decline of $4.9 million in operating results partially offset
by an increase of $3.7 million in deferred revenues. The $2.7 million increase
in net cash provided by operating activities for 1995 as compared to 1994
resulted principally from an increase in earnings which included $2.4 million in
non-cash amortization of software development costs due principally to the
write-off of amounts previously capitalized related to CardPac.
Net cash used in investing activities was $3.3 million, $2.6 million and
$1.8 million for 1994, 1995 and 1996, respectively, and $1.0 million and $1.1
million for the six months ended June 30, 1996 and 1997, respectively. The net
cash used in investing activities in all such periods was used principally for
capitalized software development costs and purchases of furniture and equipment
to support the Company's growing employee base. Net cash provided by financing
activities was $0.6 million for 1994 and net cash used in financing activity was
$44,000, $0.9 million, $0.2 million and $0.2 million for 1995, 1996 and the six
months ended June 30, 1996 and 1997, respectively. In 1994 and 1995, the Company
borrowed $1.0 million and $0.4 million, respectively, from ISC. The $0.8 million
increase in net cash used in financing activities from 1995 to 1996 resulted
from decreased borrowings and from the repayment of $0.4 million of indebtedness
to ISC. See "Certain Transactions."
The Company's capital commitments consist primarily of capital leases and
noncancelable operating leases for office space, furnishings and equipment. At
December 31, 1996, the Company's commitments under capital leases and
noncancelable operating leases with terms in excess of one year totaled $1.8
million, $1.7 million, $1.6 million and $0.6 million for 1997, 1998, 1999 and
2000, respectively. The Company is also committed to pay certain royalties to
Household International, Inc. See Note 5 of Notes to Consolidated Financial
Statements. Upon the completion of the offering, the Company intends to make a
payment to Household from the net proceeds of the sale of shares of Common Stock
offered hereby by the Company of $5.1 million less the amount of royalties paid
by the Company to Household prior to such settlement payment, in settlement of
all current and future obligations to Household pursuant to the agreement
providing for such royalty payments.
31
<PAGE>
The Company has $4.0 million outstanding at September 30, 1997 under a term
loan agreement, which matures September 2002, with Sirrom Capital Corporation,
the payment of which is secured by the Company's assets, which accrues interest
at an annual rate of 13.5%. The principal balance of the loan is due on the
maturity date and interest is due monthly in arrears. The Company intends to
prepay such principal amount and any accrued interest from the net proceeds of
the sale of shares of Common Stock offered hereby by the Company. See "Use of
Proceeds." If the loan is not paid within thirty days of the completion of the
offering, then the warrant issued to Sirrom Capital Corporation in connection
with this loan becomes exercisable for an increasingly higher number of shares
of Common Stock until the loan is paid in full.
As of June 30, 1997, the Company's total liabilities exceeded its total
assets by $4.5 million and current liabilities exceeded current assets by $7.7
million. The Company expects to incur a net loss for 1997. See "Risk
Factors--History of Operating Losses." The Company intends to use a substantial
portion of the net proceeds from the sale of shares of Common Stock offered
hereby by the Company for general corporate purposes, including, among other
things, working capital. See "Use of Proceeds." Included in the Company's
current liabilities was $12.2 million of deferred revenue resulting from
customer prepayments of service fees of $6.3 million and customer payments of
license fees of $5.9 million. The Company had not recognized such deferred
revenue as of June 30, 1997 because certain contingencies to such recognition
(including, in one instance, the customer's acceptance of the software) had not
occurred. If certain services are not performed and such contingencies are not
satisfied, customers may be entitled to, or the Company may be obligated to
make, a refund of some or all of such deferred revenue.
The Company believes the net proceeds of the offering, together with cash
flows from operations, will provide sufficient cash to meet the Company's
anticipated cash requirements for at least the next twelve months.
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued a new
accounting pronouncement, SFAS No. 128, "Earnings per Share," which will change
the current method of computing earnings per share. The new standard requires
presentation of "basic earnings per share" and "diluted earnings per share"
amounts, as defined. SFAS No. 128 will be effective for the Company's quarter
and year ending December 31, 1997, and, upon adoption, all prior-period earnings
per share data presented shall be restated to conform with the provisions of the
new pronouncement. Application earlier than the Company's quarter ending
December 31, 1997 is not permitted. The Company has evaluated the impact of
adopting SFAS No. 128 and does not expect restated basic and diluted earnings or
loss per share to be reported upon adoption of SFAS No. 128 to differ from
amounts reported under existing accounting rules for all periods reported by the
Company through June 30, 1997.
BACKLOG
Backlog, defined as the contract value of executed license and service
agreements minus revenue recognized from those contracts, totaled $15.5 million
as of June 30, 1997. The June 30, 1997 backlog was comprised of $7.2 million in
license fees and $8.3 million in service fees. As of June 30, 1996, the
Company's backlog was $6.2 million, comprised of $0.5 million in license fees
and $5.7 million in service fees. Backlog of license and service fees is
expected to be realized within a period of one year. There can be no assurance
that the contracts included in backlog will actually generate the specified
revenues or that such revenues will be generated within such one-year period.
32
<PAGE>
BUSINESS
The Company is the world's leading supplier of software that performs
mission-critical credit card transaction processing functions. The Company's
current software product, VisionPLUS, is a customizable software system
consisting of a range of integrated application modules for processing both bank
and retail credit card transactions. VisionPLUS provides the necessary
functionality for processing credit card transactions from application
processing and transaction authorization requests through billing and
collection. The Company licenses its software to banks, finance companies and
retailers that process their own credit card transactions as well as to
third-party processors that process such transactions for others. The services
offered by the Company to its customers include product customization,
installation, training, product maintenance and support and ongoing compliance
with bank card association (Visa, MasterCard and Europay) standards. As of
August 31, 1997, the Company was supporting 101 licensees of VisionPLUS and its
other products in 28 countries which, the Company believes, were processing more
than 100 million accounts. The Company's customers include leading domestic and
international banks, finance companies, retailers and third-party processors
such as Citicorp, GE Global Consumer Finance, Electronic Data Systems,
Spiegel's, Neiman Marcus, Toronto Dominion Bank, Bank of Nova Scotia, ABN Amro
Bank, Household International, Beneficial Finance, The Associates Financial
Services and Whirlpool Financial.
The Company's objective is to leverage its position as the leading supplier
of software for processing credit card transactions to further strengthen its
market position and to expand into software for other payment transactions and
related functions. The Company's strategy to achieve this objective includes
maintaining market-leading products, expanding product offerings to broaden
customer relationships, aggressively pursuing international markets, developing
additional strategic alliances to help generate sales referrals and for joint
marketing programs, increasing the use of pricing methods that produce recurring
revenues, and developing a new software platform to facilitate the introduction
of new products and functions.
INDUSTRY BACKGROUND
Worldwide spending in 1995 for software for processing credit card
transactions was estimated to be $1.2 billion according to the Tower Group. In
addition to these software expenditures, $1.9 billion was spent for hardware and
$2.5 billion for information technology services, including outsourcing
contracts, for a total of $5.6 billion in expenditures in 1995 for credit card
processing information technology, which is expected to grow at a compound
annual rate of 9% from 1995 through 2000, according to the same source.
A majority of the spending on software for processing credit card
transactions is for software developed "in-house" by credit card issuers and
third-party processors who process transactions on behalf of credit card
issuers. In 1995, spending for software and related services for credit and
debit card transaction processing purchased from "outside" vendors, such as the
Company, was estimated by published reports to be $90 million. The Nilson Report
estimates that there were approximately 9,100 issuers of MasterCard and Visa
credit and debit cards worldwide in 1995.
Software for processing credit card transactions on the customer side of the
transaction typically supports functions like application processing, credit
policy implementation, account set-up and maintenance, authorization, customer
service and statement rendering. On the merchant side of the transaction
functions such as account acquisition, risk management, merchant accounting and
settlement, and exceptions and inventory management are supported. This software
is essential to the business of the financial institutions and retailers who are
the principal issuers of credit cards and for third-party processors. In order
to remain competitive and to maintain and expand their customer base, credit
card issuers are increasingly offering a variety of interest rate structures,
credit limits, fee arrangements, and ancillary features such as co-branding and
other promotional programs. These requirements have significantly increased the
demands placed on software for processing credit card transactions.
33
<PAGE>
Credit card transaction processing is conducted by banks and retailers
either on systems developed internally or acquired from vendors such as the
Company or is provided as a service by third-party processors. The Tower Group
estimates that 54% of credit card transactions in the United States are
processed by third-parties with the balance being processed in-house. The
Company believes that outside of the United States, the majority of processing
occurs in-house. Among the factors influencing the decision to utilize the
services of a third-processor as opposed to processing in-house are the
following:
- COSTS: Economies of scale are important in the credit card processing
business. Therefore, a financial institution or a retailer should have, or
plan to have, a sizable portfolio of accounts to warrant the costs of
staffing and the infrastructure for in-house processing.
- CURRENT INFORMATION TECHNOLOGY INFRASTRUCTURE: If its existing system does
not adequately support its current credit card business, an issuer may
consider outsourcing a reasonable alternative to acquiring the necessary
technology. The experience and abilities of the issuer's system support
staff may also influence a decision to outsource.
- CONTROL: Many credit card issuers prefer to ensure their data integrity
and service levels by processing in-house. This is particularly true
outside of the United States, where most issuers prefer to have complete
control over the direction of their credit card business, the data
captured in their credit card data bases, and the technology that supports
it.
The volume of credit card transactions now occurring worldwide has been made
possible by an electronic transaction processing infrastructure of which
software programs such as those offered by the Company are a mission-critical
component. Historically, financial institutions and third-party processors have
used software developed internally. Today credit card transactions are primarily
electronic and require software protocols that can support huge volumes of
diverse, complex transactions. Furthermore, the interchange associations (Visa,
MasterCard and Europay) update the communications and other interface standards
several times a year and require compliance in order to continue interacting
with their networks. The complexity of the interchange standards, the frequency
of change to them, emerging new requirements (e.g., year 2000 compliance), and
the sheer volume of transactions make it increasingly difficult to continue to
develop software solutions internally. The trend of moving away from internal
development to buying software solutions from outside vendors is already evident
with major credit card issuers such as Citibank.
Software products that serve the credit card processing industry today tend
to be:
- Confined to run on a single platform, in most cases mainframe (e.g. IBM
mainframe)
- Dedicated to a single task (e.g. bank card only, retail card only)
- Designed to handle common tasks in non-integrated ways (e.g. unable to
create reports from multiple modules)
- Difficult and expensive to maintain and upgrade
- Difficult and expensive to operate, requiring large amounts of detailed
training
The Company believes that a strong worldwide market opportunity exists,
particularly in the non-U.S. markets, for software solutions that address the
above issues among credit card issuers and third-party processors.
THE PAYSYS SOLUTION
The Company offers a single, comprehensive, integrated software solution
that can process both bank and retail credit card and consumer loan
transactions. Use of the Company's software and services allows the Company's
customers to conduct transaction processing activities while avoiding the time,
expense and difficulty of developing, maintaining and supporting their own
processing software. The Company's
34
<PAGE>
approach to addressing the above issues related to providing effective payment
transaction processing solutions for the evolving marketplace is as follows:
<TABLE>
<CAPTION>
ISSUE PAYSYS SOLUTION CUSTOMER BENEFIT
- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C>
Multiple Platforms Produce a single-source Customers have the
software product which can flexibility to run the
run equally well on major software on the best-
platforms, from mainframes to available or most
AS/400 to UNIX-based cost-effective platform.
machines.
Lack of Multi-Function Create an integrated product Customers can run more of
Software suite which can be adapted to their operations on a single
meet increasing processing system, reducing acquisition,
requirements. operation and training costs.
Disparate Solutions to Common Build a new component-based Customers can reduce a
Tasks system that constructs variety of internal costs,
specific solutions (e.g. enhance reporting flexibility
fraud management, and offer innovative products
collections) from a set of more quickly and with less
shared building blocks. difficulty.
Difficult and Expensive to Transition to a new software Customers can reduce costs
Maintain and Upgrade system that uses and improve the speed and
object-oriented programming quality with which they can
and repository technology. respond to new market
conditions.
Difficult and Expensive to Develop a software system Customers can operate their
Operate that embodies workflow and software with fewer people
process automation and who can perform multiple
provides a common user functions with less training
interface. and produce more consistent,
higher quality results.
</TABLE>
STRATEGY
The Company's objective is to leverage its position as the leading supplier
of software for processing credit card transactions to further strengthen its
market position and to expand into software for other payment transactions and
related functions. The Company's strategy to achieve this objective includes the
following key elements:
- MAINTAIN PRODUCT LEADERSHIP -- The Company's depth of knowledge and
ongoing development efforts responsive to the requirements of the bank and
retail credit card markets have enabled it to develop market-leading
products. This expertise has also resulted in the development of
VisionPLUS, which the Company believes is rapidly becoming the leading
solution for processing both bank and retail credit card transactions. The
Company intends to continue its efforts to increase its depth of knowledge
of credit card transaction processing and to reflect that knowledge in
product enhancements and to leverage such knowledge to develop software
for other types of financial transactions.
- EXPAND PRODUCT OFFERINGS TO BROADEN CUSTOMER RELATIONSHIPS -- The Company
intends to continually expand its product and service offerings to its
existing and prospective customers. Currently, the Company is developing
three new application modules to complement and extend the functionality
of VisionPLUS. These new modules, data warehousing, fraud management and
universal message
35
<PAGE>
processor, are being designed to provide a significant benefit over
similar products offered by other software vendors and systems developed
internally by users.
- AGGRESSIVELY PURSUE INTERNATIONAL MARKETS -- As a result of continuing
expansion of credit card use, the international financial transaction
processing market is growing rapidly. Therefore, the Company intends to
expand its international marketing efforts in Europe, Asia and South
America, through additional direct sales personnel, sales agents, and
alliance partners.
- FURTHER DEVELOP STRATEGIC RELATIONSHIPS -- The Company has established
strategic relationships for the purpose of generating sales referral and
joint marketing opportunities, obtaining hardware software certification
from appropriate hardware vendors and for specific software development
projects. The Company currently has relationships with Hewlett-Packard
Company, Sun Microsystems, Inc., Fair, Isaac and Company, Incorporated and
Alltel Information Services, Inc. The Company intends to maintain and
expand its existing relationships and to develop new ones.
- INCREASE RECURRING REVENUES -- In order to make its revenues more
predictable, the Company has begun to pursue strategies to increase the
percentage of revenues represented by recurring fees (as opposed to
one-time large license fees). Recently, the Company has begun to license
its software to third-party processors on a monthly usage fee basis and,
to date, there are five agreements structured in this fashion. In
addition, the Company has begun charging annual fees for providing bank
card association compliance services for its customers separately from
maintenance and support fees.
- DEVELOP NEW APPLICATIONS THROUGH NEW SOFTWARE SYSTEM -- The Company
believes that its competitive position in current and future markets will
be enhanced by the use of object oriented technology to facilitate rapid
development, implementation and customization of its software products to
meet customer demands. The Company is developing a new software system
designed to allow the development of payment transaction applications
utilizing a common body of code (a transaction engine) and a set of
business object components without requiring substantial additional code
for each application. The new universal message processor and fraud
management modules currently being developed by the Company are being
developed using this software system and the data warehouse module now
under development incorporates portions of such system.
PRODUCTS
The Company's current product is VisionPLUS, which is used for processing
both bank and retail credit card transactions. The Company's earlier products
were CardPac, for processing bank credit card transactions, and Vision21 for
processing retail credit card transactions.
CARDPAC. The Company believes that its original product, CardPac, which was
introduced in 1983, is currently the most widely-used product worldwide for
processing bank credit card transactions. The Company has licensed CardPac to
customers in North and South America, and it sold to The SEMA Group, S.A. the
right to license CardPac in Western Europe and certain areas in Asia. In 1995,
the Company discontinued granting new licenses for CardPac and it intends to
discontinue the provision of maintenance and support for CardPac after 1998. As
of August 31, 1997, the Company was continuing to support 35 customers using
CardPac. The Company is offering its current CardPac users incentives to
encourage them to purchase VisionPLUS for their processing activities. Through
August 31, 1997, 19 CardPac users (including the ten largest users based on
account volume at the time that VisionPLUS was introduced) have migrated or
agreed to migrate to VisionPLUS.
VISION21. The Company believes that its Vision21 product, which was
introduced in 1987, is currently the most widely-used product worldwide for
processing retail credit card transactions. In 1995, the Company discontinued
granting new licenses for Vision21. The Company intends to discontinue
maintenance and support of Vision21 upon distribution of the next release of
VisionPLUS in 1998. Vision21
36
<PAGE>
licensees who are receiving maintenance and support from the Company will be
entitled to receive, for no additional license fee, those modules of the next
release of VisionPLUS affording equivalent functionality to that of the
customer's current Vision21 software. As of August 31, 1997, the Company was
continuing to support 20 customers using Vision21. Through August 31, 1997, 13
Vision21 customers had migrated or agreed to migrate to VisionPLUS.
VISIONPLUS. The Company's current product, VisionPLUS, combines the
functionality of CardPac and Vision21 for processing both retail credit card and
bank credit card transactions, including transactions generated by co-branded
bank credit cards offering features and benefits similar to those offered by
retail credit cards. As of August 31, 1997, the Company had licensed VisionPLUS
to 45 customers, eight of which were using the product in live production.
The complete VisionPLUS product consists of the following modules:
<TABLE>
<CAPTION>
MODULE FUNCTION
- ------------------------------ -------------------------------------
<S> <C>
Credit Decision Management New account processing
Credit Management System Account financial transactions and
billing
Account Service Management Customer service
Financial Authorization Transaction authorizations
Services
Collection, Tracking and Collection of delinquent accounts
Analysis
Interchange Tracking System Dispute handling
Transaction Management System Transaction formatting and mapping
("TRAMS")
Merchant Banking System Acquisition of transactions from
merchants honoring credit cards
</TABLE>
In addition, VisionPLUS includes four interface suites providing interfaces
to certain third-party products that provide risk management, credit bureau
access, statement formatting and autodial equipment access functions.
The modular structure of VisionPLUS facilitates upgrading by existing
customers without replacement of the entire system. The Company expects to
continually upgrade the VisionPLUS system, and presently three new modules, data
warehousing, fraud management, and universal message processor, are under
development. See "-- Product Development."
The current VisionPLUS modules are written in COBOL. VisionPLUS operates in
IBM mainframe MVS and VSE environments; however, the Company is developing
versions of the product for operation in IBM AS/400 and the Hewlett-Packard and
Sun Microsystems UNIX operating environments. In August 1997, the Company
installed its first AS/400 version and its first Sun Microsytems UNIX version of
VisionPLUS at beta test sites. The Hewlett-Packard version of VisionPLUS is
expected to be generally available in mid-1998.
License fees for VisionPLUS are based upon the product modules and interface
suites included in the system delivered and the number of accounts that the
customer maintains with the product. Each module is separately priced.
Generally, additional license fees are due as the number of accounts processed
using the software crosses certain tiers. The Company does not charge its
customers for maintenance services during the initial agreed-upon warranty
period, which is generally one year. The list initial license fee for a license
of VisionPLUS, including each of the currently available modules and interface
suites, ranges from $800,000 for an installation processing up to 100,000
accounts to $4,000,000 for an installation processing up to 20 million accounts.
While the Company has licensed certain of its modules on an individual basis,
generally a license is for a complete system, including five or more modules.
37
<PAGE>
SERVICES
To provide its customers with the benefit of the Company's in-depth
knowledge of credit card transaction processing and the credit card industry,
the Company provides services in connection with the customization,
installation, use and maintenance of the Company's software. The services
provided by the Company are:
<TABLE>
<CAPTION>
CUSTOMIZATION In connection with installation, customers generally require adaptations
of the Company's software to integrate it with other software used by
those customers or to add additional features. The Company also offers
consulting that involves an analysis of customers' existing systems and
requirements and the determination of the extent and nature of required or
desirable customizations. The extent to which a particular customer
utilizes customization services varies according to the needs of the
customer.
<S> <C>
INSTALLATION The Company offers assistance with the installation of the software, which
generally involves project management, on-site installation services,
assistance with conversion from existing systems and assistance with
testing and quality assurance.
TRAINING The Company provides training services, both at its offices and at
customer sites, including the provision of trainers, training materials,
test systems and various other forms of educational support to customer
employees.
MAINTENANCE AND The Company offers maintenance and support services for each of its
SUPPORT installed products, although the Company intends to discontinue
maintenance and support for CardPac and Vision21 after 1998. Support is
provided by means of a telephone service center through which the Company
provides response to problem reports, as well as various forms of training
assistance. Maintenance services also include periodic enhancements and
upgrades to licensed products. The Company currently provides maintenance
and support services from its Maitland, Florida and Dublin, Ireland
offices. The Company is in the process of establishing maintenance and
support facilities in Melbourne, Australia and Singapore.
COMPLIANCE The provision of compliance services is unique to the bank credit card
industry. These services consist of periodic upgrades to the Company's
software to maintain compliance with interchange association (Visa,
MasterCard and Europay) standards. The standards are revised several times
each year, differ among major associations and may differ on a regional
basis within a given association. Substantially all the Company's
customers involved in processing bank credit cards purchase compliance
services.
</TABLE>
After the expiration of an agreed-upon initial warranty period, which is
generally one year, the Company typically charges an annual fee for maintenance
services equal to a percentage of the license fee, and, with respect to
VisionPLUS, a separate annual fee for compliance services. The Company generally
seeks to obtain a three-to-five year commitment from the customer for such
maintenance and support and compliance services. After this three-to-five year
period, such services are provided, at the request of the customer, on a
year-to-year basis. With regard to professional services, customers may purchase
such services in hourly blocks or on a per hour basis.
PRODUCT DEVELOPMENT
The Company's product development efforts are focused on completion of the
Hewlett-Packard and Sun Microsystems UNIX versions of VisionPLUS, the next
release of VisionPLUS, new application
38
<PAGE>
modules for VisionPLUS consisting of data warehouse, fraud management and
universal message processor, and a new software platform for use in developing
future products. Product development is conducted by the Company's software
development and customer support staff. As of August 31, 1997, the Company's
software development and customer support staff consisted of 249 full-time
employees and 64 independent contractors. The Company's total product
development expenditures were $1.6 million, $2.1 million and $6.9 million in
1994, 1995 and 1996, respectively and $2.8 million and $4.9 million for the six
months ended June 30, 1996 and 1997, respectively.
In August 1997, the Company installed at two customer sites for beta testing
versions of VisionPLUS for operation on the Sun Microsystems UNIX and the IBM
AS/400 platforms. The Company believes that these versions of VisionPLUS will be
generally available in 1998. The Company is continuing the development of a
version of this product for operation in the Hewlett-Packard UNIX environment.
A release of VisionPLUS is being developed to provide enhanced
functionality, including certain additional international capabilities. This
release is currently scheduled for delivery in mid-1998.
The three application modules currently under development are:
DATA WAREHOUSE MODULE. The data warehouse module is being designed to
permit a customer to extract customer and account data from VisionPLUS,
normalize and manipulate the data to the customer's individual needs and
facilitate portfolio and demographic analysis and reporting. The module is
being designed to enable customers to perform data mining, scheduled
reporting and ad hoc queries utilizing relational database technology and
data manipulation facilities. This module has not been installed for beta
testing, but general release is currently scheduled for early 1998.
FRAUD MANAGEMENT MODULE. In cooperation with Fair, Isaac and Company,
Incorporated, the Company is developing a fraud management module for
VisionPLUS, which includes interface software to support operation with
Fair, Isaac's fraud detection software. This module is being designed to
support automated workflow case management to allow users to monitor and
manage suspicious and fraudulent activity and to provide configurable
routing schemes, dynamic queuing, and management reporting delivered on a
scalable, flexible operating platform. This module has not been installed
for beta testing, but general release is currently scheduled for early 1998.
UNIVERSAL MESSAGE PROCESSOR MODULE. The Company is in an early stage of
developing a module for transaction mapping and formatting to replace the
VisionPLUS TRAMS module which the Company markets pursuant to a license
agreement with a third party that requires the payment of royalties. This
new module is being designed to provide high-volume, real-time processing
for financial and non-financial data.
The three new modules under development share a common set of components and
core modules, which are being designed to meet the goals of the Company's
product strategy. This approach is intended to enable new modules to run on all
currently supported platforms with the addition of Windows NT. A major objective
of the new system is to enable customers to enjoy the benefits of modern
computing elements (GUI, Web, DBMS, etc.), while avoiding technical
obsolescence. The system under development is being designed with the intention
of incorporating the following structural components:
<TABLE>
<CAPTION>
<S> <C>
</TABLE>
39
<PAGE>
<TABLE>
<S> <C>
DBB ENGINE New modules under development are being built using a software
"engine" that the Company calls dbb. Dbb will provide services to
applications while they run, which will allow applications to
benefit from advanced workflow process automation and the
up-to-date versions of database management systems, networked
parallel computers, graphical user interfaces, etc., without
having to be re-written specifically for those systems. Dbb will
enable an application to be delivered for a small, inexpensive
computer running Windows NT and, with changes in configuration
parameters, it will run the same application on a large,
distributed network of powerful machines serving thousands of
directly connected users, or millions of users via the Internet.
COMMON APPLICATION All the new modules will be based on common application components
COMPONENTS ("CAC"). CAC's are collections of object components built using
the dbb engine. Each will define functionality that is required by
more than one application. Any one or more components will not by
themselves constitute a complete application. Examples are
interchange message definitions, account management, work
management, etc. The use of CAC's will enable applications to
cross normal departmental boundaries, enhancing quality and
uniformity while reducing costs. Enhancements made to dbb or to
CAC's benefit all dbb applications.
DBB APPLICATIONS Dbb applications will be complete, useable applications defined by
dbb entries, optionally also incorporating one or more CAC's or
custom code written in a standard computer language such as C++.
Examples are authorization processing, new application processing,
fraud detection and resolution, etc. Dbb applications can support
large numbers of users and large transaction volumes with
collections of inexpensive computers. They are less expensive to
purchase and install, less expensive to upgrade, easier to change,
and more efficient to operate than systems built using other
technology.
</TABLE>
Because of the complexity of credit card processing software in general and
the difficulty of accurately predicting the effort required to accomplish the
Company's product development objectives, the Company's product versions for new
hardware platforms, new release and new module development efforts are subject
to significant technical risk. Furthermore, complex software products such as
those currently being developed by the Company may be subject to delays,
undetected errors or compatibility problems upon their introduction or
thereafter. There can be no assurance that the Company will not encounter
difficulties in the completion of versions of VisionPLUS for operation in
environments other than mainframes, development of the next release of
VisionPLUS or the development of new software modules. These difficulties could
delay or prevent the successful and timely development, introduction and
marketing of these planned products. Moreover, even if such planned products are
developed and introduced, there can be no assurance that there will be a
significant market for such products or that the products will achieve any
significant degree of market acceptance. Failure to release these planned
products on a timely basis or failure of these products, when released, to
achieve significant market acceptance would have a material adverse effect upon
the Company's business, financial condition and results of operations. See "Risk
Factors--Technological Change; Evolving Industry Standards; Dependence on New
Products" and "--Application of Products to New Platforms."
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<PAGE>
Several software programs incorporated, or to be incorporated, in the
Company's products are owned by third parties and licensed to the Company.
Currently, the Company markets TRAMS, the transaction mapping and formatting
module of VisionPLUS, pursuant to a worldwide non-exclusive license from CCN,
Inc. Pursuant to licenses with suppliers, the Company will incorporate
third-party software programs into its AS/400 and Sun Microsystems and
Hewlett-Packard UNIX versions of VisionPLUS that will enable the Company's
software to function in those environments. The data warehouse module now under
development will incorporate certain credit scoring and mapping software
programs pursuant to value-added reseller agreements with the owners of such
programs. In the future, the Company may license or acquire other such products
or products that expand or improve the functionality of the Company's existing
or future products. If one or more of these current or future third-party
vendors were to terminate its relationship with the Company or to materially
increase the cost to the Company of its products, or if a material problem were
to arise in connection with any of the software products licensed from such
third-party, the Company would be required to license an alternative product
from another third-party or attempt to develop a replacement for the function of
the licensed software. The failure of the Company to obtain or develop such
alternative products on a timely basis and at reasonable cost would have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Risk Factors--Dependence Upon Third Party
Relationships and Certain Licenses."
CUSTOMERS
As of August 31, 1997, the Company was supporting 67 customers using its
products in live production in 28 countries and had 34 customers in the process
of implementing the Company's software for use in live production. Customers
consist principally of banks, finance companies and retailers that process their
own credit card transactions and third-party processors that process
transactions on behalf of their financial customers. The following table
describes the Company's customers by category and the typical use of the
Company's products by customers in each category, and identifies certain current
licensees of the Company's software in each category.
<TABLE>
<CAPTION>
TYPE OF CUSTOMER EXAMPLES OF LICENSEES TYPICAL USE
- ------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
Banks Toronto Dominion Issuing bank credit cards and
ABN Amro servicing merchants that wish to
SouthTrust accept credit card charges
Banco Santander
Finance Companies GE Global Consumer Finance Issuing bank credit cards and
Household International private label credit cards in
The Associates support of their general lending
Whirlpool Financial programs
Canadian Tire and Acceptance
Beneficial Finance
Retailers Spiegel's Issuing retail credit cards to
Talbots promote customer loyalty and
Hudson's Bay merchandise sales through creative
Carson Pirie Scott credit plans
Neiman Marcus
Third-Party Processors Electronic Data Systems Processing various aspects of card
Unnisa programs that bank and retail
issuers elect not to process
in-house
</TABLE>
41
<PAGE>
In 1996, license, services and maintenance fees paid by Beneficial Finance
accounted for 11% of the Company's revenues. In 1995, such fees paid to the
Company by Household International and The Associates accounted for 15% and 13%,
respectively, of the Company's revenues. In 1994, such fees paid to the Company
by Bell Atlantic Network Services and The Associates accounted for 9% and 16%,
respectively, of the Company's revenues. Generally, the customers contributing
most significantly to the Company's revenues vary from year to year.
Nevertheless, the Company believes that the loss of any principal customer could
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company's five largest customers during the first
six months of 1997, ABN Amro Bank, Edgar's, Alphacard, Hudson's Bay and Neiman
Marcus, accounted for 31% of the Company's revenues.
COMPETITION
The market for credit card transaction processing solutions is highly
competitive. The Company competes with a number of other providers of credit
card transaction processing software and services, with in-house software
development by potential customers, and with third-party processors that process
credit card transactions for retailers, banks and finance companies. The Company
believes that the principal competitive factors in the market for credit card
transaction processing solutions are (i) provision of a modifiable, high
capacity reliable system, (ii) an established presence in the industry, (iii)
price and potential cost savings, and (iv) control of the process by the issuer.
Processing of credit card transactions is either handled in-house by the
card issuer or is outsourced to a third-party processor. In marketing its
products and services, the Company competes with other vendors of software
solutions and with third-party processors.
The Company's principal competitors offering software in the industry
include Computer Sciences Corporation (Hogan Systems) and FBS Software, a
wholly-owned subsidiary of Equifax, Inc. Both Computer Sciences Corporation and
FBS offer bank credit card processing products. In Western Europe and certain
areas in Asia, the Company competes with The SEMA Group, S.A., one of the
Company's licensees of CardPac software, which markets and supports versions of
CardPac modified for use in Europe and Asia. In addition, there are a number of
other companies that offer products with credit card transaction processing
applications.
In marketing its software, the Company also competes with companies that
offer third-party processing services. To the extent that such third-party
processors do not use the Company's software in their operations, they compete
for the same business as the Company by offering an alternative to current and
potential customers that the Company does not currently offer. Outside
processors offering service alternatives to the Company's products include First
Data Corporation, Total Systems Services, Inc., Electronic Data Systems
Corporation and a number of others. The Company also competes against in-house
development by a potential customer of its own software solution. The Company
also faces competition from vendors of specialized software that addresses only
the functions desired by certain customers. There are many vendors of such
applications.
Many of the Company's current and potential competitors have significantly
greater financial, technical, marketing and other resources than the Company. As
a result, they may be able to respond more quickly to new or emerging
technologies and changes in customer requirements, or to devote greater
resources to the development, promotion, sale and support of their products than
the Company. Accordingly, it is possible that new or existing competitors may
emerge and rapidly acquire significant market share. If this were to occur, it
would have a material adverse effect on the Company's business, financial
condition and results of operations.
As the Company offers new products in the future, it expects that, in
addition to its current competitors, it will face competition from additional
competitors. See "Risk Factors--Competition."
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<PAGE>
ALLIANCES
The Company seeks alliances with other vendors of software, hardware or
services to the credit card industry. Such alliances may take various forms,
from coordinated marketing efforts to cooperation with respect to product
development and cross marketing of products by the Company and its alliance
partner. The Company currently maintains alliances with the following:
SUN MICROSYSTEMS, INC. AND HEWLETT-PACKARD COMPANY. The Company has
entered into independent software vendor agreements with Sun Microsystems
and Hewlett-Packard, which provide for working relationships in supporting
VisionPLUS on the computing platforms of these vendors, as well as some
cooperative marketing and lead generation efforts from time to time. The
Company is in the process of porting of VisionPLUS to both the Sun and
Hewlett-Packard UNIX platforms. See "-- Product Development."
FAIR, ISAAC AND COMPANY, INCORPORATED. Fair, Isaac is the leading
provider of risk management software for the financial services industry.
VisionPLUS integrates with Fair, Isaac's credit scoring and bureau access
software and the Company maintains the interface between these products to
ensure that VisionPLUS remains compatible with new releases of these
products. Additionally, Fair, Isaac has funded a portion of the cost of
developing a fraud management module for VisionPLUS plus an interface
designed to permit the module to communicate with Fair, Isaac's fraud
detection product. The Company and Fair, Isaac have agreed to share in the
ownership of and revenues from the sale of the fraud management module and
the interface software which will be marketed by both companies.
ALLTEL FINANCIAL SERVICES. Alltel is a leading provider of core banking
application software and processing services to banks worldwide. The Company
and Alltel have entered into a cooperative marketing agreement to provide
each other with leads and sales referrals.
The Company believes that alliances such as these are necessary to support
its growth and industry penetration plans. The Company intends to seek
additional such alliances as appropriate alliance partners are identified, but
there can be no assurance that the Company will be successful in consummating
any of such alliances or, if any such alliances are consummated, that they or
any existing alliances will be successful in supporting the Company's growth.
SALES AND MARKETING
At August 31, 1997, the Company's sales and marketing organization consisted
of 69 persons. Historically, the Company has licensed its software through its
direct sales force. However, the Company is in the process of negotiating
agreements with potential sales agents in Southeast Asia for the marketing and
sale of its software and services and has entered into several memoranda of
agreement with such agents that provide that such agents will license the
Company's software and pay the Company royalties equal to a percentage of the
sublicense fees received by the agent from their sales of the Company's
software. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations-- Overview" and "Risk Factors--International Sales."
For 1994, 1995, 1996 and the first six months of 1997, export sales
represented approximately 6%, 39%, 33% and 59% of the Company's revenues,
respectively. See Note 8 of Notes to Consolidated Financial Statements for
certain financial information concerning the Company's export sales in 1994,
1995 and 1996 and the first six months of 1997.
The sales cycle begins with the generation of a sales lead or the receipt of
a request for proposal from a prospect. After the lead is qualified, the Company
typically makes a presentation to the buying group, executes a mutual
confidentiality agreement, determines the customer's operating environment,
prepares and presents a sales proposal, conducts one or more
presentations/demonstrations, and, if successful, negotiates a contract and
obtains a commitment from the customer. While the sales cycle varies
substantially from customer to customer, it is typically six to twelve months in
duration.
43
<PAGE>
PROPRIETARY RIGHTS
The Company believes that because of the rapid pace of technological change
in the credit card and software industries, legal protections for its products
are less important to the Company's success than are the knowledge, ability and
experience of the Company's employees and the timeliness and quality of support
services provided by the Company. Nonetheless, the Company regards its software
technology as proprietary and attempts to protect it with a combination of
copyright and trade secret laws, non-disclosure agreements with employees,
consultants, systems integrators and prospective customers, licensing agreements
and other methods of protection. The Company holds no patents on its software
technology. The Company has filed applications to register its marks, PaySys and
VisionPLUS, in the United States and may apply to register those marks in other
jurisdictions or other marks in the future, but there can be no assurance that
it will be able to secure significant trademark or service mark protection for
any mark in any jurisdiction. It may be possible for unauthorized third parties
to copy portions of the Company's products, to reverse engineer the Company's
products, to acquire the Company's know-how regarding the financial transaction
processing industry or software technology or to obtain and use information that
the Company regards as proprietary. There can be no assurance that the Company's
means of protecting its proprietary rights, software technology, know-how or
information will be adequate or that the Company's competitors will not
independently develop similar technology or know-how. The Company's competitive
position may be adversely affected by its inability to protect its proprietary
rights, software technology, know-how or information.
Enforcement of the Company's proprietary rights may be difficult. The laws
of some countries where the Company's software is or may be used may afford the
Company little or no effective protection of its intellectual property. There
can be no assurance that the steps taken by the Company will prevent
misappropriation of its technology or that agreements entered into for that
purpose will be enforceable under the laws of the jurisdictions in which the
software is used. In addition, litigation may be necessary in the future to
enforce the Company's intellectual property rights, to protect the Company's
trade secrets, to determine the validity and scope of the proprietary rights of
others or to defend against claims of infringement or invalidity. Such
litigation, whether successful or unsuccessful, could result in substantial
costs and diversions of resources, either of which could have a material adverse
effect on the Company's business, financial condition and results of operations.
Although the Company believes that its products do not infringe the
proprietary rights of third parties, there can be no assurance that infringement
claims will not be asserted against the Company. Any infringement claims, with
or without merit, could be time-consuming to defend, could result in costly
litigation, could divert management's attention and resources or could require
the Company to enter into royalty or license agreements. There can be no
assurance that such licenses would be available on reasonable terms, if at all,
and the assertion or prosecution of any such claims could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Risk Factors--Dependence on Proprietary Technology; Risk of
Infringement Claims."
EMPLOYEES
As of August 31, 1997, the Company employed 345 persons, including 249 in
software development and customer support, 69 in sales and marketing and 27 in
management, administration and finance. Of the total employees, 330 are employed
in the United States (278 in Maitland, Florida, 45 in Atlanta, Georgia, and 7 in
Westerville, Ohio) and 15 outside of the United States. In addition, the Company
at that date had 68 independent contractors, most of whom were engaged in
product development. None of the Company's employees is represented by a labor
union. The Company has never experienced a work stoppage, and believes that its
employee relations are good.
The Company's success depends to a significant extent upon the continued
service of members of its senior management and other key research, development,
sales and marketing personnel. Accordingly, any
44
<PAGE>
loss of members of its senior management or key research, development, sales and
marketing personnel could have a material adverse effect on the Company's
business, financial condition and results of operations. None of the Company's
employees is subject to an employment agreement with the Company. The Company
believes that its future success will depend upon its ability to attract, train,
motivate and retain highly skilled managerial, research, development sales and
marketing personnel, for whom the competition is intense. In addition,
competitors may attempt to recruit the Company's key employees. There can be no
assurance that the Company will be successful in attracting, training,
motivating and retaining such personnel, and any failure in this regard could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Risk Factors--Dependence on Key Employees; Need
for Qualified Employees."
PROPERTIES
The Company's current sales, administrative, development and service offices
are as follows:
<TABLE>
<CAPTION>
LOCATION LEASE/OWN SQUARE FT. PURPOSE
- ------------------------ ----------- ----------- ---------------------------------------------
<S> <C> <C> <C>
Maitland, Florida Lease 61,659 Sales/Service/Development/Headquarters
Norcross, Georgia Lease 25,000 Development/Service
Melbourne, Australia Lease 3,000 Sales/Service
Westerville, Ohio Lease 2,264 Development
Singapore Lease 1,938 Sales/Service
Dublin, Ireland Lease 1,800 Sales/Service
</TABLE>
The Company's corporate headquarters are located in Maitland, Florida, in a
leased facility occupied under a lease expiring June 30, 2002. The Company
believes its existing facilities and offices and additional space available to
it are adequate to meet its requirements through 1998, but, if necessary,
additional or alternative space will be available on commercially reasonable
terms.
LEGAL PROCEEDINGS
The Company is not a party to any legal proceeding that it believes would
have a material adverse effect on its business, financial condition or results
of operations.
45
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The directors and executive officers of the Company and their ages as of
September 30, 1997 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------------- ----------- -------------------------------------------------
<S> <C> <C>
Stephen B. Grubb................................. 52 President, Chief Executive Officer, Chairman of
the Board
David B. Black................................... 47 Chief Technology Officer
William J. Pearson............................... 50 Chief Financial Officer, Senior Vice President,
Administration, Treasurer and Secretary
Carl E. Caruso................................... 44 Executive Vice President, Operations
Daniel F. Cone................................... 35 Senior Vice President, Sales
Daniel P. Stavros................................ 46 Senior Vice President, Development
Mark A. Thompson................................. 45 Senior Vice President, Business Development
Daniel M. DiDomenico............................. 42 Senior Vice President, Customer Services
Rosalind L. Fisher............................... 50 Director
Patricia M. Helbig............................... 48 Director
J. Leland Strange................................ 56 Director and Vice Chairman
</TABLE>
STEPHEN B. GRUBB has served as Chief Executive Officer and President of the
Company since April 1994, as a director of the Company since 1987 and as
Chairman of the Board of Directors since August 1993. Mr. Grubb has served as a
managing director of Grubb & Williams, Ltd. and GW Investments, Ltd., both
venture capital firms, since 1987. Mr. Grubb holds a B.A. from The Citadel, an
M.B.A. from Emory University and a J.D. from the University of South Carolina.
DAVID B. BLACK has served as the Company's Chief Technology Officer since
March 1996. Mr. Black is also the sole principal of Mentis Research, Inc., a
technology consulting firm that he founded in August 1992. Through Mentis
Research, Inc., Mr. Black served as a consultant to the Company from October
1993 to March 1996. Mr. Black, through Mentis Research, Inc., has also served as
a technology consultant to Oak Investment Partners, a venture capital firm,
since March 1992. Mr. Black holds an A.B. from Harvard University.
WILLIAM J. PEARSON has served as the Company's Chief Financial Officer,
Senior Vice President, Finance and Administration, Treasurer and Secretary since
June 1997. From May 1995 to June 1997, Mr. Pearson was a principal of Chancellor
Management, an investment banking and consulting services firm. From 1989 to
April 1995, Mr. Pearson served as President of Air Quality Sciences, Inc., an
indoor air quality firm co-founded by him. From 1986 to 1989, Mr. Pearson was a
private investor. Mr. Pearson served as the Chief Financial Officer of VideoStar
Connections, Inc., a satellite communications company, from 1982 to 1986, and as
an investment banker with Lehman Brothers, Inc. from 1977 to 1982. Mr. Pearson
holds a B.S. from the University of Kentucky and a M.B.A. from the Harvard
University Graduate School of Business.
CARL E. CARUSO has served as the Company's Executive Vice President,
Operations since September 1997. From March 1995 to August 1997, Mr. Caruso
served as Development Director of the Application Solution Division of Sybase,
Inc., a software development company. From December 1992 to February 1995, Mr.
Caruso served as Development Director of Dun & Bradstreet Software. Mr. Caruso
served as Marketing Manager of Digital Equipment Corporation from 1987 to
November 1992. Mr. Caruso holds a B.S. from the University of Massachusetts at
Lowell.
46
<PAGE>
DANIEL F. CONE has served as the Company's Senior Vice President, Sales
since July 1994. Mr. Cone joined the Company in January 1987 as a sales
representative and served in various sales management capacities from such date
to June 1994. Mr. Cone holds a B.A. from Florida State University.
DANIEL P. STAVROS has served as the Company's Senior Vice President,
Development since June 1997. Mr. Stavros joined the Company in June 1994 upon
the Company's acquisition of the assets of TranSys Corporation, a company owned
by Mr. Stavros and his wife (see "Certain Transactions"), and served as the
Company's Senior Vice President of International Operations/CIO from such date
to May 1997. From December 1992 to May 1994, Mr. Stavros served as President of
TranSys Corporation and from 1989 to November 1992, Mr. Stavros served as
President of CNN Management Systems, Inc. See "Certain Transactions." Mr.
Stavros holds a B.B.A. from Bradley University and a Masters in Accounting and
Finance from Northwestern University.
MARK A. THOMPSON has served as the Company's Senior Vice President, Business
Development since May 1997. From August 1993 to May 1997, Mr. Thompson served as
a Regional Vice President for Product Marketing of Computer Sciences
Corporation, a supplier of core banking software. From 1982 to June 1993, Mr.
Thompson was employed by BankOne Texas Holding Co., Inc., a commercial bank, and
served in various capacities, including as a Senior Vice President from 1985 to
June 1993. Mr. Thompson holds a B.B.A. from the University of Texas at
Arlington.
DANIEL M. DIDOMENICO has served as the Company's Senior Vice President,
Customer Service since June 1997. From December 1996 to May 1997, Mr. DiDomenico
served as the Company's Director of Customer Service. During October and
November, 1996, Mr. DiDomenico served as a consultant for Technical Aid
Corporation, an employee placement firm in the engineering and data processing
industries. From September 1992 to September 1996, Mr. DiDomenico served as
Customer Relations Manager for the petroleum software division of Electronic
Data Systems, and as such was responsible for customer support, implementation
and training. Mr. DiDomenico holds a B.S. from St. John Fisher College and an
M.B.A. from Nova Southeastern University.
ROSALIND L. FISHER has served as a director of the Company since September
1997. Ms. Fisher is presently a private investor and was employed by Visa
U.S.A., Inc. and Visa International, Inc. from 1981 to September 1997 and served
in various capacities, including as Executive Vice President of Visa U.S.A.,
Inc., from 1989 to September 1997, in which capacity she was responsible for the
delivery of system-based services for Visa members in the United States. From
March 1992 to December 1995, Ms. Fisher also served as President of Merchant
Bank Services, a subsidiary of Visa U.S.A., Inc., that provided processing
services to Visa members' merchant customers. From January 1996 to March 1997,
Ms. Fisher served on the board of directors of Vital Processing Services LLC, a
privately-held joint venture owned by Visa U.S.A., Inc. and Total System
Services, Inc. Ms. Fisher holds a B.A. from Smith College.
PATRICIA M. HELBIG has served as a director of the Company since September
1997. Ms. Helbig has served as the managing partner of Briarleigh Partners, a
consulting firm focused on strategic, marketing and organizational planning
since April 1997. From 1983 to September 1996, Ms. Helbig was employed by
American Express Company, Inc. and served in various capacities, including as
the Senior Vice President and General Manager of its Retail Industry/Merchant
Division from 1991 to September 1996, in which capacity she was responsible for,
among other things, marketing, sales and relationship development activities
with regard to the American Express credit card. Ms. Helbig holds a B.S. from
New York University and a M.B.A. from the University of Chicago.
J. LELAND STRANGE has served as a director of the Company since August 1993
and as Vice Chairman of the Board of Directors since August 1996. Mr. Strange
has served as President of Intelligent Systems Corporation ("ISC") since 1982
and as its Chairman in 1985. ISC is a publicly-held company with various
operations and investments in technology and healthcare-related companies. Mr.
Strange also serves on the boards of directors of IQ Software Corporation and
Healthdyne Technologies, Inc., as well as several
47
<PAGE>
privately-held companies. Mr. Strange holds a B.S. from Georgia Institute of
Technology and an M.B.A. from Georgia State University.
The Company's Bylaws provide that the number of the Company's directors
shall be between five and nine and that the Board of Directors has the authority
to determine the number of directors and to fill vacancies on the Board of
Directors. The number of directors is presently fixed at five. The Company
presently has four directors and one vacancy on the Board of Directors. The
Board of Directors intends to fill the existing vacancy with a person who is not
an employee of the Company as soon as practicable following the completion of
the offering. The directors of the Company are divided into three classes, as
nearly equal in number as possible, serving staggered terms of three years each.
Ms. Helbig serves in the class whose term expires in 1998, Mr. Grubb and Mr.
Strange both serve in the class whose term expires in 1999 and Ms. Fisher serves
in the class whose term expires in 2000. There is one vacancy in the class whose
term expires in 1998. Upon the expiration of the term of a class of directors,
directors within such class are elected for a three-year term at the annual
meeting of shareholders in the year in which such term expires.
The Board of Directors intends to establish an Audit Committee and a
Compensation and Stock Option Committee upon the completion of the offering or
as soon thereafter as is practicable. The Audit Committee will be responsible
for recommending to the Board of Directors the appointment of independent
auditors, reviewing with the auditors the plans and results of the audit
engagement, approving professional services provided by the auditors, reviewing
the independence of the independent public accountants, considering the range of
audit and non-audit fees and reviewing the adequacy of the Company's internal
accounting controls. The Compensation and Stock Option Committee will be
responsible for reviewing the performance of all executive officers, determining
all compensation for such officers and administering the Company's 1995 Stock
Incentive Plan and 1997 Stock Incentive Plan. The Company's Amended and Restated
Bylaws provide that at least two members of each of the Audit Committee and the
Compensation and Stock Option Committee shall be persons who are not officers or
employees of the Company and who do not have a relationship with the Company
that, in the opinion of the Board of Directors, would interfere with the
exercise of independent judgment. The Board of Directors may from time to time
establish such other committees as circumstances warrant. Such committees will
have such authority and responsibility as is delegated by the Board of
Directors.
Executive officers of the Company are appointed by and serve at the
discretion of the Board of Directors. There are no family relationships between
any of the directors or executive officers of the Company.
LIMITATIONS OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Amended and Restated Articles of Incorporation and Amended and
Restated Bylaws provide that the Company shall indemnify its directors and
officers to the fullest extent permitted by Florida law, including circumstances
in which indemnification is otherwise discretionary under Florida law. See
"Description of Capital Stock." At present, there is no pending litigation or
proceeding involving a director, officer, employee or agent of the Company where
indemnification will be required or permitted. The Company is not aware of any
threatened litigation or proceeding which may result in a claim for such
indemnification.
Under the Florida Business Corporations Act, a director is not personally
liable for monetary damages to the Company or any other person for acts or
omissions in his or her capacity as a director except in certain limited
circumstances such as certain violations of criminal law and transactions in
which the director derived an improper personal benefit. As a result,
shareholders may be unable to recover monetary damages against directors for
actions that directors take which constitute negligence or gross negligence or
which are in violation of the fiduciary duties of the directors, although
injunctive or other equitable relief may be available to shareholders.
48
<PAGE>
The Company currently intends to obtain insurance covering its executive
officers and directors for claims against them for wrongful acts including those
for which the Company may be required to indemnify them.
COMPENSATION OF DIRECTORS
Prior to the completion of the offering, no director of the Company has
received any compensation for serving in such capacity. Following the completion
of the offering, the Company's Board of Directors intends to begin paying each
director who is not an employee of the Company a quarterly payment of $2,000 and
fees of $1,000 and $500 for each meeting of the Board of Directors and committee
thereof, respectively, attended in person. Directors are reimbursed for their
out-of-pocket expenses incurred in connection with their service on the Board of
Directors. In addition, the Company has agreed to grant an option to purchase
12,000 shares of Common Stock to each of Ms. Fisher, Ms. Helbig and Mr. Strange.
Each such option will be granted upon the completion of the offering, will
become exercisable in three equal annual increments commencing on the first
anniversary of the date of grant and will have an exercise price equal to the
initial public offering price of the Common Stock. Following the completion of
the offering, directors may receive additional discretionary grants of options
to purchase shares of Common Stock under the Company's 1997 Stock Incentive
Plan. See "--Stock Incentive Plans."
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table sets forth certain information regarding the annual
compensation for services in all capacities to the Company for the year ended
December 31, 1996, with respect to the Company's Chief Executive Officer and the
Company's other executive officers whose total salary and bonus for 1996
exceeded $100,000 (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------------
AWARDS
-------------------
ANNUAL COMPENSATION SECURITIES
NAME AND ------------------------ UNDERLYING ALL OTHER
PRINCIPAL POSITION SALARY($) BONUS($) OPTIONS(#) COMPENSATION ($)(1)
------------------ ----------- ----------- ------------------- -------------------
<S> <C> <C> <C> <C>
Stephen B. Grubb
President, Chief Executive
Officer and Director........................... $ 150,000 $ 150,000(2) 633,025(3) $ 1,668
David B. Black (4)
Chief Technology Officer....................... $ 112,500 $ 25,000 823,255(3) $ 1,061
Daniel F. Cone
Senior Vice President, Sales................... $ 100,000 $ 87,952(5) 65,000 $ 1,335
Daniel P. Stavros
Senior Vice President, Development............. $ 100,000 -- -- $ 1,112
</TABLE>
- ------------------------------
(1) Represents contributions by the Company under its 401(k) Profit Sharing Plan
on behalf of the Named Executive Officers.
(2) Consists of discretionary cash bonuses paid to Mr. Grubb of $50,000 in 1996
that was earned in 1995 and of $100,000 in 1997 that was earned in 1996.
(3) Includes a warrant to purchase 552,055 shares of Common Stock granted to
each of Mr. Grubb and Mr. Black in February 1996. In August 1997, the
Company and each of Mr. Grubb and Mr. Black agreed to amend each such
person's warrant to fix the exercise price at $4.80 per share, to provide
that such warrants were immediately exercisable and to restrict the transfer
of shares of Common Stock acquired upon exercise until the earlier of the
achievement of certain product-related milestones or February 2003. See Note
12 of Notes to Consolidated Financial Statements.
(4) Mr. Black's employment by the Company commenced in March 1996, prior to
which date he provided consulting services to the Company. The compensation
shown does not include amounts paid by the Company to Mr. Black for such
services. See "Certain Transactions."
(5) Consists of sales commissions paid to Mr. Cone of $34,329 in 1996 that were
earned in such year and of $17,011 in 1996 that were earned in 1995, as well
as a discretionary cash bonus paid to Mr. Cone of $36,612 in 1997 that was
earned in 1996.
49
<PAGE>
STOCK OPTIONS AND WARRANTS
The following table summarizes certain information regarding options and
warrants to purchase Common Stock granted to the Named Executive Officers during
the year ended December 31, 1996. The Company did not grant any stock
appreciation rights in 1996.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL
RATES
OF STOCK PRICE
APPRECIATION FOR
OPTION
INDIVIDUAL GRANTS TERM (2)
------------------------------------------------------------ ---------------------
<S> <C> <C> <C> <C> <C> <C>
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/
UNDERLYING WARRANTS
OPTIONS/ GRANTED TO
WARRANTS EMPLOYEES EXERCISE OR EXPIRATION
NAME GRANTED IN FISCAL YEAR BASE PRICE(1) DATE 5% 10%
- -------------------------- ----------- ----------------- --------------- ----------- --------- ----------
Stephen B. Grubb.......... 552,055(3) 34.32% (3) 2/28/03 -- --
80,970(4) 5.03 $ 0.80 3/1/06 $ 40,737 $ 103,236
David B. Black............ 552,055(3) 34.32 (3) 2/28/03 -- --
80,970(4) 5.03 0.80 3/1/06 40,737 103,236
190,230(4) 11.82 0.80 3/1/06 95,707 242,542
Daniel F. Cone............ 65,000(4) 4.04 0.80 11/1/06 32,703 82,875
</TABLE>
- ------------------------
(1) The exercise price of the options granted was the fair market value of the
Common Stock on the date of grant as determined by the Board of Directors.
(2) The dollar amounts shown as potential realizable values assumes that the
market price of the Common Stock appreciates at cumulative annual rates of
5% and 10% over the term of the option or warrant from the date of grant.
The assumed rates of 5% and 10% were established by the Securities and
Exchange Commission and are not intended to forecast possible future
appreciation of the Common Stock.
(3) Each warrant originally became exercisable, subject to continued employment,
upon the occurrence of certain product-related milestones at an exercise
price per share equal to $50.0 million divided by the number of shares of
Common Stock then outstanding on a fully diluted basis. In August 1997, each
of Mr. Grubb and Mr. Black agreed to amend each such person's warrant to fix
the exercise price at $4.80 per share, to provide that such warrants were
immediately exercisable and to restrict the transfer of shares of Common
Stock acquired upon exercise until the earlier of the achievement of certain
product-related milestones or February 2003. See Note 12 of Notes to
Consolidated Financial Statements.
(4) Granted pursuant to the Company's 1995 Stock Option Plan and intended to
qualify as incentive stock options under Section 422 of the Internal Revenue
Code of 1986, as amended (the "IRC"). Mr. Cone's option becomes exercisable,
subject to continued employment, in equal annual increments on the first,
second and third anniversaries of the date of grant, January 1996. Mr.
Black's option to purchase 190,230 shares of Common Stock is currently
exercisable with respect to 126,820 such shares and becomes exercisable,
subject to continued employment, with respect to the remaining 63,410 such
shares in January 1998. The option of each of Mr. Grubb and Mr. Black to
purchase 80,970 shares of Common Stock will become exercisable upon the
completion of the offering in accordance with the terms of the related stock
option agreement.
50
<PAGE>
The following table summarizes the number and value of unexercised options
held by Named Executive Officers as of December 31, 1996. No Named Executive
Officers exercised any options in the year ended December 31, 1996.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING
UNEXERCISED OPTIONS VALUE OF UNEXERCISED IN-THE-MONEY
AS OF DECEMBER 31, 1996 OPTIONS AS OF DECEMBER 31, 1996(1)
-------------------------------------- --------------------------------------
<S> <C> <C> <C> <C>
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------ ------------------ ------------------ ------------------ ------------------
Stephen B. Grubb.................... 250,000 793,105 $ 575,000 $ 554,415
David B. Black...................... 126,820 696,435 291,686 332,074
Daniel F. Cone...................... 21,670 43,360 49,841 99,659
</TABLE>
- ------------------------
(1) There was no public trading market for the Common Stock as of December 31,
1996. These values have been calculated based on a fair market value of
$3.10 per share on December 31, 1996, as determined by the Board of
Directors, less the per share exercise price. The exercise price of a
warrant to purchase 552,055 shares of Common Stock granted to each of Mr.
Grubb and Mr. Black in 1996 was not fixed as of December 31, 1996 and, as a
result, any value of such warrants is not reflected in the calculation. In
August 1997, the Company and Mr. Grubb and Mr. Black agreed to amend each
such person's warrant to, among other things, fix the exercise price at
$4.80 per share. See Note 12 of Notes to Consolidated Financial Statement.
EMPLOYMENT ARRANGEMENTS
The Company does not have employment agreements with any of its executive
officers. Daniel M. DiDomenico, Mark A. Thompson, William J. Pearson and Carl E.
Caruso were employed by the Company in December 1996, May 1997, July 1997 and
September 1997, respectively. The current base annual salaries of the executive
officers are as follows: Mr. Grubb-$250,000, Mr. Caruso-$165,000, Mr. Black-
$150,000, each of Mr. Pearson, Mr. Cone, Mr. Thompson and Mr. Stavros-$120,000
and Mr. DiDomenico-$100,000. The Company does not have any formal bonus plan for
its executive officers. The Company's executive officers are not entitled to any
payments in connection with a termination of employment or a change in control
of the Company. Pursuant to the Company's 1995 Stock Incentive Plan, the
exercisability of options granted under such plan may be accelerated in the
event of certain changes in control of the Company.
David B. Black is a party to a confidentiality and non-compete agreement
with the Company, dated March 1996, pursuant to which Mr. Black has agreed not
to disclose or use any trade secrets of the Company and not to compete with the
Company during the term of his employment and for two years thereafter within
the geographic areas served by the Company.
STOCK INCENTIVE PLANS
The Company has two plans pursuant to which it may grant options to purchase
shares of Common Stock and other equity-based awards to its employees and
pursuant to which options to purchase shares of Common Stock will automatically
be granted to the Company's directors.
1995 STOCK INCENTIVE PLAN
Under the Company's 1995 Stock Incentive Plan (the "1995 Plan"), options to
purchase up to 1,088,750 shares of Common Stock may be granted to employees and
directors of the Company. The 1995 Plan is presently administered by the Board
of Directors. Options intended to qualify as incentive stock options under
Section 422 of the IRC, as well as nonqualified stock options, may be granted
under the 1995 Plan from time to time to purchase such number of shares of
Common Stock as may be determined
51
<PAGE>
by the Board of Directors. Options are exercisable at such times and subject to
such conditions as the Board of Directors may determine. Any shares as to which
an option expires, lapses or is forfeited, terminated or canceled may become
subject to a new option. The 1995 Plan terminates on February 2005, but the
exercise date of options granted prior to such date may extend beyond such date.
However, in the case of an incentive stock option, the term will be no more than
ten years after the date of grant. The exercise price for an incentive stock
option will not be less than 100% of the fair market value of the Common Stock
on the date of grant and may be less than such fair market value for a
nonqualified option.
As of August 1997, options to purchase an aggregate of 1,088,750 shares of
Common Stock (having a weighted average exercise price of $1.35 per share) were
outstanding under the 1995 Plan. In addition, an option to purchase 1,750 shares
of Common Stock, having an exercise price of $.002 per share, was outstanding
under a prior employee benefit plan. See Note 7 of Notes to Consolidated
Financial Statements.
In October 1997, the Board of Directors amended the 1995 Plan to provide
for, among other things, its administration by the Compensation and Stock Option
Committee at such time as such committee is established and, in connection with
the adoption of the Company's 1997 Stock Incentive Plan (the "1997 Plan").
1997 STOCK INCENTIVE PLAN
The Company adopted the 1997 Plan in October 1997, under which a maximum of
411,250 shares of Common Stock may be issued pursuant to awards granted under
the 1997 Plan to provide employees (including officers and directors),
non-employee directors and consultants and other individuals providing services
to the Company an opportunity to own Common Stock of the Company and to provide
incentives for such persons to promote the financial success of the Company.
Awards under the 1997 Plan may be structured in a variety of ways, including as
"incentive stock options," as defined in Section 422 of the Internal Revenue
Code, as amended (the "IRC"), "non-qualified stock options," shares of Common
Stock subject to terms and conditions set by the Board of Directors ("restricted
stock awards"), performance share awards and stock appreciation rights ("SARs").
Incentive stock options may be granted only to employees (including officers) of
the Company. Nonqualified options, restricted stock awards, SARs and other
permitted forms of awards may be granted to any person employed by or performing
services for the Company, including non-employee directors and independent
contractors. The 1997 Plan terminates in October 2007.
The 1997 Plan is administered by the Compensation and Stock Option Committee
of the Board of Directors, which is authorized, subject to the provisions of the
1997 Plan, to select the persons to receive awards and to determine the number
of shares of Common Stock subject to an award and the form, terms, condition and
duration of each award. The Compensation and Stock Option Committee is given
broad discretion under the 1997 Plan to accelerate the vesting of options or
restricted stock awards in the event of certain changes in control of the
Company. The Compensation and Stock Option Committee may provide for the
transferability of options to certain immediate family members of an optionee as
provided in the 1997 Plan. The decisions of the Compensation and Stock Option
Committee shall be final and binding upon all parties. As of October, 1997, no
awards were outstanding under the 1997 Plan, however, the Company has agreed to
grant an option to purchase 12,000 shares of Common Stock to each of Rosalind L.
Fisher, Patricia M. Helbig and J. Leland Strange each such option will be
granted upon the completion of the offering, will become exercisable in three
equal annual increments commencing on the first anniversary of the date of grant
and will have an exercise price equal to the initial public offering price.
The exercise price of options granted under the 1997 Plan may not be less
than 100% of the fair market value of the Common Stock on the date of grant (or,
in the case of incentive stock options granted to any person who controls 10% or
more of the Common Stock on such date, 110% of such value) and
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must be exercised within 10 years from the date of grant (or, in the case of
incentive stock options granted to any person who controls 10% or more of the
Common Stock on such date, within five years from such date). The Compensation
and Stock Option Committee may allow cashless exercises and may allow the
exercise price of an option to be paid in shares of Common Stock owned by the
optionee at the time of exercise having an aggregate fair market value equal to
the exercise price of the option.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1996, decisions concerning the compensation of the Company's executive
officers were made by the Company's Board of Directors which included Mr. Grubb,
President and Chief Executive Officer of the Company.
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PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of September 30, 1997, and as adjusted to reflect
the sale of shares of Common Stock offered hereby by (i) each director of the
Company who beneficially owns Common Stock, (ii) each Named Executive Officer of
the Company who beneficially owns Common Stock, (iii) all directors and
executive officers of the Company as a group, (iv) each person known to the
Company to beneficially own more than 5% of the outstanding Common Stock and (v)
the Selling Shareholders. Unless otherwise indicated, shares of Common Stock all
are owned directly and the indicated person has sole voting and investment
power.
<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY BENEFICIALLY
OWNED OWNED AFTER
PRIOR TO OFFERING NUMBER OF OFFERING
------------------ SHARES TO BE ------------------
NAME NUMBER PERCENT OFFERED NUMBER PERCENT
- --------------------------------------------------------------------------- --------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
Intelligent Systems Corporation(1)......................................... 4,135,330 58.0% 712,500 3,422,830 37.2%
Grubb & Williams, Ltd...................................................... 546,895 7.7 272,270 274,625 3.0
GW Investments, Ltd........................................................ 382,105 5.4 190,230 191,875 2.1
Oak Investment Partners V, Limited Partnership............................. 539,305 7.6 -- 539,305 5.9
Stephen B. Grubb(2)........................................................ 1,938,265 24.2 462,500 1,475,765 14.6
J. Leland Strange(3)....................................................... 4,255,780 59.7 712,500 3,543,280 38.5
David B. Black(4).......................................................... 875,930 10.9 -- 875,930 8.7
Daniel F. Cone(5).......................................................... 50,220 * -- 50,220 *
All directors and executive officers as a group (11 persons)(6)............ 7,120,195 79.9 1,175,000 5,945,195 54.1
Sirrom Investments, Inc.(7)................................................ 187,660 2.6 75,000 112,660 1.2
</TABLE>
- ------------------------
* Less than 1%.
(1) If the Underwriters exercise the over-allotment option in full, Intelligent
Systems Corporation will sell an additional 250,000 shares of Common Stock
in the offering and, in such event, will own 3,172,830 shares of Common
Stock (34% of the outstanding Common Stock) following the offering.
(2) Represents 546,895 and 382,105 shares of Common Stock owned by Grubb &
Williams, Ltd. and GW Investments, Ltd., respectively, of each of which Mr.
Grubb is a managing director, 100,000 shares of Common Stock owned by SBG,
Inc. of which Mr. Grubb is the President and sole shareholder, 11,215 shares
of Common Stock owned by the Steven B. Grubb Issue Trust II of which Mr.
Grubb is sole trustee, an aggregate of 15,025 shares of Common Stock owned
by Mr. Grubb's family members and an aggregate of 883,025 shares of Common
Stock subject to options and warrants that are presently exercisable or will
become exercisable upon the completion of the offering.
(3) Includes 4,135,330 shares of Common Stock owned by Intelligent Systems
Corporation of which Mr. Strange is the President and Chairman of the Board
of Directors.
(4) Includes an aggregate of 875,930 shares of Common Stock subject to options
and warrants that are presently exercisable or will become exercisable upon
the completion of the offering.
(5) Represents 21,670 shares of Common Stock subject to a presently exercisable
option.
(6) Includes an aggregate of 1,780,625 shares of Common Stock subject to options
and warrants that are presently exercisable or will become exercisable upon
the completion of the offering.
(7) Includes 37,660 shares of Common Stock subject to a presently exercisable
warrant held by a wholly-owned subsidiary of Sirrom Investments.
The business address of Intelligent Systems Corporation and Mr. J. Leland
Strange is 4355 Shackleford Road, Norcross, Georgia 30094, Grubb & Williams,
Ltd. and GW Investments, Ltd. is The Lenox Building, Suite 1790, Atlanta,
Georgia 30326, Mr. Stephen B. Grubb is 900 Winderley Place, Maitland, Florida
32751-7267 and Oak Investment Partners V, Limited Partnership is One Gorham
Island, Westport, Connecticut 06880.
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CERTAIN TRANSACTIONS
The Company and Intelligent Systems Corporation ("ISC") entered into a loan
agreement dated January 1994, pursuant to which ISC agreed to lend the Company,
from time to time as provided therein, up to $1.0 million and the Company issued
to ISC its promissory note, also dated January 1994, in the principal amount of
$1.0 million. Pursuant to such loan agreement, the Company borrowed $1.0 million
from ISC which amount accrued interest at the prime rate (as defined in such
note) plus 4%. The principal balance of such loan was due July 1995 and accrued
interest was due monthly. In consideration for the loan, the Company granted to
ISC a warrant to purchase 277,605 shares of Common Stock at an exercise price of
$.01 per share, which warrant ISC exercised in August 1997. In addition to
amounts borrowed by the Company pursuant to the loan agreement and related
promissory note, in May 1995, the Company borrowed $300,000 from ISC evidenced
by a promissory note in such amount providing for the accrual of interest on
amounts borrowed at the prime rate (as defined in therein) plus 5%. The
principal balance of such note was payable on demand and accrued interest was
payable monthly. In August 1995, the Company issued 1,552,010 shares of Common
Stock to ISC in exchange for ISC's cancellation of the following indebtedness of
the Company to it or its subsidiaries: $675,000 ($600,000 principal amount and
$75,000 accrued interest) outstanding pursuant to the January 1994 loan
agreement and related promissory note, $308,000 ($300,000 principal amount and
$8,000 accrued interest) outstanding under the May 1995 promissory note and
$259,000 owed to Kase Systems, Inc. a wholly-owned subsidiary of ISC, for the
provision of certain services as discussed below. In addition, in August 1995,
ISC canceled the Company's January 1994 promissory note and the Company issued
to ISC its promissory note in the principal amount of $400,000, representing the
remaining principal balance of the January 1994 note. Amounts outstanding under
such note accrued interest at the prime rate (as defined therein) plus 4%. The
principal balance of such note was due in July 1996 and interest was due
monthly. The Company paid ISC, pursuant to such note, an aggregate of $42,450 in
accrued interest and, in January 1996, the principal amount of $400,000.
From March 1995 to September 1996, Kase Systems, Inc. a wholly-owned
subsidiary of ISC, provided certain software programming services to the Company
pursuant to a verbal arrangement. Pursuant to this arrangement, the Company
incurred an aggregate obligation of $564,700 to Kase Systems. The Company paid
$305,700 of this obligation in cash and Kase Systems canceled the remaining
$259,000 of this obligation in exchange for the Company's issuance of shares of
Common Stock to ISC as discussed above. The fees charged by Kase Systems to the
Company pursuant to this arrangement were based principally upon the cost to
Kase Systems of providing of such programming services. Upon the termination of
this arrangement in September 1996, the Company employed several of the
programmers who had been performing such services.
In August 1997 the Company borrowed $426,999 from ISC, which amount accrued
interest at 14.0% and matured on September 15, 1997. The Company paid ISC the
amount owed under this loan, including $4,575 in interest, on September 29, 1997
from the proceeds of a term loan from Sirrom Capital Corporation. See "Use of
Proceeds."
The Company leases office space located in Norcross, Georgia from Quadram
Corporation ("Quadram"), a wholly-owned subsidiary of ISC, in the same facility
in which ISC's headquarters are located. The Company entered into a sublease
agreement with Quadram dated June 1996 for a term ending May 1997, pursuant to
which the Company agreed to lease certain office space, modular furnishings and
communications services as specified therein for monthly rent (including
utilities, taxes, insurance and maintenance) of $7,969. The sublease agreement
was amended on four occasions during its term to provide for the Company's lease
of additional space, furnishings and services from, and payment of increased
rent to, Quadram. From June 1996 through June 1997, the Company paid $203,000 in
rent to Quadram. The Company and Quadram entered into a new sublease agreement
dated July 1997 for a term ending November 2002 (subject to earlier termination
if Quadram's lease is terminated), pursuant to which the Company agreed to lease
certain office space (19,000 square feet until November 1997 and 25,000
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square feet thereafter during the remaining term), as well as certain modular
furnishings and communications services as specified therein. The lease provides
for monthly rent (including utilities, taxes, insurance and maintenance) of
$23,921 from July 1997 through November 1997, $25,838 from December 1997 through
November 2000 and $26,359 from December 2000 through November 2002, all of which
amounts are subject to adjustment annually to reflect the Company's share of
Quadram's actual costs of certain maintenance and other services provided to the
Company (based on the square feet subleased by the Company). The amount of rent
charged by Quadram to the Company is based principally on the amount of rent
paid by Quadram under the primary lease and the cost to Quadram of providing the
furnishings and services to the Company. J. Leland Strange, a director of the
Company, is an officer, director and holder of more than five percent of the
outstanding capital stock of ISC. Prior to the completion of the offering, ISC
beneficially owned 59.7% of the outstanding Common Stock of the Company. See
"Principal and Selling Shareholders."
Pursuant to an asset purchase agreement dated January 1994, the Company
purchased the assets of TranSys Corporation, a company owned by Daniel J.
Stavros and his wife, that distributed and supported the TRAMS system (included
in VisionPLUS) pursuant to an agreement with CCN Management Systems, Inc. , the
owner of the system. The purchase price for the assets was $350,000, $50,000 of
which was paid in cash and $300,000 of which was paid in the form of a
non-interest-bearing promissory note which was subsequently paid in full. Upon
the completion of the asset purchase, Mr. Stavros became an executive officer of
the Company. In addition, pursuant to a license and distribution agreement also
dated January 1994, the Company acquired from CCN Management Systems, Inc. a
non-exclusive, transferable and perpetual license to sublicense and distribute
the TRAMS software.
In March 1996, David Black transferred and assigned to the Company certain
software and software designs, together with all intellectual property rights
associated therewith, owned by him in consideration of his employment by the
Company. In connection with such transfer, in March 1996, the Company issued to
Mr. Black a warrant to purchase up to 552,055 shares of Common Stock and Mr.
Black entered into a confidentiality and non-compete agreement with the Company.
See "Management--Executive Compensation." Prior to his employment by the
Company, from October 1993 to February 1996, Mr. Black, through his company,
Mentis Research, Inc., provided certain consulting services to the Company.
During this period, the Company paid Mentis Research, Inc. an aggregate of
approximately $148,000 in fees and, in October 1995, issued to Mr. Black a
warrant to purchase 52,675 shares of Common Stock at an exercise price of $0.60
per share. The warrant became exercisable in full over a 24 month period that
ended June 1996.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 30,000,000 shares of
Common Stock, par value $0.01 per share, and 10,000,000 shares of Preferred
Stock, par value $0.01 per share (the "Preferred Stock"). As of September 30,
1997, 7,130,075 shares of Common Stock were issued and outstanding and were held
of record by 84 shareholders and 2,284,945 shares of Common Stock subject to
options and warrants to acquire Common Stock were held by 79 option and warrant
holders. At that date there were no outstanding shares of Preferred Stock or
options or other rights to acquire shares of Preferred Stock.
COMMON STOCK
The Company is authorized to issue up to 30,000,000 shares of Common Stock.
Holders of Common Stock are entitled to receive ratably such dividends as may
from time to time be declared by the Board of Directors of the Company out of
funds legally available therefor. Holders of Common Stock are entitled to one
vote per share on all matters on which the holders of Common Stock are entitled
to vote, and do not have any cumulative voting rights. Holders of Common Stock
have no preemptive, conversion, redemption or sinking fund rights. In the event
of a liquidation, dissolution or winding up of the Company, holders of the
Common Stock are entitled to share ratably in the assets of the Company, if any,
remaining after the payment of all debts and liabilities of the Company and the
liquidation preference of any outstanding class or series of Preferred Stock.
The outstanding shares of Common Stock are, and the shares of Common Stock
offered by the Company hereby when issued will be, fully paid and nonassessable.
The rights, preferences and privileges of holders of Common Stock are subject to
any series of Preferred Stock which the Company may issue in the future as
described below.
PREFERRED STOCK
The Company is authorized to issue up to 10,000,000 shares of Preferred
Stock. The Board of Directors has the authority to issue Preferred Stock in one
or more series and to fix the number of shares constituting any such series, the
voting powers, designations, preferences and other rights and qualifications,
limitations or restrictions thereof, including the dividend rights, dividend
rate, terms of redemption, redemption price or prices, conversion and voting
rights and liquidation preferences of the shares constituting any series,
without any further vote or action by the shareholders of the Company. The
issuance of Preferred Stock by the Board of Directors could adversely affect the
rights of holders of Common Stock. For example, issuance of Preferred Stock
could result in a series of securities outstanding that would have preferences
over the Common Stock with respect to dividends and in liquidation and that
could (upon conversion or otherwise) enjoy all the rights appurtenant to Common
Stock.
The authority possessed by the Board of Directors to issue Preferred Stock
could potentially be used to discourage attempts by others to obtain control of
the Company through merger, tender offer, proxy or consent solicitation or
otherwise by making such attempts more difficult to achieve or more costly. The
Board of Directors may issue Preferred Stock without stockholder approval and
with voting rights that could adversely affect the voting power of holders of
Common Stock. There are currently no agreements or understandings regarding the
issuance of Preferred Stock, and the Board of Directors has no present intention
of issuing any shares of Preferred Stock.
CERTAIN PROVISIONS OF THE ARTICLES AND BYLAWS
The Company's Amended and Restated Articles of Incorporation ("Articles")
and Amended and Restated Bylaws ("Bylaws") contain certain provisions, described
below, that could delay, defer or prevent a change in control of the Company if
the Board determines that such a change in control is not in the best interests
of the Company and its shareholders, and could have the effect of making it more
difficult to acquire the Company or remove incumbent management.
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CLASSIFIED BOARD. Under the Company's Articles and Bylaws, the Board of
Directors of the Company is divided into three classes, with staggered terms of
three years each. Each year the term of one class expires. The Articles provide
that any director may be removed from office, but only for cause by an
affirmative vote of at least two-thirds of the outstanding capital stock
entitled to vote in the election of directors. The Articles also provide that
any vacancies on the Board of Directors shall be filled only by the affirmative
vote of a majority of the directors then in office, even if less than a quorum.
SPECIAL VOTING REQUIREMENTS. The Company's Articles provide that all
actions taken by the shareholders must be taken at an annual or special meeting
of the shareholders or by unanimous written consent. The Articles provide that
special meetings of the shareholders may be called by only a majority of the
directors, the Chairman of the Board of Directors or the holders of not less
than 50% of the Company's outstanding voting shares. Under the Company's Bylaws,
shareholders will be required to comply with advance notice provisions with
respect to any proposal submitted for shareholder vote, including nominations
for elections to the Board of Directors. The Articles and Bylaws of the Company
contain provisions requiring the affirmative vote of the holders of at least
two-thirds of the Common Stock to amend certain provisions thereof.
INDEMNIFICATION AND LIMITATION OF LIABILITY. The Florida Business
Corporations Act (the "Florida Act") authorizes Florida corporations to
indemnify any person who was or is a party to any proceeding (other than an
action by, or in the right of, the corporation), by reason of the fact that he
or she is or was a director, officer, employee or agent of the corporation or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation or other entity, against liability
incurred in connection with such proceeding, including any appeal thereof, if he
or she acted in good faith and in a manner he or she reasonably believed to be
in, or not opposed to, the best interests of the corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful. In the case of an action by or on behalf of a
corporation, indemnification may not be made if the person seeking
indemnification is adjudged liable, unless the court in which such action was
brought determines such person is fairly and reasonably entitled to
indemnification. The indemnification provisions of the Florida Act require
indemnification if a director or officer has been successful on the merits or
otherwise in defense of any action, suit or proceeding to which he or she was a
party by reason of the fact that he or she is or was a director or officer of
the corporation. The indemnification authorized under Florida law is not
exclusive, and is in addition to any other rights granted to officers and
directors under the Articles of Incorporation or Bylaws of the corporation or
any agreement between officers and directors and the corporation. A corporation
may purchase and maintain insurance or furnish similar protection on behalf of
any officer or director against any liability asserted against the officer or
director and incurred by the officer or director in such capacity, or arising
out of the status, as an officer or director, whether or not the corporation
would have the power to indemnify him or her against such liability under the
Florida Act. The Company's Articles of Incorporation provide for the
indemnification of directors and executive officers of the Company to the
maximum extent permitted by Florida law and for the advancement of expenses
incurred in connection with the defense of any action, suit or proceeding that
the director or executive officer was a party to by reason of the fact that he
or she is or was a director or executive officer of the Company upon the receipt
of an undertaking to repay such amount, unless it is ultimately determined that
such person is not entitled to indemnification. Under the Florida Act, a
director is not personally liable for monetary damages to the Company or any
other person for acts or omissions in his or her capacity as a director except
in certain limited circumstances such as certain violations of criminal law and
transactions in which the director derived an improper person benefit. As a
result, shareholders may be unable to recover monetary damages against directors
for actions taken by them which constitute negligence or gross negligence or
which are in violation of their fiduciary duties, although injunctive or other
equitable relief may be available. The foregoing provisions of the Florida Act
and the Articles and Bylaws could have the effect of preventing or delaying a
person from acquiring or seeking to acquire a substantial equity interest in, or
control of, the Company.
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AMENDMENTS OF THE ARTICLES AND BYLAWS. Certain provision of the Articles
and Bylaws, including those pertaining to a classified board, special meetings
of shareholders, removal of directors and director liability and
indemnification, may be amended only by the affirmative vote of two-thirds of
the shares of the capital stock of the Company entitled to vote in the election
of directors.
ADVANCE NOTICE PROVISIONS. The Company's Bylaws require advance notice for
shareholder proposals and director nominations.
CERTAIN STATUTORY PROVISIONS
The Florida Act provides for special voting requirements to approve
affiliated transactions unless the transaction falls under one or more
enumerated exceptions (the "Affiliated Transaction Provision"). In September
1997, the Company elected, as permitted by the Florida Act, not to be covered by
either the Affiliated Transaction Provision, which election will become
effective 18 months following such election.
TRANSFER AGENT
The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company, New York, New York.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the offering, there has been no public market for the Common Stock
of the Company. Sales of substantial amounts of shares of the Company's Common
Stock in the public market following the offering, or the perception that such
sales could occur could adversely affect the market price of the Common Stock
prevailing from time to time and could impair the Company's ability to raise
capital in the future through sales of its equity securities at a time and price
which it deems appropriate.
Upon completion of the offering, assuming no exercise of outstanding options
or warrants, the Company will have 9,213,408 shares of Common Stock outstanding.
Of these shares, the 3,333,333 shares of Common Stock sold in the offering will
be freely tradeable without restriction or further registration under the
Securities Act, except that any shares purchased by "affiliates" of the Company,
as that term is defined in Rule 144 ("Rule 144") under the Securities Act
("Affiliates"), may generally only be sold in compliance with Rule 144 described
below. The remaining 5,880,075 shares of Common Stock are "Restricted
Securities" as defined in Rule 144. Restricted Securities may be sold in the
public market only if registered or if they qualify for an exemption from
registration under Rules 144, 144(k) or 701 under the Securities Act, which
rules are summarized below.
SALES OF RESTRICTED SECURITIES
Subject to the provisions of Rule 144(k) under the Securities Act, 91,140
shares will be eligible for immediate sale in the public market that are not
otherwise subject to certain lock-up agreements among certain shareholders of
the Company, including directors, officers and Selling Shareholders and the
Underwriters (the "Lock-Up Agreements"). Beginning 90 days after the offering,
an additional 14,060 shares will become eligible for sale subject to the
provisions of Rule 701 and Rule 144. Beginning 180 days after the offering (or
earlier with the written consent of NationsBanc Montgomery Securities, Inc. in
its discretion), an aggregate of 5,774,875 shares additionally will be available
for sale in the public market upon expiration of Lock-Up Agreements and subject
to the provisions of Rule 144.
In general, under Rule 144 as currently in effect, beginning 90 days after
the effective date of this Prospectus, a person (or persons whose shares are
aggregated) who has beneficially owned Restricted Securities for at least one
year, including a person who may be deemed an Affiliate of the Company, is
entitled to sell, within any three-month period, a number of shares of Common
Stock of the Company that
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does not exceed the greater of one percent of the then-outstanding shares of
Common Stock (approximately 92,134 shares after giving effect to the offering)
and the average weekly reported trading volume of the Company's Common Stock
during the four calendar weeks preceding such sale. Sales under Rule 144 are
subject to certain restrictions relating to manner of sale, notice and
availability of current public information about the Company. In addition, under
Rule 144(k), a person who is not an Affiliate and has not been an Affiliate at
any time during the 90 days preceding a sale, and who has beneficially owned
shares for at least two years, would be entitled to sell such shares immediately
following the offering without regard to the volume limitations, manner of sale
provisions or notice or other requirements of Rule 144. After the 180-day
lock-up period 1,344,320 shares held by non-Affiliates will be available for
sale in the public market under Rule 144(k). In meeting the one- and two-year
holding periods described above, a holder of Restricted Securities can include
the holding periods of a prior owner who was not an Affiliate. The one- and
two-year holding periods described above do not begin to run until the full
purchase price or other consideration is paid by the person acquiring the
Restricted Securities from the issuer or an Affiliate.
OPTIONS
As of September 30, 1997, options and warrants to purchase an aggregate of
2,284,945 shares of Common Stock were outstanding. See "Management--Executive
Compensation." Of the shares issuable upon exercise of such options and
warrants, 263,410 are not subject to the Lock-Up Agreements.
Rule 701 under the Securities Act provides that shares of Common Stock
acquired on the exercise of outstanding options may be resold by persons other
than Affiliates, beginning 90 days after the date of this Prospectus, subject
only to the manner of sale provisions of Rule 144, and by Affiliates under Rule
144 without compliance with its one-year minimum holding period, subject to
certain limitations.
The Company may file one or more registration statements on Form S-8 under
the Securities Act to register all shares of Common Stock issuable pursuant to
the 1995 Plan and the 1997 Plan. Shares of Common Stock covered by these
registration statements will thereupon be eligible for sale in the public
markets subject to Lock-Up Agreements, if applicable.
LOCK-UP AGREEMENTS
The Company, certain shareholders, including the Selling Shareholders, and
all executive officers and directors of the Company have agreed, pursuant to
Lock-Up Agreements, not to directly or indirectly, without the prior written
consent of NationsBanc Montgomery Securities, Inc. offer to sell, contract to
sell, or otherwise sell, dispose of, loan, pledge, or grant any rights with
respect to an aggregate of 5,774,875 shares of Common Stock, options and
warrants to purchase an aggregate of 2,021,535 shares of Common Stock and any
securities convertible or exchangeable for shares of Common Stock beneficially
owned by them or any such securities hereafter acquired by them for a period of
180 days after the date of this Prospectus other than (i) bona fide gift or (ii)
certain distributions to such holder's partners or shareholders, as the case may
be, provided any such transferee agrees to be bound by the terms of the Lock-Up
Agreement.
REGISTRATION RIGHTS
In consideration of Sirrom making a five-year secured loan of $4.0 million
to the Company on September 26, 1997, the Company issued to Sirrom a warrant to
purchase up to 37,660 shares of Common Stock having an exercise price of $.002
per share (and conditionally and progressively up to an additional 848,690
shares at the same price if the loan remains unpaid until its maturity date).
Sirrom has purchased 150,000 shares of Common Stock pursuant to the exercise of
a warrant granted in May 1992 in connection with an earlier loan, 75,000 of
which shares are being offered by Sirrom in the offering. Under both of these
warrants, the Company has agreed to provide Sirrom (and its permitted
transferees) written notice of
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any proposed secondary registration by the Company of shares of Common Stock
pursuant to a registration statement to be filed under the Securities Act and to
permit Sirrom and its permitted transferees (subject to certain limitations in
the event of an underwritten offering by the Company) to sell shares of Common
Stock acquired pursuant to the exercise of the warrant pursuant to any such
registration statement provided that the registration statement form permits
such secondary sale. The Company also agreed to bear the expenses of such
registration, other than fees and expenses of counsel to the selling holders and
underwriting discounts, commissions and filing fees attributable to those shares
of Common Stock included in the registration statement. In addition, the Company
has agreed to indemnify the selling holders for certain liabilities, including
liabilities under the Securities Act, that arise out of any registration of
their shares of Common Stock. Sirrom's registration rights under its earlier
warrant are still effective for 75,000 shares of Common Stock purchased under
that warrant. The Company also has granted certain affiliates of the Company
holding options to purchase up to 352,170 shares of Common Stock and warrants to
purchase up to 1,104,110 shares of Common Stock, the right to have those shares
registered by the Company on Form S-8, if that form is available for those
shares, prior to their exercise of those options and warrants.
UNDERWRITING
The Underwriters named below (the "Underwriters"), acting through their
representatives, NationsBanc Montgomery Securities, Inc. and Raymond James &
Associates, Inc. (the "Representatives"), have severally agreed, subject to the
terms and conditions of the Underwriting Agreement, to purchase from the Company
and the Selling Shareholders the number of shares of Common Stock set forth
opposite their respective names below. The Underwriters are committed to
purchase and pay for all such shares if any are purchased.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ------------------------------------------------------------------------------------------------------- -----------
<S> <C>
NationsBanc Montgomery Securities, Inc.................................................................
Raymond James & Associates, Inc........................................................................
-----------
Total..............................................................................................
-----------
-----------
</TABLE>
The Representatives have advised the Company and the Selling Shareholders
that the Underwriters propose to offer the shares of Common Stock to the public
at the initial public offering price set forth on the cover page of this
Prospectus, and to certain dealers at such price less a concession not in excess
of $ per share. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $ per share to certain other
dealers. After the initial public offering, the public offering price,
concessions and reallowances to dealers may be reduced by the Representatives.
No such reduction shall change the amount of proceeds to be received by the
Company as set forth on the cover of this Prospectus.
The Company and one of the Selling Shareholders has granted to the
Underwriters an option, exercisable not later than 30 days from the date of this
Prospectus, to purchase up to 500,000 additional shares of Common Stock at the
initial public offering price less the underwriting discounts and commissions
set forth on the cover page of this Prospectus. To the extent that the
Underwriters exercise such option, each of the Underwriters will have a firm
commitment to purchase approximately the same percentage thereof that the number
of shares of Common Stock to be purchased by it shown in the above table bears
to the total shares of Common Stock listed in such table, and the Company and
the Selling Shareholder will be obligated, pursuant to such option, to sell such
shares to the Underwriters. The Underwriters may exercise such option only to
cover over-allotments made in connection with the sale of Common Stock offered
hereby. If purchased, the Underwriters will offer such additional shares on the
same terms as those on which the initial shares are being offered.
61
<PAGE>
The Company and the Selling Shareholders on the one hand, and the
Underwriters on the other hand, have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.
The Company, certain security holders, including the Selling Shareholders,
and all executive officers and directors of the Company, have agreed, pursuant
to the Lock-Up Agreements, not to direct or indirectly, without the prior
written consent of NationsBanc Montgomery Securities, Inc., offer to sell,
contract to sell, or otherwise sell, dispose of, loan, pledge, or grant any
rights with respect to an aggregate of shares of Common Stock, options to
purchase an aggregate of shares of Common Stock and any securities
convertible or exchangeable for shares of Common Stock beneficially owned by
them or any such securities hereafter acquired by them for a period of 180 days
after the date of this Prospectus otherwise than (i) transfers by bona fide
gift, or (ii) as a distribution to such holder's partners or shareholders, as
the case may be, provided any such transferee agrees to be bound by the Lock-Up
Agreement. See "Shares Eligible for Future Sale."
The Representatives have advised the Company that they do not intend to
confirm sales to any accounts over which they exercise discretionary authority.
Prior to the offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price for the Common
Stock was determined by negotiation between the Company and the Representatives.
Among the factors considered in such negotiations were the prevailing market
conditions, the results of operations of the Company in recent periods, the
market capitalization and stages of development of other companies which the
Company and the Representatives believe to be comparable to the Company,
estimates of the business potential of the Company, the present state of the
Company's development and other factors deemed relevant.
LEGAL MATTERS
The validity of the Common Stock being offered hereby is being passed upon
for the Company by Kilpatrick Stockton LLP, Atlanta, Georgia. Certain legal
matters in connection with the offering will be passed upon for the Underwriters
by Alston & Bird LLP, Atlanta, Georgia.
EXPERTS
The consolidated financial statements of the Company at December 31, 1995
and 1996 and for each of the three years in the period ended December 31, 1996
appearing in this Prospectus and the Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing herein and in the Registration Statement, and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission in Washington, D.C. a Registration
Statement on Form S-1 (the "Registration Statement") under the Securities Act
with respect to the Common Stock offered hereby. As used herein, the term
"Registration Statement" means the initial Registration Statement and any and
all amendments thereto. This Prospectus omits certain information contained in
said Registration Statement as permitted by the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement, including
the exhibits thereto. Statements herein concerning the contents of any contract
or other document are not necessarily complete and in each instance reference is
made to such contract or other document filed with the Commission as an exhibit
to the Registration Statement. Each such statement is qualified in its entirety
by such reference.
As a result of the offering, the Company will become subject to the
informational requirements of the Securities Exchange Act of 1934, as amended,
and in accordance therewith will file reports and other
62
<PAGE>
information with the Commission, most of which it will file electronically under
the Commission's EDGAR system. Reports, registration statements, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, and at the following regional offices of the Commission: 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade
Center, New York, New York 10048. Copies of such materials can be obtained at
prescribed rates from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, or at the Commission's web site
at http://www.sec.gov.
63
<PAGE>
PAYSYS INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
CONTENTS
Report of Independent Auditors................................................................................................. F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996 and June 30, 1997 (unaudited)..................................... F-3
Consolidated Statements of Operations for the Years Ended December 31, 1994, 1995 and 1996 and the Six Months Ended June 30,
1996 and 1997 (unaudited).................................................................................................... F-4
Consolidated Statements of Shareholder's Equity (Deficit) for the Years Ended December 31, 1994, 1995 and 1996 and the Six
Months Ended June 30, 1996 and 1997 (unaudited).............................................................................. F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1995 and 1996 and the Six Months Ended June 30,
1996 and 1997 (unaudited).................................................................................................... F-6
Notes to Consolidated Financial Statements for the Years Ended December 31, 1994, 1995 and 1996 and the Six Months Ended June
30, 1996 and 1997 (unaudited)................................................................................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
PaySys International, Inc.
We have audited the accompanying consolidated balance sheets of PaySys
International, Inc. and subsidiaries as of December 31, 1995 and 1996, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for the three years then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with 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 consolidated financial position of PaySys
International, Inc. and subsidiaries at December 31, 1995 and 1996, and the
consolidated results of their operations and their cash flows for the three
years then ended, in conformity with generally accepted accounting principles.
Ernst & Young LLP
Orlando, Florida
February 7, 1997, except for
Note 12 as to which the date is
October 7, 1997
F-2
<PAGE>
PAYSYS INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- JUNE 30,
1995 1996 1997
------- ------- -----------
<S> <C> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS, EXCEPT SHARE
DATA)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................................................... $ 1,222 $ 2,037 $ 1,859
Accounts receivable, less allowance for bad debts of $119, $143, $120 at December 31, 1995 and
1996 and June 30, 1997, respectively............................................................ 4,808 4,055 3,102
Unbilled receivables.............................................................................. 1,076 5,094 5,390
Prepaid expenses and other current assets......................................................... 166 237 473
Deferred income taxes............................................................................. 92 277 --
------- ------- -----------
Total current assets................................................................................ 7,364 11,700 10,824
Furniture and equipment, net........................................................................ 1,053 1,705 2,161
Computer software costs, net of accumulated amortization of $1,529, $2,914 and $3,540 at December
31, 1995 and 1996 and June 30, 1997, respectively................................................. 2,662 2,733 2,357
Deposits and other assets........................................................................... 14 56 60
Deferred income taxes............................................................................... 414 -- --
------- ------- -----------
$11,507 $16,194 $15,402
------- ------- -----------
------- ------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................................................. $ 1,934 $ 1,859 $ 1,615
Accrued employee compensation..................................................................... 1,223 1,319 1,208
Deferred revenues................................................................................. 4,833 8,374 12,267
Current portion of long-term debt and capital lease obligations................................... 302 1,393 1,314
Accrued royalties................................................................................. -- 1,039 1,559
Other current liabilities......................................................................... 254 287 599
Line of credit.................................................................................... 368 -- --
------- ------- -----------
Total current liabilities........................................................................... 8,914 14,271 18,562
Long-term debt and capital lease obligations, less current portion.................................. 1,088 482 310
Deferred rent expense............................................................................... 1,355 1,122 981
Other noncurrent liabilities........................................................................ 138 157 --
------- ------- -----------
11,495 16,032 19,853
Shareholders' equity (deficit):
Preferred stock, no par value; 2,000,000 shares authorized; no shares issued or outstanding -- -- --
Common stock, $.01 par value; 20,000,000 shares authorized; 6,822,520, 6,826,520 and 6,861,520
shares issued at December 31, 1995 and 1996 and June 30, 1997................................... 68 68 69
Additional paid-in capital........................................................................ 2,074 2,079 2,099
Deficit in earnings............................................................................... (1,578) (1,439) (6,061)
Cumulative translation adjustments................................................................ (61) (55) (67)
------- ------- -----------
503 653 (3,960)
Less 159,050 shares held in treasury, at cost..................................................... (491) (491) (491)
------- ------- -----------
12 162 (4,451)
------- ------- -----------
$11,507 $16,194 $15,402
------- ------- -----------
------- ------- -----------
</TABLE>
See accompanying notes.
F-3
<PAGE>
PAYSYS INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------------------- ---------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1996 1997
------ ------ ------- ------ -------
<CAPTION>
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues:
License....................................................................... $5,749 $8,668 $13,366 $5,496 $ 4,245
Services...................................................................... 10,720 13,060 13,558 6,260 9,425
------ ------ ------- ------ -------
Total revenues.................................................................. 16,469 21,728 26,924 11,756 13,670
Cost of revenues:
License....................................................................... 940 1,324 2,935 1,088 1,553
Services...................................................................... 7,640 9,503 8,956 4,148 6,938
------ ------ ------- ------ -------
Total cost of revenues.......................................................... 8,580 10,827 11,891 5,236 8,491
Gross margin.................................................................... 7,889 10,901 15,033 6,520 5,179
Operating expenses:
Sales and marketing........................................................... 2,481 2,298 3,270 1,350 1,733
Research and development...................................................... 1,612 2,133 6,944 2,757 4,872
General and administrative.................................................... 3,040 4,105 4,227 1,584 2,884
Write off of capitalized software............................................. -- 2,143 -- -- --
------ ------ ------- ------ -------
Total operating expenses........................................................ 7,133 10,679 14,441 5,691 9,489
------ ------ ------- ------ -------
Income (loss) from operations................................................... 756 222 592 829 (4,310)
Interest income (expense):
Interest income............................................................... 105 27 83 27 67
Interest expense.............................................................. (345) (365) (233) (108) (102)
------ ------ ------- ------ -------
(240) (338) (150) (81) (35)
------ ------ ------- ------ -------
Income (loss) before income taxes............................................... 516 (116) 442 748 (4,345)
Income tax expense.............................................................. 367 356 303 513 277
------ ------ ------- ------ -------
Income (loss) from continuing operations........................................ 149 (472) 139 235 (4,622)
Discontinued operations:
Loss from operations of discontinued subsidiary net of income tax benefit of
$32......................................................................... (172) -- -- -- --
------ ------ ------- ------ -------
Net income (loss)............................................................... $ (23) $ (472) $ 139 $ 235 $(4,622)
------ ------ ------- ------ -------
------ ------ ------- ------ -------
Income (loss) per share from continuing operations.............................. $ 0.02 $(0.07) $ 0.02 $ 0.03 $ (0.61)
------ ------ ------- ------ -------
------ ------ ------- ------ -------
Net income (loss) per share..................................................... $ 0.00 $(0.07) $ 0.02 $ 0.03 $ (0.61)
------ ------ ------- ------ -------
------ ------ ------- ------ -------
Shares used in per share calculations........................................... 5,972 6,620 8,570 8,470 7,553
</TABLE>
See accompanying notes.
F-4
<PAGE>
PAYSYS INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK
----------------- -------------------
NUMBER NUMBER
OF SHARES AMOUNT OF SHARES AMOUNT
--------- ------ ---------- ------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT SHARE DATA)
Balance at January 1, 1994............... 5,269,010 $53 172,800 $(533)
Net loss............................... -- -- -- --
Foreign currency translation
adjustments.......................... -- -- -- --
Issuance of common stock warrant....... -- -- -- --
--------- ------ ---------- ------
Balance at December 31, 1994............. 5,269,010 53 172,800 (533)
Net loss............................... -- -- -- --
Foreign currency translation
adjustments.......................... -- -- -- --
Issuance of stock purchase warrants.... -- -- -- --
Issuance of employee stock options..... 1,500 -- -- --
Treasury shares issued pursuant to
exercise of employee stock options... -- -- (13,750) 42
Conversion of debt to equity........... 1,552,010 15 -- --
--------- ------ ---------- ------
Balance at December 31, 1995............. 6,822,520 68 159,050 (491)
Net income............................. -- -- -- --
Foreign currency translation
adjustments.......................... -- -- -- --
Exercise of employee stock options..... 4,000 -- -- --
Issuance of stock purchase warrants.... -- -- -- --
--------- ------ ---------- ------
Balance at December 31, 1996............. 6,826,520 68 159,050 (491)
Net loss (unaudited)................... -- -- -- --
Foreign currency translation adjustment
(unaudited).......................... -- -- -- --
Exercise of stock purchase warrants
(unaudited).......................... 35,000 1 -- --
--------- ------ ---------- ------
Balance at June 30, 1997 (unaudited)..... 6,861,520 $69 159,050 $(491)
--------- ------ ---------- ------
--------- ------ ---------- ------
<CAPTION>
RETAINED
ADDITIONAL EARNINGS CUMULATIVE
PAID-IN (DEFICIT IN TRANSLATION
CAPITAL EARNINGS) ADJUSTMENTS TOTAL
---------- ----------- ----------- -------
<S> <C> <C> <C> <C>
Balance at January 1, 1994............... $ 760 $(1,083) $(55) $ (858)
Net loss............................... -- (23) -- (23)
Foreign currency translation
adjustments.......................... -- -- 10 10
Issuance of common stock warrant....... 111 -- -- 111
---------- ----------- --- -------
Balance at December 31, 1994............. 871 (1,106) (45) (760)
Net loss............................... -- (472) -- (472)
Foreign currency translation
adjustments.......................... -- -- (16) (16)
Issuance of stock purchase warrants.... 9 -- -- 9
Issuance of employee stock options..... 9 -- -- 9
Treasury shares issued pursuant to
exercise of employee stock options... (42) -- -- --
Conversion of debt to equity........... 1,227 -- -- 1,242
---------- ----------- --- -------
Balance at December 31, 1995............. 2,074 (1,578) (61) 12
Net income............................. -- 139 -- 139
Foreign currency translation
adjustments.......................... -- -- 6 6
Exercise of employee stock options..... -- -- -- --
Issuance of stock purchase warrants.... 5 -- -- 5
---------- ----------- --- -------
Balance at December 31, 1996............. 2,079 (1,439) (55) 162
Net loss (unaudited)................... (4,622) -- -- (4,622)
Foreign currency translation adjustment
(unaudited).......................... -- -- (12) (12)
Exercise of stock purchase warrants
(unaudited).......................... 20 -- -- 21
---------- ----------- --- -------
Balance at June 30, 1997 (unaudited)..... $2,099 $(6,061) $(67) $(4,451)
---------- ----------- --- -------
---------- ----------- --- -------
</TABLE>
See accompanying notes.
F-5
<PAGE>
PAYSYS INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
YEAR ENDED DECEMBER JUNE
31, 30,
---------------------- ------
<S> <C> <C> <C> <C>
1994 1995 1996 1996
------ ------ ------ ------
<CAPTION>
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).......................................................................... $ (23) $ (472) $ 139 $ 235
Add (deduct) adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation........................................................................... 553 580 624 355
Amortization of computer software...................................................... 1,043 3,437 1,383 563
Amortization of discounts on debt...................................................... 13 90 45 34
Accrued rent expense................................................................... 30 (135) (233) (210)
Deferred income taxes.................................................................. 252 37 228 185
Changes in operating assets and liabilities:
Accounts receivable and unbilled receivables......................................... (94) (1,760) (3,265) 1,122
Recoverable income taxes............................................................. 156 -- -- --
Other assets......................................................................... (32) 19 (113) (55)
Accounts payable..................................................................... (333) 1,113 (75) (415)
Income taxes payable................................................................. (7) 6 (6) 285
Deferred revenues.................................................................... (468) 823 3,541 336
Accrued employee compensation........................................................ (546) (37) 96 (224)
Other liabilities.................................................................... 170 (293) 1,098 228
------ ------ ------ ------
Net cash provided by operating activities.................................................. 714 3,408 3,462 2,439
INVESTING ACTIVITIES
Purchases of furniture and equipment....................................................... (606) (215) (665) (478)
Computer software development.............................................................. (2,643) (2,343) (1,132) (545)
Other...................................................................................... (4) -- -- --
------ ------ ------ ------
Net cash used in investing activities...................................................... (3,253) (2,558) (1,797) (1,023)
FINANCING ACTIVITIES
Issuance of options and warrants........................................................... -- 18 5 --
Proceeds from borrowings................................................................... 1,000 300 23 --
Principal payments on long-term debt, capital lease obligations, and line of credit........ (360) (362) (884) (225)
------ ------ ------ ------
Net cash provided by (used in) financing activities........................................ 640 (44) (856) (225)
------ ------ ------ ------
Effect of foreign currency translation on cash and cash equivalents........................ 10 (16) 6 16
------ ------ ------ ------
Increase (decrease) in cash and cash equivalents........................................... (1,889) 790 815 1,207
Cash and cash equivalents at beginning of period........................................... 2,321 432 1,222 1,222
------ ------ ------ ------
Cash and cash equivalents at end of period................................................. $ 432 $1,222 $2,037 $2,429
------ ------ ------ ------
------ ------ ------ ------
<CAPTION>
<S> <C>
1997
-------
<S> <C>
OPERATING ACTIVITIES
Net income (loss).......................................................................... $(4,622)
Add (deduct) adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation........................................................................... 388
Amortization of computer software...................................................... 626
Amortization of discounts on debt...................................................... 4
Accrued rent expense................................................................... (141)
Deferred income taxes.................................................................. 277
Changes in operating assets and liabilities:
Accounts receivable and unbilled receivables......................................... 657
Recoverable income taxes............................................................. --
Other assets......................................................................... (240)
Accounts payable..................................................................... (244)
Income taxes payable................................................................. --
Deferred revenues.................................................................... 3,735
Accrued employee compensation........................................................ (111)
Other liabilities.................................................................... 831
-------
Net cash provided by operating activities.................................................. 1,160
INVESTING ACTIVITIES
Purchases of furniture and equipment....................................................... (790)
Computer software development.............................................................. (303)
Other...................................................................................... --
-------
Net cash used in investing activities...................................................... (1,093)
FINANCING ACTIVITIES
Issuance of options and warrants........................................................... 21
Proceeds from borrowings................................................................... --
Principal payments on long-term debt, capital lease obligations, and line of credit........ (254)
-------
Net cash provided by (used in) financing activities........................................ (233)
-------
Effect of foreign currency translation on cash and cash equivalents........................ (12)
-------
Increase (decrease) in cash and cash equivalents........................................... (178)
Cash and cash equivalents at beginning of period........................................... 2,037
-------
Cash and cash equivalents at end of period................................................. $ 1,859
-------
-------
</TABLE>
See accompanying notes.
F-6
<PAGE>
PAYSYS INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies used in
preparation of these consolidated financial statements.
OPERATIONS
PaySys International, Inc. (the Company) was incorporated on January 27,
1981. The Company develops, licenses and supports computer software for use by
financial institutions, retailers and third party processors to process credit
card transactions. The consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All significant intercompany
balances, transactions, and profits and losses have been eliminated.
INTERIM FINANCIAL INFORMATION
In the opinion of management, the interim financial statements have been
prepared on the same basis as the annual financial statements and include all
adjustments (consisting only of normal recurring adjustments) necessary to state
fairly the financial information set forth herein, in accordance with generally
accepted accounting principles.
The results of operations for the six months ended June 30, 1997 are not
necessarily indicative of results to be expected for the full fiscal year.
REVENUE RECOGNITION
Revenues are derived from sales of software licenses and related services.
Revenue recognition practices are in accordance with Statement of Position 91-1
"Software Revenue Recognition." The Company generally recognizes software
license revenue upon delivery of the software and related documentation when
there are no significant remaining obligations. The Company accrues the costs of
any insignificant obligations remaining when software license revenue is
recognized. Service fees received from the sale of software maintenance and
support contracts provide customers access to technical support and minor
upgrades to licensed releases and are recognized as services are provided over
the life of such contracts. Revenue from professional services is recognized as
services are performed or over the term of the related agreement.
Deferred revenue primarily represents advance payments from customers for
service agreements and license fees.
NET INCOME (LOSS) PER SHARE
Net income (loss) per share is based on the weighted average number of
common shares outstanding and dilutive common stock equivalents during the
periods presented. Pursuant to Securities and Exchange Commission Staff
Accounting Bulletin No. 83, Common Stock issued for consideration below the
assumed initial public offering (the "IPO") price and stock options and warrants
issued with exercise prices below the IPO price during the twelve-month period
preceding the initial filing of the Registration Statement,
F-7
<PAGE>
PAYSYS INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
have been included in the calculation of common shares, using the treasury stock
method, as if they were outstanding for all periods presented.
CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
The Company's revenues consist primarily of license and service revenues
from large companies in the United States, Canada, South America, Australia, New
Zealand, and South Africa. The Company does not obtain collateral against its
outstanding receivables. The Company maintains reserves for potential credit
losses. Bad debt expense was $200,000, $121,000 and $133,000 during the years
ended 1994, 1995 and 1996, respectively, and $75,000 and $304,000 during the six
months ended June 30, 1996 and 1997, respectively. No customer accounted for
more than 10% of revenues during the six months ended June 30, 1997. Two
customers accounted for 22% and 11% of revenues during the six months ended June
30, 1996. During fiscal 1996, one customer accounted for 11% of revenues; during
fiscal 1995, two customers accounted for 15% and 13% of revenues; during fiscal
1994, one customer accounted for 16% of revenues.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities of three
months or less when purchased to be cash equivalents. The Company maintains
deposits with a bank and invests its excess cash in overnight funds which bear
minimal risk.
FURNITURE AND EQUIPMENT
Furniture and equipment are carried at cost less accumulated depreciation.
Depreciation is computed using straight-line method over the estimated useful
lives (generally 3 to 5 years). Amortization of computer equipment under capital
lease is being recorded over the five-year term of the lease and is included in
depreciation expense. Expenditures for repairs and maintenance are charged to
operations as incurred.
COMPUTER SOFTWARE COSTS
The Company conforms with the requirements of Statement of Financial
Accounting Standards (SFAS) No. 86, "Accounting for the costs of Computer
Software to Be Sold, Leased or Otherwise Marketed", which requires
capitalization of costs incurred in developing new software products once
technological feasibility, as defined, has been reached. Costs of maintaining
existing software and research and development are expensed as incurred. The
Company has capitalized software development costs of $2,643,000, $2,343,000 and
$1,132,000 during the years ended 1994, 1995, and 1996, respectively, and
$545,000 and $249,000 during the six months ended June 30, 1996 and 1997,
respectively. The Company records amortization of software development costs
capitalized in an amount equal to the greater of the amount computed using (i)
the ratio that current gross revenues for a product bear to the total of current
and anticipated revenues for that product or (ii) the straight-line method over
the estimated useful life of the released product (currently three years).
Amortization of internally-developed software costs totaled
F-8
<PAGE>
PAYSYS INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
$886,000, $3,247,000 and $1,168,000 for the years ended December 31, 1994, 1995
and 1996, respectively, and $563,000 and $626,000 for the six months ended June
30, 1996 and 1997, respectively. The higher amortization of capitalized software
costs for 1995 is due to the write-off of $2.1 million of capitalized software
costs for two projects deemed to have no net realizable value.
INCOME TAXES
The Company follows the liability method of accounting for income taxes.
Deferred income taxes relate to the net 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.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
STOCK-BASED COMPENSATION
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation", which provides an alternative to Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25), in
accounting for stock-based compensation issued to employees. As permitted by
SFAS No. 123, the Company continues to account for stock option grants in
accordance with APB 25 and has elected the pro forma disclosure alternative of
the effect of SFAS No. 123. Accordingly, adoption of the standard in 1996 did
not affect the Companies' results of operations.
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued a new
accounting pronouncement, SFAS No. 128, "Earnings per Share," which will change
the current method of computing earnings per share. The new standard requires
presentation of "basic earnings per share" and "diluted earnings per share"
amounts, as defined. SFAS No. 128 will be effective for the Company's quarter
and year ending December 31, 1997, and, upon adoption, all prior-period earnings
per share data presented shall be restated to conform with the provisions of the
new pronouncement. Application earlier than the Company's quarter ending
December 31, 1997 is not permitted. The Company has evaluated the impact of
adopting SFAS No. 128 and does not expect restated basic and diluted earnings or
loss per share to be reported upon adoption of SFAS No. 128 to differ from
amounts reported under existing accounting rules for all periods reported by the
Company through June 30, 1997.
RECLASSIFICATION
Certain amounts reported in the 1994, 1995, and 1996 financial statements
have been reclassified to conform to the June 30, 1997 financial statement
presentation.
F-9
<PAGE>
PAYSYS INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
2. FURNITURE AND EQUIPMENT
Furniture and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1995 1996 1997
--------- --------- -----------
<S> <C> <C> <C>
Furniture and equipment:
Office furniture and equipment.................................................. $ 1,083 $ 1,158 $ 1,562
Computer equipment and purchased software....................................... 2,388 2,629 3,108
Computer equipment under capital lease.......................................... 1,690 2,569 1,745
--------- --------- -----------
5,161 6,356 6,415
Less allowances for depreciation and amortization............................... (4,108) (4,651) (4,254)
--------- --------- -----------
$ 1,053 $ 1,705 $ 2,161
--------- --------- -----------
--------- --------- -----------
</TABLE>
3. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company considers its cash and cash equivalents, accounts receivable,
line of credit and long-term debt and capital lease obligations to be its only
significant financial instruments and believes that the carrying amounts of
these instruments approximates their fair value. The carrying amount of
long-term debt approximates fair value based on current interest rates available
to the Company for debt instruments with similar terms, degree of risk and
remaining maturities. The remaining financial instruments approximate fair value
based on the short-term nature of these instruments.
F-10
<PAGE>
PAYSYS INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
4. LONG-TERM DEBT AND LEASES
Long-term debt and capital lease obligations consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- --------- JUNE 30,
1997
-------------
(UNAUDITED)
<S> <C> <C> <C>
Note payable due September 1, 1997,
interest at 13%, secured by
equipment, accounts receivable,
software and related materials............................................... $ 1,000 $ 1,000 $ 900
Less discount.................................................................. 17 4 --
--------- --------- ------
983 996 900
Notes payable for computer equipment, interest at 10%, payable through January
1997......................................................................... 6 -- --
Other note payable............................................................. 64 21 50
Capital lease obligations, various imputed interest rates
and monthly payments......................................................... 337 858 674
--------- --------- ------
1,390 1,875 1,624
Less current portion........................................................... (302) (1,393) (1,314)
--------- --------- ------
$ 1,088 $ 482 $ 310
--------- --------- ------
--------- --------- ------
</TABLE>
The Company entered into a lease agreement to secure premises for a period
of ten years commencing July 1, 1990. The lease provides for increasing rental
payments over the ten year period. Rent expense is being amortized on a
straight-line basis over the ten year term of the lease.
Under a sublease agreement, the Company leases office space from Quadram
Corporation ("Quadram"), a wholly-owned subsidiary of Intelligent Systems
Corporation (ISC). ISC and the chairman of ISC are shareholders' of the Company.
The lease began in 1996 and ends November 2002 (subject to earlier termination
if Quadram's lease is terminated). Rental expense under this agreement was
$86,000 for the year ended December 31, 1996 and $117,000 for the six months
ended June 30, 1997.
Rental expense was $1,141,000, $1,171,000 and $1,108,000 for the years ended
December 31, 1994, 1995, and 1996, respectively, and $529,000 and $727,000 for
the six months ended June 30, 1996 and 1997, respectively.
F-11
<PAGE>
PAYSYS INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
4. LONG-TERM DEBT AND LEASES (CONTINUED)
Required payments by fiscal year for long-term debt, capital leases and
noncancelable operating leases with initial or remaining terms in excess of one
year at December 31, 1996, were as follows (in thousands):
<TABLE>
<CAPTION>
LONG-TERM CAPITAL OPERATING
YEAR ENDING DECEMBER 31, DEBT LEASES LEASES
- --------------------------------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
1997............................................................................. $ 1,021 $ 416 $ 1,383
1998............................................................................. -- 341 1,402
1999............................................................................. -- 158 1,398
2000............................................................................. -- -- 636
----------- ----- -----------
1,021 915 4,819
Less amount representing interest................................................ -- (57) --
----------- ----- -----------
$ 1,021 $ 858 $ 4,819
----------- ----- -----------
----------- ----- -----------
</TABLE>
5. COMMITMENTS AND CONTINGENCIES
ROYALTY AGREEMENT
In connection with a software development agreement entered into by the
Company and a customer, the Company is required to pay royalties to the customer
for sales of the product developed under the agreement. The Company is required
to pay 10% of any sale, license or other grant of right to use the product which
total less than $1,000,000 and 15% of any sale, license or other grant of right
to use product which total more than $1,000,000. Further the Company is required
to pay the following incremental royalty fees on the sale, license, or other
grant of right to use the product:
<TABLE>
<S> <C>
1996..................................................... 2.5%
1997..................................................... 5.0%
1998..................................................... 7.5%
1999 and beyond.......................................... 10.0%
</TABLE>
Total amounts to be paid under this agreement are capped at $6,027,000. As
of December 31, 1996 and June 30, 1997, amounts accrued under this agreement are
approximately $654,000 and $1,559,000 respectively. See Note 12.
LEGAL MATTERS
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not be material to the Company's consolidated
financial position and operations.
F-12
<PAGE>
PAYSYS INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
6. INCOME TAXES
The provision for income taxes for the years ended December 31, 1994, 1995
and 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, SIX MONTHS
------------------------------- ENDED JUNE 30,
1994 1995 1996 1997
--------- --------- --------- -----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current tax expense:
Federal................................................................. $ -- $ 6 $ 21 $ --
Foreign................................................................. 81 313 54 --
State................................................................... 2 -- -- --
--------- --------- --------- -----
Total current............................................................. 83 319 75 --
Deferred tax expense
(benefit):
Federal............................................................... 226 48 181 277
Foreign............................................................... -- -- -- --
State................................................................. 58 (11) 47 --
--------- --------- --------- -----
Total deferred............................................................ 284 37 228 277
--------- --------- --------- -----
$ 367 $ 356 $ 303 $ 277
--------- --------- --------- -----
--------- --------- --------- -----
</TABLE>
A reconciliation of the statutory U.S. income tax rate to the effective
income tax rate is as follows
(in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------------
1994 1995 1996
--------- --------- --------- SIX MONTHS
ENDED
JUNE 30,
1997
-------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Tax (benefit) at statutory federal rate.................................. $ 176 $ (39) $ 150 $ (1,477)
State taxes net of federal benefit....................................... 39 (7) 31 (23)
Research and development credit.......................................... -- (51) (490) --
Foreign tax credits...................................................... -- -- (205) --
International withholding taxes.......................................... -- 210 1 --
Foreign operations not subject to U.S. tax............................... 143 43 58 75
Expiring foreign tax credits............................................. 14 161 -- --
Meals and entertainment.................................................. 19 29 34 17
Other--net............................................................... (24) 10 (16) --
Change in valuation allowance............................................ -- -- 740 1,685
--------- --------- --------- -------------
Total income tax expense................................................. $ 367 $ 356 $ 303 $ 277
--------- --------- --------- -------------
--------- --------- --------- -------------
</TABLE>
F-13
<PAGE>
PAYSYS INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
6. INCOME TAXES (CONTINUED)
Components of U.S. deferred tax assets (liabilities) are as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- --------- JUNE 30,
1997
-------------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets:
Federal and state net operating losses...................................... $ 248 $ 86 $ 1,258
Accruals not deductible for tax purposes.................................... 135 445 532
General business credit carryforwards....................................... 1,280 1,771 1,771
Foreign tax credit carryforwards............................................ 271 69 69
Minimum tax credit carryforwards............................................ 163 207 207
Other....................................................................... 1 -- --
--------- --------- -------------
Total gross deferred tax assets............................................... 2,098 2,578 3,837
Deferred tax liability:
Property and equipment, principally due to depreciation....................... (65) (40) (32)
Amortization of intangibles................................................... (918) (912) (770)
--------- --------- -------------
Total gross deferred tax liabilities.......................................... (983) (952) (802)
Less valuation allowance...................................................... (609) (1,349) (3,035)
--------- --------- -------------
Net deferred tax asset........................................................ $ 506 $ 277 $ --
--------- --------- -------------
--------- --------- -------------
</TABLE>
At December 31, 1996, the Company had general business, foreign tax and AMT
credit carryforwards available to offset future federal income tax liabilities
totalling approximately $2,047,000 which expire in 1997 through 2011. The tax
benefits of these credit carryforwards can be realized only through their
application to taxable income arising from future successful operations of the
Company. Due to the uncertainty of the Company's ability to fully realize the
benefits of the credit carryforwards, a valuation allowance of $1,349,000 has
been established at December 31, 1996. When recognized, the tax benefit of those
items will be applied to reduce future income tax amounts.
The Company's Irish subsidiary had a current year tax loss of $172,000 and
cumulative losses of $3,324,000 which have been fully reserved by a valuation
allowance.
7. SHAREHOLDERS' EQUITY
COMMON STOCK
Effective August 1, 1995, the Company issued 1,552,010 shares of common
stock to ISC for the cancellation of $900,000 in line of credit borrowings,
$83,000 in accrued interest and $259,000 in accounts payable to a subsidiary of
ISC. The original line of credit was also amended to $400,000 and was available
through July 31, 1996. Accrued interest on this line of credit was $4,000 at
December 31, 1995.
F-14
<PAGE>
PAYSYS INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
7. SHAREHOLDERS' EQUITY (CONTINUED)
WARRANTS
Pursuant to a loan agreement between the Company and Sirrom Capital, L.P.
(Sirrom), the Company granted Sirrom the right to purchase 75,000 shares of the
Company's common stock plus an additional 5,000 shares of common stock for each
full calendar month the note payable remains outstanding up to 75,000 additional
shares. The warrant is exercisable at any time until September 30, 1997 at an
exercise price of $.002 per share.
Pursuant to a loan agreement dated January 24, 1994 between the Company and
ISC, ISC has been granted a warrant to purchase 277,605 shares of the Company's
common stock at par value of $.01 per share in consideration for making the
loan. The warrant is exercisable at any time through January 31, 1999, at which
time the Company may extend the exercise period.
During 1995, the Company issued to two individuals warrants to purchase
105,350 shares of common stock at an exercise price of $.60 per share. These
warrants, which expire in December 2005, become exercisable equally over a two
year and three year vesting period. In April and June 1997, 35,000 shares of
common stock were issued under these warrants. In June 1997, a warrant to
purchase 17,675 shares of common stock was canceled.
During 1996, the Company issued warrants to employees to purchase 1,104,110
shares of common stock exercisable at a price per share based on $50,000,000
divided by the number of shares outstanding at the exercise date. These warrants
are exercisable upon achievement of certain milestones and expire in February
2003. See Note 12.
The weighted average grant date fair value of warrants issued during the
years ended December 31, 1995 and 1996 was $.40 and $0, respectively. Warrants
for the purchase of 470,150 and 496,490 shares of common stock have been earned
and are available for exercise at December 31, 1995 and 1996, respectively.
STOCK OPTIONS
The Company has elected to follow APB 25 and related interpretations in
accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under SFAS No. 123 requires use
of option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, no compensation expense is recognized for options
with an exercise price equal to the fair value of the underlying stock on date
of grant.
The 1995 Stock Incentive Plan (the "1995 Plan") allows for the granting of
options for up to 1,500,000 shares of common stock to employees and directors.
Stock options granted under the Plan may be either incentive stock options or
nonqualified stock options. Incentive stock options may be granted with exercise
prices of no less than the fair market value. The options expire 10 years from
the date of grant. Options may be granted with different vesting terms but are
generally provide for vesting equally over a four year period.
F-15
<PAGE>
PAYSYS INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
7. SHAREHOLDERS' EQUITY (CONTINUED)
Proforma information regarding net income (loss) and net income (loss) per
share is required by SFAS No. 123, which also requires that the information be
determined as if the Company has accounted for its employee stock options
granted subsequent to December 31, 1994 under the fair value method prescribed
by that statement. The fair value for these options were estimated at the date
of grant using the minimum value method with the following weighted-average
assumptions for December 31, 1995 and 1996: risk-free interest rate of 6%;
dividend yields of 0%; and a weighted-average expected life of the options of 8
years. The weighted average fair value of options granted during the years ended
December 31, 1995 and 1996 was $.26 per share.
In addition, the option valuation models require the input of highly
subjective assumptions. Because the Company's employee stock options have
characteristics different from these 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 proforma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information is as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
Net income (loss)....................................... $ (474) $ 89
Net income (loss) per share............................. $ (0.07) $ 0.01
</TABLE>
Because SFAS No. 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until 1999.
F-16
<PAGE>
PAYSYS INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
7. SHAREHOLDERS' EQUITY (CONTINUED)
The following table summarizes option activity for the years ended December
31, 1995 and 1996 and the period ended June 30, 1997.
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE EXERCISE
SHARES PRICE RANGE PRICE
---------- ------------- -----------
<S> <C> <C> <C>
Outstanding at January 1, 1995............................................. 32,750 $ 0 $ 0
Granted.................................................................. 410,080 $ .80 $ .80
Exercised................................................................ (15,250) $ 0 $ 0
Expired.................................................................. (11,750) $ 0 $ 0
---------- ------------- -----------
Outstanding at December 31, 1995........................................... 415,830 $ 0 - $.80 $ .79
Granted.................................................................. 504,670 $ .80 - $3.10 $ 1.20
Exercised................................................................ (4,000) $ 0 $ 0
---------- ------------- -----------
Outstanding at December 31, 1996........................................... 916,500 $ 0 - $3.10 $ 1.02
Granted.................................................................. 297,075 $ 3.10 $ 3.10
Expired.................................................................. (123,075) $ 3.10 $ 3.10
---------- ------------- -----------
Outstanding at June 30, 1997............................................... 1,090,500 $ 0 - $3.10 $ 1.35
---------- ------------- -----------
---------- ------------- -----------
Exercisable at December 31, 1996........................................... 315,160 $ 0 - $.80 $ .80
---------- ------------- -----------
---------- ------------- -----------
Exercisable at June 30, 1997............................................... 400,240 $ 0 - $.80 $ .80
---------- ------------- -----------
---------- ------------- -----------
</TABLE>
Options exercisable at $.80 per share totaled 827,250 of which 313,410 were
exercisable at December 31, 1996. The weighted average remaining contractual
life of options exercisable at $.80 per share was 9.1 years at December 31,
1996. Options exercisable at $3.10 per share totaled 75,000 of which none were
exercisable at December 31, 1996. The weighted average remaining contractual
life of options exercisable at $3.10 per share was 9.8 years at December 31,
1996. Options exercisable at $0 per share totaled 1,750, of which all were
exercisable at December 31, 1996. The weighted average remaining contractual
life of options exercisable at $0 per share was .1 years at December 31, 1996.
At June 30, 1997, a total of 3,086,140 shares of the Company's common stock
were reserved for the exercise of stock warrants and options.
8. EMPLOYEE BENEFIT PLAN
The Company has a 401(k) Profit Sharing Plan for the benefit of eligible
employees and their beneficiaries. All employees who have completed three months
of service are eligible to participate in the Plan and are fully vested. The
Company's contributions to the Plan are discretionary. The Company contributions
are allocated among participants at a rate of $.25 to $.50 per dollar of
participant contributions depending on Company profit levels. Contributions to
the Plan during the years ended December 31, 1994, 1995, and 1996 were $0, $0,
and $100,000, respectively.
F-17
<PAGE>
PAYSYS INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
9. FOREIGN OPERATIONS
Export sales were $1,026,000, $8,411,000 and $8,803,000 for the years ended
December 31, 1994, 1995 and 1996, respectively, and $2,580,000 and $8,031,000
for the six months ended June 30, 1996 and 1997, respectively. Such revenues
were derived principally from Australia, New Zealand, Canada, West Indies, South
Africa and South America. Accounts receivable arising from foreign revenues
total $4,198,000, $3,691,000 and $2,724,000 as of December 31, 1995 and 1996 and
June 30, 1997, respectively.
Information about the Company's operations by geographic area is as follows
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------- JUNE 30,
1994 1995 1996 1997
--------- --------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
UNITED STATES:
Revenues........................................................ $ 16,106 $ 21,106 $ 26,445 $ 13,565
Income (loss) from continuing operations........................ $ 679 $ (344) $ 301 $ (4,401)
Identifiable Assets............................................. $ 10,082 $ 11,265 $ 16,086 $ 15,214
EUROPE/FAR EAST:
Revenues........................................................ $ 363 $ 622 $ 479 $ 105
(Loss) from continuing operations............................... $ (530) $ (128) $ (162) $ (221)
Identifiable Assets............................................. $ 268 $ 242 $ 108 $ 188
</TABLE>
10. SUPPLEMENTAL CASH FLOW INFORMATION
The following is a summary of non cash transactions and additional cash flow
information:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FOR THE YEAR ENDED DECEMBER 31,
JUNE 30,
------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION
Stock issued for the cancellation of accounts payable, line of credit
borrowings and related accrued interest................................ $ -- $ 1,242 $ -- $ -- $ --
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Furniture and equipment acquired under capital lease obligations......... $ 2 $ 6 $ 933 $ 767 $ --
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Note payable issued to seller of Transys Corporation..................... $ 300 $ -- $ -- $ -- $ --
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Cash paid for interest................................................... $ 249 $ 278 $ 204 $ 107 $ 102
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Cash paid for income taxes............................................... $ 5 $ -- $ 65 $ 20 $ --
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
11. DISCONTINUED OPERATIONS
During the fiscal year ended January 31, 1993, the Company adopted a plan to
discontinue the operations of its Cuso Management Group, Inc. ("Cuso")
subsidiary. Effective September 4, 1992, the
F-18
<PAGE>
PAYSYS INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
11. DISCONTINUED OPERATIONS (CONTINUED)
stock of Cuso was sold for $35,000 cash and the balance of approximately
$305,000 on the original note payable was assigned to the purchaser.
The operating results for Cuso are included in the accompanying consolidated
statements of operations for the year ended December 31, 1994 under the caption
"Discontinued Operations." The pre-tax Cuso loss amounted to $204,000 for the
year ended December 31, 1994 and has been reduced for resultant income tax
benefits of $32,000. Revenues associated with the discontinued operations were
$0 for the year ended December 31, 1994.
12. SUBSEQUENT EVENTS
In July 1997, the Company's board of directors authorized management to file
a Registration Statement with the Securities and Exchange Commission permitting
the Company to sell shares of its common stock to the public. In addition, the
Company's Board of Directors has approved a five-for-one stock split effected as
a stock dividend. Accordingly, all the share and per share data have been
retroactively adjusted to reflect these changes.
During August and September 1997 warrants to purchase an aggregate of
427,605 shares of common stock were exercised for aggregate proceeds of
approximately $1,000.
Effective August 5, 1997, the Company amended outstanding warrants to
purchase 1,104,110 shares of common stock which were issued to employees in 1996
(see Note 7). The amendment fixed the exercise price of the warrants at $4.80
per share, and the warrants became fully exercisable as of the amendment date.
In addition, the amendment added provisions (i) restricting transfer of any
shares obtained from exercise of the warrants until the earlier of achievement
of certain milestones or February 2003 and (ii) withholding certain registration
rights until achievement of the milestones. As a result of amending the
warrants, the Company will record in the quarter ending September 30, 1997
compensation expense totalling approximately $3,875,000 for the difference
between the exercise price and estimated fair value per share at the amendment
date.
Pursuant to an agreement dated June 1993, Household International, Inc. paid
the Company an aggregate of $4.6 million ($1.4 million, $3.0 million and $0.2
million in 1993, 1994 and 1995, respectively), to fund the development of
VisionPLUS. In exchange for such payments, Household acquired a 50% ownership in
VisionPLUS and a right to royalties on the sale of any of the VisionPLUS
modules, subject to specific maximum. Following the payment of the maximum
royalties, the Company has the right to acquire, for a nominal amount,
Household's interest in VisionPLUS. In September 1997, the Company and Household
agreed that the Company would pay to Household, from the net proceeds of the
sale of shares of Common Stock offered hereby by the Company, up to $5.1 million
in settlement of all current and future obligations of the Company to Household
pursuant to such agreement. Following such payment, the Company will retain its
right to acquire Household's interest in VisionPLUS for a nominal amount.
On September 26, 1997, the Company entered into a $4.0 million loan
agreement with Sirrom Capital Corporation. The loan is due in five years at
13.5% interest. The loan proceeds are to be used to pay
F-19
<PAGE>
PAYSYS INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
12. SUBSEQUENT EVENTS (CONTINUED)
$900,000 outstanding under a previous loan agreement with the same lender,
amounts borrowed in August 1997 from a shareholder and working capital. In
connection with the financing the Company incurred loan costs of $80,000 and
issued a warrant to purchase 37,660 shares of the Company's common stock at an
exercise price of $.002 per share. The warrants were valued at approximately
$300,000. If the debt remains outstanding for certain periods during the term of
the financing arrangement the Company will be required to issue additional
shares under the warrant.
In October 1997, the Company adopted the 1997 Stock Incentive Plan (the
"1997 Plan"). The 1997 Plan allows for the granting of options for up to 411,250
shares of common stock to employees, non-employee directors, consultants and
other vendors.
F-20
<PAGE>
[INSIDE BACK COVER]
Dual graphical presentation of three parts of credit card processing
relationship and flow (upper half of page) and the application of the Company's
product to those parts (lower half of page)
Upper half:
to left, graphic of bank labelled: MERCHANT'S BANK (ACQUIRER) and MERCHANT BANK
and the numeral 1
to center, VISA and Mastercard logos and text: ASSOCIATION NETWORK (BANK CARD)
and CARDHOLDER PURCHASE and the numeral 2
to right, graphic of bank labelled: CARDHOLDER'S BANK (ISSUER), graphic of
people labelled: CARDHOLDER, and the numeral 3
Lower half
Graphical text in three columns labeled left to right 1, 2, and 3 with the
overall caption: PAYSYS VISIONPLUS
Left column, the text:
* MERCHANT ACCOUNT SET UP
* AUTHORIZATION REQUEST RESPONSE ROUTING
* DEPOSIT PROCESSING & SETTLEMENT
* NET OF PROCESSING DISCOUNT/FEES & INTERCHANGE FEES
* DEPOSIT FRAUD MONITORING
* EXCEPTION PROCESSING
Middle column, the text:
* INTERCHANGE COMPLIANCE
* AUTHORIZATIONS
* CLEARING & SETTLEMENT
* EXCEPTIONS
* ON-US ACTIVITY
Right column, the text:
* CARDHOLDER APPLICATION SCORING APPROVAL & ACCOUNT SET UP
* AUTHORIZATION DECISION CRITERIA
* TRANSACTION POSTING/PAYMENT APPLICATION
* CARDHOLDER BILLING & COLLECTION
* INTEREST/FEES ACCRUED
* MINIMUM DUE
* BONUS POINTS
* CARDHOLDER DISPUTES/EXCEPTION PROCESSING
* FRAUD MONITORING
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, ANY SELLING SHAREHOLDER OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES,
OR AN OFFER TO, OR SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH AN
OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
------------------------
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
SUMMARY........................................
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS...................................
RISK FACTORS...................................
USE OF PROCEEDS................................
DIVIDEND POLICY................................
CAPITALIZATION.................................
DILUTION.......................................
SELECTED CONSOLIDATED FINANCIAL DATA...........
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS...................................
BUSINESS.......................................
MANAGEMENT.....................................
PRINCIPAL AND SELLING SHAREHOLDERS.............
CERTAIN TRANSACTIONS...........................
DESCRIPTION OF CAPITAL STOCK...................
SHARES ELIGIBLE FOR FUTURE SALE................
UNDERWRITING...................................
LEGAL MATTERS..................................
EXPERTS........................................
ADDITIONAL INFORMATION.........................
</TABLE>
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES OF THE COMPANY,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
3,333,333 SHARES
[LOGO]
COMMON STOCK
----------------
PROSPECTUS
------------------------
NATIONSBANC MONTGOMERY
SECURITIES, INC.
RAYMOND JAMES
& ASSOCIATES, INC.
OCTOBER , 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below is an estimate of the approximate amount of the fees and
expenses (other than underwriting commissions and discounts) payable by the
Company in connection with the issuance and distribution of the shares of Common
Stock.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............................... $ 15,101
---------
NASD Filing Fee................................................................... $ 5,100
---------
Nasdaq National Market fees....................................................... $ 42,000
---------
Printing and Mailing Expenses..................................................... $ 125,000
---------
Accounting Fees and Expenses...................................................... $ 350,000
---------
Blue Sky Fees and Expenses........................................................ $ 10,000
---------
Legal Fees and Expenses........................................................... $ 250,000
---------
Transfer Agent Fees and Expenses.................................................. $ 10,000
---------
Miscellaneous..................................................................... $ 17,799
---------
Total......................................................................... $ 825,000
---------
---------
</TABLE>
The Selling Shareholders will pay all underwriting discounts and commissions
and transfer taxes, if any, relating to the sale of the Selling Shareholders'
shares of Common Stock in the offering.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Florida Business Corporation Act (the "Florida Act") authorizes Florida
corporations to indemnify any person who was or is a party to any proceeding
(other than an action by, or in the right of, the corporation), by reason of the
fact that he or she is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or other entity,
against liability incurred in connection with such proceeding, including any
appeal thereof, if he or she acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. In the case of an
action by or on behalf of a corporation, indemnification may not be made if the
person seeking indemnification is adjudged liable, unless the court in which
such action was brought determines such person is fairly and reasonably entitled
to indemnification. The indemnification provisions of the Florida Act require
indemnification if a director or officer has been successful on the merits or
otherwise in defense of any action, suit or proceeding to which he or she was a
party by reason of the fact that he or she is or was a director or officer of
the corporation. The indemnification authorized under Florida law is not
exclusive, and is in addition to any other rights granted to officers and
directors under the Articles of Incorporation or Bylaws of the corporation or
any agreement between officers and directors and the corporation. A corporation
may purchase and maintain insurance or furnish similar protection on behalf of
any officer or director against any liability asserted against the officer or
director and incurred by the officer or director in such capacity, or arising
out of the status, as an officer or director, whether or not the corporation
would have the power to indemnify him or her against such liability under the
Florida Act.
II-1
<PAGE>
The Company's Articles of Incorporation and Bylaws provide for the
indemnification of directors and executive officers of the Company to the
maximum extent permitted by Florida law, including circumstances in which
indemnification is otherwise discretionary under Florida law, and for the
advancement of expenses incurred in connection with the defense of any action,
suit or proceeding that the director or executive officer was a party to by
reason of the fact that he or she is or was a director or executive officer of
the Company, upon the receipt of an undertaking to repay such amount, unless it
is ultimately determined that such person is not entitled to indemnification.
The Company currently intends to obtain insurance covering its executive
officers and directors for claims against them for wrongful acts, including
those for which the Company may be required to indemnify them.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the past three years, the following persons were issued Common Stock
of the Company in reliance upon the exemption contained in Section 4(2) of, or
Rule 701 under, the Securities Act, in the number of shares, on the date and for
the consideration referenced below:
<TABLE>
<CAPTION>
NO. OF DATE OF
NAME SHARES ISSUANCE CONSIDERATION
- ---------------------------------------------------------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
Debbie Jo Daniels............................................... 500 10/26/95 $ *
-------------
Morris Daniels.................................................. 2,000 2/08/96 $ *
-------------
Laura D. Griffani............................................... 3,000 6/28/95 $ *
-------------
Sally B. Haas................................................... 750 6/28/95 $ *
-------------
Terry R. Hollinger.............................................. 1,250 7/13/95 $ *
-------------
Intelligent Systems Corporation................................. 1,552,010 8/1/95 $ 1,242,000
-------------
Robert D. or Jennifer R. Musser................................. 6,250 6/28/95 $ *
-------------
Tanya Sears..................................................... 1,250 6/28/95 $ *
-------------
Gerald Vaughan.................................................. 15,000 4/9/97 $ 9,000
-------------
Gerald Vaughan.................................................. 20,000 6/3/97 $ 12,000
-------------
Intelligent Systems Corporation................................. 277,605 8/8/97 $ *
-------------
Sirrom Investments, Inc......................................... 150,000 9/8/97 $ 300
-------------
</TABLE>
- ------------------------
* Nominal amount
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
* 1.1 Form of Underwriting Agreement.
1.2 Form of Lock-Up Agreement.
3.1 Amended and Restated Articles of Incorporation of the PaySys International, Inc. (the "Company").
3.2 Bylaws, as amended, of the Company.
* 4.1 Form of Common Stock Certificate of the Company.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
* 5.1 Opinion of Kilpatrick Stockton LLP.
*10.1 1995 Stock Incentive Plan.
*10.2 1997 Stock Incentive Plan.
10.3 Stock Purchase Warrant issued to Sirrom Capital, L.P., dated May 29, 1992.
10.4 Loan and Security Agreement between the Company and Sirrom Capital, L.P. (assigned to Sirrom
Investments, Inc.), dated May 29, 1992.
10.5 Secured Promissory Note of the Company payable to Sirrom Capital, L.P. (assigned to Sirrom
Investments, Inc.), dated May 29, 1992.
10.6 Amended and Restated Warrant Certificate issued to Stephen B. Grubb, dated March 1, 1996.
10.7 Amended and Restated Warrant Certificate issued to David Black, dated March 1, 1996.
10.8 Incentive Stock Option Agreement between the Company and David Black, dated March 1, 1996.
10.9 Incentive Stock Option Agreement between the Company and David Black, dated March 1, 1996.
10.10 Incentive Stock Option Agreement between the Company and Steven Grubb, dated March 1, 1996.
10.11 Asset Purchase Agreement among CCS Commercial Credit Systems, Inc. and TranSys Corporation and its
Shareholders, dated January 1, 1994.
10.12 Software License and Distribution Agreement between the Company and CCN Management Systems, Inc.,
dated January 1, 1994.
10.13 Agreement for Professional Services between the Company and Bull HN Information Systems, Inc., dated
December 13, 1995.
10.14 License Agreement between the Company and Access to Information, Inc., dated October 1, 1996.
10.15 Termination Agreement between the Company and Ferntree Computer Corporation Pty. Limited, dated June
20, 1997.
* 10.16 Software Development Agreement between the Company and Household International, Inc., dated June 30,
1993, as amended.
10.17 Standard Commercial Lease between the Company and Spectrum Development, Inc., dated July 1, 1990.
10.18 Sublease Agreement between the Company and Quadram Corporation, dated July 1, 1997.
10.19 Loan Agreement between the Company and Sirrom Capital Corporation, dated September 26, 1997.
10.20 Secured Promissory Note of the Company payable to Sirrom Capital Corporation, dated September 26,
1997, in the principal amount of $4,000,000.
10.21 Security Agreement between the Company and Sirrom Capital Corporation, dated September 26, 1997.
10.22 Stock Purchase Warrant issued to Sirrom Capital Corporation, dated September 26, 1997.
10.23 Term Note of the Company payable to Intelligent Systems Corporation, dated August 29, 1997.
11.1 Computation of Per Share Earnings (Loss).
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
* 23.1 Consent of Kilpatrick Stockton LLP (See Exhibit 5.1).
23.2 Consent of Ernst & Young LLP.
24.1 Powers of Attorney (included on Signature Page).
27.1 Financial Data Schedules.
</TABLE>
- ------------------------
* To be filed by amendment
(b) Financial Statement Schedules
The financial statement schedules for which provision is made in the
applicable accounting regulations of the Commission are either not required
under the related instructions and have therefore been omitted or the required
information is included in the Company's financial statements.
ITEM 17. UNDERTAKINGS
The undersigned Company hereby undertakes to provide the underwriters at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit, or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question as to whether such indemnification by it is against
public policy as expressed in the Securities Act, and will be governed by the
final adjudication of such issue.
The undersigned Company hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post- effective amendment that contains a form of Prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Atlanta, State of Georgia,
on the 8th day of October, 1997.
<TABLE>
<S> <C> <C>
PAYSYS INTERNATIONAL, INC.
By: /s/ STEPHEN B. GRUBB
-----------------------------------------
Stephen B. Grubb
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Stephen B. Grubb and William J. Pearson and either of them, his true and lawful
attorneys-in-fact with full power of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement
as well as any new registration statement filed to register additional
securities pursuant to Rule 462(b) under the Securities Act of 1933, as amended,
and to cause the same to be filed, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, hereby
granting to said attorneys-in-fact and agent, full power and authority to do and
perform each and every act and thing whatsoever requisite or desirable to be
done in and about the premises, as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
acts and things that said attorneys-in-fact and agents, or their substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on the 8th day
of October, 1997, in the capacities indicated.
SIGNATURE POSITION
- ------------------------------ --------------------------
President and Chief
/s/ STEPHEN B. GRUBB Executive Officer and
- ------------------------------ Director (Principal
Stephen B. Grubb Executive Officer)
Chief Financial Officer,
Senior Vice President,
/s/ WILLIAM J. PEARSON Finance and
- ------------------------------ Administration and
William J. Pearson Treasurer and Secretary
(Principal Financial and
Accounting Officer)
/s/ J. LELAND STRANGE
- ------------------------------ Director
J. Leland Strange
/s/ ROSALIND L. FISHER
- ------------------------------ Director
Rosalind L. Fisher
/s/ PATRICIA M. HELBIG
- ------------------------------ Director
Patricia M. Helbig
II-5
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
EXHIBITS TO
REGISTRATION STATEMENT
ON
FORM S-1
---------------
PAYSYS INTERNATIONAL, INC.
- ---------------------------------------------------------
- ---------------------------------------------------------
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- --------- --------------------------------------------------------------------------
<C> <S>
* 1.1 Form of Underwriting Agreement.
1.2 Form of Lock-Up Agreement.
3.1 Amended and Restated Articles of Incorporation of the PaySys
International, Inc. (the "Company").
3.2 Bylaws, as amended, of the Company.
* 4.1 Form of Common Stock Certificate of the Company.
* 5.1 Opinion of Kilpatrick Stockton LLP.
*10.1 1995 Stock Incentive Plan.
*10.2 1997 Stock Incentive Plan.
10.3 Stock Purchase Warrant issued to Sirrom Capital, L.P., dated May 29, 1992.
10.4 Loan and Security Agreement between the Company and Sirrom Capital, L.P.
(assigned to Sirrom Investments, Inc.), dated May 29, 1992.
10.5 Secured Promissory Note of the Company payable to Sirrom Capital, L.P.
(assigned to Sirrom Investments, Inc.), dated May 29, 1992.
10.6 Amended and Restated Warrant Certificate issued to Stephen B. Grubb, dated
March 1, 1996.
10.7 Amended and Restated Warrant Certificate issued to David Black, dated
March 1, 1996.
10.8 Incentive Stock Option Agreement between the Company and David Black,
dated March 1, 1996.
10.9 Incentive Stock Option Agreement between the Company and David Black,
dated March 1, 1996.
10.10 Incentive Stock Option Agreement between the Company and Steven Grubb,
dated March 1, 1996.
10.11 Asset Purchase Agreement among CCS Commercial Credit Systems, Inc. and
TranSys Corporation and its Shareholders, dated January 1, 1994.
10.12 Software License and Distribution Agreement between the Company and CCN
Management Systems, Inc., dated January 1, 1994.
10.13 Agreement for Professional Services between the Company and Bull HN
Information Systems, Inc., dated December 13, 1995.
10.14 License Agreement between the Company and Access to Information, Inc.,
dated October 1, 1996.
10.15 Termination Agreement between the Company and Ferntree Computer
Corporation Pty. Limited, dated June 20, 1997.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- --------- --------------------------------------------------------------------------
<C> <S>
* 10.16 Software Development Agreement between the Company and Household
International, Inc., dated June 30, 1993, as amended.
10.17 Standard Commercial Lease between the Company and Spectrum Development,
Inc., dated July 1, 1990.
10.18 Sublease Agreement between the Company and Quadram Corporation, dated July
1, 1997.
10.19 Loan Agreement between the Company and Sirrom Capital Corporation, dated
September 26, 1997.
10.20 Secured Promissory Note of the Company payable to Sirrom Capital
Corporation, dated September 26, 1997, in the principal amount of
$4,000,000.
10.21 Security Agreement between the Company and Sirrom Capital Corporation,
dated September 26, 1997.
10.22 Stock Purchase Warrant issued to Sirrom Capital Corporation, dated
September 26, 1997.
10.23 Term Note of the Company payable to Intelligent Systems Corporation, dated
August 29, 1997.
11.1 Computation of Per Share Earnings (Loss).
* 23.1 Consent of Kilpatrick Stockton LLP (See Exhibit 5.1).
23.2 Consent of Ernst & Young LLP.
24.1 Powers of Attorney (included on Signature Page).
27.1 Financial Data Schedules.
</TABLE>
- ------------------------
* To be filed by amendment
<PAGE>
Exhibit 1.2
PAYSYS INTERNATIONAL, INC.
LOCK-UP AGREEMENT
_______________, 1997
Montgomery Securities
Raymond James & Associates, Inc.
Wessels, Arnold & Henderson, L.L.C.
As Representatives of the Several Underwriters
c/o Montgomery Securities
600 Montgomery Street
San Francisco, California 94111
Ladies and Gentlemen:
The undersigned understands that you, as Representatives of the several
underwriters (the "Underwriters"), propose to enter into an Underwriting
Agreement (the "Underwriting Agreement") with PaySys International, Inc. (the
"Company") providing for the public offering (the "Public Offering") by the
Underwriters, including yourselves, of Common Stock of the Company (the "Common
Stock") pursuant to the Company's Registration Statement on Form S-1 to be filed
with the Securities and Exchange Commission on or about October ____, 1997 (the
"Registration Statement").
In consideration of the Underwriters' agreement to purchase and make the
Public Offering of the Common Stock, and for other good and valuable
consideration, receipt of which is hereby acknowledged, the undersigned hereby
agrees, for a period of 180 days after the effective date of the Registration
Statement (the "Lock-Up Period"), not to offer to sell, contract to sell or
otherwise sell, dispose of, loan, pledge or grant any rights with respect to
(collectively, a "Disposition") any shares of Common Stock, any options or
warrants to purchase any shares of Common Stock or any securities convertible
into or exchangeable for shares of Common Stock (collectively, "Securities"),
now owned or hereafter acquired directly by the undersigned or with respect to
which the undersigned has or hereafter acquires the power of disposition,
otherwise than (i) as a bona fide gift or gifts, provided the donee or donees
thereof agree in writing to be bound by this Lock-Up Agreement, (ii) as a
distribution to partners or stockholders of the undersigned, provided that the
distributees thereof agree in writing to be bound by the terms of this Lock-Up
Agreement or (iii) with the prior written consent of Montgomery Securities. The
foregoing restriction is expressly agreed to preclude the holder of the
Securities from engaging in any hedging or other transaction which is designed
to or reasonably expected to lead to or result in a Disposition of Securities
during the Lock-Up Period even if such Securities would be disposed of by
someone other than the undersigned. Such prohibited hedging or other
transactions would include without limitation any short sale (whether or not
against the box) or any purchase, sale or grant of any right (including without
limitation any put or call option) with respect to any Securities or with
respect to any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value from
Securities. Notwithstanding the foregoing,
<PAGE>
this Lock-Up Agreement does not prohibit the sale of shares of the Common Stock
by the undersigned to the Underwriters in the Public Offering.
Furthermore, the undersigned hereby agrees and consents to the entry of
stop transfer instructions with the Company's transfer agent against the
transfer of the Securities held by the undersigned except in compliance with
this Lock-Up Agreement. In the event that the Registration Statement shall not
have been declared effective on or before January 31, 1998, this Lock-Up
Agreement shall be of no further force or effect.
Very truly yours,
____________________________________
Name:_______________________________
Title:______________________________
(print or type)
Accepted as of the date first set forth above:
Montgomery Securities
Raymond James & Associates, Inc.
Wessels, Arnold & Henderson, L.L.C.
As Representatives of the Several Underwriters
By: Montgomery Securities
By: __________________________
(authorized signatory)
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
PAYSYS INTERNATIONAL, INC.
ARTICLE 1
Name
----
The name of the Corporation is PaySys International, Inc.
ARTICLE 2
Existence of Corporation
------------------------
The Corporation shall have perpetual existence.
ARTICLE 3
Business and Activities
-----------------------
The Corporation may, and is authorized to, engage in any activity or
business now or hereafter permitted under the laws of the United States and
of the State of Florida.
ARTICLE 4
Capital Stock
-------------
4.1 Authorized Shares. The total number of shares of all classes of
-----------------
capital stock that the Corporation shall have the authority to issue shall be
40,000,000 shares, of which 30,000,000 shares shall be Common Stock having a
par value of $0.01 per share ("Common Stock") and 10,000,000 shares shall be
Preferred Stock, $0.01 par value per share ("Preferred Stock"). The Board of
Directors is expressly authorized, pursuant to Section 607.0602 of the
Florida Business Corporation Act ("FBCA"), to provide for the classification
and reclassification of any unissued shares of Preferred Stock and the
issuance thereof in one or more classes or series without the approval of the
shareholders of the Corporation, all within the limitations set forth in
Sections 607.0601 and 607.0602 of the FBCA.
4.2 Common Stock.
------------
(A) Relative Rights. The Common Stock shall be subject to all of
---------------
the rights, privileges, preferences, and priorities of the Preferred Stock as
set forth in the Articles of Amendment to these Articles of Incorporation that
may hereafter be filed pursuant to Section 607.0602 of the FBCA to establish
the respective class or series of the Preferred Stock. Except as
<PAGE>
otherwise provided in these Articles of Incorporation, each share of Common
Stock shall have the same rights as and be identical in all respects to all
the other shares of Common Stock.
(B) Voting Rights. Except as otherwise provided in these Articles of
-------------
Incorporation, except as otherwise provided by the FBCA and except as may be
determined by the Board of Directors with respect to the Preferred Stock,
only the holders of Common Stock shall be entitled to vote for the election
of directors of the Corporation and for all other corporate purposes. Upon
any such vote, each holder of Common Stock shall, except as otherwise
provided by the FBCA, be entitled to one vote for each share of Common Stock
held by such holder.
(C) Dividends. Whenever there shall have been paid, or declared
---------
and set aside for payment, to the holders of the shares of any class of stock
having preference over the Common Stock as to the payment of dividends, the
full amount of dividends and of sinking fund or retirement payments, if any,
to which such holders are respectively entitled in preference to the Common
Stock, then the holders of record of the Common Stock and any class or series
of stock entitled to participate therewith as to dividends, shall be entitled
to receive dividends, when, as, and if declared by the Board of Directors,
out of any assets legally available for the payment of dividends thereon.
(D) Dissolution, Liquidation, Winding Up. In the event of any
------------------------------------
dissolution, liquidation, or winding up of the Corporation, whether voluntary
or involuntary, the holders of record of the Common Stock then outstanding,
and all holders of any class or series of stock entitled to participate
therewith in whole or in part, as to the distribution of assets, shall become
entitled to participate in the distribution of assets of the Corporation
remaining after the Corporation shall have paid, or set aside for payment, to
the holders of any class of stock having preference over the Common Stock in
the event of dissolution, liquidation, or winding up, the full preferential
amounts (if any) to which they are entitled, and shall have paid or provided
for payment of all debts and liabilities of the Corporation.
4.3 Preferred Stock.
---------------
(A) Issuance, Designations, Powers, Etc. The Board of Directors is
-----------------------------------
expressly authorized, subject to the limitations prescribed by the FBCA and
the provisions of these Articles of Incorporation, to provide, by resolution
and by filing Articles of Amendment to these Articles of Incorporation,
which, pursuant to Section 607.0602(4) of the FBCA shall be effective without
shareholder action, for the issuance from time to time of the shares of the
Preferred Stock in one or more classes or series, to establish from time to
time the number of shares to be included in each such class or series, and to
fix the designations, powers, preferences and other rights of the shares of
each such class or series and to fix the qualifications, limitations, and
restrictions thereon, including, but without limiting the generality of the
foregoing, the following:
(1) the number of shares constituting that class or series and the
distinctive designation of that class or series;
2
<PAGE>
(2) the dividend rate on the shares of that class or series, whether
dividends shall be cumulative, noncumulative, or partially
cumulative and, if so, from which date or dates, and the relative
rights of priority, if any, of payments of dividends on shares of
that class or series;
(3) whether that class or series shall have voting rights, in addition
to the voting rights provided by the FBCA, and, if so, the terms
of such voting rights;
(4) whether that class or series shall have conversion privileges,
and, if so, the terms and conditions of such conversion, including
provision for adjustment of the conversion rate in such events as
the Board of Directors shall determine;
(5) whether or not the shares of that class or series shall be
redeemable, and, if so, the terms and conditions of such
redemption, including the dates upon or after which the class or
series shall be redeemable, and the amount per share payable in
case of redemption, which amount may vary under different
conditions and at different redemption dates;
(6) whether that class or series shall have a sinking fund for the
redemption or purchase of shares of that class or series, and, if
so, the terms and amount of such sinking fund;
(7) the rights of the shares of that class or series in the event of
voluntary or involuntary liquidation, dissolution, or winding up
of the Corporation, and the relative rights of priority, if any,
of payment of shares of that class or series; and
(8) any other relative powers, preferences, and rights of that class
or series, and qualifications, limitations, or restrictions on
that class or series.
(B) Dissolution, Liquidation, Winding In the event of any
---------------------------------
liquidation, dissolution, or winding up of the Corporation, whether voluntary
or involuntary, the holders of Preferred Stock of each class or series shall
be entitled to receive only such amount or amounts as shall have been fixed
by the Articles of Amendment to these Articles of Incorporation filed
pursuant to the resolution or resolutions of the Board of Directors providing
for the issuance of such class or series.
4.4 No Preemptive Rights. Except as the Board of Directors may otherwise
--------------------
determine, no shareholder of the Corporation shall have any preferential or
preemptive right to subscribe for
3
<PAGE>
or purchase from the Corporation any new or additional shares of capital
stock, or securities convertible into shares of capital stock, of the
Corporation, whether now or thereafter authorized.
ARTICLE 5
Board of Directors
------------------
5.1 Number. Except as otherwise provided in these Articles of
------
Incorporation or Articles of Amendment filed pursuant to Section 4.3 hereof
relating to the rights of the holders of any class or series of Preferred
Stock, voting separately by class or series, to elect additional directors
under specified circumstances, the number of directors of the Corporation
shall be as fixed from time to time by or pursuant to these Articles of
Incorporation or by bylaws of the Corporation (the "Bylaws"), but in no event
shall the number of directors be less than five (5) nor more than nine (9).
The number of directors constituting the initial Board of Directors of the
Corporation is five (5).
5.2 Classification and Term. The directors, other than those who may be
-----------------------
elected by the holders of any class or series of Preferred Stock voting
separately by class or series, shall be classified, with respect to the time
for which they severally hold office, into three classes, Class I, Class II
and Class III, each of which shall be as nearly equal in number as possible,
and shall be adjusted from time to time in the manner specified in the Bylaws
to maintain such proportionality. Each initial director in Class I shall
hold office for a term expiring at the 1998 annual meeting of the
shareholders; each initial director in Class II shall hold office for a term
expiring at the 1999 annual meeting of the shareholders; and each initial
director in Class III shall hold office for a term expiring at the 2000
annual meeting of the shareholders. At each annual meeting of the
shareholders, the successors to the class of directors whose term expires at
that meeting shall be elected to hold office for a term expiring at the
annual meeting of the shareholders held in the third year following the year
of their election. Despite the expiration of a director's term pursuant to
the foregoing provisions of this Section 5.2, such director shall serve until
such directors' successor is duly elected and qualified, until such
directors' earlier death, resignation or removal, or until there is a
decrease in the number of directors.
5.3 Removal.
-------
(A) Removal For Cause. Except as otherwise provided pursuant to the
-----------------
provisions of these Articles of Incorporation or Articles of Amendment
relating to the rights of the holders of any class or series of Preferred
Stock, voting separately by class or series, to elect directors under
specified circumstances, any director or directors may be removed from office
at any time, but only for cause (as defined in Section 5.3(B) hereof) and
only by the affirmative vote, at a special meeting of the shareholders called
for such a purpose, of not less than sixty-six and two-thirds percent (66
2/3%) of the total number of votes of the then outstanding shares of capital
stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, but only if notice of such
proposed removal was contained in the notice of such meeting. At least
thirty (30) days prior to such special meeting of shareholders, written
notice shall be sent to the director or directors whose removal will be
considered at such meeting. Any vacancy on the
4
<PAGE>
Board of Directors resulting from such removal or otherwise shall be filled
only by vote of a majority of the directors then in office, although less
than a quorum, and any director so chosen shall hold office until the next
election of the class for which such director shall have been chosen and
until his or her successor shall have been duly elected and qualified or
until any such director's earlier death, resignation, or removal.
(B) "Cause" Defined. For the purposes of this Section 5.3, "cause"
----------------
shall mean (i) misconduct as a director of the Corporation or any subsidiary
of the Corporation which involves dishonesty with respect to a substantial or
material corporate activity or corporate assets, or (ii) conviction of an
offense punishable by one (1) or more years of imprisonment (other than minor
regulatory infractions and traffic violations which do not materially
adversely affect the Corporation).
5.4 Change of Number of Directors. In the event of any increase or
-----------------------------
decrease in the authorized number of directors, the newly created or
eliminated directorships resulting from such increase or decrease shall be
apportioned by the Board of Directors among the three classes of directors so
as to maintain such classes as nearly equal as possible. No decrease in the
number of directors constituting the Board of Directors shall shorten the
term of any incumbent director.
5.5 Directors Elected by Holders of Preferred Stock. Notwithstanding
-----------------------------------------------
the foregoing, whenever the holders of any one or more classes or series of
Preferred Stock issued by the Corporation shall have the right, voting
separately by class or series, to elect one or more directors at an annual or
special meeting of shareholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of these Articles of Incorporation, as amended by Articles of Amendment
applicable to such classes or series of Preferred Stock, and such directors
so elected shall not be divided into classes pursuant to this Article 5
unless expressly provided by the Articles of Amendment applicable to such
classes or series of Preferred Stock.
5.6 Exercise of Business Judgment. In discharging his duties as a
-----------------------------
director of the Corporation, a director may consider such factors as the
director considers relevant, including the long-term prospects and interests
of the corporation and its shareholders, and the social, economic, legal, or
other effects of any corporate action or inaction on the employees,
suppliers, customers of the Corporation or its subsidiaries, the communities
and society in which the Corporation or its subsidiaries operate, the economy
of the State of Florida and the United States, and any other factors
permitted under the FBCA.
ARTICLE 6
Action By Shareholders
----------------------
6.1 Call For Special Meeting. Special meetings of the shareholders of
------------------------
the Corporation may be called at any time, but only by (a) the Chairman of
the Board of the Corporation, (b) a majority of the directors in office,
although less than a quorum, or (c) the written demand upon the Corporation's
secretary by the holders of not less than fifty percent (50%) of the total
number of
5
<PAGE>
votes of the then outstanding shares of capital stock of the Corporation
entitled to vote on any issue proposed to be considered at the proposed
special meeting.
6.2 Shareholder Action by Unanimous Written Consent. Any action
-----------------------------------------------
required or permitted to be taken by the Shareholders of the Corporation must
be effected at a duly called annual or special meeting of the shareholders,
and may not be effected by any consent in writing by such shareholders,
unless such written consent is unanimous.
ARTICLE 7
Indemnification
---------------
7.1 Provision of Indemnification. The Corporation shall, to the fullest
----------------------------
extent permitted or required by the FBCA, including any amendments thereto
(but in the case of any such amendment, only to the extent such amendment
permits or requires the Corporation to provide broader indemnification rights
than prior to such amendment), indemnify its Directors and Executive Officers
against any and all Liabilities, and advance any and all reasonable Expenses,
incurred thereby in any Proceeding to which any such Director or Executive
Officer is a party or in which such Director or Executive Officer is deposed
or called to testify as a witness because he or she is or was a Director or
Executive Officer of the Corporation. The rights to indemnification granted
hereunder shall not be deemed exclusive of any other rights to
indemnification against Liabilities or the advancement of Expenses which a
Director or Executive Officer may be entitled under any written agreement,
Board of Directors' resolution, vote of shareholders, the FBCA, the Bylaws of
the Corporation or otherwise. The Corporation may, but shall not be required
to, supplement the foregoing rights to indemnification against Liabilities
and advancement of Expenses by the purchase of insurance on behalf of any one
or more of its Directors or Executive Officers whether or not the Corporation
would be obligated to indemnify or advance Expenses to such Director or
Executive Officer under this Article. For purposes of this Article, the term
"Directors" includes former directors of the Corporation and any director who
is or was serving at the request of the Corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust,
or other enterprise, including, without limitation, any employee benefit plan
(other than in the capacity as an agent separately retained and compensated
for the provision of goods or services to the enterprise, including, without
limitation, attorneys-at-law, accountants, and financial consultants). The
term "Executive Officers" includes those individuals who are or were at any
time "executive officers" of the Corporation as defined in Securities and
Exchange Commission Rule 3b-7 promulgated under the Securities Exchange Act
of 1934, as amended. All other capitalized terms used in this Article 7 and
not otherwise defined herein have the meaning set forth in Section 607.0850,
Florida Statutes (1995). The provisions of this Article 7 are intended
solely for the benefit of the indemnified parties described herein, their
heirs and personal representatives and shall not create any rights in favor
of third parties. No amendment to or repeal of this Article 7 shall diminish
the rights of indemnification provided for herein prior to such amendment or
appeal.
6
<PAGE>
ARTICLE 8
Amendments
----------
8.1 Articles of Incorporation. Notwithstanding any other provision of
-------------------------
these Articles of Incorporation or the Bylaws of the Corporation (and
notwithstanding that a lesser percentage may be specified by law) the
affirmative vote of sixty-six and two-thirds percent (66 2/3%) of the total
number of votes of the then outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required (unless separate voting by
classes is required by the FBCA, in which event the affirmative vote of
sixty-six and two-thirds percent (66 2/3%) of the number of shares of each
class or series entitled to vote as a class shall be required), to amend or
repeal, or to adopt any provision inconsistent with the purpose or intent of,
Articles 5, 6, 7 or this Article 8 of these Articles of Incorporation.
Notice of any such proposed amendment, repeal, or adoption shall be contained
in the notice of the meeting at which it is to be considered. Subject to the
provisions set forth herein, the Corporation reserves the right to amend,
alter, repeal, or rescind any provision contained in these Articles of
Incorporation in the manner now or hereafter prescribed by law.
8.2 Bylaws. The shareholders of the Corporation may adopt or amend a
------
bylaw which fixes a greater quorum or voting requirement for shareholders (or
voting groups of shareholders) than is required by the FBCA. The adoption or
amendment of a bylaw that adds, changes or deletes a greater quorum or voting
requirement for shareholders must meet the same quorum or voting requirement
and be adopted by the same vote and voting groups required to take action
under the quorum or voting requirement then in effect or proposed to be
adopted, whichever is greater.
ARTICLE 9
Affiliated Transactions
-----------------------
The Corporation expressly elects, pursuant to Section 607.0901(5)(a) of
the FBCA, not to be governed by the provisions and rules pertaining to
affiliated transactions contained in Section 607.0901 of the FBCA.
ARTICLE 10
Control-Share Acquisitions
--------------------------
The Corporation exercises its right, pursuant to Section 607.0902(5) of
the FBCA, to avoid the provisions pertaining to control-share acquisitions
contained in Sections 607.0902, 607.1302(1)(c), and 607.1320 of the FBCA.
7
<PAGE>
ARTICLE 11
Principal Office and Mailing Address
------------------------------------
The street address of the Principal Office of the Corporation and its
mailing address is 900 Winderley Place, Suite 200, Maitland, Florida
32751-5575. The location of the Principal Office and the mailing address
shall be subject to change as may be provided in the FBCA.
IN WITNESS WHEREOF, these Amended and Restated Articles of Incorporation
have been signed on behalf of the Corporation as of the ______ day of
_________________, 1997.
PAYSYS INTERNATIONAL, INC.
By: ___________________________________
Name:___________________________________
Title:__________________________________
<PAGE>
Exhibit 3.2
BYLAWS
OF
PAYSYS INTERNATIONAL, INC.
(a Florida corporation)
<PAGE>
TABLE OF CONTENTS
ARTICLE 1.
Definitions
Section 1.1 Definitions.....................................................1
ARTICLE 2.
Offices
Section 2.1 Principal and Business Offices..................................1
Section 2.2 Registered Office...............................................1
ARTICLE 3.
Shareholders
Section 3.1 Annual Meeting..................................................1
Section 3.2 Special Meetings................................................2
Section 3.3 Place of Meeting................................................3
Section 3.4 Notice of Meeting...............................................3
Section 3.5 Waiver of Notice................................................3
Section 3.6 Fixing of Record Date...........................................4
Section 3.7 Shareholders' List for Meetings.................................4
Section 3.8 Quorum..........................................................5
Section 3.9 Voting of Shares................................................6
Section 3.10 Vote Required...................................................6
Section 3.11 Conduct of Meeting..............................................6
Section 3.12 Inspectors of Election..........................................6
Section 3.13 Proxies.........................................................7
Section 3.14 Action by Shareholders Without Meeting..........................7
Section 3.15 Acceptance of Instruments Showing Shareholder Action............8
ARTICLE 4.
Board of Directors
Section 4.1 General Powers and Number.......................................8
Section 4.2 Qualifications..................................................9
Section 4.3 Term of Office..................................................9
Section 4.4 Nominations of Directors........................................9
Section 4.5 Removal........................................................10
Section 4.6 Resignation....................................................10
Section 4.7 Vacancies......................................................11
Section 4.8 Compensation...................................................11
Section 4.9 Regular Meetings...............................................11
Section 4.10 Special Meetings...............................................11
Section 4.11 Notice.........................................................12
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<PAGE>
Section 4.12 Waiver of Notice...............................................12
Section 4.13 Quorum and Voting..............................................12
Section 4.14 Conduct of Meetings............................................12
Section 4.15 Committees.....................................................13
Section 4.16 Action Without Meeting.........................................13
ARTICLE 5.
Officers
Section 5.1 Number.........................................................14
Section 5.2 Election and Term of Office....................................14
Section 5.3 Removal........................................................14
Section 5.4 Resignation....................................................14
Section 5.5 Vacancies......................................................14
Section 5.6 Chairman of the Board..........................................14
Section 5.7 President......................................................15
Section 5.8 Vice President.................................................15
Section 5.9 Secretary......................................................15
Section 5.10 Treasurer......................................................16
Section 5.11 Assistant Secretaries and Assistant Treasurers.................16
Section 5.12 Other Assistants and Acting Officers...........................16
Section 5.13 Salaries.......................................................16
ARTICLE 6.
Contracts, Checks and Deposits; Special Corporate Acts
Section 6.1 Contracts......................................................17
Section 6.2 Checks, Drafts, etc............................................17
Section 6.3 Deposits.......................................................17
Section 6.4 Voting of Securities Owned by Corporation......................17
ARTICLE 7.
Certificates for Shares; Transfer of Shares
Section 7.1 Consideration for Shares.......................................18
Section 7.2 Certificates for Shares........................................18
Section 7.3 Transfer of Shares.............................................18
Section 7.4 Restrictions on Transfer.......................................19
Section 7.5 Lost, Destroyed, or Stolen Certificates........................19
Section 7.6 Stock Regulations..............................................19
ARTICLE 8.
Seal
Section 8.1 Seal...........................................................19
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<PAGE>
ARTICLE 9.
Books And Records
Section 9.1 Books and Records..............................................19
Section 9.2 Shareholders' Inspection Rights................................20
Section 9.3 Distribution of Financial Information..........................20
Section 9.4 Other Reports..................................................20
ARTICLE 10.
Indemnification
Section 10.1 Provision of Indemnification...................................20
ARTICLE 11.
Amendments
Section 11.1 Power to Amend.................................................21
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<PAGE>
ARTICLE 1.
Definitions
Section 1.1 Definitions. The following terms shall have the
following meanings for purposes of these bylaws:
"Act" means the Florida Business Corporation Act, as it may be amended
from time to time, or any successor legislation thereto.
"Corporation" means PaySys International, Inc., a Florida corporation.
"Deliver" or "deliver", unless otherwise specfied in these bylaws,
includes delivery by hand; United States mail; facsimile, telegraph, teletype
or other form of electronic transmission, with written confirmation or other
acknowledgment or receipt; and private mail carriers handling nationwide mail
services.
"Principal office" means the office (within or without the State of
Florida) where the Corporation's principal executive offices are located, as
designated in the Articles of Incorporation until an annual report has been
filed with the Florida Department of State, and thereafter as designated in
the annual report.
ARTICLE 2.
Offices
Section 2.1 Principal and Business Offices. The Corporation may have
such principal and other business offices, either within or without the State
of Florida, as the Board of Directors may designate or as the business of the
Corporation may require from time to time.
Section 2.2 Registered Office. The registered office of the
Corporation required by the Act to be maintained in the State of Florida may
but need not be identical with the principal office if located in the State
of Florida, and the address of the registered office may be changed from time
to time by the Board of Directors or by the registered agent. The business
office of the registered agent of the Corporation shall be identical to such
registered office.
ARTICLE 3.
Shareholders
Section 3.1 Annual Meeting.
(a) Call by Directors. The annual meeting of shareholders shall be
held within six months after the close of each fiscal year of the Corporation
on a date and at a time and place designated by the Board of Directors, for
the purpose of electing directors and for the transaction of such other
business as may come before the meeting. If the election of directors shall
not be held on the day fixed as herein provided for any annual meeting of
<PAGE>
shareholders, or at any adjournment thereof, the Board of Directors shall
cause the election to be held at a special meeting of shareholders as soon as
thereafter as is practicable. The failure to hold the annual meeting of the
shareholders within the time stated in these bylaws shall not affect the
terms of office of the officers or directors of the Corporation or the
validity of any corporate action.
(b) Business At Annual Meeting. At an annual meeting of the
shareholders of the Corporation, only such business shall be conducted as
shall have been properly brought before the meeting. To be properly brought
before an annual meeting, business must be (i) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board
of Directors, (ii) otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (iii) otherwise properly brought
before the meeting by a shareholder. For business to be properly brought
before an annual meeting by a shareholder, the shareholder must have given
timely notice thereof in writing to the Secretary of the Corporation. To be
timely, a shareholder's notice shall be received at the principal business
office of the Corporation no later than the date designated for receipt of
shareholders' proposals in a prior public disclosure made by the Corporation.
If there has been no such prior public disclosure, then to be timely, a
shareholder's notice must be delivered to or mailed and received at the
principal business office of the Corporation not less than sixty (60) days
nor more then ninety (90) days prior to the annual meeting of shareholders;
provided, however, that in the event that less than seventy (70) days' notice
of the date of the meeting is given to shareholders by notice or prior public
disclosure, notice by the shareholders, to be timely, must be received by the
Corporation not later than the close of business on the tenth day following
the day on which the Corporation gave notice or made a public disclosure of
the date of the annual meeting of the shareholders. A shareholder's notice
to the Secretary shall set forth as to each matter the shareholder proposes
to bring before the annual meeting (i) a brief description of the business
desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (ii) the name and address, as
they appear on the Corporation's stock books, of the shareholders proposing
such business, and (iii) the class and number of shares of the Corporation
which are beneficially owned by the shareholder, (iv) any material interest
of the shareholder in such business, and (v) the same information required by
clauses (ii), (iii) and (iv) above with respect to any other shareholder
that, to the knowledge of the shareholder proposing such business, supports
such proposal. Notwithstanding anything in these bylaws to the contrary, no
business shall be conducted at any annual meeting except in according with
the procedures set forth in this Section 3.1(b). The Chairman of an annual
meeting shall, if the facts warrant, determine and declare to the annual
meeting that a matter of business was not properly brought before the meeting
in accordance with the provisions of this Section 3.1(b), and if the Chairman
shall so determine, the Chairman shall so declare at the meeting and any such
business not properly brought before the meeting shall not be transacted.
Section 3.2 Special Meetings.
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<PAGE>
(a) Call by Directors. Special meetings of shareholders of the
Corporation, for any purpose or purposes, may be called by (i) the Chairman
of the Board (if any) or (ii) a majority of the directors in office, although
less than a quorum.
(b) Call by Shareholders. The Corporation shall call a special
meeting of shareholders in the event that the holders of not less than fifty
percent (50%) of the total number of votes of the then outstanding shares of
capital stock of the Corporation entitled to vote on any issue proposed to be
considered at the proposed special meeting sign, date, and deliver to the
Secretary one or more written demands for the meeting describing one or more
purposes for which it is to be held. The Corporation shall give notice of
such a special meeting within sixty days after the date that the demand is
delivered to the Corporation.
Section 3.3 Place of Meeting. The Board of Directors may designate
any place, either within or without the State of Florida, as the place of
meeting for any annual or special meeting of shareholders. If no designation
is made, the place of meeting shall be the principal office of the
Corporation.
Section 3.4 Notice of Meeting.
(a) Content and Delivery. Written notice stating the date, time, and
place of any meeting of shareholders and, in the case of a special meeting,
the purpose or purposes for which the meeting is called, shall be delivered
not less than ten days nor more then sixty days before the date of the
meeting by or at the direction of the President or the Secretary, or the
officer or persons duly calling the meeting, to each shareholder of record
entitled to vote at such meeting and to such other persons as required by the
Act. Unless the Act requires otherwise, notice of an annual meeting need not
include a description of the purpose or purposes for which the meeting is
called. If mailed, notice of a meeting of shareholders shall be deemed to be
delivered when deposited in the United States mail, addressed to the
shareholder at his address as it appears on the stock record books of the
Corporation, with postage thereon prepaid.
(b) Notice of Adjourned Meetings. If an annual or special
meeting of shareholders is adjourned to a different date, time, or place the
Corporation shall not be required to give notice of the new date, time, or
place if the new date, time, or place is announced at the meeting before
adjournment; provided, however, that if a new record date for an adjourned
meeting is or must be fixed, the Corporation shall give notice of the
adjourned meeting to persons who are shareholders as of the new record date
who are entitled to notice of the meeting.
(c) No Notice Under Certain Circumstances. Notwithstanding the other
provisions of this Section, no notice of a meeting of shareholders need be
given to a shareholder if (i) an annual report and proxy statement for two
consecutive annual meetings of shareholders, or (ii) all, and at least two,
checks in payment of dividends or interest on securities during a
twelve-month period, have been sent by first-class, United States mail,
addressed to the shareholder at his address as it appears on the share
transfer -3-
<PAGE>
books of the Corporation, and returned undeliverable. The obligation of the
Corporation to give notice of a shareholders' meeting to any such shareholder
shall be reinstated once the Corporation has received a new address for such
shareholder for entry on its share transfer books.
Section 3.5 Waiver of Notice.
(a) Written Waiver. A shareholder may waive any notice required by the
Act or these bylaws before or after the date and time stated for the meeting
in the notice. The waiver shall be in writing and signed by the shareholder
entitled to the notice, and be delivered to the Corporation for inclusion in
the minutes or filing with the corporate records. Neither the business to be
transacted at nor the purpose of any regular or special meeting of
shareholders need be specified in any written waiver of notice.
(b) Waiver by Attendance. A shareholder's attendance at a meeting, in
person or by proxy, waives objection to all of the following: (i) lack of
notice or defective notice of the meeting, unless the shareholder at the
beginning of the meeting objects to holding the meeting or transacting
business at the meeting; and (ii) consideration of a particular matter at the
meeting that is not within the purpose or purposes described in the meeting
notice, unless the shareholder objects to considering the matter when it is
presented.
Section 3.6 Fixing of Record Date.
(a) General. The Board of Directors may fix in advance a date as the
record date for the purpose of determining shareholders entitled to notice of
a shareholders' meeting, entitled to vote, or take any other action. In no
event may a record date fixed by the Board of Directors be a date preceding
the date upon which the resolution fixing the record date is adopted or a
date more than seventy days before the date of meeting or action requiring a
determination of shareholders.
(b) Special Meeting. The record date for determining shareholders
entitled to demand a special meeting shall be the close of business on the
date the first shareholder delivers his demand to the Corporation.
(c) Shareholder Action by Written Consent. If no prior action is
required by the Board of Directors pursuant to the Act, the record date for
determining shareholders entitled to take action without a meeting shall be
the close of business on the date the first signed written consent with
respect to the action in question is delivered to the Corporation, but if
prior action is required by the Board of Directors pursuant to the Act, such
record date shall be the close of business on the date on which the Board of
Directors adopts the resolution taking such prior action unless the Board of
Directors otherwise fixes a record date.
(d) Absence of Board Determination for Shareholders' Meeting. If the
Board of Directors does not determine the record date for determining
shareholders entitled to notice of and to vote at an annual or special
shareholders' meeting, such record date shall
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<PAGE>
be the close of business on the day before the first notice with respect
thereto is delivered to shareholders.
(e) Adjourned Meeting. A record date for determining shareholders
entitled to notice of or to vote at a shareholders' meeting is effective for
any adjournment of the meeting unless the Board of Directors fixes a new
record date, which it must do if the meeting is adjourned to a date more than
120 days after the date fixed for the original meeting.
Section 3.7 Shareholders' List for Meetings.
(a) Preparation and Availability. After a record date for a meeting
of shareholders has been fixed, the Corporation shall prepare an alphabetical
list of the names of all of the shareholders entitled to notice of the
meeting. The list shall be arranged by class or series of shares, if any,
and show the address of and number of shares held by each shareholder. Such
list shall be available for inspection by any shareholder for a period of ten
days prior to the meeting or such shorter time as exists between the record
date and the meeting date, and continuing through the meeting, at the
Corporation's principal office, at a place identified in the meeting notice
in the city where the meeting will be held, or at the office of the
Corporation's transfer agent or registrar, if any. A shareholder or his
agent or attorney may, on written demand, inspect the list, subject to the
requirements of the Act, during regular business hours and at his expense,
during the period that it is available for inspection pursuant to this
Section. A shareholder's written demand to inspect the list shall describe
with reasonable particularity the purpose for inspection of the list, and the
Corporation may deny the demand to inspect the list if the Secretary
determines that the demand was not made in good faith and for a proper
purpose or if the list is not directly connected with the purpose stated in
the shareholder's demand, all subject to the requirements of Section
607.1602(3) of the Act. Notwithstanding anything herein to the contrary, the
Corporation shall make the shareholders' list available at any annual meeting
or special meeting of shareholders and any shareholder or his agent or
attorney may inspect the list at any time during the meeting or any
adjournment thereof.
(b) Prima Facie Evidence. The shareholders' list is prima facie
evidence of the identity of shareholders entitled to examine the
shareholders' list or to vote at a meeting of shareholders.
(c) Failure to Comply. If the requirements of this Section have not
been substantially complied with, or if the Corporation refuses to allow a
shareholder or his agent or attorney to inspect the shareholders' list before
or at the meeting, on the demand of any such shareholder, in person or by
proxy, who failed to get such access, the meeting shall be adjourned until
such requirements are complied with.
(d) Validity of Action Not Affected. Refusal or failure to prepare or
make available the shareholders' list shall not affect the validity of any
action taken at a meeting of shareholders.
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Section 3.8 Quorum.
(a) What Constitutes a Quorum. Shares entitled to vote as a separate
voting group may take action on a matter at a meeting only if a quorum of
those shares exists with respect to that matter. If the Corporation has only
one class of stock outstanding, such class shall constitute a separate voting
group for purposes of this Section. Except as otherwise provided in the Act,
a majority of the votes entitled to be cast on the matter shall constitute a
quorum of the voting group for action on that matter.
(b) Presence of Shares. Once a share is represented for any purpose
at a meeting, other than for the purpose of objecting to holding the meeting
or transacting business at the meeting, it is considered present for purposes
of determining whether a quorum exists for the remainder of the meeting and
for any adjournment of that meeting unless a new record date is or must be
set for the adjourned meeting.
(c) Adjournment in Absence of Quorum. Where a quorum is not present,
the holders of a majority of the shares represented and who would be entitled
to vote at the meeting if a quorum were present may adjourn such meeting from
time to time.
Section 3.9 Voting of Shares. Except as provided in the Articles of
Incorporation or the Act, each outstanding share, regardless of class, is
entitled to one vote on each matter voted on at a meeting of shareholders.
Section 3.10 Vote Required.
(a) Matters Other Than Election of Directors. If a quorum exists,
except in the case of the election of directors, action on a matter shall be
approved by a majority of the votes cast at such meeting, unless the Act or
the Articles of Incorporation require a greater number of affirmative votes.
(b) Election of Directors. Each director shall be elected by a
plurality of the votes cast by the shares entitled to vote in the election of
directors at a meeting at which a quorum is present. Each shareholder who is
entitled to vote at an election of directors has the right to vote the number
of shares owned by him for as many persons as there are directors to be
elected. Shareholders do not have a right to cumulate their votes for
directors.
Section 3.11 Conduct of Meeting. The Chairman of the Board of
Directors, and if there be none, or in his absence, the President, and in his
absence, a Vice President in the order provided under the Section of these
bylaws titled "Vice Presidents," and in their absence, any person chosen by
the shareholders present, shall call a shareholders' meeting to order and
shall act as presiding officer of the meeting, and the Secretary of the
Corporation shall act as secretary of all meetings of the shareholders, but,
in the absence of the Secretary, the presiding officer may appoint any other
person to act as secretary of the meeting. The presiding officer of the
meeting shall have broad discretion in determining the order of business at a
shareholders' meeting. The presiding officer's authority to
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conduct the meeting shall include, but in no way be limited to, recognizing
shareholders entitled to speak, calling for the necessary reports, stating
questions and putting them to a vote, calling for nominations, and announcing
the results of voting. The presiding officer also shall take such actions as
are necessary and appropriate to preserve order at the meeting. The rules of
parliamentary procedure need not be observed in the conduct of shareholders'
meetings.
Section 3.12 Inspectors of Election. Inspectors of election may be
appointed by the Board of Directors to act at any meeting of shareholders at
which any vote is taken. If inspectors of election are not so appointed, the
presiding officer of the meeting may, and on the request of any shareholder
shall, make such appointment. Each inspector, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute
the duties of inspector at such meeting with strict impartiality and
according to the best of his ability. The inspectors of election shall
determine the number of shares outstanding, the voting rights with respect to
each, the shares represented at the meeting, the existence of a quorum, and
the authenticity, validity, and effect of proxies; receive votes, ballots,
consents, and waivers; hear and determine all challenges and questions
arising in connection with the vote; count and tabulate all votes, consents,
and waivers; determine and announce the result; and do such acts as are
proper to conduct the election or vote with fairness to all shareholders. No
inspector, whether appointed by the Board of Directors or by the person
acting as presiding officer of the meeting, need be a shareholder. The
inspectors may appoint and retain other persons or entities to assist the
inspectors in the performance of the duties of the inspectors. On request of
the person presiding at the meeting, the inspectors shall make a report in
writing of any challenge, question, or matter determined by them and execute
a certificate of any fact found by them.
Section 3.13 Proxies.
(a) Appointment. At all meetings of shareholders, a shareholder may
vote his shares in person or by proxy. A shareholder may appoint a proxy to
vote or otherwise act for the shareholder by signing an appointment form,
either personally or by his attorney-in-fact. If an appointment form
expressly provides, any proxy holder may appoint, in writing, a substitute to
act in his , place. A telegraph, telex, cablegram, a facsimile transmission
of a signed appointment form, or a photographic, photostatic, or equivalent
reproduction of a signed appointment form is a sufficient appointment form.
(b) When Effective. An appointment of a proxy is effective when
received by the Secretary or other officer or agent of the Corporation
authorized to tabulate votes. An appointment is valid for up to eleven (11)
months unless a longer period is expressly provided in the appointment form.
An appointment of a proxy is revocable by the shareholder unless the
appointment form conspicuously states that it is irrevocable and the
appointment is coupled with an interest.
Section 3.14 Action by Shareholders Without Meeting.
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(a) Requirements for Unanimous Written Consent. Any action required
or permitted by the Act to be taken at any annual or special meeting of
shareholders may be taken without a meeting, without prior notice, and
without a vote if one or more written consents describing the action taken
shall be signed and dated by the holders of all (but not less than all) of
the outstanding capital stock of the Corporation entitled to vote thereon.
Such consents must be delivered to the principal office of the Corporation in
Florida, the Corporation's principal place of business, the Secretary, or
another officer or agent of the Corporation having custody of the books in
which proceedings of meetings of shareholders are recorded. No written
consent shall be effective to take the corporate action referred to therein
unless, within sixty days of the date of the earliest dated consent delivered
in the manner required herein, written consents signed by the number of
holders required to take action are delivered to the Corporation by delivery
as set forth in this Section.
(b) Revocation of Written Consents. Any written consent may be
revoked prior to the date that the Corporation receives the required number
of consents to authorize the proposed action. No revocation is effective
unless in writing and until received by the Corporation at its principal
office, or received by the Secretary or other officer or agent having custody
of the books in which proceedings of meetings of shareholders are recorded.
(c) Same Effect as Vote At Meeting. A consent signed under this
Section has the effect of a meeting vote and may be described as such in any
document. Whenever action is taken by written consent pursuant to this
Section, the written consent of the shareholders consenting thereto or the
written reports of inspectors appointed to tabulate such consents shall be
filed with the minutes of proceedings of shareholders.
Section 3.15 Acceptance of Instruments Showing Shareholder Action.
If the name signed on a vote, consent, waiver, or proxy appointment
corresponds to the name of a shareholder, the Corporation, if acting in good
faith, may accept the vote, consent, waiver, or proxy appointment and give it
effect as the act of a shareholder. If the name signed on a vote, consent,
waiver, or proxy appointment does not correspond to the name of a
shareholder, the Corporation, if acting in good faith, may accept the vote,
consent, waiver, or proxy appointment and give it effect as the act of the
shareholder if any of the following apply:
(a) The shareholder is an entity and the name signed purports to be
that of an officer or agent of the entity;
(b) The name signed purports to be that of an administrator, executor,
guardian, personal representative, or conservator representing the
shareholder and, if the Corporation requests, evidence of fiduciary status
acceptable to the Corporation is presented with respect to the vote, consent,
waiver, or proxy appointment;
(c) The name signed purports to be that of a receiver or trustee in
bankruptcy, or assignee for the benefit of creditors of the shareholder and,
if the Corporation requests, evidence of this status acceptable to the
Corporation is presented with respect to the vote, consent, waiver, or proxy
appointment;
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(d) The name signed purports to be that of a pledgee, beneficial
owner, or attorney-in-fact of the shareholder and, if the Corporation
requests, evidence acceptable to the Corporation of the signatory's authority
to sign for the shareholder is presented with respect to the vote, consent,
waiver, or proxy appointment; or
(e) Two or more persons are the shareholder as cotenants or
fiduciaries and the name signed purports to be the name of at least one of
the co-owners and the person signing appears to be acting on behalf of all
co-owners. The Corporation may reject a vote, consent, waiver, or proxy
appointment if the Secretary or other officer or agent of the Corporation who
is authorized to tabulate votes, acting in good faith, has reasonable basis
for doubt about the validity of the signature on it or about the signatory's
authority to sign for the shareholder.
ARTICLE 4.
Board of Directors
Section 4.1 General Powers and Number. All corporate powers shall be
exercised by or under the authority of, and the business and affairs of the
Corporation managed under the direction of, the Board of Directors. The
Corporation shall have five (5) directors initially. The number of directors
may be increased or decreased from time to time by vote of a majority of the
Board of Directors, but shall never be less than five (5) nor more than nine
(9).
Section 4.2 Qualifications. Directors must be natural persons who
are eighteen years of age or older but need not be residents of the State of
Florida or shareholders of the Corporation.
Section 4.3 Classification and Term of Office. The directors shall
be classified, with respect to the time for which they severally hold office,
into three (3) classes, Class I, Class II and Class III, each of which shall
be as nearly equal in number as possible. Class I shall be established for a
term expiring at the annual meeting of shareholders to be held in 1998 and
shall consist initially of two (2) directors, Class II shall be established
for a term expiring at the annual meeting of shareholders to be held in 1999
and shall consist initially of two (2) directors. Class III shall be
established for a term expiring at the annual meeting of shareholders to be
held in 2000 and shall consist initially of one (1) director. At each annual
meeting of the shareholders of Corporation, the successors of the class of
directors whose terms expire at that meeting shall be elected to hold office
for a term expiring at the annual meeting of shareholders held in the third
year following the year of their election. Unless otherwise provided in the
Articles of Incorporation, when the number of directors of the Corporation is
changed, the Board of Directors shall determine the class or classes to which
the increased or decreased number of directors shall be apportioned,
provided, however, that no decrease in the number of directors shall affect
the term of any director then in office.
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Section 4.4 Nominations of Directors. Except as otherwise provided
pursuant to the provisions of the Articles of Incorporation or Articles of
Amendment relating to the rights of the holders of any class or series of
Preferred Stock, voting separately by class or series, to elect directors
under specified circumstances, nominations of persons for election to the
Board of Directors may be made by the Chairman of the Board on behalf of the
Board of Directors or by any shareholder of the Corporation entitled to vote
for the election of directors at the annual meeting of the shareholders who
complies with the notice provisions set forth in this Section 4.4. To be
timely, a shareholder's notice shall be received at the principal business
office of the Corporation no later than the date designated for receipt of
shareholders' proposals in a prior public disclosure made by the Corporation.
If there has been no such prior public disclosure, then to be timely, a
shareholder's nomination must be delivered to or mailed and received at the
principal business office of the Corporation not less than sixty (60) days
nor more than ninety (90) days prior to the annual meeting of shareholders;
provided, however, that in the event that less than seventy (70) days' notice
of the date of the meeting is given to the shareholders or prior public
disclosure of the date of the meeting is made, notice by the shareholder to
be timely must be so received not later than the close of business on the
tenth day following the day on which such notice of the date of the annual
meeting was mailed or such public disclosure was made. A shareholder's
notice to the Secretary shall set forth (i) as to each person the shareholder
proposes to nominate for election or election as a director, (A) the name,
age, business address, and residence address of such proposed nominee, (B)
the principal occupation or employment of such person, (C) the class and
number of shares of capital stock of the Corporation which are beneficially
owned by such person, and (D) any other information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (including without
limitation such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); and (ii) as
to the shareholder giving notice (A) the name and address as they appear on
the Corporation's books, of the shareholder proposing such nomination, and
(B) the class and number of shares of stock of the Corporation which are
beneficially owned by the shareholder. No person shall be eligible for
election as a director of the Corporation unless nominated in accordance with
the procedures set forth in this Section 4.4. The Chairman of the meeting
shall, if the facts warrant, determine and declare to the annual meeting that
a nomination was not made in accordance with the provisions of this Section
4.4, and if the Chairman shall so determine, the Chairman shall so declare at
the meeting and the defective nomination shall be disregarded.
Section 4.5 Removal.
(a) Generally. Except as otherwise provided pursuant to the provisions
of the Articles of Incorporation or Articles of Amendment relating to the
rights of the holders of any class or series of Preferred Stock, voting
separately by class or series, to elect directors under specified
circumstances, any director or directors may be removed from office at any
time, but only for cause (as defined in Section 4.5(b) hereof) and only by
the affirmative
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vote, at a special meeting of the shareholders called for such a purpose, of
not less than the total number of votes of the then outstanding shares of
capital stock of the Corporation required by the Articles of Incorporation of
the Corporation for such vote, but only if notice of such proposed removal
was contained in the notice of such meeting. At least thirty (30) days prior
to such special meeting of shareholders, written notice shall be sent to the
director or directors whose removal will be considered at such meeting. Any
vacancy on the Board of Directors resulting from such removal or otherwise
shall be filled only by vote of a majority of the directors then in office,
although less then a quorum, and any director so chosen shall hold office
until the next election of the class for which such director shall have been
chosen and until his successor shall have been elected and qualified or until
any such director's earlier death, resignation or removal.
(b) "Cause" Defined. For the purposes of this Section 4.5, "cause"
shall mean (i) misconduct as a director of the Corporation or any subsidiary
of the Corporation which involves dishonesty with respect to a substantial or
material corporate activity or corporate assets, or (ii) conviction of an
offense punishable by one (1) or more years of imprisonment (other than minor
regulatory infractions and traffic violations which do not materially and
adversely affect the Corporation).
Section 4.6 Resignation. A director may resign at any time by
delivering written notice to the Board of Directors or its Chairman (if any)
or to the Corporation. A director's resignation is effective when the notice
is delivered unless the notice specifies a later effective date.
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Section 4.7 Vacancies.
(a) Who May Fill Vacancies. Except as provided below, whenever any
vacancy occurs on the Board of Directors, including a vacancy resulting from
an increase in the number of directors, it may be filled by the affirmative
vote of a majority of the remaining directors though less than a quorum of
the Board of Directors. Any director elected in accordance with the
preceding sentence shall hold office until his successor is duly elected and
qualified, and such successor shall complete such director's remaining term.
(b) Directors Elected by Voting Groups. Whenever the holders of
shares of any voting group are entitled to elect a class of one or more
directors by the provisions of the Articles of Incorporation, vacancies in
such class may be filled by holders of shares of that voting group or by a
majority of the directors then in office elected by such voting group or by a
sole remaining director so elected. If no director elected by such voting
group remains in office, unless the Articles of Incorporation provide
otherwise, directors not elected by such voting group may fill vacancies.
(c) Prospective Vacancies. A vacancy that will occur at a specific
later date, because of a resignation effective at a later date or otherwise,
may be filled before the vacancy occurs, but the new director may not take
office until the vacancy occurs.
Section 4.8 Compensation. The Board of Directors, irrespective of
any personal interest of any of its members, may establish reasonable
compensation of all directors for services to the Corporation as directors,
officers, or otherwise, or may delegate such authority to an appropriate
committee. The Board of Directors also shall have authority to provide for
or delegate authority to an appropriate committee to provide for reasonable
pensions, disability, or death benefits, and other benefits or payments, to
directors, officers, and employees and to their families, dependents,
estates, or beneficiaries on account of prior services rendered to the
Corporation by such directors, officers, and employees.
Section 4.9 Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this bylaw immediately
after the annual meeting of shareholders and each adjourned session thereof.
The place of such regular meeting shall be the same as the place of the
meeting of shareholders which precedes it, or such other suitable place as
may be announced at such meeting of shareholders. The Board of Directors may
provide, by resolution, the date, time, and place, either within or without
the State of Florida, for the holding of additional regular meetings of the
Board of Directors without notice other than such resolution.
Section 4.10 Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board (if any), the President,
or not less than one-third (1/3) of the members of the Board of Directors.
The person or persons calling the meeting may fix any place, either within or
without the State of Florida, as the place for holding any
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special meeting of the Board of Directors, and if no other place is fixed,
the place of the meeting shall be the principal office of the Corporation.
Section 4.11 Notice. Special meetings of the Board of Directors must
be preceded by at least two days' notice of the date, time, and place of the
meeting. The notice need not describe the purpose of the special meeting.
Section 4.12 Waiver of Notice. Notice of a meeting of the Board of
Directors need not be given to any director who signs a waiver of notice
either before of after the meeting. Attendance of a director at a meeting
shall constitute a waiver of notice of such meeting and waiver of any and all
objections to the place of the meeting, the time of the meeting, or the
manner in which it has been called or convened, except when a director
states, at the beginning of the meeting or promptly upon arrival at the
meeting, any objection to the transaction of business because the meeting is
not lawfully called or convened.
Section 4.13 Quorum and Voting. A quorum of the Board of Directors
consists of a majority of the number of directors prescribed by these bylaws
(or if no number is proscribed, the number of directors in office immediately
before the meeting begins). If a quorum is present when a vote is taken, the
affirmative vote of a majority of directors present is the Act of the Board
of Directors. A director who is present at a meeting of the Board of
Directors or a committee of the Board of Directors when corporate action is
taken is deemed to have assented to the action taken unless, (i) he objects
at the beginning of the meeting (or promptly upon his arrival) to holding it
or transacting specified business at the meeting; or (ii) he votes against or
abstains from the action taken.
Section 4.14 Conduct of Meetings.
(a) Presiding Officer. The Board of Directors may elect from among
its members a Chairman of the Board of Directors, who shall preside at
meetings of the Board of Directors. The Chairman, and if there be none, or
in his absence, the President and in his absence, a Vice President in the
order provided under the Section of these bylaws titled "Vice Presidents,"
and in his absence, any director chosen by the directors present, shall call
meetings of the Board of Directors to order and shall act as presiding
officer of the meeting.
(b) Minutes. The Secretary of the Corporation shall act as secretary
of all meetings of the Board of Directors, but in the absence of the
Secretary, the presiding officer may appoint any other person present to act
as secretary of the meeting. Minutes of any regular or special meeting of
the Board of Directors shall be prepared and distributed to each director.
(c) Adjournments. A majority of the directors present, whether or not
a quorum exists, may adjourn any meeting of the Board of Directors to another
time and place. Notice of any such adjourned meeting shall be given to the
directors who are not present at the time of the adjournment and, unless the
time and place of the adjourned meeting are announced at the time of the
adjournment, to the other directors.
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(d) Participation by Conference Call or Similar Means. The Board of
Directors may permit any or all directors to participate in a regular or a
special meeting by, or conduct the meeting through the use of, any means of
communication by which all directors participating may simultaneously hear
each other during the meeting. A director participating in a meeting by this
means is deemed to be present in person at the meeting.
Section 4.15 Committees. The Board of Directors, by resolution
adopted by a majority of the full Board of Directors, may designate from
among its members an Executive Committee and one or more other committees,
which may include, by way of example and not as a limitation, a Compensation
Committee (for the purpose of establishing and implementing an executive
compensation policy) and an Audit Committee (for the purpose of examining and
considering matters relating to the financial affairs of the Corporation).
Each committee shall have two or more members, who serve at the pleasure of
the Board of Directors, provided that the Compensation Committee and the
Audit Committee shall consist of at least two Independent Directors. For
purposes of this section, "Independent Director" shall mean a person other
than an officer or employee of the Corporation or any subsidiary of the
Corporation or any other individual having a relationship which, in the
opinion of the Board of Directors, would interfere with the exercise of
independent judgment in carrying out the responsibilities of a director. To
the extent provided in the resolution of the Board of Directors establishing
and constituting such committees, such committees shall have and may exercise
all the authority of the Board of Directors, except that no such committee
shall have the authority to:
(a) approve or recommend to shareholders actions or proposals required
by the Act to be approved by shareholders;
(b) fill vacancies on the Board of Directors or any committee thereof;
(c) adopt, amend, or repeal these bylaws;
(d) authorize or approve the reacquisition of shares unless pursuant to
a general formula or method specified by the Board of Directors; or
(e) authorize or approve the issuance or sale or contract for the sale
of shares, or determine the designation and relative rights, preferences, and
limitations of a voting group except that the Board of Directors may
authorize a committee (or a senior executive officer of the Corporation) to
do so within limits specifically prescribed by the Board of Directors.
The Board of Directors, by resolution adopted in accordance with this
Section, may designate one or more directors as alternate members of any such
committee, who may act in the place and stead of any absent member or members
at any meeting of such committee. The provisions of these bylaws which
govern meetings, notice and waiver of notice, and quorum and voting
requirements of the Board of Directors apply to committees and their members
as well.
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Section 4.16 Action Without Meeting. Any action required or permitted
by the Act to be taken at a meeting of the Board of Directors or a committee
thereof may be taken without a meeting if the action is taken by all (and not
less than all) members of the Board or of the committee. The action shall be
evidence by one or more written consents describing the action taken, signed
by each director or committee member and retained by the Corporation. Such
action shall be effective when the last director or committee member signs
the consent, unless the consent specifies a different effective date. A
consent signed under this Section has the effect of a vote at a meeting and
may be described as such in any document.
ARTICLE 5.
Officers
Section 5.1 Number. The principal officers of the Corporation shall
be a Chairman, a President, the number of Vice Presidents, if any, as
authorized from time to time by the Board of Directors, a Secretary, and a
Treasurer, each of whom shall be elected by the Board of Directors. Such
other officers and assistant officers as may be deemed necessary may be
elected or appointed by the Board of Directors. The Board of Directors may
also authorize any duly appointed officer to appoint one or more officers or
assistant officers. The same individual may simultaneously hold more than
one office.
Section 5.2 Election and Term of Office. The officers of the
Corporation to be elected by the Board of Directors shall be elected annually
by the Board of Directors at the first meeting of the Board of Directors held
after each annual meeting of the shareholders. If the election of officers
shall not be held at such meeting, such election shall be held as soon
thereafter as is practicable. Each officer shall hold office until his
successor shall have been duly elected or until his prior death, resignation,
or removal.
Section 5.3 Removal. The Board of Directors may remove any officer
and, unless restricted by the Board of Directors, an officer may remove any
officer or assistant officer appointed by that officer, at any time, with or
without cause and notwithstanding the contract rights, if any, of the officer
removed. The appointment of an officer does not of itself create contract
rights.
Section 5.4 Resignation. An officer may resign at any time by
delivering notice to the Corporation. The resignation shall be effective
when the notice is delivered, unless the notice specifies a later effective
date and the Corporation accepts the later effective date. If a resignation
is made effective at a later date and the Corporation accepts the future
effective date, the pending vacancy may be filled before the effective date,
but the successor may not take office until the effective date.
Section 5.5 Vacancies. A vacancy in any principal office because of
death, resignation, removal, disqualification, or otherwise, shall be filled
as soon thereafter as practicable by the Board of Directors for the unexpired
portion of the term.
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Section 5.6 Chairman of the Board. The Chairman of the Board (the
"Chairman") shall be a member of the Board of Directors of the Corporation
and shall preside over all meetings of the Board of Directors and
shareholders of the Corporation. The Chairman shall have authority, subject
to such rules as may be prescribed by the Board of Directors, to appoint such
agents and employees of the Corporation as he shall deem necessary, to
prescribe their powers, duties and compensation, and to delegate authority to
them. Such agents and employees shall hold office at the direction of the
Chairman. The Chairman shall have authority to sign certificates for shares
of the Corporation the issuance of which shall have been authorized by
resolution of the Board of Directors, and to execute and acknowledge, on
behalf of the Corporation, all deeds, mortgages, bonds, contracts, leases,
reports, and all other documents or instruments necessary or proper to be
executed in the course of the Corporation's regular business, or which shall
be authorized by resolution of the Board of Directors; and, except as
otherwise provided by law or the Board of Directors, the Chairman may
authorize the President or any Vice President or other officer or agent of
the Corporation to execute and acknowledge such documents or instruments in
his place and stead. In general, he shall perform all duties as may be
prescribed by the Board of Directors from time to time.
Section 5.7 President. The President shall be the chief executive
officer of the Corporation and, subject to the direction of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the Corporation. If the Chairman of the Board is not present, the
President shall preside at all meetings of the Board of Directors and
shareholders. The President shall have authority, subject to such rules as
may be prescribed by the Board of Directors, to appoint such agents and
employees of the Corporation as he shall deem necessary, to prescribe their
powers, duties and compensation, and to delegate authority to them. Such
agents and employees shall hold office at the discretion of the President.
The President shall have authority to sign certificates for shares of the
Corporation the issuance of which shall have been authorized by resolution of
the Board of Directors, and to execute and acknowledge, on behalf of the
Corporation, all deeds, mortgages, bonds, contracts, leases, reports, and all
other documents or instruments necessary or proper to be executed in the
course of the Corporation's regular business, or which shall be authorized by
resolution of the Board of Directors; and, except as otherwise provided by
law or the Board of Directors, the President may authorize any Vice President
or other officer or agent of the Corporation to execute and acknowledge such
documents or instruments in his place and stead. In general he shall perform
all duties incident to the office of President and such other duties as may
be prescribed by the Board of Directors from time to time.
Section 5.8 Vice President. In the absence of the President or in
the event of the President's death, inability or refusal to act, or in the
event for any reason it shall be impracticable for the President to act
personally, the Vice President, if any (or in the event there be more than
one Vice President, the Vice Presidents in the order designated by this Board
of Directors, or in the absence of any designation, then in the order of
their election), shall perform the duties of the President, and when so
acting, shall have all the powers of and be subject to all the restrictions
upon the President. Any Vice President may sign
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certificates for shares of the Corporation the issuance of which shall have
been authorized by resolution of the Board of Directors; and shall perform
such other duties and have such authority as from time to time may be
delegated or assigned to him by the President or by the Board of Directors.
The execution of any instrument of the Corporation by any Vice President
shall be conclusive evidence, as to third parties, of his authority to act in
the stead of the President. The Corporation may have one or more Executive
Vice Presidents and one or more Senior Vice Presidents, who shall be Vice
Presidents for purposes hereof.
Section 5.9 Secretary. The Secretary shall: (i) keep, or cause to be
kept, minutes of the meetings of the shareholders and of the Board of
Directors (and of committees thereof) in one or more books provided for that
purpose (including records of actions taken by the shareholders or the Board
of Directors (or committees thereof) without a meeting); (ii) be custodian of
the corporate records and of the seal of the Corporation, if any, and if the
Corporation has a seal, see that it is affixed to all documents the execution
of which on behalf of the Corporation under its seal is duly authorized;
(iii) authenticate the records of the Corporation; (iv) maintain a record of
the shareholders of the Corporation, in a form that permits preparation of a
list of the names and addresses of all shareholders, by class or series of
shares and showing the number and class or series of shares held by each
shareholder; (v) have general charge of the stock transfer books of the
Corporation; and (vi) in general perform all duties incident to the office of
Secretary and have such other duties and exercise such authority as from time
to time may be delegated or assigned by the President or by the Board of
Directors.
Section 5.10 Treasurer. The Treasurer shall: (i) have charge and
custody of and be responsible for all funds and securities of the
Corporation, (ii) maintain appropriate accounting records; (iii) receive and
give receipts for moneys due and payable to the Corporation from any source
whatsoever, and deposit all such moneys in the name of the Corporation in
such banks, trust companies, or other depositories as shall be selected in
accordance with the provisions of these bylaws; and (iv) in general perform
all of the duties incident to the office of Treasurer and have such other
duties and exercise such other authority as from time to time may be
delegated or assigned by the President or by the Board of Directors . If
required by the Board of Directors, the Treasurer shall give a bond for the
faithful discharge of his duties in such sum and with such surety or sureties
as the Board of Directors shall determine.
Section 5.11 Assistant Secretaries and Assistant Treasurers. There
shall be such number of Assistant Secretaries and Assistant Treasurers as the
Board of Directors may from time to time authorize. The Assistant Treasurers
shall respectively, if required by the Board of Directors, give bonds for the
faithful discharge of their duties in such sums and with such sureties as the
Board of Directors shall determine. The Assistant Secretaries and Assistant
Treasurers, in general, shall perform such duties and have such authority as
shall from time to time be delegated or assigned to them by the Secretary or
the Treasurer, respectively, or by the President, the Chairman, or the Board
of Directors.
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Section 5.12 Other Assistants and Acting Officers. The Board of
Directors shall have the power to appoint, or to authorize any duly appointed
officer of the Corporation to appoint, any person to act as assistant to any
officer, or as agent for the Corporation in his stead, or to perform the
duties of such officer whenever for any reason it is impracticable for such
officer to act personally, and such assistant or acting officer or other
agent so appointed by the Board of Directors or an authorized officer shall
have the power to perform all the duties of the office to which he is so
appointed to be an assistant, or as to which he is so appointed to act,
except as such power may be otherwise defined or restricted by the Board of
Directors or the appointing officer.
Section 5.13 Salaries. The salaries of the principal officers shall
be fixed from time to time by the Board of Directors or by a duly authorized
committee thereof, and no officer shall be prevented from receiving such
salary by reason of the fact that he is also a director of the Corporation.
ARTICLE 6.
Contracts, Checks and Deposits; Special Corporate Acts
Section 6.1 Contracts. The Board of Directors may authorize any
officer or officers, or any agent or agents to enter into any contract or
execute or deliver any instrument in the name of and on behalf of the
Corporation, and such authorization may be general or confined to specific
instances. In the absence of other designation, all deeds, mortgages, and
instruments of assignment or pledge made by the Corporation shall be executed
in the name of the Corporation by the Chairman, the President, or one of the
Vice Presidents; the Secretary or an Assistant Secretary, when necessary or
required, shall attest and affix the corporate seal, if any, thereto; and
when so executed no other party to such instrument or any third party shall
be required to make any inquiry into the authority of the signing officer or
officers.
Section 6.2 Checks, Drafts, etc. All checks, drafts, or other orders
for the payment of money, notes, or other evidences of indebtedness issued in
the name of the Corporation, shall be signed by such officer or officers,
agent or agents of the Corporation and in such manner as shall from time to
time be determined by or under the authority of a resolution of the Board of
Directors.
Section 6.3 Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the
Corporation in such banks, trust companies, or other depositories as may be
selected by or under the authority of a resolution of the Board of Directors.
Section 6.4 Voting of Securities Owned by Corporation. Subject
always to the specific directions of the Board of Directors, (i) any shares
or other securities issued by any other corporation and owned or controlled
by the Corporation may be voted at any meeting of security holders of such
other corporation by the President of the Corporation if he be present, or in
his absence by any Vice President of the Corporation who may be present, and
(ii) whenever, in the judgment of the President, or in his absence, of any
Vice
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President, it is desirable for the Corporation to execute a proxy or written
consent in respect of any such shares or other securities, such proxy or
consent shall be executed in the name of the Corporation by the President or
one of the Vice Presidents of the Corporation, without necessity of any
authorization by the Board of Directors, affixation of corporate seal, if
any, or countersignature or attestation by another officer. Any person or
persons designated in the manner above stated as the proxy or proxies of the
Corporation shall have full right, power, and authority to vote the shares or
other securities issued by such other corporation and owned or controlled by
the Corporation the same as such shares or other securities might be voted by
the Corporation.
ARTICLE 7.
Certificates for Shares; Transfer of Shares
Section 7.1 Consideration for Shares. The Board of Directors may
authorize shares to be issued for consideration consisting of any tangible or
intangible property or benefit to the Corporation, including cash, promissory
notes, services performed, promises to perform services evidenced by a
written contract, or other securities of the Corporation. Before the
Corporation issues shares, the Board of Directors shall determine that the
consideration received or to be received for the shares to be issued is
adequate. The determination of the Board of Directors is conclusive insofar
as the adequacy of consideration for the issuance of shares relates to
whether the shares are validly issued, fully paid, and nonassessable. The
Corporation may place in escrow shares issued for future services or benefits
or a promissory note, or make other arrangements to restrict the transfer of
the shares, and may credit distributions in respect of the shares against
their purchase price, until the services are performed, the note is paid, or
the benefits are received. If the services are not performed, the note is
not paid, or the benefits are not received, the Corporation may cancel, in
whole or in part, the shares escrowed or restricted and the distributions
credited.
Section 7.2 Certificates for Shares. Every holder of shares in the
Corporation shall be entitled to have a certificate representing all shares
to which he is entitled unless the Board of Directors authorizes the issuance
of some or all shares without certificates. Any such authorization shall not
affect shares already represented by certificates until the certificates are
surrendered to the Corporation. If the Board of Directors authorizes the
issuance of any shares without certificates, within a reasonable time after
the issue or transfer of any such shares, the Corporation shall send the
shareholder a written statement of the information required by the Act or the
Articles of Incorporation to be set forth on certificates, including any
restrictions on transfer. Certificates representing shares of the
Corporation shall be in such form, consistent with the Act, as shall be
determined by the Board of Directors. Such certificates shall be signed
(either manually or in facsimile) by the Chairman, the President, or any Vice
President or any other persons designated by the Board of Directors and may
be sealed with the seal of the Corporation or a facsimile thereof. All
certificates for shares shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
shall be entered on the stock transfer books of
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the Corporation. Unless the Board of Directors authorizes shares without
certificates, all certificates surrendered to the Corporation for transfer
shall be canceled and no new certificate shall be issued until the former
certificate for a like number of shares shall have been surrendered and
canceled, except as provided in these bylaws with respect to lost, destroyed,
or stolen certificates. The validity of a share certificate is not affected
if a person who signed the certificate (either manually or in facsimile) no
longer holds office when the certificate is issued.
Section 7.3 Transfer of Shares. Prior to due presentment of a
certificate for shares for registration of transfer, the Corporation may
treat the registered owner of such shares as the person exclusively entitled
to vote, to receive notifications, and otherwise to have and exercise all the
rights and power of an owner. Where a certificate for shares is presented to
the Corporation with a request to register a transfer, the Corporation shall
not be liable to the owner or any other person suffering loss as a result of
such registration of transfer if (i) there were on or with the certificate
the necessary endorsements, and (ii) the Corporation had no duty to inquire
into adverse claims or has discharged any such duty. The Corporation may
require reasonable assurance that such endorsements are genuine and effective
and compliance with such other regulations as may be prescribed by or under
the authority of the Board of Directors.
Section 7.4 Restrictions on Transfer. The face or reverse side of
each certificate representing shares shall bear a conspicuous notation as
required by the Act or the Articles of Incorporation of the restrictions, if
any, imposed by the Corporation upon the transfer of such shares.
Section 7.5 Lost, Destroyed, or Stolen Certificates. Unless the
Board of Directors authorizes shares without certificates, where the owner
claims that certificates for shares have been lost, destroyed, or wrongfully
taken, a new certificate shall be issued in place thereof if the owner (i) so
requests before the Corporation has notice that such shares have been
acquired by a bone fide purchaser, (ii) files with the Corporation a
sufficient indemnity bond if required by the Board of Directors or any
principal officer, and (iii) satisfies such other reasonable requirements as
may be prescribed by at under the authority of the Board of Directors.
Section 7.6 Stock Regulations. The Board of Directors shall have the
power and authority to make all such further rules and regulations not
inconsistent with law as they may deem expedient concerning the issue,
transfer, and registration of shares of the Corporation.
ARTICLE 8.
Seal
Section 8.1 Seal. The Board of Directors may provide for a
corporate seal for the Corporation.
ARTICLE 9.
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Books and Records
Section 9.1 Books and Records.
(a) The Corporation shall keep as permanent records minutes of all
meetings of the shareholders and Board of Directors, a record of all actions
taken by the shareholders or Board of Directors without a meeting, and a
record of all actions taken by a committee of the Board of Directors in place
of the Board of Directors on behalf of the Corporation.
(b) The Corporation shall maintain accurate accounting records.
(c) The Corporation or its agent shall maintain a record of the
shareholders in a form that permits preparation of a list of the names and
addresses of all shareholders in alphabetical order by class of shares
showing the number and series of shares held by each.
(d) The Corporation shall keep a copy of all written communications
within the preceding three years to all shareholders generally or to all
shareholders of a class or series, including the financial statements
required to be furnished by the Act, and a copy of its most recent annual
report delivered to the Department of State.
Section 9.2 Shareholders' Inspection Rights. Shareholders are
entitled to inspect and copy records of the Corporation as permitted by the
Act.
Section 9.3 Distribution of Financial Information. The Corporation
shall prepare and disseminate financial statements to shareholders as
required by the Act.
Section 9.4 Other Reports. The Corporation shall disseminate such
other reports to shareholders as are required by the Act, including reports
regarding indemnification in certain circumstances and reports regarding the
issuance or authorization for issuance of shares in exchange for promises to
render services in the future.
ARTICLE 10.
Indemnification
Section 10.1 Provision of Indemnification. The Corporation shall, to
the fullest extent permitted or required by the Act, including any amendments
thereto (but in the case of any such amendment, only to the extent such
amendment permits or requires the Corporation to provide broader
indemnification rights than prior to such amendment), indemnify its Directors
and Executive Officers against any and all Liabilities, and advance any and
all reasonable Expenses, incurred thereby in any Proceeding to which any such
Director or Executive Officer is a Party or in which such Director or
Executive Officer is deposed or called to testify as a witness because he is
or was a Director or Executive Officer of the Corporation. The rights to
indemnification granted hereunder shall not be deemed exclusive of any other
rights to indemnification against Liabilities or the advancement of Expenses
which a Director or Executive Officer may be entitled under any written
agreement, Board of Directors' resolution, vote of shareholders, the Act, or
otherwise. The
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Corporation may, but shall not be required to, supplement the foregoing
rights to indemnification against Liabilities and advancement of Expenses by
the purchase of insurance on behalf of any one or more of its Director or
Executive Officers whether or not the Corporation would be obligated to
indemnify or advance Expenses to such Director or Executive Officer under
this Article. For purposes of this Article, the term "Directors" includes
former directors of the Corporation and any director who is or was serving at
the request of the Corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise,
including, without limitation, any employee benefit plan (other than in the
capacity as an agent separately retained and compensated for the provision of
goods or services to the enterprise, including, without limitation,
attorneys-at-law, accountants, and financial consultants). The term
"Executive Officers" includes those individuals who are or were at any time
"executive officers" of the Corporation as defined in Securities and Exchange
Commission Rule 3b-7 promulgated under the Securities Exchange Act of 1934,
as amended. All other capitalized terms used in this Article 10 and not
otherwise defined herein have the meaning set forth in Section 607.0850,
Florida Statutes (1995). The provisions of this Article 10 are intended
solely for the benefit of the indemnified parties described herein, their
heirs and personal representatives and shall not create any rights in favor
of third parties. No amendment to or repeal of this Article 10 shall
diminish the rights of indemnification provided for herein prior to such
amendment or repeal.
ARTICLE 11.
Amendments
Section 11.1 Power to Amend. These bylaws may be amended or repealed
by either the Board of Directors or the shareholders, unless the Act reserves
the power to amend these bylaws generally or any particular bylaw provision,
as the case may be, exclusively to the shareholders or unless the
shareholders, in amending or repealing these bylaws generally or any
particular bylaw provision, provide expressly that the Board of Directors may
not amend or repeal these bylaws or such bylaw provision, as the case may be.
The shareholders of the Corporation may adopt or amend a bylaw provision
which fixes a greater quorum or voting requirement for shareholders (or
voting groups of shareholders) than is required by the Act. The adoption or
amendment of a bylaw provision that adds, changes, or deletes a greater
quorum or voting requirement for shareholders must meet the same quorum or
voting requirement and be adopted by the same vote and voting groups required
to take action under the quorum or voting requirement then in effect or
proposed to be adopted, whichever is greater.
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THIS WARRANT AND THE CHARGES OF COMMON STOCK ISSUABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNTIL (i) A
REGISTRATION STATEMENT UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES LAWS
SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) IN THE OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY REGISTRATION UNDER SUCH SECURITIES ACT OR
SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH
PROPOSED TRANSFER.
STOCK PURCHASE WARRANT
This WARRANT is issued this 29th day of May, 1992, by CCS TECHNOLOGY
GROUP, INC., a Florida corporation (the "Company"), to SIRROM CAPITAL, L.P.,
a Tennessee limited partnership (SIRROM CAPITAL, L.P. and any subsequent
assignee or transferee hereof are hereinafter referred to collectively as
"Holder" or "Holders").
1. Issuance of Warrant; Term. For and in consideration of SIRROM
CAPITAL, L.P. making a loan to the company in an amount of $1,000,000
pursuant to the terms of a secured promissory note and related loan and
security agreement, each dated the date hereof (respectively, the "Note" and
the "Loan Agreement"), and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company hereby
grants to Holder the right to purchase (i) Fifteen Thousand (15,000) shares
of the Company's Common Stock, $.01 par value (the "Common Stock"), plus (ii)
an additional One Thousand (1,000) Shares of Common Stock for each full
calendar month the obligations of the Company remain outstanding under the
Loan Agreement up to a total of Fifteen Thousand (15,000) additional shares.
The shares of Common Stock issuable upon exercise of this Warrant are
hereinafter referred to as the "Shares." This Warrant shall be exercisable
at any time and from time to time from the date hereof until May 29, 1997.
2. Exercise Price. The exercise price per share for which all or any
of the Shares may be purchased pursuant to the terms of this Warrant shall be
$.01.
3. Exercise. This Warrant may be exercised by the Holder hereof (but
only on the conditions hereinafter set forth) as to all or any increment or
increments of the Shares upon delivery of written notice of intent to
exercise to the Company at the following address: 900 Winderley Place,
Maitland, Florida 32751 or such other address as the company shall designate
in a written notice to the Holder hereof, together with this Warrant and a
certified or cashier's check payable to the Company for the aggregate
purchase price of the Shares so purchased. Upon exercise of this Warrant as
aforesaid, the Company shall as promptly as practicable, and in any event
within 15 days thereafter, execute and deliver to the Holder of this Warrant
a certificate or certificates for the total number of whole Shares for which
this Warrant is being exercised in such names and denominations as are
<PAGE>
requested by such Holder. If this Warrant shall be exercised with respect to
less than all of the Shares, the Holder shall be entitled to receive a new
Warrant covering the number of Shares in respect of which this Warrant shall
not have been exercised, which new warrant shall in all other respects be
identical to this Warrant. The Company covenants and agrees that it will pay
when due any and all state and federal issue taxes which may be payable in
respect of the issuance of this Warrant or the issuance of any Shares upon
exercise of this Warrant; provided, however, that the Company shall have no
liability for any state or federal income taxes which may be payable by
Holder upon income recognized by Holder as a result of the exercise of this
Warrant.
4. Covenants and Conditions. The above provisions are subject to the
following:
(a) Neither this Warrant nor the Shares have been registered
under the "Securities Act") or any state securities laws ("Blue
Sky Laws"). This Warrant has been acquired for investment
purposes and not with a view to distribution or resale and may
not be pledged, hypothecated, sold, made subject to a security
interest, or otherwise transferred without (i) an effective
registration statement for such Warrant under the Securities Act
and such applicable Blue Sky Laws, or (ii) an opinion of counsel
reasonably satisfactory to the Company that registration is not
required under the Securities Act or under any applicable Blue
Sky Laws. Transfer of the Shares issued upon the exercise of
this Warrant shall be restricted in the same manner and to the
same extent as the Warrant and the certificates representing such
Shares shall bear substantially the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES
LAW AND MAY NOT BE TRANSFERRED UNTIL (i) A REGISTRATION
STATEMENT UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES
LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR
(ii) IN THE OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY
REGISTRATION UNDER SUCH SECURITIES ACT OR SUCH APPLICABLE
STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH
SUCH PROPOSED TRANSFER.
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(b) The Company covenants and agrees that all Shares which may be
issued upon exercise of this Warrant will, upon issuance and
payment therefor, be legally and validly issued and outstanding,
fully paid and nonassessable. The Company shall at all times
reserve and keep available for issuance upon the exercise of this
Warrant such number of authorized but unissued shares of Common
Stock as will be sufficient to permit the exercise in full of this
Warrant.
5. Transfer of Warrant. Subject to the provisions of Paragraph 4,
this Warrant may be transferred, in whole or in part, to any person or
business entity, by presentation of the Warrant to the Company with written
instructions for such transfer and by the execution by such transferee of an
investment letter in a form reasonably satisfactory to the Company. Upon
such presentation for transfer and receipt of such investment letter, the
Company shall promptly execute and deliver a new Warrant or Warrants in the
form hereof in the name of the assignee or assignees and in the denominations
specified in such instructions. The Company shall pay all expenses in
connection with the preparation, issuance and delivery of Warrants under this
Paragraph; provided, however, that the Holder shall reimburse the Company for
any out-of-pocket expenses incurred by the Company in connection with such
issuance.
6. Warrant Holder Not Shareholder; Rights Offering. This Warrant
does not confer upon the Holder hereof, as such, any right whatsoever as a
shareholder of the Company. Notwithstanding the foregoing, in the event the
Company should offer to all of the Company's shareholders the right to
purchase any securities of the Company, then all shares of Common Stock that
are subject to this Warrant shall be deemed to be outstanding and owned by
the Holder as of the subscription date and the Holder shall be entitled to
participate in such rights offering as if it were a shareholder.
7. Adjustment Upon Changes In Stock.
(a) If all or any portion of this Warrant shall be exercised
subsequently to any stock dividend, stock split, recapitalization,
merger, consolidation, combination or exchange of shares, separation,
reorganization or liquidation of the Company occurring after the date
hereof, as a result of which shares of any class shall be issued in
respect of outstanding shares of Common Stock (or shall be issuable
in respect of securities convertible into shares of Common Stock) or
upon exercise of rights or options (other than this Warrant) to
purchase shares of Common Stock or shares of such Common Stock shall
be changed into the same or a different number of shares of the same
or another class or classes, the Holder exercising this Warrant shall
receive, for the aggregate price paid upon such exercise, the
aggregate number and class of shares which such Holder would have
received if this Warrant had been exercised immediately prior to such
stock dividend, split-up, recapitalization, merger, consolidation,
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combination or exchange of shares, separation, reorganization or
liquidation (or the record date, if any, for such transaction or
event). If any adjustment under this Paragraph 7 would create a
fractional share of Common Stock or a right to acquire a fractional
share of Common Stock, such fractional share shall be disregarded and
the number of shares subject to this Warrant shall be the next lower
whole number of shares, rounding all fractions downward. Whenever
there shall be an adjustment pursuant to this Paragraph 7, the Company
shall forthwith notify the Holder or Holders of this Warrant of such
adjustment, setting forth in reasonable detail the event requiring the
adjustment and the method by which such adjustment was calculated.
(b) In the event of a merger, consolidation, recapitalization,
combination or exchange of shares occurring after the date hereof
pursuant to which the Company is not the surviving entity, the Company
covenants that it will use its best efforts to obtain from the
acquiring entity, as a condition to the closing of such transaction or
event, the right for the Holder to exchange this Warrant, at its sole
option and in lieu of exercise hereof, for a warrant to purchase shares
of the acquiring entity. The period of exercise of such new warrant
shall be equal to the remaining duration of the exercise period of this
Warrant and shall permit the Holder to purchase that number of shares
or other consideration of the acquiring entity which the Holder would
be entitled to receive as a result of such merger, consolidation,
recapitalization, combination or exchange of shares if this Warrant
had been exercised immediately prior to such merger, consolidation,
recapitalization, combination or exchange of shares (or the
record date, if any, for such transaction or event) for the same
aggregate exercise price as provided for this Warrant.
(c) To the extent the Warrant has not been fully exercised, then
in the event of any proposed transaction or event contemplated in
Section 7(b), if, after the Company has used its best efforts to obtain
a new warrant as set forth in Section 7(b), and if the acquiring entity
indicates that the Warrant must be exercised, then in that case,
immediately prior to said closing, the Holder shall exercise the
Warrant in its entirety.
(d) In the event the Warrant has been fully exercised prior to
the closing of a transaction or event contemplated in Section 7(b),
and the acquiring entity proposes to acquire not less than 100% of the
outstanding stock in the Company, then and in such event, the Holder
shall vote the Shares in the same manner as a majority of the remaining
shares of common stock in the Company are voted on any such proposal
which may be submitted to the shareholders of the Company.
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8. Registration.
(a) The Company and the holders of the Shares agree that if at
any time after the date hereof the Company shall propose to file a
registration statement with respect to any of its Common Stock on a
form suitable for a secondary offering, it will give notice in writing
to such effect to the registered holders of the Warrant and the Shares
at least 30 days prior to such filing, and, at the written request of
any such registered holder, made within 10 days after the receipt of
such notice, will include therein at the Company's costs and expense
(except for the fees and expenses of counsel to such holders and
underwriting discounts, commissions, and filing fees, attributable to
the Shares included therein) such of the Shares as such holders shall
request; provided, however, that if the offering being registered by
the Company is underwritten and if no other outstanding Common Stock
is offered thereby by a person or entity other than the Company and if
the representative of the underwriters certifies in writing that the
inclusion therein of the Shares would materially and adversely affect
the sale of the securities to be sold by the Company thereunder, the
Shares shall not be included in such registration statement or such
registration statement shall include only so many shares as will not
have such an effect.
The Company, at its own expense, will cause the prospectus included in
such registration statement to meet the requirements of the Securities
Act for a period of at least nine months after the effective date of
such registration statement.
(b) At the time any registration statement filed in accordance
with the provisions of Paragraph 8(a) above becomes effective, and at
the effective date of any post effective amendment thereto, the Company
will, at its own expense, furnish thereto, the Company will, at its own
expense furnish to the holders of the shares included in such
registration statement pursuant to this Paragraph 8, an opinion of the
Company's counsel to the effect that the registration statement and the
prospectus contained therein, and each amendment or supplement thereto,
as of their respective effective issue dates, comply as to form in all
material respects with the requirements of the Securities Act and the
rules and regulations promulgated thereunder.
Such counsel shall also state that no facts have come to the
attention of such counsel which cause them to believe that such
registration statement, the prospectus contained therein, or any
amendment or supplement thereto, as of their respective effective or
issue dates, contains any untrue statement of any material fact or
omits to state any material fact necessary to make the statements
therein not misleading (except that no statement need be made with
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respect to any financial statements, notes thereto or other financial
data or other expertized material contained therein).
If for any reason the Company's counsel is unable to make such a
statement and unless the representative of the underwriters directs
otherwise, the Company shall so notify the holders of the Shares and
shall use its best efforts to remove expeditiously all impediments to
the rendering of such opinion.
(c) The Company shall promptly notify the participating holders
of Shares of the occurrence of any event as a result of which any
current prospectus included in a registration statement filed pursuant
to this Paragraph 8 includes any misstatement of a material fact or
omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in light of
the circumstances then existing.
(d) The Company's obligations under Paragraph 8(a) with respect
to each holder of Shares are expressly conditioned upon such holder's
furnishing to the Company in writing such information concerning such
holder and the terms of such holder's proposed offering as the Company
or representative of the underwriters shall reasonably request for
inclusion in the registration statement. If any registration statement
including any of the Shares is filed, the Company shall indemnify each
holder thereof (and each underwriter for such holder and each person,
if any, who controls such underwriter within the meaning of the
Securities Act) from any loss, claim, damage or liability arising out
of or based upon any untrue statement of a material fact contained in
such registration statement or any omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, except for any such statement or omission based
on information furnished in writing by such holder of the shares
expressly for use in connection with such registration statement; and
such holder shall indemnify the Company (and each of its officers and
directors who has signed such registration statement, each director,
each person, if any, who controls the Company within the meaning of
the Securities Act, each underwriter for the Company and each person,
if any, who controls such underwriter within the meaning of the
Securities Act) and each other such holder against any loss, claim,
damage or liability arising from any such statement or omission which
was made in reliance upon information furnished in writing to the
Company by such holder of the shares expressly for use in connection
with such registration statement.
(e) The Company shall have no obligation to register the Shares
if at the time a request to register such Shares is made pursuant to
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this Section 8, the holder of the Shares could otherwise sell such
Shares pursuant to Rule 144 under the Securities Act.
9. Certain Notices. In case at any time the Company shall propose to:
(a) declare any cash dividend upon its Common Stock;
(b) declare any dividend upon its Common Stock payable in stock or
make any special dividend other distribution to the holders of its Common
Stock;
(c) offer for subscription to the holders of any shares of its Common
Stock or otherwise issue, or enter into an agreement providing for the
issuance of, any additional shares of stock of any class or other rights;
(d) reorganize, or reclassify the capital stock of the Company, or
consolidate, merge or otherwise combine with, or sell of all or
substantially all of its assets to, another corporation; or
(e) voluntarily or involuntarily dissolve, liquidate or wind up the
affairs of the Company;
then, in any one or more of said cases, the Company shall give, by certified
or registered mail, (i) at least 20 days' prior written notice of the date on
which the books of the Company shall close or a record shall be taken for
such dividend distribution or subscription rights or for determining rights
to vote in respect of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, and (ii)
in the case of such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up, at least 20 days' prior written
notice of the date when the same shall take place. Any notice required by
clause (i) shall also specify, in the case of any such dividend,
distribution or subscription rights, the date on which the holders of Common
Stock shall be entitled thereto, and any notice required by clause (ii) shall
specify the date on which the holders of Common Stock shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, as the case may be.
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IN WITNESS WHEREOF, parties hereto have set their hands as of the date
first above written.
CCS TECHNOLOGY GROUP, INC.
By: /s/ Edward A. Hargroves
----------------------------
Title: President
----------------------------
SIRROM CAPITAL, L.P.
By: SIRROM CORPORATION
Its General Partner
By: /s/ George M. Miller, II
------------------------------
George M. Miller, II
Vice President
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May 28, 1997
PySys International, Inc.
900 Winderly Place
Maitland Florida 32751
Attention: Michael R. Vandiver
Re: Amendment to that Certain Loan Agreement dated May 29, 1992 (the "Loan
Agreement"), by and between Sirrom Capital, L.P. ("Sirrom") and CCS
Technology Group, Inc. (Borrower")
Dear Mr. Vandiver:
The purpose of this letter is to confirm an amendment to the Loan
Agreement and the Loan Documents. Capitalized terms not otherwise defined
shall have the meanings set forth in the Loan Agreement. Specifically, we
have agreed to amend the Loan Documents as follows:
1. CCS Technology Group, Inc. has changed its name to PaySys
International, Inc.
2. Sirrom Capital Corporation is the successor to Sirrom Capital, L.P.
3. Sirrom Capital Corporation has assigned its interest in the Secured
Promissory Note dated May 29, 1992, executed by CCS Technology Group,
Inc. in favor of Sirrom Capital, LP (the "Note"), the Stock Purchase
Warrant between CCS Technology Group, Inc. and Sirrom Capital, L.P.
(the "Warrant"), and the other Loan Documents to Sirrom Investments,
Inc.
4. The Note is amended as follows:
Principal shall be paid as follows: $100,000 shall be due
and payable on June 2, 1997 and $900,000 shall be due and
<PAGE>
payable on September 1, 1997. The maturity date as defined
in the Note shall be September 1, 1997.
5. The Warrant is amended to provide that it shall be exercisable until
September 30, 1997.
If you find that the foregoing adequately sets forth your understanding
and agreement with respect to the above, please execute this Letter Agreement
where indicated below.
Sincerely,
SIRROM INVESTMENTS, INC. (assignee of
Sirrom Capital Corporation, the successor
of Sirrom Capital, L.P.)
By: ____________________________________
Title: __________________________________
Accepted and agreed to as of
May 28, 1997.
PAYSYS INTERNATIONAL, INC.
(formerly CCS Technology
Group, Inc.
By: /s/ Michael R. Vandiver
----------------------------
Title: Controller
----------------------------
<PAGE>
EXHIBIT 10.4
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT ("Agreement"), dated as of the 29th
day of May, 1992, is made and entered into on the terms and conditions
hereinafter set forth, by and among CCS TECHNOLOGY GROUP, INC., a Florida
corporation ("Borrower"), and SIRROM CAPITAL, L.P., a Tennessee limited
partnership ("Lender").
RECITALS:
WHEREAS, Borrower has requested that Lender make available to
Borrower a loan in the principal amount of $1,000,000 (the "Loan") on the
terms and conditions hereinafter set forth, and for the purposes hereinafter
set forth; and
WHEREAS, in order to induce Lender to make the Loan to Borrower,
Borrower has made certain representations to Lender; and
WHEREAS, Lender, in reliance upon the representations and
inducements of Borrower, has agreed to make the Loan upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the agreement of Lender to make
the Loan, the mutual covenants and agreements hereinafter set forth, and
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Borrower and Lender hereby agree as follows:
ARTICLE I
THE LOAN
1.01 EVIDENCE OF LOAN INDEBTEDNESS AND REPAYMENT. The Loan shall
be evidenced by a Secured Promissory Note in the original principal amount of
One Million and No/100 Dollars($1,000,000), substantially in the form
attached hereto as EXHIBIT A (the "Note"), of even date herewith, executed by
Borrower, in favor of Lender. The Loan shall be payable in accordance with
the terms of the Note.
<PAGE>
1.02 COMMITMENT FEE. Borrower shall pay to Lender a commitment
fee of $15,000 on the date the Loan is funded.
ARTICLE II
SECURITY
2.01 SECURITY. The Secured Obligations (as hereinafter
defined) are and shall continue to be secured as follows:
(A) Borrower hereby assigns and pledges to Lender a first and prior
security interest in the following described property and interests in
property, together with all proceeds thereof (collectively, "the Collateral"):
(i) EQUIPMENT. All machinery and equipment, all data processing
and office equipment, all computer equipment, hardware and firmware,
all furniture, fixtures, appliances and all other goods of every type
and description, whether now owned or hereafter acquired and wherever
located, together with all parts, accessories and attachments and all
replacements thereof and additions thereto; notwithstanding the
foregoing, Lender acknowledges that Borrower has previously granted a
security interest in certain equipment to IBM Credit Corporation and
other equipment lessors which security interests may be found to be
senior to the security interest in equipment granted to Lender in this
Section 2.01(A)(i); and
(ii) INVENTORY. All inventory and goods of Borrower, whether
held for lease, sale or furnishing under contracts of service, all
agreements for lease of same and rentals
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therefrom, whether now in existence or owned or hereafter acquired
and wherever located; and
(iii) GENERAL INTANGIBLES. All rights, interests, chooses in
action, causes of action, claims and all other intangible property of
Borrower of every kind and nature, in each instance whether now owned
or hereafter required but not limited to, all corporate and business
records; all loans, royalties, and other obligations receivable; all
trade secrets, inventions, designs, patents, patent applications,
registered or unregistered service marks, trade names, trademarks,
copyrights and the goodwill associated therewith and incorporated
therein, and all registrations and applications for registration
related thereto; goodwill, licenses, permits, franchises, customer
lists and credit files; all customer and supplier contracts, firm sale
orders, rights under license and franchise agreements, and other
contracts and contract rights; all right, title and interest under
leases, subleases, licenses and concessions and other agreements
relating to real or personal property and any security agreements
relating thereto; all rights to indemnification; all proceeds of
insurance of which Borrower is beneficiary; all letters of credit,
guarantees, liens, security interests and other security held by or
granted to Borrower; and all other intangible property, whether or not
similar to the foregoing; and
(iv) ACCOUNTS CHATTEL PAPER, INSTRUMENTS AND DOCUMENTS. All of
Borrower's accounts, accounts receivable, chattel paper, instruments
and documents, whether now in existence or owned or hereafter
acquired, entered into, created or arising, and wherever located;
provided, however, that Lender will release its claim to a first and
prior security interest in a portion of Borrower's accounts
3
<PAGE>
receivable and, if required, inventory to the extent
necessary to secure additional financing of up to $1,000,000 from a
third party lender as provided in Section 4.02; and
(v) SOFTWARE AND RELATED MATERIALS. The object codes and the
source codes comprising the computer software programs listed on
SCHEDULE 2.01 as the same exist on the date hereof and all future
improvements, enhancements, revisions and versions thereof, including
all versions of such software as adapted and as marketed for use on
all types of computer hardware (collectively, the "Software"); all
rights to royalties generated from the Software pursuant to licensing,
distribution, purchase or similar agreements presently or hereinafter
in effect; and all rights, interests, choses in action, causes of
action and claims for infringement relative to such property interest
of Borrower; any and all documentation, specifications, instructions,
user manuals and other written materials and software necessary to run
the Software, to provide a complete understanding of the development
of the Software, and to enable the continued and uninterrupted
marketing of the Software; and
(vi) STOCK OF SUBSIDIARIES. All of Borrower's right, title and
interest in and to the capital stock of each of its subsidiaries
(collectively, the "Subsidiaries") listed on SCHEDULE 2.01(A)(vi) and
all payments thereunder and all dividends, instruments or other
property from time to time distributed in respect thereof; and
(vii) OTHER PROPERTY. All property or interests in property
now owned or hereafter acquired by Borrower.
(B) The guaranty of each of Borrower's Subsidiaries with such
guaranty being secured by the grant to Lender of a security interest in certain
property and assets of such Subsidiaries as set forth in a Guaranty and Security
Agreement in the form of EXHIBIT B hereto.
4
<PAGE>
This Agreement and any other instruments, documents or agreements now
or hereafter securing the Secured Obligations are herein collectively referred
to as the "Security Instruments". The Security Instruments, together with the
Note and any other instruments and documents now or hereafter evidencing,
securing or in any way related to the indebtedness evidenced by the Note are
herein individually referred to as a "Loan Document" and collectively referred
to as the "Loan Documents".
2.02 SECURED OBLIGATIONS. Without limiting any of the
provisions thereof, the Security Instruments shall secure:
(a) The full and timely payment of the indebtedness
evidenced by the Note, together with interest thereon, and any
extensions, modifications, consolidations, and/or renewals
thereof and any notes given in payment thereof,
(b) The full and prompt performance of all of the
obligations of Borrower to Lender under the Loan Documents to
which Borrower is a party,
(c) The full and prompt payment of all court costs,
expenses and costs of whatever kind incident to the collection of
the indebtedness evidenced by the Note, the enforcement or
protection of the security interests of the Security Instruments
or the exercise by Lender of any rights or remedies of Lender
with respect to the indebtedness evidenced by the Note, including
without limitation reasonable attorney's fees incurred by Lender,
all of which Borrower agrees to pay to Lender upon demand, and
(d) The full and prompt payment and performance of any and
all other indebtedness and other obligations of Borrower to
Lender, direct or contingent, however evidenced or denominated,
and however and whenever incurred,
5
<PAGE>
including but not limited to indebtedness incurred pursuant to
any present or future commitment of Lender to Borrower,
together with interest thereon, and any extensions,
modifications, consolidations and/or renewals
thereof and any notes given in payment thereof.
All of the foregoing indebtedness and other obligations are herein collectively
referred to as the "Secured Obligations".
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender as follows:
3.01 CORPORATE STATUS. (a) Borrower and each of its Subsidiaries is
a corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation, and has the corporate power to own and
operate its properties, to carry on its business as now conducted and to
enter into and to perform its obligations under this Agreement and the other
Loan Documents to which it is a party. Borrower and each of its Subsidiaries
is duly qualified to do business and is in good standing in each state in
which a failure to be so qualified would have a material adverse effect on
such entity's financial position or its ability to conduct its business in
the manner now conducted.
3.02 AUTHORIZATION. Borrower and each of its Subsidiaries
has full legal right, power and authority to enter into and perform its
obligations under the Loan Documents, including the delivery of certificates
representing shares of capital stock of each of Borrower's Subsidiaries,
without the consent or approval of any other person, firm, governmental
agency or other legal entity. The execution and delivery of this Agreement,
the borrowing hereunder, the execution and delivery of each Loan Document to
which Borrower or any of its Subsidiaries is a party, and the performance by
Borrower and each of its Subsidiaries of their obligations hereunder and/or
thereunder are within the corporate powers of each such entity and have been
duly authorized by all
6
<PAGE>
necessary corporate action properly taken, have received all necessary
governmental approvals, if any were required, and do not and will not
contravene or conflict with any provision of law, any applicable judgment,
ordinance, regulation or order of any court or governmental agency, the
charter or bylaws of Borrower and its Subsidiaries, or any agreement binding
upon Borrower, its Subsidiaries or their respective properties. The
officer(s) executing this Agreement, the Note and all of the other Loan
Documents to which Borrower or its Subsidiaries is a party, are duly
authorized to act on behalf of such entity.
3.03 VALIDITY AND BINDING EFFECT. This Agreement and the other Loan
Documents are the legal, valid and binding obligations of the Borrower and
its Subsidiaries, enforceable in accordance with their respective terms,
subject to limitations imposed by bankruptcy, insolvency, moratorium, or
similar laws or provisions of general application.
3.04 OTHER TRANSACTIONS. Except as disclosed in Section 2.01 and on
SCHEDULE 3.04, there are no outstanding loans, liens, pledges, security
interests, agreements or other financing upon which Borrower or any of its
Subsidiaries is obligated or by which Borrower or any of its Subsidiaries is
bound that will in any way permit any third person to have or obtain priority
over Lender as to any of the collateral security granted to Lender pursuant
to this Agreement and the other Security Instruments. Consummation of the
transactions hereby contemplated and the performance of the obligations of
Borrower and its Subsidiaries under and by virtue of the Loan Documents to
which such entity is a party will not result in any breach of, or constitute
a default under, any mortgage, security deed or agreement, deed of trust,
lease, bank loan or credit agreement, corporate charter or bylaws, agreement
or certificate of limited partnership, partnership agreement, license,
franchise or any other instrument or agreement to which Borrower or any of
its Subsidiaries is a party or by which Borrower, its Subsidiaries or their
respective properties may be bound or affected or to which Borrower or such
Subsidiaries have not obtained an effective waiver.
3.05 PLACES OF BUSINESS. The records with respect to all intangible
personal property constituting the collateral security for the Secured
Obligations are maintained
7
<PAGE>
at the chief executive offices of Borrower at 900 Winderley Place, Maitland,
Florida 32751 or at the principal office of Borrower's Subsidiaries;
notwithstanding the foregoing, the location of such records may be changed
upon prior written notice to Lender of such change.
3.06 LITIGATION. Except as set forth on SCHEDULE 3.06 hereto, there
are no actions, suits or proceedings pending, or, to the knowledge of
Borrower, threatened, against or affecting Borrower or its Subsidiaries or
involving the validity or enforceability of any of the Loan Documents or the
priority of the liens thereof, at law or in equity, or before any
governmental or administrative agency, except actions, suits and proceedings
that are fully covered by insurance and that, if adversely determined, would
not impair materially the ability of Borrower or its Subsidiaries to perform
each and every one of their respective obligations under and by virtue of the
Loan Documents; and to Borrower's knowledge, neither Borrower nor any
Subsidiary is in default with respect to any order, writ, injunction, decree
or demand of any court or any governmental authority.
3.07 FINANCIAL STATEMENTS. The financial statement(s) of Borrower
and its Subsidiaries heretofore delivered to Lender are true and correct in
all material respects, have been prepared on the basis of accounting
principles consistently applied, and, except with regard to interim financial
statements which may be subject to year-end adjustments, fairly present the
financial condition of the subjects thereof as of the date(s) thereof. No
material adverse change has occurred in the financial condition of Borrower
and its Subsidiaries since the date(s) thereof, and no additional borrowings
have been made by Borrower or its Subsidiaries since the date(s) thereof
other than in the ordinary course of business.
3.08 NO DEFAULTS. Except as set forth on SCHEDULE 8.03, no default
or event of default by Borrower or its Subsidiaries exists under this
Agreement or any of the other Loan Documents, or under any other instrument
or agreement to which Borrower or its Subsidiaries is a party or by which
Borrower or any Subsidiary or its respective properties may be bound or
affected, and no event has occurred
8
<PAGE>
and is continuing that with notice or the passage of time or both would
constitute a default or event of default thereunder.
3.09 COMPLIANCE WITH LAW. Borrower and its Subsidiaries have
obtained all necessary licenses, permits and governmental approvals and
authorizations necessary or proper in order to conduct its business and
affairs as heretofore conducted and as hereafter intended to be conducted.
To Borrower's knowledge, Borrower and each Subsidiary is in compliance with
all laws, regulations, decrees and orders applicable to it (including but not
limited to laws, regulations, decrees and orders relating to environmental,
occupational and health standards and controls, antitrust, monopoly,
restraint of trade or unfair competition) to the extent that noncompliance,
in the aggregate, cannot reasonably be expected to have a material adverse
effect on its business, operations, property or financial condition and will
not materially adversely affect its ability to perform its obligations under
the Loan Documents.
3.10 NO BURDENSOME RESTRICTIONS. No instrument, document or
agreement to which Borrower or its Subsidiaries is a party or by which
Borrower, any Subsidiary or its respective properties may be bound or
affected materially adversely affects, or may reasonably be expected to so
affect, the business, operations, property or financial condition thereof.
3.11 TAXES. Borrower and each Subsidiary has filed or caused to be
filed all tax returns that to its knowledge are required to be filed (except
for returns that have been appropriately extended), and has paid all taxes
shown to be due and payable on said returns and all other taxes, impositions,
assessments, fees or other charges imposed on it by any governmental
authority, agency or instrumentality, prior to any delinquency with respect
thereto (other than taxes, impositions, assessments, fees and charges
currently being contested in good faith by appropriate proceedings, for which
appropriate amounts have been reserved). No tax liens have been filed against
Borrower, any Subsidiary or any of the respective property thereof.
9
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3.12 COLLATERAL. Each of Borrower and its Subsidiaries has all
necessary right, power end authority to grant to Lender a valid and
enforceable security interest in the collateral security for the Secured
Obligations. Except as provided in Section 2.01 and on SCHEDULE 3.04,
Lender's security interest in such collateral security constitutes a first
and prior lien upon and security interest in such collateral, and, except for
liens arising by operation of law, no other person or entity has any right,
title, interest, security interest, claim or lien with respect thereto.
3.13 CERTAIN TRANSACTIONS. Except as to indebtedness incurred in the
ordinary course of business and approved by the Board of Directors of
Borrower or the appropriate Subsidiary and except as otherwise disclosed in
SCHEDULE 3.13, neither Borrower nor any Subsidiary is indebted, directly or
indirectly, to any of its respective officers or directors or to their
respective spouses or children, in excess of an aggregate amount of $50,000;
none of said officers or directors or any members of their immediate families
are indebted to the Borrower or any Subsidiary in excess of an aggregate
amount of $50,000 or have any direct or indirect ownership interest in any
firm or corporation with which the Borrower or any Subsidiary is affiliated
or with which the Borrower or any Subsidiary has a business relationship, or
any firm or corporation which competes with the Borrower or any Subsidiary,
except that officers and/or directors of the Borrower or any Subsidiary may
own no more than 4.9% of the outstanding stock of publicly traded companies
which competes directly with the Borrower or any Subsidiary. No officer or
director or any member of their immediate families, is, directly or
indirectly, interested in any material contract with the Borrower or any
Subsidiary unless such contract has been fully disclosed to and approved by
the Board of Directors of the Borrower or such Subsidiary is on arm's length
terms. Neither the Borrower nor any Subsidiary is a guarantor or indemnitor
of any indebtedness, other than the Loan and indebtedness of the Borrower or
any Subsidiary, of any other person, firm or corporation.
3.14 TITLE TO PROPERTY. Except as described on SCHEDULE 3.14 or
in the financial statements, neither Borrower nor any Subsidiary own any real
property. As of the date
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hereof, the Borrower and each Subsidiary has good and marketable title to all
of its personal property, free and clear of any and all claims, liens,
encumbrances, equities and restrictions of every kind and nature whatsoever,
except as disclosed on SCHEDULE 3.14 hereto and except for such claims,
liens, encumbrances, equities and restrictions as are not in the aggregate
material to the business, operations or financial condition of the Borrower
and its Subsidiaries taken as a whole.
3.15 INTELLECTUAL PROPERTY. Except as set forth in SCHEDULE 3.15,
the Borrower and each Subsidiary are the lawful owners of the proprietary
information free and clear of any claim, right, trademark, patent or
copyright protection of any third party. As used herein, "proprietary
information" includes without limitation (a) the Software Collateral Package
(as hereinafter defined), (b) any computer software and related
documentation, inventions, technical and nontechnical data related thereto,
and (c) other documentation, inventions and data related to patterns, plans,
methods, techniques drawings, finances, customer lists, suppliers, products,
special pricing and cost information, designs, processes, procedures,
formulas, research data owned or used by Borrower or marketing studies
conducted by Borrower, all of which Borrower considers to be commercially
important and competitively sensitive and which generally has not been
disclosed to third parties other than customers in the ordinary course of
business. Except as set forth in SCHEDULE 3.15, the Borrower and each
Subsidiary has good and marketable title to all patents, trademarks, trade,
names, service marks, copyrights or other intangible property rights, and
registrations or applications for registration thereof, owned by Borrower or
its Subsidiaries or used or required by each such entity in the operation of
its business as presently being conducted. Neither Borrower nor any
Subsidiary has knowledge of any infringements or conflict with (and knows of
no infringement with or conflict with) asserted rights of others with respect
to copyrights, patents, trademarks, service marks, trade names, trade secrets
or other intangible property rights or know how which could result in any
material adverse effect upon the Borrower. To the Borrower's knowledge, no
products or processes of the Borrower or any Subsidiary infringe or conflict
with any rights of patent or
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copyright, or any discovery, invention product or process, that is the
subject of a patent or copyright application or registration known to
Borrower. The Borrower follows such procedures as the Board of Directors of
the Borrower deem necessary or appropriate to provide reasonable protection
of the Borrower's trade secrets and proprietary rights in intellectual
property of all kinds. To the knowledge of the Borrower, no person employed
by or affiliated with the Borrower has employed or proposes to employ any
trade secret or any information or documentation proprietary to any former
employer, and to the knowledge of the Borrower, no person employed by or
affiliated with the Borrower has violated any confidential relationship that
such person may have had with any third person, in connection with the
development, manufacture or sale of any product or proposed product or the
development or sale of any service or proposed service of the Borrower.
3.16 STATEMENTS NOT FALSE OR MISLEADING. No representation or
warranty given as of the date hereof by the Borrower contained in this
Agreement or any schedule attached hereto or any statement in any document,
certificate or other instrument furnished or to be furnished to the Lender
pursuant hereto, taken as a whole, contains or will (as of the time so
furnished) contain any untrue statement of a material fact, or omits or will
(as of the time so furnished) omit to state any material fact which is
necessary in order to make the statements contained therein not misleading.
3.17. SMALL BUSINESS CONCERN. The Company, together with its
"affiliates" (as that term is defined in Title 13, United States Code of
Federal Regulations Section 121.401, if any, is a "small business concern"
within the meaning of Section 121.802 of Title 13 of the United States Code
of Federal Regulations. The information set forth in the Small Business
Administration Form 480, Form 652-D and Part A of Form 1031 regarding the
Company is accurate and complete.
3.18 SURVIVAL. The representations and warranties of the Borrower
contained in this Agreement shall survive until the later of five years
following the execution and delivery of this Agreement or until this
Agreement terminates in accordance with Article VII hereof.
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ARTICLE IV
COVENANTS AND AGREEMENTS
Borrower covenants and agrees that during the term of this Agreement:
4.01 PAYMENT OF SECURED OBLIGATIONS. Borrower Shall pay the
indebtedness evidenced by the Note according to the terms thereof, and shall
timely pay or perform, as the case may be, all of the other Secured
Obligations.
4.02 SALES OF AN ENCUMBRANCES ON COLLATERAL. Borrower will not, and
will cause each of its Subsidiaries not to, sell, exchange, lease, negotiate,
pledge, assign or grant any security interest in or otherwise dispose of the
collateral security described in Section 2.01 or the Security Instruments to
anyone other than Lender, nor permit any other lien of any kind to attach
thereto without Lender's prior written consent, except:
(i) purchase money liens granted by Borrower or such
Subsidiary (including the interest of a lessor under a capital lease)
arising in the ordinary course of business;
(ii) liens arising by operation of law;
(iii) liens with respect to judgments or attachments which
are actively contested by Borrower or such Subsidiary and which do not
have a material adverse effect on the business of Borrower or such
Subsidiary; and
(iv) a lien on accounts receivable granted by Borrower or
such Subsidiary to a third party lender providing up to $l,000,000 of
additional financing to Borrower or its Subsidiaries.
Nothing contained in this Section 4.02 or elsewhere in this Agreement or any
other Loan Document shall prohibit any of the following transactions from
being undertaken by the Borrower or any subsidiary:
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(a) The acquisition from time to time of equipment for use
in the ordinary course of its business, whether said equipment is
financed through a purchase money security interest or capitalized
leases.
(b) The sale from time to time of equipment due to
obsolescence, replacement or repair and, in such event, any security
interest therein shall be released at the time of said sale, and any
new equipment shall be subject to the Lender's security interest
hereunder.
(c) The granting of licenses from time to time to third
parties of the right to use software and, in said events, the rights
granted to said third parties to use said software pursuant to the
applicable license agreement shall be prior to any rights of the
Lender hereunder. Said grants shall be in accordance with the ordinary
and normal course of business of the Borrower, consistent with past
practice, or customary in the software industry. At the request of any
customer, the Lender shall confirm in writing that any interest which
it may have in any of the collateral will not adversely affect the
rights of the customer under said license agreement.
(d) The sale by the Borrower of any of its unprofitable
subsidiaries, provided said sale is to unaffiliated third parties.
4.03 MAINTAIN SOFTWARE COLLATERAL PACKAGE. During the term of this
Agreement and any extension hereof, Borrower will maintain for the benefit of
the Lender, at Borrower's principal place of business, a package consisting
of (i) accurate, current, complete copies of each component of the Software
in source code form and in machine readable object code as well as the
associated job control language
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and any other software needed to compile and link-edit the code in order that
it will compile; (ii) all documentation, specifications, instructions, user
manuals and other written materials and software necessary to run the
Software, to provide a complete understanding of the development of the
Software, and to enable the continued and uninterrupted marketing of the
Software; and (iii) a listing of all programs represented by the source codes
(collectively, the "Software Collateral Package"). Borrower will maintain at
its principal place of business archival copies of all such Software and will
take all actions necessary to update and currently maintain the Software
Collateral Package to reflect the most recent changes thereto.
4.04 USE OF PROCEEDS. Borrower shall use the proceeds of the Loan
for any corporate and business purpose of the Borrower or its Subsidiaries,
excluding, however, without the prior written consent of Lender, passive
investments, capital expenditures, acquisitions or purchases other than in
the ordinary course of business consistent with past practices.
4.05 FURTHER ASSURANCES. Borrower will take all actions requested by
Lender to create and maintain in Lender's favor valid liens upon, security
titles to and/or perfected security interests in any collateral security
described in Section 2.01 or Security Instruments and all other security for
the Secured Obligations now or hereafter held by or for Lender. Without
limiting the foregoing, Borrower agrees to execute such further instruments
(including financing statements and continuation statements) as may be
required or permitted by any law relating to notices of, or affidavits in
connection with, the perfection of Lender's security interests, and to
cooperate with Lender in the filing or recording and renewal thereof.
4.06 LIMITATIONS ON DEBT AND OBLIGATION. Except as to the
indebtedness incurred pursuant to the Note, or as listed on SCHEDULE 3.13 or
accounts payable and other trade payables incurred in the ordinary course of
business, Borrower shall not incur additional indebtedness in excess of
$1,000,000. Borrower agrees that all loans, debts and
15
<PAGE>
obligations will be incurred only after Lender has been notified, at the
address set forth in Section 8.09 of this Agreement.
4.07 FINANCIAL STATEMENTS AND REPORTS. Beginning with the month
ended May, 1992 and until such time as the Loan is no longer outstanding,
Borrower shall furnish to Lender (i) within one hundred and twenty (120) days
after the end of each fiscal year of Borrower, a consolidated balance sheet
of Borrower and its Subsidiaries as of the close of such fiscal year,
statements of earnings and retained earnings of Borrower and its Subsidiaries
as of the close of such fiscal year, and statements of cash flows for
Borrower and its Subsidiaries for such fiscal year, all in reasonable detail,
prepared in accordance with generally accepted accounting principles
consistently applied, and in such form as has customarily been prepared by
Borrower, and a certificate of the chief executive or chief financial officer
of Borrower, stating that, to the best of the knowledge of such officer,
Borrower has kept, observed, performed and fulfilled each covenant, term and
condition of this Agreement and the other Loan Documents during the preceding
fiscal year and that no Event of Default hereunder has occurred and is
continuing (or if an Event of Default has occurred and is continuing,
specifying the nature of same, the period of existence of same and the action
Borrower proposes to take in connection therewith), (ii) within thirty (30)
days of the end of each calendar month, balance sheets of Borrower and its
Subsidiaries as of the close of such month and statements of earnings and
retained earnings of Borrower and its Subsidiaries as of time close of such
month, all in reasonable detail, and prepared on the basis of accounting
principles consistently applied, and (iii) with reasonable promptness, such
other financial data as Lender may reasonably request.
4.08 MAINTENANCE OF BOOKS AND RECORDS; INSPECTION. Borrower shall
maintain its books, accounts and records on the basis of accounting
principles consistently applied, and permit a representative of Lender, at
Lender's expense, to visit and inspect any of its properties (including but
not limited to the collateral security described in Section 2.01 or the
Security Instruments), corporate books and financial records, and to discuss
its accounts, affairs and
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<PAGE>
finances with Borrower or the principal officers of Borrower during
reasonable business hours, all at such times as Lender may reasonably request.
4.09 INSURANCE. Without limiting any of the requirements of any of
the other Loan Documents, Borrower shall maintain, in amounts customary for
entities engaged in comparable business activities, life, fire, liability and
other forms of insurance on its properties (including but not limited to the
collateral security now or hereafter securing payment and performance of the
Secured Obligations), against such hazards and in at least such amounts as is
customary in Borrower's business. At the request of Lender, Borrower will
deliver forthwith a certificate specifying the details of such insurance in
effect.
4.10 TAXES AND ASSESSMENTS. Borrower shall, and shall cause its
Subsidiaries to, (a) file all tax returns and appropriate schedules thereto
that are required to be filed under applicable law, prior to the date of
delinquency, (b) pay and discharge all taxes, assessments and governmental
charges or levies imposed upon Borrower or its respective Subsidiaries, upon
its income and profits or upon any properties belonging to it, prior to the
date on which penalties attach thereto, and (c) pay all taxes, assessments
and governmental charges or levies that, if unpaid, might become a lien or
charge upon any of its properties; provided, however, that Borrower in good
faith may contest any such tax, assessment, governmental charge or levy
described in the foregoing clauses (b) and (c) so long as appropriate
reserves are maintained with respect thereto.
4.11 CORPORATE EXISTENCE. Borrower shall maintain its corporate
existence and good standing in the state of its incorporation, and its
qualification and good standing as a foreign corporation in each jurisdiction
in which such qualification is required by applicable law.
4.12 COMPLIANCE WITH LAW AND AGREEMENTS. Borrower shall maintain its
business operations and property owned or used in connection therewith in
compliance with (i) all applicable federal, state and local laws, regulations
and ordinances governing such business operations and the use and
17
<PAGE>
ownership of such property, and (ii) all agreements, licenses, franchises,
indentures and mortgages to which Borrower is a party or by which Borrower or
any of its properties is bound. Without limiting the foregoing, Borrower
shall pay all of its indebtedness promptly in accordance with the terms
thereof.
4.13 NOTICE OF DEFAULT. Borrower shall give written notice to Lender
of the occurrence of any default, event of default or Event of Default under
this Agreement or any other Loan Document promptly upon the occurrence
thereof.
4.14 NOTICE OF LITIGATION. Borrower shall give notice, in writing,
to Lender of (i) any actions, suits or proceedings instituted by any persons
whomsoever against Borrower or materially affecting any of the assets of
Borrower, and (ii) any dispute between Borrower on the one hand and any
governmental regulatory body on the other hand, which dispute might interfere
with the normal operations of Borrower; provided, however, that Lender shall
not disclose any such information to any third party other than Lender's
counsel and except to the extent compelled by legal process or law or
otherwise authorized by Borrower.
4.15 CONDUCT OF BUSINESS. Borrower will continue to engage, in an
efficient and economical manner, in a business of the same general type as
conducted by it on the date of this Agreement.
4.16 ERISA PLAN. If Borrower has in effect, or hereafter institutes,
a pension plan that is subject to the requirements of Title IV of the
Employee Retirement Income Security Act of 1974, Pub. L. No. 93-406,
September 2, 1974, 88 Stat. 829, 29 U.S.C.A. Section 1001 ET SEQ. (1975), as
amended from time to time ("ERISA"), then the following warranty and
covenants shall be applicable during such period as any such plan (the
"Plan") shall be in effect: (i) Borrower hereby warrants that no fact that
might constitute grounds for the involuntary termination of the Plan, or for
the appointment by the appropriate United States District Court of a trustee
to administer the Plan, exists at the time of execution of this Agreement,
(ii) Borrower hereby covenants that throughout the existence of the Plan,
Borrower's contributions under the Plan will meet the minimum funding
standards required by ERISA and
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Borrower will not institute a distress termination of the Plan, and (iii)
Borrower covenants that it will send to Lender a copy of any notice of a
reportable event (as defined in ERISA) required by ERISA to be filed with the
Labor Department or the Pension Benefit Guaranty Corporation, at the time
that such notice is so filed.
4.17 OBSERVER RIGHTS. Borrower shall invite one representative of
Lender to attend, at Lender's expense, all meetings of Borrower's Board of
Directors and all committees of Borrower's Board of Directors in a nonvoting
capacity and, in this respect, shall give such representative copies of all
notices and meeting agenda in advance of such meetings and shall permit such
representative to review all documents and other materials provided to
directors at such meetings.
4.18 INFORMATION. Borrower will furnish to Lender such financial
data and other information relating to the business of Borrower and its
Subsidiaries as Lender may from time to time reasonably request. Borrower
will, upon reasonable request, cooperate fully with Lender, Lender's
representatives and counsel in the preparation of any document or other
material which may be required by the United States Small Business
Administration or any other governmental agency as a predicate to or result
of the transaction herein contemplated.
ARTICLE V
CONDITIONS TO CLOSING
5.01 CONDITIONS OF THE LENDER OBLIGATIONS. The obligation of the
Lender to make the Loan is subject to the receipt by Lender of the following
documents, each of which shall be satisfactory to Lender in form and
substance:
(a) CORPORATE DOCUMENTS. A copy of the Articles of
Incorporation of the Borrower, as amended and restated, certified by
the Secretary of State of Florida, and a certificate of good standing
from the Secretary of State, each as of a recent date.
19
<PAGE>
(b) OFFICER'S CERTIFICATE. A certificate of the President
and Chief Executive Officer of Borrower to the effect set forth in
EXHIBIT C hereto.
(c) OPINION OF COUNSEL. The opinion of Akerman,
Senterfitt & Eidson, P.A., counsel to Borrower, in form satisfactory
to Waller Lansden Dortch & Davis, counsel to the Lender, substantially
in the form of EXHIBIT D hereto.
(d) THE NOTE. The Note, duly completed and executed.
(e) SUBSIDIARY STOCK CERTIFICATES. Certificates
representing all of the outstanding shares of capital stock owned by
Borrower of each of Borrower's Subsidiaries accompanied by duly
executed instruments of transfer or assignments in blank.
(f) GUARANTY AND SECURITY AGREEMENT. The Guaranty and
Security Agreement, duly completed and executed by each of Borrower's
Subsidiaries.
(g) UCC-1 FINANCING STATEMENTS. Financing Statements on
Form UCC-1 duly completed and executed by Borrower and each of its
Subsidiaries securing the rights of Lender to the collateral security
listed in Section 2.01 and the Guaranty and Security Agreement.
(h) IBM SUBORDINATION OF SECURITY INTEREST. A written
agreement between Lender and IBM Credit Corporation pursuant to which
IBM Credit Corporation agrees to subordinate to Lender its security
interest in the Collateral other than certain equipment as provided in
Section 2.01(A)(i) hereof.
(i) STOCK PURCHASE WARRANT. A Stock Purchase Warrant to
purchase up to 30,000 shares of the Borrower's Common Stock.
20
<PAGE>
(j) COMMITMENT FEE. Evidence that the Commitment Fee
provided in Section 1.02 has been or is being paid in full.
ARTICLE VI
DEFAULT AND REMEDIES
6.01 EVENTS OF DEFAULT. The occurrence of any of the following
shall constitute an Event of Default hereunder:
(a) Default in the payment of the principal of or interest on
the indebtedness evidenced by the Note in accordance with the terms
of the Note, which default is not cured within fifteen (15) business
days;
(b) Failure by Borrower to update and keep current the Software
Collateral Package
(c) Any misrepresentation by Borrower as to any material matter
hereunder or under any of the other Loan Documents, or delivery by
Borrower of any schedule, statement, resolution, report, certificate,
notice or writing to Lender that is untrue in any material respect on
the date as of which the facts set forth therein are stated or
certified;
(d) Failure of Borrower to perform any of its obligations under
this Agreement, any of the Security Instruments or any of the other
Loan Documents;
(e) Borrower (i) admits in writing its inability to pay its
debts generally as they become due; or (ii) shall make an assignment
for the benefit of creditors or petition or apply to any tribunal for
the appointment of a custodian, receiver or trustee for it or a
substantial part of its assets; or (iii) shall commence any
proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect; or (iv) shall
have had any such petition or application filed or any such
proceeding commenced against it in which an order for relief is
21
<PAGE>
entered or an adjudication or appointment is made; or (v) shall
indicate, by any act or omission, its consent to, approval of or
acquiescence in any such petition, application, proceeding or order
for relief or the appointment of a custodian, receiver or trustee
for it or a substantial part of its assets; or (vi) shall suffer any
such custodianship, receivership or trusteeship to continue
undischarged for a period of thirty (30) days or more;
(f) Borrower shall be liquidated, dissolved, partitioned or
terminated, or the articles of incorporation thereof shall expire or
be revoked;
(g) A default or event of default shall occur under any of the
other Loan Documents and, if subject to a cure right, such default or
event of default shall not be cured within the applicable cure
period;
(h) Borrower shall default in the timely payment or performance
of any obligation now or hereafter owed to Lender in connection with
any indebtedness of Borrower now or hereafter owed to Lender other
than the Loan; or
(i) Borrower shall default in the timely payment or performance
of any indebtedness other than the Loan, which in the aggregate
exceeds $10,000 and which is not actively contested by Borrower.
With respect to any Event of Default described above that is capable
of being cured and that does not already provide its own cure procedure (a
"Curable Default"), the occurrence of such Curable Default shall not
constitute an Event of Default hereunder if such Curable Default is fully
cured and/or corrected within thirty (30) business days (ten (10) business
days, if such Curable Default may be cured by payment of a sum of money) of
notice thereof to Borrower; provided, however, that any Curable Default which
may be cured by payment of a sum of money may be cured, for purposes of this
Section 6.01, by a Subsidiary of Borrower.
22
<PAGE>
6.02 ACCELERATION OF MATURITY; REMEDIES. Upon the occurrence of any
Event of Default described in subsection 6.01, the indebtedness evidenced by
the Note as well as any and all other indebtedness of Borrower to Lender
shall be immediately due and payable in full; and upon the occurrence of any
other Event of Default described above, Lender at any time thereafter may at
its option accelerate the maturity of the indebtedness evidenced by the Note
as well as any and all other indebtedness of Borrower to Lender; all without
notice of any kind. Upon the occurrence of any such Event of Default and the
acceleration, of the maturity of the indebtedness evidenced by the Note:
(a) Lender shall be immediately entitled to exercise any
and all rights and remedies possessed by Lender pursuant to the terms
of the Security Instruments and all of the other Loan Documents;
(b) Lender shall have all of the rights and remedies of a
secured party under the Uniform Commercial Code; and
(c) Lender shall have any and all other rights and remedies
that Lender may now or hereafter possess at law, in equity or by
statute.
6.03 REMEDIES CUMULATIVE; NO WAIVER. No right, power or remedy
conferred upon or reserved to Lender by this Agreement or any of the other
Loan Documents is intended to be exclusive of any other right, power or
remedy, but each and every such right, power and remedy shall be cumulative
and concurrent and shall be in addition to any other right, power and remedy
given hereunder, under any of the other Loan Documents or now or hereafter
existing at law, in equity or by statute. No delay or omission by Lender to
exercise any right, power or remedy accruing upon the occurrence of any Event
of Default shall exhaust or impair any such right, power or remedy or shall
be construed to be a waiver of any such Event of Default or an acquiescence
therein, and every right, power and remedy given by this Agreement and the
other Loan Documents to Lender may be exercised from time to time and as
often as may be deemed expedient by Lender.
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<PAGE>
6.04 PROCEEDS OF REMEDIES. Any or all proceeds resulting from the
exercise of any or all of the foregoing remedies shall be applied as set
forth in the Loan Document(s) providing the remedy or remedies exercised; if
none is specified, or if the remedy is provided by this Agreement, then as
follows:
First, to the costs and expenses, including reasonable
attorney's fees, incurred by Lender in connection with the exercise
of its remedies;
Second, to the expenses of curing the default that has occurred,
in the event that Lender elects, in its sole discretion, to cure the
default that has occurred;
Third, to the payment of the Secured Obligations, including but
not limited to the payment of the principal of and interest on the
indebtedness evidenced by the Note, in such order of priority as
Lender shall determine in it sole discretion; and
Fourth, the remainder, if any, to Borrower or to any other person
lawfully thereunto entitled.
ARTICLE VII
TERMINATION
This Agreement shall remain in full force and effect until the later
of (i) May 29, 1997, or (ii) the payment by Borrower of all amounts owed to
Lender under the Loan Documents.
ARTICLE VIII
MISCELLANEOUS
8.01 PERFORMANCE BY LENDER. If Borrower shall default in the
payment, performance or observance of any covenant, term or condition of this
Agreement, Lender may, at its option, pay, perform or observe the same, and
all payments made or costs or expenses incurred by Lender in connection
therewith (including but not limited to reasonable attorney's
24
<PAGE>
fees), with interest thereon at the highest default rate provided in the Note
(if none, then at the maximum rate from time to time allowed by applicable
law), shall be immediately repaid to Lender by Borrower and shall constitute
a part of the Secured Obligations and be secured hereby until fully repaid.
Lender shall be the sole judge of the necessity for any such actions and of
the amounts to be paid.
8.02 SUCCESSORS AND ASSIGNS INCLUDED IN PARTIES. Whenever in this
Agreement one of the parties hereto is named or referred to, the heirs, legal
representatives, successors, successors-in-title and assigns of such parties
shall be included, and all covenants and agreements contained in this
Agreement by or on behalf of Borrower or by or on behalf of Lender shall bind
and inure to the benefit of their respective heirs, legal representatives,
successors-in-title and assigns, whether so expressed or not.
8.03 COSTS AND EXPENSES. Borrower agrees to pay all costs and
expenses incurred by Lender in connection with the making of the Loan that is
the subject of this Agreement, including but not limited to filing fees,
recording taxes and reasonable attorney's fees, promptly upon demand of
Lender. Borrower further agrees to pay all premiums for insurance required to
be maintained pursuant to the terms of the Loan Documents and all of the
out-of-pocket costs and expenses incurred by Lender in connection with the
administration, servicing and/or collection of the Loan that is the subject
of this Agreement, including but not limited to reasonable attorney's fees,
promptly upon demand of Lender.
8.04 ASSIGNMENT. The Note, this Agreement and the other Loan
Documents may be endorsed, assigned and/or transferred in whole or in part by
Lender, and any such holder and/or assignee of the same shall succeed to and
be possessed of the rights and powers of Lender under all of the same to the
extent transferred and assigned. Lender may grant participations in all or
any portion of its interest in the indebtedness evidenced by the Note.
Borrower shall not assign any of its rights nor delegate any of its duties
hereunder or under any of the other Loan Documents without the prior express
written consent of Lender.
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<PAGE>
8.05 TIME OF THE ESSENCE. Time is of the essence with respect to
each and every covenant, agreement and obligation of Borrower hereunder and
under all of the other Loan Documents.
8.06 SEVERABILITY. If any provision(s) of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the
application of such provisions to other persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by
law.
8.07 INTEREST AND LOAN CHARGES NOT TO EXCEED MAXIMUM ALLOWED BY LAW.
Anything in this Agreement, the Note, the Security Instruments or any of the
other Loan Documents to the contrary notwithstanding, in no event whatsoever,
whether by reason of advancement of proceeds of the loan made pursuant to
this Agreement, acceleration of the maturity of the unpaid balance of the
loan or otherwise, shall the interest and loan charges agreed to be paid to
Lender for the use of the money advanced or to be advanced hereunder exceed
the maximum amounts collectible under applicable laws in effect from time to
time. It is understood and agreed by the parties that, if for any reason
whatsoever the interest or loan charges paid or contracted to be paid by
Borrower in respect of the indebtedness evidenced by the Note shall exceed
the maximum amounts collectible under applicable laws in effect from time to
time, then IPSO FACTO, the obligation to pay such interest and/or loan
charges shall be reduced to the maximum amounts collectible under applicable
laws in effect from time to time, and any amounts collected by Lender that
exceed such maximum amounts shall be applied to the reduction of the
principal balance of the indebtedness evidenced by the Note and/or refunded
to Borrower so that at no time shall the interest or loan charges paid or
payable in respect of the indebtedness evidenced by the Note [exceed] the
maximum amounts permitted from time to time by applicable law.
8.08 ARTICLE AND SECTION HEADINGS; DEFINED TERMS. Numbered and
titled article and section headings and defined terms are for convenience
only and shall not be
26
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construed as amplifying or limiting any of the provisions of this Agreement.
8.09 NOTICES. Any and all notices, elections or demands permitted or
required to be made under this Agreement shall be in writing, signed by the
party giving such notice, election or demand and shall be delivered
personally, telecopied, telexed, or sent by certified mail or nationally
recognized courier service (such as Federal Express), to the other party at
the address set forth below, or at such other address as may be supplied in
writing and of which receipt has been acknowledged in writing. The date of
personal delivery, telecopy or telex or the date of mailing (or delivery to
such courier service), as the case may be, shall be the date of such notice,
election or demand. For the purposes of this Agreement:
The Address of Sirrom Capital, L.P.
Lender is: Nashville City Center, Suite 900
511 Union Street
Nashville, Tennessee 37219
Attention: George M. Miller, II
with a copy to: Waller Lansden Dortch & Davis
Nashville City Center
511 Union Street, Suite 2100
Nashville, Tennessee 37219-1760
Attention: J. Chase Cole, Esq.
The Address of CCS Technology Group, Inc.
Borrower is: 900 Winderley Place
Maitland, Florida 32751
Attention: Edward F. Hargroves,
President and Chief Executive Officer
27
<PAGE>
with a copy to: Akerman, Senterfitt & Eidson, P.A.
17th Floor, Firstate Building
255 South Orange Avenue
Post Office Box 231
Orlando, Florida 32802-0231
Attention: Patrick T. Christiansen, Esq.
8.10 ENTIRE AGREEMENT. This Agreement and the other written
agreements between Borrower and Lender represent the entire agreement between
the parties concerning the subject matter hereof, and all oral discussions
and prior agreements are merged herein; provided, however, if there is a
conflict between this Agreement and any other document executed
contemporaneously herewith with respect to the Secured Indebtedness, the
provision most favorable to Lender shall control.
8.11 MISCELLANEOUS. This Agreement shall be construed and enforced
under the laws of the State of Tennessee. No amendment or modification hereof
shall be effective except in a writing executed by each of the parties
hereto.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
or have caused this Agreement to be executed by their duly authorized
officers, as of the day and year first above written.
LENDER:
SIRROM CAPITAL, L.P.
By: Sirrom Corporation
Its General Partner
By: /s/ George M. Miller, II
------------------------
George M. Miller, II
Vice President
BORROWER:
CCS TECHNOLOGY GROUP, INC.
By: /s/ Edward A. Hargroves
-------------------------
Title: President
29
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INDEX OF SCHEDULES AND ATTACHMENTS
Exhibit A. Form of Secured Promissory Note
Exhibit B. Form of Guaranty and Security Agreement
Exhibit C. Form of Officer's Certificate
Exhibit D. Form of Opinion of Counsel
Schedule 2.01 Software Collateral
Schedule 2.01(A) (vi) Stock of Subsidiaries
Schedule 3.04 Other Transactions
Schedule 3.06 Litigation
Schedule 3.08 Defaults
Schedule 3.13 Insider Transactions
Schedule 3.14 Title to Property
Schedule 3.15 Intellectual Property
30
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SCHEDULE 2.01
SOFTWARE COLLATERAL
CCS Technology Group, Inc. Software Systems and ownership Rights
I. Products/Systems/Modules owned solely by CCS
CARDPAC - Transaction Management System
CMP - Cardholder/Merchant Processing
(CARDPAC Base System)
OLA - On-Line Authorizations
OLC - On-Line Collections (Formerly CMC
or CMCS - Collections Management
and Control System)
ITS - Interchange Tracking System
SBS - Settlement and Balancing System
CSM - Customer Service Module
VISION 21 - Retail Credit Portfolio Management System
CMS - Credit Management System
(Vision21 Base System)
CAS - Customer Authorization System
CTA - Collection, Tracking and Analysis
ASM - Account Services and Management System
RMS - Retail Merchant System
Combined Products (Work with both CARDPAC and VISION21 Systems)
CDM - Credit Decision Management
(Formerly APS - Application
Processing System)
MTS - Memo Tickler System
LTS - Letters System
EXAM - Utility Extract System
SPP - Securitization Portfolio
Processing
SS/IMP - Security and Implementation System
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PARS - Data Dictionaries and User Exits
to interface the CCA (Praxis)
IMAGINE produt to the CCS
Products.
Other Systems
UCS - Utilities Collection System
II. Products offered by CCS to users but owned by third parties & CCS
Magnum BAS - Bureau Access System (CREDITCHEK) -
interfaces to CDM
PRAXIS/ IMAGINE - Report Writer and Inquiry Utility
CCA Marketpulse - Direct Marketing Management System
FAIR, TRIAD - Behavorial Scoring and
ISSAC Analysis/Adaptive Control System
32
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SCHEDULE 2.01 (A) (vi)
STOCK OF SUBSIDIARIES
(1) Credit Card Software Group, Inc.
1,000 shares - par value: $1 per share
(2) Revolving Credit Solutions, Inc.
1,000 shares - par value: $1 per share
(3) Credit Card Software International, Inc.
1,000 shares - par value: Fifty Cents per share
33
<PAGE>
SCHEDULE 3.04
The Company is the maker of a demand promissory note dated October 31, 1991,
payable to a Sales employee of the Company for $150,000 with 10% interest per
annum. This note is included in the Company's financial statement as short
term debt.
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SCHEDULE 3.06
CLAIMS & LITIGATION
On April 21, 1992, the Company received a letter (copy attached) from an
Orlando attorney on behalf of two employees who were released as part of a
general reduction in work force. They were pregnant at the time of their
release. They threaten to file a claim with the EEOC for discrimination.
The Company replied per the attached letter dated May 1, 1992, by Irving
Miller, Esquire, of the law firm of Akerman, Senterfitt and Eidson. We
believe the claims are without merit.
I am not aware of any other such claims or litigation.
/s/ P. Richard Biondo May 26, 1992
- ----------------------------- --------------------
P. Richard Biondo
Corporate Counsel & Secretary
35
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SCHEDULE 3.08
DEFAULTS
NONE
36
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May 28, 1997
PaySys International, Inc.
900 Winderley Place
Maitland, Florida 32751
Attention: Michael R. Vandiver
Re: Amendment to that certain Loan Agreement dated May 29,
1992 (the "Loan Agreement"), by and between Sirrom
Capital, L.P. ("Sirrom") and CCS Technology Group, Inc.
("Borrower")
Dear Mr. Vandiver:
The purpose of this letter is to confirm an amendment to the Loan
Agreement and the Loan Documents. Capitalized terms not otherwise defined
shall have the meanings set forth in the Loan Agreement. Specifically, we
have agreed to amend the Loan Documents as follows:
1. CCS Technology Group, Inc. has changed its name to PaySys
International, Inc.
2. Sirrom Capital Corporation is the successor to Sirrom Capital,
L.P.
3. Sirrom Capital Corporation has assigned its interest in the
Secured Promissory Note dated May 29, 1992, executed by CCS
Technology Group, Inc. in favor of Sirrom Capital, L.P. (the
"Note"), the Stock Purchase Warrant between CCS Technology Group,
Inc. and Sirrom Capital, L.P. (the "Warrant"), and the other Loan
Documents to Sirrom Investments, Inc.
4. The Note is amended as follows:
Principal shall be paid as follows: $100,000
shall be due and payable on June 2, 1997 and
<PAGE>
$900,000 shall be due and payable on
September 1, 1997. The maturity date as
defined in the Note shall be September 1, 1997.
5. The Warrant is amended to provide that it shall be exercisable
until September 30, 1997.
If you find that the foregoing adequately sets forth your understanding and
agreement with respect to the above, please execute this Letter Agreement
where indicated below.
Sincerely,
SIRROM INVESTMENTS, INC. (assignee
of Sirrom Capital Corporation, the successor
of Sirrom Capital, L.P.)
By: ________________________________
Title: _______________________________
Accepted and agreed to as of May ____, 1997
PAYSYS INTERNATIONAL, INC.
(formerly CCS Technology Group, Inc.)
By: __________________________________
Title: _________________________________
<PAGE>
EXHIBIT 10.5
SECURED PROMISSORY NOTE
$1,000,000.00 Nashville, Tennessee May 29, 1992
FOR VALUE RECEIVED, the undersigned, CCS TECHNOLOGY GROUP, INC., a
Florida corporation ("Maker"), promises to pay to the order of SIRROM
CAPITAL, L.P., a Tennessee limited partnership ("Payee"; Payee and any
subsequent holder(s) hereof are hereinafter referred to collectively as
"Holder"), at the office of Payee at First American Trust Company, Custody
Department, 800 First American Center, Nashville, Tennessee 37237, or at such
other place as Holder may designate to Maker in writing from time to time,
the principal sum of ONE MILLION DOLLARS AND NO/100THS DOLLARS
($1,000,000.00), together with interest on the outstanding principal balance
hereof from the date hereof at the rate of thirteen percent (13%) per annum
(computed on the basis of a 365-day year); provided, however, that Holder may
charge and receive interest upon any renewal or extension hereof at the
greater of (i) the rate set out above, or (ii) any rate agreed to by the
undersigned that is not in excess of the maximum rate of interest allowed to
be charged under applicable law (the "Maximum Rate") at the time of such
renewal or extension.
Interest only on the outstanding principal balance hereof shall be due
and payable monthly, in arrears, with the first installment being payable on
the first (1st) day of July 1992, and subsequent installments being payable
on the first (1st) day of each succeeding month thereafter until June 1, 1997
(the "Maturity Date"), at which time the entire outstanding principal
balance, together with all accrued and unpaid interest, shall be immediately
due and payable in full.
The indebtedness evidenced hereby may be prepaid in whole or in part at
any time and from time to time, without penalty. Any such prepayments shall
be credited first to any accrued and unpaid interest and then to the
outstanding principal balance hereof.
Time is of the essence of this Note. It is hereby expressly agreed that
in the event that any default be made in the payment of principal or interest
as stipulated above, which default is not cured within fifteen (15) business
days; or in the event that any default or event of default shall occur under
that certain Loan and Security Agreement of even date herewith, between Maker
and Payee (the "Loan Agreement"), which default or event of default is not
cured within any applicable cure period set forth in said Loan Agreement; or
should any default be made in the performance or observance of any covenants
or conditions contained in any other instrument or document now or hereafter
evidencing, securing or otherwise relating to the indebtedness evidenced
hereby (subject to any applicable notice and cure period provisions that may
be set forth therein); then, and in such event, the entire outstanding
principal balance of the
<PAGE>
indebtedness evidenced hereby, together with any other sums advanced
hereunder, under the Loan Agreement and/or under any other instrument or
document now or hereafter evidencing, securing or in any way relating to the
indebtedness evidenced hereby, together with all unpaid interest accrued
thereon, shall, at the option of Holder and without notice to Maker, at once
become due and payable and may be collected forthwith, regardless of the
stipulated date of maturity. Upon the occurrence of any default as set forth
herein, at the option of Holder and without notice to Maker, all accrued and
unpaid interest, if any, shall be added to the outstanding principal balance
hereof, and the entire outstanding principal balance, as so adjusted, shall
bear interest thereafter until paid at an annual rate (the "Default Rate")
equal to the lesser of (i) the rate that is two percentage points (2.0%) in
excess of the above-specified interest rate, or (ii) the Maximum Rate in
effect from time to time, regardless of whether or not there has been an
acceleration of the payment of principal as set forth herein. All such
interest shall be paid at the time of and as a condition precedent to the
curing of any such default.
In the event this Note is placed in the hands of an attorney for
collection or for enforcement or protection of the security, or if Holder
incurs any costs incident to the collection of the indebtedness evidenced
hereby or the enforcement or protection of the security, Maker and any
endorsers hereof agree to pay to Holders an amount equal to all such costs,
including without limitation all reasonable attorney's fees and all court
costs.
Presentment for payment, demand, protest and notice of demand, protest
and nonpayment are hereby waived by Maker and all other parties hereto. No
failure to accelerate the indebtedness evidenced hereby by reason of default
hereunder, acceptance of a past-due installment or other indulgences granted
from time to time, shall be construed as a novation of this Note or as a
waiver of such right of acceleration or of the right of Holder thereafter to
insist upon strict compliance with the terms of this Note or to prevent the
exercise of such right of acceleration or any other right granted hereunder
or by applicable laws. No extension of the time for payment of the
indebtedness evidenced hereby or any installment due hereunder, made by
agreement with any person now or hereafter liable for payment of the
indebtedness evidenced hereby, shall operate to release, discharge, modify,
change or affect the original liability of Maker hereunder or that of any
other person now or hereafter liable for payment of the indebtedness
evidenced hereby, either in whole or in part, unless Holder agrees otherwise
in writing. This Note may not be changed orally, but only be an agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
The indebtedness and other obligations evidenced by this Note are further
evidenced and/or secured by (a) the Loan Agreement of even date herewith, and
(b) certain other instruments and documents, as may be required to protect
and preserve the rights of Maker and Holder as more specifically described in
the Loan Agreement.
All agreements herein made are expressly limited so that in no event
whatsoever, whether by reason of advancement of proceeds hereof, acceleration
of maturity of the unpaid balance hereof or otherwise, shall the amount paid
or agreed to be paid to Holder for the use of the money advanced or to be
advanced hereunder exceed the Maximum Rate. If, from any circumstances
whatsoever, the fulfillment of any provision of this Note or any other
agreement
2
<PAGE>
or instrument now or hereafter evidencing, securing or in any way relating to
the indebtedness evidenced hereby shall involve the payment of interest in
excess of the Maximum Rate, then, IPSO FACTO, the obligation to pay interest
hereunder shall be reduced to the Maximum Rate; and if from any circumstance
whatsoever, Holder shall ever receive interest, the amount of which would
exceed the amount collectible at the Maximum Rate, such amount as would be
excessive interest shall be applied to the reduction of the principal balance
remaining unpaid hereunder and not to the payment of interest. This
provision shall control every other provision in any and all other agreements
and instruments existing or hereafter arising between Maker and Holder with
respect to the indebtedness evidenced hereby.
Notwithstanding the place of making of this Note, the parties agree that
this Note is intended as a contract under and shall be construed and
enforceable in accordance with the laws of the State of Tennessee, except to
the extent that federal law may be applicable to the determination of the
Maximum Rate.
As used herein, the terms "Maker" and "Holder" shall be deemed to include
their respective successors, legal representatives and assigns, whether by
voluntary action of the parties or by operation of law.
MAKER:
CCS TECHNOLOGY GROUP, INC.
By: /s/ Edward A. Hargroves
--------------------------------
Title: President
----------------
3
<PAGE>
ACKNOWLEDGMENT:
State of----------------
County of---------------
The foregoing instrument was acknowledged before me this _____ day of
___________, 19___, by _____________________, a corporation organized under the
laws of the state of _______________ on behalf of said corporation.
------------------------------
Signature
------------------------------
Name
4
<PAGE>
GUARANTY AND SECURITY AGREEMENT
GUARANTY AND SECURITY AGREEMENT dated as of May 29, 1992 among
CREDIT CARD SOFTWARE GROUP, INC., a Florida corporation, CUSO MANAGEMENT
GROUP, INC., a Delaware corporation, CREDIT CARD SOFTWARE INTERNATIONAL,
INC., a Florida corporation, REVOLVING CREDIT SOLUTIONS, INC., a Florida
corporation (each a "Guarantor" and, collectively, the "Guarantors") and
SIRROM CAPITAL, L.P., a Tennessee limited partnership ("Lender").
WHEREAS, CCS Technology Group, Inc., a Florida corporation and the
parent corporation of the Guarantors (the "Company"), and Lender are parties
to a Loan and Security Agreement of even date herewith (the "Loan Agreement)
providing, subject to the terms and conditions thereof, for the making of a
$l,000,000 loan by Lender to the Company as evidenced by a secured promissory
note of even date herewith (the "note"); and
WHEREAS, to induce the Lender to enter into the Loan Agreement and
to make the loan thereunder, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Guarantors
have agreed to guaranty the Secured Obligations (as defined in the Loan
Agreement) and, as security for the performance of such guaranty, to grant a
security interest in the Collateral (as hereinafter defined).
NOW, THEREFORE, in consideration of the premises and as an
inducement for the Lender to make the loan under the Loan Agreement, the
Guarantors do hereby, subject to the terms hereof, covenant and agree with
the Lender as follows:
ARTICLE I
COVENANTS AND AGREEMENTS
Section 1.1. UNLIMITED GUARANTEE OF PAYMENT. (a) Each Guarantor
hereby jointly and severally, irrevocably and unconditionally guarantees to
the Lender for the benefit of the holders from time to time of the Note the
full and prompt payment of all sums under the Note when and as the same shall
become due, whether at the stated maturity thereof, by acceleration or
otherwise, and full and prompt payment and satisfaction of the Secured
Obligations (as defined in Section 2.03 of the Loan Agreement). Each
Guarantor hereby jointly and severally, irrevocably and unconditionally
agrees that upon any default by the Company in the payment, when due, of the
Secured Obligations, such Guarantor will promptly pay the same.
(b) all payments by the Guarantors shall be made in lawful money of
the United States of America.
(c) The Guarantors shall pay to the Lender all reasonable costs and
expenses (including legal fees) incurred by the Lender in the protection of
any of its rights or in the pursuance of any of its remedies in respect of
the Secured Obligations or this Guaranty.
5
<PAGE>
Section 1.2. OBLIGATIONS UNCONDITIONAL. The obligations of the
Guarantors under this Guaranty shall be absolute and unconditional and shall
remain in full force and effect until the Secured Obligations, together with
all other sums payable by the Company under the terms of the Loan Agreement
or this Guaranty have been paid in full, and, to the extent permitted by law,
such obligations shall not be impaired by any state of facts or the happening
of any event, including, without limitation, any of the following, whether or
not with notice to or the consent of the Guarantors:
(a) the invalidity, irregularity, illegality or unenforceability
of, or any defect in (i) the Loan Agreement or (ii) any collateral security;
(b) the waiver, compromise, settlement, release or termination of
any of the obligations, covenants or agreements of the Company under the Loan
Agreement (except by payment in full of the Secured Obligations);
(c) the failure to give notice to any of the Guarantors of the
occurrence of an event of default under the Loan Agreement the Note or this
Guaranty;
(d) the release, sale, exchange, surrender or other change in any
security for payment of the Secured Obligations;
(e) the extension of time for payment of any principal of or
interest on the Note or for performance of any other obligations under the
Loan Agreement, the Note or this Guaranty or the extension or the renewal of
any thereof;
(f) the modification or amendment (whether material or otherwise)
of any obligation, covenant or agreement set forth in the Loan Agreement or
the Note;
(g) the taking of, or the omission to take, any of the actions
referred to in the Loan Agreement, the Note or this Guaranty;
(h) any failure, omission or delay on the part of the Company, the
Lender or any other person to enforce, assert or exercise any right, power or
remedy conferred on the Company, the Lender or such other person in the Loan
Agreement, the Note or this Guaranty;
(i) with respect to any Guarantor, the voluntary or involuntary
liquidation, dissolution, sale or other disposition of all or substantially
all the assets, marshaling of assets and liabilities, receivership,
insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition with creditors or readjustment of,
or other similar proceedings affecting any other Guarantor, the Company or
any of the assets of any of them, or any allegation or contest of the
validity of the Note, or this Guaranty, or the disaffirmance or attempted
disaffirmance of the Note, or this Guaranty, in any such proceedings;
(j) the default or failure of any Guarantor fully to perform any of
its obligations set forth in this Guaranty; or
6
<PAGE>
(k) any other circumstances which might otherwise constitute a
legal or equitable discharge or defense of a surety or a guarantor.
Notwithstanding the foregoing, each Guarantor shall be obligated to
perform its obligations under this Guaranty to the extent such performance
would not render such Guarantor insolvent for the purposes of United States
bankruptcy laws or other applicable federal or state law providing for the
relief of creditors.
Section 1.3. WAIVERS BY GUARANTORS. The Guarantors hereby waive
with respect to the Note, the indebtedness evidenced thereby, the Secured
Obligations and this Guaranty: diligence; presentment for payment; demand of
payment; filing of claims with a court in the event of bankruptcy of the
Company or any other person liable in respect of the Note; any right to
require a proceeding first against the Company or any other such person; any
right to reimbursement by the Company upon performance of any Guarantor's
obligations hereunder; notice of protest; protest; notice of dishonor or
nonpayment of any such liabilities and any other notice from the Company and
the holders of the Note of acceptance and notice and proof of reliance of the
benefits of this Guaranty.
Section 1.4. OTHER SECURITY. The Lender may pursue its rights and
remedies under this Guaranty notwithstanding (a) any other guaranty of or
security for the Secured Obligations, and (b) any action taken or omitted to
be taken by the Lender or any other Person to enforce any of the rights or
remedies under such other guaranty or with respect to any other security.
Section 1.5. NO SET-OFF BY GUARANTORS. No set-off, counterclaim,
reduction or diminution of an obligation, or any defense of any kind or
nature (other than performance by each Guarantor of his obligations
hereunder) which any Guarantor has or may have with respect to a claim under
this Guaranty, shall be available hereunder to such Guarantor against the
Lender.
ARTICLE II
SECURITY
Section 2.1. SECURITY INTEREST. As security for the performance of
the obligations of each Guarantor hereunder, each Guarantor hereby grants to
Lender a security interest in the following described property and interest
in property together with all proceeds thereof (collectively, the
"Collateral"):
(i) EQUIPMENT. All machinery and equipment, all data
processing and office equipment, all computer equipment, hardware
and firmware, all furniture, fixtures, appliances-and all other
goods of every type and description, whether now owned or hereafter
acquired and wherever located, together with all parts, accessories
and attachments and all replacements thereof and additions thereto,
and
7
<PAGE>
(ii) INVENTORY. All inventory and goods of Guarantor, whether
held for lease, sale or furnishing under contracts of service, all
agreements for lease of same and rental. therefrom, whether now in
existence or owned or hereafter acquired and wherever located; and
(iii) GENERAL INTANGIBLES. All rights, interests, chooses in
action, causes of action, claims and all other intangible property of
Guarantor of every kind and nature, in each instance whether now owned
or hereafter acquired but not limited to, all corporate and business
records: all loans, royalties, and other obligations receivable; all
trade secrets, inventions, designs, patents, patent applications,
registered or unregistered service marks, trade names, trademarks,
copyrights and the goodwill associated therewith and incorporated
therein, and all registrations and applications for registration
related thereto; goodwill, licenses, permits, franchises, customer
lists and credit files; all customer and supplier contracts, firm sale
orders, rights under license and franchise agreements, and other
contracts and contract rights; all right, title and interest under
leases, subleases, licenses and concession, and other agreements
relating to real or personal property and any security agreements
relating thereto; all rights to indemnification; all proceeds of
insurance of which Guarantor is beneficiary; all letters of credit,
guarantees, liens, security interests and other security held by or
granted to Guarantor; and all other intangible property, whether or
not similar to the foregoing; and
(iv) ACCOUNTS, CHATTEL PAPER, INSTRUMENTS AND DOCUMENTS. All of
Guarantor's accounts, accounts receivable, chattel paper, instruments
and documents, whether now in existence or owned or hereafter
acquired, entered into, created or arising, and wherever located;
provided, however, that Lender will release its claim to a first and
prior security interest in a portion of Guarantor's accounts
receivable to the extent necessary to secure additional financing of
up to $1,000,000 from a third party lender; and
(v) SOFTWARE AND RELATED MATERIALS. The object codes and the
source codes comprising the computer software programs listed on
SCHEDULE 2.01 to the Loan Agreement as the same exist on the date
hereof and all future improvements, enhancements, revisions and
versions thereof, including all versions of such software as adapted
and as marketed for use on all types of computer hardware
(collectively, the "Software"); all rights to royalties generated from
the Software pursuant to licensing, distribution, purchase or similar
agreements presently or hereinafter in effect and all rights,
interests, chooses in action, causes of action and claims for
infringement relative to such property interest of Guarantor; any and
all documentation, specifications, instructions, user manuals and
other written materials and software necessary to run the Software, to
provide a complete understanding of the development of the Software,
and to enable the continued and uninterrupted marketing of the
Software; and
8
<PAGE>
(vi) OTHER PROPERTY. All-property or interests in property now
owned or hereafter acquired by Guarantor.
Nothing contained in this Section 2.1 or elsewhere in this Agreement or any
other Loan Document (as defined in the Loan Agreement) shall prohibit any of
the following transactions from being undertaken by any Guarantor:
(a) The acquisition from time to time of equipment for use in the
ordinary course of its business, whether said equipment is financed through a
purchase money security interest or capitalized leases;
(b) The, sale from time to time of equipment due to obsolescence,
replacement or repair and, in such event, any security interest therein shall
be released at the time of said sale, and any new equipment shall be subject
to the Lender's security interest hereunder; or
(c) The granting of licenses from time to time to third parties of the
right to use software and, in said events, the rights granted to said third
parties to use said software pursuant to the applicable license agreement
shall be prior to any rights of the Lender hereunder. Said grants shall be in
accordance with the ordinary and normal course of business of the Guarantor,
consistent with past practice, or customary in the software industry. At the
request of any customer, the Lender shall confirm in writing that any
interest which it may have in any of the Collateral will not adversely affect
the rights of the customer under said license agreement.
ARTICLE III
EVENTS OF DEFAULT
Section 3.1. NATURE OF EVENTS. An "event of default" shall exist if any
of the following occurs and is continuing:
(a) Any Guarantor fails to perform or observe any covenant contained
herein;
(b) The occurrence of an Event of Default under Section 6.01 of the Loan
Agreement which is not cured within the applicable cure period as provided in
the Loan Agreement;
(c) An order for relief is entered under the United States bankruptcy
laws or any other decree or order is entered by a court having jurisdiction
in the premises (i) adjudging any Guarantor a bankrupt or insolvent, or (ii)
approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of any Guarantor under the United
States bankruptcy laws or any other applicable federal or state law, or (iii)
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator
(or other similar official) of any Guarantor or of any substantial part of
such Guarantor's property, or (iv) ordering the winding up or liquidation of
the affairs of any Guarantor, and any such decree or order continues unstayed
and in-effect for a period of 60 consecutive days; or
9
<PAGE>
(d) Any Guarantor (i) commences a voluntary case under the United States
bankruptcy laws, or (ii) commences proceedings to be adjudicated bankrupt or
insolvent, or (iii) consents to the institution of bankruptcy or insolvency
proceedings against itself, or (iv) files a petition or answer or consent
seeking reorganization, an arrangement with creditors or an order for relief
under the United States bankruptcy laws or any other applicable federal or
state law, or (v) consents to the filing of any such petition or to the
appointment of a receiver, liquidator, assignee, trustee custodian,
sequestrator (or other similar official) of such Guarantor or of any
substantial part of his property or (vi) makes an assignment for the benefit
of creditors, or (vii) admits in writing its inability to pay its debts
generally as they become due.
Section 3.2. DEFAULT REMEDIES. If an event of default exists,
Lender may proceed to enforce the provisions hereof and to exercise any other
rights, powers and remedies available to the Lender, including foreclosure on
the Collateral. The Lender, in its sole discretion, shall have the right to
proceed first and directly against any Guarantor under this Guaranty without
proceeding against any other Guarantor or exhausting any other remedies which
it may have and without resorting to any other security held by or for the
benefit of the Lender.
Section 3.3. REMEDIES; WAIVER AND NOTICE. (a) No remedy herein
conferred upon or reserved to the Lender is intended to be exclusive of any
other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under the
Guaranty or now or hereafter existing at law or in equity or by statute.
(b) No delay or omission to exercise any right or power accruing
upon the occurrence of any event of default hereunder shall impair any such
right or power or shall be construed to be a waiver thereof, but any such
right or power may be exercised from time to time and as often as may be
deemed expedient.
(c) In the event any provision contained in this Guaranty should be
breach by any party and thereafter duly waived by the other party so
empowered to act, such waiver shall be limited to the particular breach so
waived and shall not be deemed to waive any other breach hereunder.
(d) No waiver, amendment, release or modification of this Guaranty
shall be established by conduct, custom or course of dealing.
ARTICLE IV
MISCELLANEOUS
Section 4.1. SURVIVAL. All warranties, representations and
covenants made by the Guarantors herein shall be deemed to have been relied
upon by, the Lender and the holders from time to time of the Note and shall
survive the delivery to the Lender and the holders from time to time of the
Note of this Guaranty and the Note regardless of any investigation made by
the Lender or the holders from time to time of the Note or on its behalf.
10
<PAGE>
Section 4.2. SUCCESSORS AND ASSIGNS. This Guaranty shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties. The provisions of this Guaranty are intended to be for the benefit
of all holders, from time to time, of the Note.
Section 4.3. NOTICES. All communications under this Guaranty shall
be in writing and shall be deemed given when delivered and, if delivered by
mail, shall be mailed by registered, certified or first class mail, postage
prepaid, return receipt requested and addressed as follows:
TO ANY GUARANTOR:
c/o CCS Technology Group, Inc.
900 Winderley Place
Maitland, Florida 32751
Attention: Edward F. Hargroves,
President and Chief Executive Officer
With a copy to:
Akerman, Senterfitt & Eidson, P.A
17th Floor, Firstate Building
255 South Orange Avenue
P. O. Box 231
Orlando, Florida 32801-0231
Attention: Patrick T. Christiansen, Esq.
TO THE LENDER:
Sirrom Capital, L.P.
Nashville City Center
Suite 900, 511 Union Street
Nashville, Tennessee 37219
Attention: George M. Miller, II
With a copy to:
Waller Lansden Dortch & Davis
Nashville City Center
511 Union Street, Suite 2100
Nashville, Tennessee 37219
Attention: J.Chase Cole, Esq.
Section 4.4. AMENDMENTS. No amendment, change, modification, alteration
or termination of this Guaranty shall be made except upon the written consent
of each Guarantor and the Lender.
11
<PAGE>
Section 4.5. SEVERABILITY. The invalidity or unenforceability of any
one or more phrases, sentences, clauses or sections in this Guaranty shall
not affect the validity or enforceability of the remaining portion of this
Guaranty or any part thereof.
Section 4.6 APPLICABLE LAW. This Guaranty shall be governed by the laws
of the State of Florida applicable to agreements executed and wholly
performed therein, without regard to that state's principles of conflicts of
laws.
12
<PAGE>
IN WITNESS WHEREOF, the Guarantors have caused this Guaranty to be
duly executed and delivered as of the date first above written.
GUARANTORS:
CREDIT CARD SOFTWARE GROUP, INC.
By: /s/ David [ ]
-----------------------------------
Title:_____________________________
CUSO MANAGEMENT GROUP, INC.
By: /s/ William A. Rogers
-----------------------------------
Title:_____________________________
CREDIT CARD SOFTWARE INTERNATIONAL, INC.
By: /s/ Edward A. Hargroves
-----------------------------------
Title:_____________________________
REVOLVING CREDIT SOLUTIONS, INC.
By: /s/ Rolland E. Hunter
-----------------------------------
Title: General Manager and Chief
Operating Officer
LENDER:
SIRROM CAPITAL, L.P.
By: Sirrom Corporation
Its General Partner
13
<PAGE>
By: /s/ George M. Miller, II
-----------------------------------
George M. Miller, II
Vice President
14
<PAGE>
THE WARRANTS EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") OR THE FLORIDA
SECURITIES AND INVESTOR PROTECTION ACT (THE "FLORIDA ACT"), AND, ACCORDINGLY,
ARE RESTRICTED SECURITIES AND MAY NOT BE TRANSFERRED, NOR WILL ANY ASSIGNEE OR
ENDORSEE HEREOF BE RECOGNIZED AS AN OWNER HEREOF BY THE COMPANY FOR ANY PURPOSE,
UNLESS A REGISTRATION STATEMENT UNDER THE 1933 ACT AND THE FLORIDA ACT WITH
RESPECT TO SUCH WARRANTS SHALL THEN BE IN EFFECT, OR UNLESS THE AVAILABILITY OF
AN EXEMPTION FROM REGISTRATION WITH RESPECT TO ANY PROPOSED TRANSFER OR
DISPOSITION OF SUCH WARRANTS SHALL BE ESTABLISHED TO THE SATISFACTION OF THE
COMPANY.
AMENDED AND RESTATED
WARRANT CERTIFICATE
(Void after February 28, 2003)
PaySys International, Inc.
a Florida Corporation
110,411 shares of Common Stock
________________________________________________________________________________
1. Grant; Price; Term. THIS IS TO CERTIFY THAT Stephen B. Grubb, an
individual resident of the state of Georgia ("Grubb"), or his permitted assigns,
is entitled to purchase up to 110,411 shares of the $.01 par value common stock
(the "Common Stock") of PaySys International, Inc., a Florida Corporation (the
"Company"), at a price per share of $27.00 (as may be adjusted as provided
herein, the "Warrant Price"). This Warrant may be exercised from time to time
and at any time in whole or in part before 5:00 P.M. (Eastern time) on February
28, 2003 (the "Expiration Date") in accordance with the terms and conditions
hereof. If Grubb ceases to be an employee of the Company for any reason, the
warrant shall become non-exercisable immediately on the date of termination with
respect to any portion of the Warrant not yet exercised. The Company shall have
no right to repurchase shares acquired pursuant to any prior exercise of the
Warrant. The Company may, in its sole discretion, extend the Expiration Date by
written notice to the registered holder(s) hereof.
Subject to the provisions of Sections 2 hereof, this Warrant shall
represent the right to purchase 110,411 shares of Common Stock, less the number
of shares of Common Stock, if any, previously purchased pursuant to the exercise
in part of this Warrant.
<PAGE>
2. Adjustment. The number and kind of securities purchasable upon the
exercise of the Warrants and the Warrant Price shall be subject to adjustment
from time to time upon the occurrence of certain events, as follows:
(a) In the case of any reclassification of the Common Stock issuable
upon exercise of each Warrant, then the Company shall execute a new Warrant
certificate, providing the holder of these Warrants the right to exercise such
new Warrants and upon such exercise to receive, in lieu of each share of Common
Stock theretofore issuable upon exercise of these Warrants, the number and kind
of shares of stock, other securities, money or property receivable upon such
reclassification or change, by a holder of shares of the Common Stock. Such new
Warrant certificate shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for herein. The
provisions of this paragraph (a) shall similarly apply to successive
reclassifications or changes. In the case of any consolidation or merger of the
Company with or into another corporation (other than a merger with another
corporation in which the Company is the surviving corporation and which does not
result in any reclassification of the Common Stock issuable upon exercise of
each Warrant), or in the case of any sale of all or substantially all of the
assets of the Company, then the holder of these Warrants shall be entitled to
written notice of such merger, consolidation or sale of all or substantially all
of the Company's assets at least 30 days prior to the consummation of such
transaction. All Warrants not exercised prior to the effective date of the
merger, consolidation or sale of all or substantially all of the Company's
assets shall terminate and be null and void for all purposes on the effective
date of such transaction.
(b) If the Company at any time while these Warrants remain
outstanding and not expired shall split, subdivide or combine the Common Stock,
the Warrant Price shall be proportionately decreased in the case of a split or
subdivision or increased in the case of a combination, and the number of shares
of Common Stock issuable upon the exercise of these Warrants shall be
proportionately increased in the case of a split or subdivision or decreased in
the case of a combination.
(c) If the Company at any time while these Warrants are outstanding
and not expired shall pay a dividend with respect to the Common Stock (or make
any other distribution with respect to the Common Stock, except any distribution
specifically provided for in paragraphs(a) or (b) above), payable in shares of
Common Stock, then the Warrant Price shall be adjusted from and after the date
of determination of the shareholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Warrant Price in
effect immediately prior to such date of determination by a fraction (i) the
numerator of which shall be the total number of shares of the Common Stock
outstanding immediately prior to such dividend or distribution, and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution. If the Warrant
Price is decreased pursuant to the preceding sentence, the number of shares of
Common Stock issuable upon the exercise of these Warrants shall be
<PAGE>
proportionately increased so that the total amount payable upon the exercise of
these Warrants is the same before and after the adjustment in the Warrant Price.
3. Shares Reserved. The Company agrees at all times to reserve or hold
available a sufficient number of shares of Common Stock to cover the number of
shares issuable upon the exercise of the Warrants and all other warrants of like
tenor then outstanding.
4. Dissolution. In case any voluntary or involuntary dissolution,
liquidation, or winding up of the Company shall at any time be proposed, the
Company shall give at least 20 days prior written notice thereof to the
registered holder hereof stating the date on which such event is to take place
and the date (which shall be at least 20 days after the giving of such notice)
as of which the holders of shares of Common Stock of record shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such dissolution, liquidation or winding-up (on which date, in the event such
dissolution, liquidation or winding-up shall actually take place, the Warrants
and all rights with respect hereto shall terminate unless such dissolution,
liquidation, or winding up is in connection with a transaction subject to
Section 2(a) above). Notices pursuant to this paragraph shall be given by
certified mail, return receipt requested, postage prepaid, addressed to the
registered holder of the Warrants, at the address of such holder appearing in
the records of the Company.
5. Exercise. Exercise may be made of all or part of the Warrants
evidenced hereby to the extent permitted hereunder by surrendering this Amended
and Restated Warrant Certificate (the "Certificate"), with the form of Election
to Exercise provided for herein duly executed by the registered holder hereof,
to the Company at its principal office, or at such other place as the Company
shall designate. The Election to Exercise shall be accompanied by payment in
full of the purchase price payable in respect of the Warrants being exercised,
either (i) in cash or (ii) pursuant to a Cashless Exercise as defined herein.
The person holding this Warrant may, at his option, exercise this Warrant, in
whole or in part, without the payment of any cash amount (a "Cashless Exercise")
and receive the number of shares of Common Stock issuable upon such Cashless
Exercise of the Warrant ("Warrant Shares") determined as follows:
In connection with any Cashless Exercise, the number of Warrant Shares to
be received will equal the positive amount, if any, (rounded to the next higher
integer) found by subtracting "B" from "A," where "A" is the number (the "Total
Number") of the Warrant Shares specified in the Election to Exercise, and "B" is
the number of Warrant Shares equal to the quotient obtained by dividing (x) the
product of the Total Number and the Warrant Price by (y) the Fair Market Value
of a share of Common Stock. "Fair Market Value" means:
(i) if the Common Stock is then listed on a national securities exchange
or reported on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"), the average daily closing or last sale price per
share of Common Stock for the 30-day period preceding the delivery of the
Election to Exercise; or
<PAGE>
(ii) if the Common Stock is then not so listed or reported but traded in
the over-the-counter market, the average daily closing bid and asked prices per
share of Common Stock for the 30-day period preceding the delivery of the
Election to Exercise; or
(iii) in all other cases, the amount per share determined in good faith by
the Board of Directors based on such relevant facts and such opinions of
independent experts as may be available to the Board.
If less than all the Warrants evidenced by this Certificate are
exercised (including as exercised any Warrants utilized for payment of the
Warrant Price in the case of a Cashless Exercise), then the Company will, upon
such exercise, execute and deliver to the registered holder hereof a new
certificate (dated the date hereof) evidencing the Warrants not so exercised.
As promptly as practicable after surrender of this Certificate and the receipt
of payment as aforesaid, the Company shall issue and deliver to the registered
holder hereof, on its written order, a certificate or certificates for the
number of shares of Common Stock issuable upon the exercise of such Warrants in
accordance with the provisions hereof.
If the Company at any time proposes to register its Common Stock under
the Securities Act of 1933, as amended, for sale to the public in a firm
commitment underwritten public offering of not less than $5,000,000 and the
underwriter(s) thereof requires as a condition to such offering that the
registered holder hereof exercise the Warrants prior to such offering, then the
registered holder hereof agrees to exercise the Warrants, effective at such time
as one or more underwriters execute(s) an underwriting agreement to purchase and
resell all of the offered securities in such offering.
6. No Fractional Shares. No fractional shares or script representing
fractional shares shall be issued upon the exercise of the Warrants. If the
full exercise of the Warrants requires the issuance of any fraction of a share,
the Company shall pay the holder thereof an amount in cash equal to such
fraction multiplied by the Warrant Price.
7. Transfer. This Certificate and the Warrants evidenced hereby may be
transferred only by surrendering this Certificate for cancellation at the
principal office of the Company accompanied by duly executed transfer
instruments in form reasonably satisfactory to the Company and by compliance
with Section 10 below. Warrants may be divided or combined into a certificate
or certificates evidencing the same aggregate number of Warrants.
8. No Shareholder Rights. The person in whose name this Certificate is
registered shall be deemed the owner hereof and of the Warrants evidenced hereby
for all purposes. The registered owner of this Certificate shall not be
entitled hereunder by virtue of its ownership of the Warrants to any rights
whatsoever as a shareholder of the
<PAGE>
Company; provided, however, that the Company shall send to the registered
holder hereof, copies of all notices sent to the shareholders of the Company.
9. Registration of Shares. The Corporation will file a registration
statement on Form S-8 (or any successor form) covering the shares subject to the
Warrant, prior to the exercise of the Warrant, provided that the shares subject
to the Warrant are eligible for registration on such form, and provided further
that the Special Conditions described in Section 12 below have been satisfied.
<PAGE>
10. Restrictive Legends. Grubb acknowledges that:
THE WARRANTS ARE RESTRICTED AND ARE BEING ACQUIRED BY THE RECIPIENT
FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO FURTHER
DISTRIBUTION.
No transfer shall be permitted without the foregoing legend being
placed on or added to the Warrants and without establishing to the Company's
satisfaction that the transfer is exempt from registration under applicable
state and federal securities laws.
The holder will acquire Warrant Shares only for his own account, for
investment, and not with a view to any distribution in violation of the
registration requirements of the Securities Act of 1933 or any state securities
law, and the certificates representing Warrant Shares shall bear an appropriate
investment legend as referenced in the Election to Exercise attached hereto as
Exhibit A. At the time of exercise, the holder shall execute an Investment
Agreement in the form attached hereto as Exhibit B stating that the Warrant
Shares have not been registered under the federal or state securities laws and
that such shares may not be transferred without either (i) the shares being
registered or (ii) an opinion of counsel for the holder of the Warrants
reasonably satisfactory to the Company, that such registration is not required.
Notwithstanding the foregoing, this Warrant, or any interest therein,
may not be transferred by the holder thereof prior to the satisfaction of the
Special Conditions described in Section 12 below, and Warrant Shares may not be
transferred by the holder thereof prior to (i) satisfaction of the Special
Conditions, or (ii) February 27, 2003, whichever first occurs.
11. Expiration. To the extent not exercised prior to such time, the
Warrants evidenced by this Certificate shall be wholly void for all purposes
after 5:00 p.m., Eastern Time, on February 28, 2003.
12. Special Conditions. It shall be a condition ("Special Conditions") to
certain actions hereunder (in each case as indicated by reference to this
Section 12) that the Company has sold and installed a minimum of two (2)
software licenses in each of two (2) consecutive years, which licenses shall
relate to software based on the technology which is the subject of the
Assignment and Transfer of Patent Rights and Other Intellectual Property Rights
dated March 1, 1996 between David Black and the Company.
13. Amendment and Restatement. This agreement constitutes an amendment
and restatement of that certain Warrant Certificate issued by the Company to
Grubb on March 1, 1996 with respect to the purchase of 110, 411 shares of Common
Stock (the "First Warrant
<PAGE>
Certificate"). This Amendment and Restated Warrant Certificate amends and
restates in its entirety the First Warrant Certificate. Grubb agrees to deliver
the original First Warrant Certificate to the Company.
IN WITNESS WHEREOF, the parties have entered into this agreement and restatment
effective as of August 5, 1997.
______________________________ PAYSYS INTERNATIONAL, INC.
STEPHEN B. GRUBB
___________________ By:
_____________________________
Name:
Title:
[CORPORATE SEAL]
ATTEST:
By:
_____________________________
Name:
Title:
<PAGE>
EXHIBIT A
TO
WARRANT CERTIFICATE
Election to Exercise
The undersigned hereby elects to purchase ________ shares of the $.01 par
value Common Stock of PaySys International, Inc. under and pursuant to the
provisions of the Warrant Certificate dated ______ 1996 evidencing Warrants to
purchase 110,411 shares of the Company's Common Stock. The Company is hereby
requested to issue Certificate(s) representing said shares of Common Stock in
the name of the undersigned at the address set forth following its signature, in
denominations as indicated.
The undersigned has delivered herewith an executed Investment Agreement in
the form attached to the Warrant Certificate as Exhibit B. The undersigned
acknowledges that all shares of Common Stock to be issued as a result of this
exercise of the Warrants shall bear an appropriate investment legend in
substantially the form set forth in such Investment Agreement.
Initial here if this is to be a Cashless Dated this ____day of _____________,
Exercise. 19___.
_________________________ ____________________________________
Name or Company Name
____________________________________
Signature
____________________________________
Title
____________________________________
Address
<PAGE>
Issue Certificate(s) as Follows:
______________ Certificates for _________ Shares
each.
______________ Certificates for _________ Shares
each.
______________ Certificates for _________ Shares
each.
______________ Certificates for _________ Shares
each.
<PAGE>
EXHIBIT B
TO
WARRANT CERTIFICATE
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO PAYSYS
INTERNATIONAL INC. ALONG WITH THE ELECTION TO EXERCISE FORM BEFORE THE COMMON
STOCK ISSUABLE UPON EXERCISE OF THE AMENDED AND RESTATED WARRANT CERTIFICATE
EFFECTIVE AUGUST 5, 1997 WILL BE TRANSFERRED.
INVESTMENT AGREEMENT
__________________________, 19 _____
PaySys International Inc.
900 Winderley Place
Maitland, FL 32751
Gentlemen:
The undersigned, ______________________________________ ("Purchaser")
intends to acquire up to ___________ shares of the $.01 par value Common Stock
(the "Common Stock") of PaySys International, Inc. (the "Company") from the
Company pursuant to the exercise of certain Warrants to purchase Common Stock
held by Purchaser. The Common Stock will be issued to Purchaser in a
transaction not involving a public offering and pursuant to an exemption from
registration under the Securities Act of 1933, as amended (the "1933 Act") and
applicable state securities laws. In connection with such purchase and in order
to comply with the exemptions from registration relied upon by the Company,
Purchaser represents, warrants and agrees as follows:
Purchaser is [circle one and complete] (i) [a corporation, partnership or
other entity organized under the laws of ____________________ (state) with its
principal office located in ________________________________ (state)], (ii) [an
individual resident of _______________________ (state)], and Purchaser is
acquiring the Common Stock for its own account, to hold for investment, and
Purchaser shall not make any sale, transfer or other disposition of the Common
Stock in violation of the 1933 Act or the General Rules and Regulations
Promulgated thereunder by the Securities and Exchange Commission (the "SEC") or
in violation of any applicable state securities law.
Purchaser has been advised that the Common Stock is not being registered
under the 1933 Act or state securities laws on the ground that this transaction
is exempt
<PAGE>
from registration, and that reliance by the Company on such exemptions
is predicated in part on Purchaser's representations set forth in this letter.
Purchaser has been informed that under the 1933 Act, the Common Stock must
be held indefinitely unless it is subsequently registered under the 1933 Act or
unless an exemption from such registration (such as Rule 144) is available with
respect to any proposed transfer or disposition by Purchaser of the Common
Stock. Purchaser further agrees that the Company may refuse to permit Purchaser
to sell, transfer or dispose of the Common Stock (except as permitted under Rule
144) unless there is in effect a registration statement under the 1933 Act and
any applicable state securities laws covering such transfer, or unless Purchaser
furnishes an opinion of counsel, reasonably satisfactory to counsel for the
Company, to the effect that such registration is not required.
Purchaser also understands and agrees that there will be placed on the
certificate(s) for the Common Stock, or any substitutions therefor, a legend
stating in substance:
"This Security has been acquired for investment and has not been registered
under the Securities Act of 1933 (the "1933 Act") or under the securities
laws of any state. This Security may not be sold or transferred except in
transactions (a) registered under the 1933 Act or exemption from
registration thereunder, and (b) registered or exempt from registration
under any applicable state securities law."
Purchaser has carefully read this letter and has discussed its requirements
and other applicable limitations upon Purchaser's resale of the Common Stock
with Purchaser's counsel.
Very truly yours,
____________________________________
(Name of Purchaser)
Accepted and agreed to as of the _____ day of ______________________,
19___.
<PAGE>
PaySys International, Inc.
By:
____________________________________
Title:
____________________________________
<PAGE>
THE WARRANTS EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") OR THE FLORIDA
SECURITIES AND INVESTOR PROTECTION ACT (THE "FLORIDA ACT"), AND, ACCORDINGLY,
ARE RESTRICTED SECURITIES AND MAY NOT BE TRANSFERRED, NOR WILL ANY ASSIGNEE
OR ENDORSEE HEREOF BE RECOGNIZED AS AN OWNER HEREOF BY THE COMPANY FOR ANY
PURPOSE, UNLESS A REGISTRATION STATEMENT UNDER THE 1933 ACT AND THE FLORIDA
ACT WITH RESPECT TO SUCH WARRANTS SHALL THEN BE IN EFFECT, OR UNLESS THE
AVAILABILITY OF AN EXEMPTION FROM REGISTRATION WITH RESPECT TO ANY PROPOSED
TRANSFER OR DISPOSITION OF SUCH WARRANTS SHALL BE ESTABLISHED TO THE
SATISFACTION OF THE COMPANY.
AMENDED AND RESTATED
WARRANT CERTIFICATE
(Void after February 28, 2003)
PaySys International, Inc.
a Florida Corporation
110,411 shares of Common Stock
- -------------------------------------------------------------------------------
1. Grant; Price; Term. THIS IS TO CERTIFY THAT David Black, an
individual resident of the state of New Jersey ("Black"), or his permitted
assigns, is entitled to purchase up to 110,411 shares of the $.01 par value
common stock (the "Common Stock") of PaySys International, Inc., a Florida
Corporation (the "Company"), at a price per share of $24.00 (as may be
adjusted as provided herein, the "Warrant Price"). This Warrant may be
exercised from time to time and at any time in whole or in part before 5:00
P.M. (Eastern time) on February 28, 2003 (the "Expiration Date") in
accordance with the terms and conditions hereof. If Black ceases to be an
employee of the Company for any reason, the warrant shall become
non-exercisable immediately on the date of termination with respect to any
portion of the Warrant not yet exercised. The Company shall have no right to
repurchase shares acquired pursuant to any prior exercise of the Warrant.
The Company may, in its sole discretion, extend the Expiration Date by
written notice to the registered holder(s) hereof.
Subject to the provisions of Sections 2 hereof, this Warrant shall
represent the right to purchase 110,411 shares of Common Stock, less the
number of shares of Common Stock, if any, previously purchased pursuant to
the exercise in part of this Warrant.
<PAGE>
2. Adjustment. The number and kind of securities purchasable upon
the exercise of the Warrants and the Warrant Price shall be subject to
adjustment from time to time upon the occurrence of certain events, as
follows:
(a) In the case of any reclassification of the Common Stock
issuable upon exercise of each Warrant, then the Company shall execute a new
Warrant certificate, providing the holder of these Warrants the right to
exercise such new Warrants and upon such exercise to receive, in lieu of each
share of Common Stock theretofore issuable upon exercise of these Warrants,
the number and kind of shares of stock, other securities, money or property
receivable upon such reclassification or change, by a holder of shares of the
Common Stock. Such new Warrant certificate shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for herein. The provisions of this paragraph (a) shall similarly
apply to successive reclassifications or changes. In the case of any
consolidation or merger of the Company with or into another corporation
(other than a merger with another corporation in which the Company is the
surviving corporation and which does not result in any reclassification of
the Common Stock issuable upon exercise of each Warrant), or in the case of
any sale of all or substantially all of the assets of the Company, then the
holder of these Warrants shall be entitled to written notice of such merger,
consolidation or sale of all or substantially all of the Company's assets at
least 30 days prior to the consummation of such transaction. All Warrants
not exercised prior to the effective date of the merger, consolidation or
sale of all or substantially all of the Company's assets shall terminate and
be null and void for all purposes on the effective date of such transaction.
(b) If the Company at any time while these Warrants remain
outstanding and not expired shall split, subdivide or combine the Common
Stock, the Warrant Price shall be proportionately decreased in the case of a
split or subdivision or increased in the case of a combination, and the
number of shares of Common Stock issuable upon the exercise of these Warrants
shall be proportionately increased in the case of a split or subdivision or
decreased in the case of a combination.
(c) If the Company at any time while these Warrants are outstanding
and not expired shall pay a dividend with respect to the Common Stock (or
make any other distribution with respect to the Common Stock, except any
distribution specifically provided for in paragraphs(a) or (b) above),
payable in shares of Common Stock, then the Warrant Price shall be adjusted
from and after the date of determination of the shareholders entitled to
receive such dividend or distribution, to that price determined by
multiplying the Warrant Price in effect immediately prior to such date of
determination by a fraction (i) the numerator of which shall be the total
number of shares of the Common Stock outstanding immediately prior to such
dividend or distribution, and (ii) the denominator of which shall be the
total number of shares of Common Stock outstanding immediately after such
dividend or distribution. If the Warrant Price is decreased pursuant to the
preceding sentence, the number of shares of Common Stock issuable upon the
exercise of these Warrants shall be
<PAGE>
proportionately increased so that the total amount payable upon the exercise
of these Warrants is the same before and after the adjustment in the Warrant
Price.
3. Shares Reserved. The Company agrees at all times to reserve or hold
available a sufficient number of shares of Common Stock to cover the number
of shares issuable upon the exercise of the Warrants and all other warrants
of like tenor then outstanding.
4. Dissolution. In case any voluntary or involuntary dissolution,
liquidation, or winding up of the Company shall at any time be proposed, the
Company shall give at least 20 days prior written notice thereof to the
registered holder hereof stating the date on which such event is to take
place and the date (which shall be at least 20 days after the giving of such
notice) as of which the holders of shares of Common Stock of record shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such dissolution, liquidation or winding-up (on which date,
in the event such dissolution, liquidation or winding-up shall actually take
place, the Warrants and all rights with respect hereto shall terminate unless
such dissolution, liquidation, or winding up is in connection with a
transaction subject to Section 2(a) above). Notices pursuant to this
paragraph shall be given by certified mail, return receipt requested, postage
prepaid, addressed to the registered holder of the Warrants, at the address
of such holder appearing in the records of the Company.
5. Exercise. Exercise may be made of all or part of the Warrants
evidenced hereby to the extent permitted hereunder by surrendering this
Amended and Restated Warrant Certificate (the "Certificate"), with the form
of Election to Exercise provided for herein duly executed by the registered
holder hereof, to the Company at its principal office, or at such other place
as the Company shall designate. The Election to Exercise shall be
accompanied by payment in full of the purchase price payable in respect of
the Warrants being exercised, either (i) in cash or (ii) pursuant to a
Cashless Exercise as defined herein. The person holding this Warrant may, at
his option, exercise this Warrant, in whole or in part, without the payment
of any cash amount (a "Cashless Exercise") and receive the number of shares
of Common Stock issuable upon such Cashless Exercise of the Warrant ("Warrant
Shares") determined as follows:
In connection with any Cashless Exercise, the number of Warrant Shares to
be received will equal the positive amount, if any, (rounded to the next
higher integer) found by subtracting "B" from "A," where "A" is the number
(the "Total Number") of the Warrant Shares specified in the Election to
Exercise, and "B" is the number of Warrant Shares equal to the quotient
obtained by dividing (x) the product of the Total Number and the Warrant
Price by (y) the Fair Market Value of a share of Common Stock. "Fair Market
Value" means:
(i) if the Common Stock is then listed on a national securities exchange
or reported on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"), the average daily closing or last sale price per
share of Common Stock for the 30-day period preceding the delivery of the
Election to Exercise; or
<PAGE>
(ii) if the Common Stock is then not so listed or reported but traded in
the over-the-counter market, the average daily closing bid and asked prices
per share of Common Stock for the 30-day period preceding the delivery of the
Election to Exercise; or
(iii) in all other cases the amount per share determined in good faith
by the Board of Directors based on such relevant facts and such opinions of
independent experts as may be available to the Board.
If less than all the Warrants evidenced by this Certificate are
exercised (including as exercised any Warrants utilized for payment of the
Warrant Price in the case of a Cashless Exercise), then the Company will,
upon such exercise, execute and deliver to the registered holder hereof a new
certificate (dated the date hereof) evidencing the Warrants not so exercised.
As promptly as practicable after surrender of this Certificate and the
receipt of payment as aforesaid, the Company shall issue and deliver to the
registered holder hereof, on its written order, a certificate or certificates
for the number of shares of Common Stock issuable upon the exercise of such
Warrants in accordance with the provisions hereof.
If the Company at any time proposes to register its Common Stock
under the Securities Act of 1933, as amended, for sale to the public in a
firm commitment underwritten public offering of not less than $5,000,000 and
the underwriter(s) thereof requires as a condition to such offering that the
registered holder hereof exercise the Warrants prior to such offering, then
the registered holder hereof agrees to exercise the Warrants, effective at
such time as one or more underwriters execute(s) an underwriting agreement to
purchase and resell all of the offered securities in such offering.
6. No Fractional Shares. No fractional shares or script representing
fractional shares shall be issued upon the exercise of the Warrants. If the
full exercise of the Warrants requires the issuance of any fraction of a
share, the Company shall pay the holder thereof an amount in cash equal to
such fraction multiplied by the Warrant Price.
7. Transfer. This Certificate and the Warrants evidenced hereby may be
transferred only by surrendering this Certificate for cancellation at the
principal office of the Company accompanied by duly executed transfer
instruments in form reasonably satisfactory to the Company and by compliance
with Section 10 below. Warrants may be divided or combined into a
certificate or certificates evidencing the same aggregate number of Warrants.
8. No Shareholder Rights. The person in whose name this Certificate is
registered shall be deemed the owner hereof and of the Warrants evidenced
hereby for all purposes. The registered owner of this Certificate shall not
be entitled hereunder by virtue of its ownership of the Warrants to any
rights whatsoever as a shareholder of the
<PAGE>
Company; provided, however, that the Company shall send to the registered
holder hereof, copies of all notices sent to the shareholders of the Company.
9. Registration of Shares. The Corporation will file a registration
statement on Form S-8 (or any successor form) covering the shares subject to
the Warrant, prior to the exercise of the Warrant, provided that the shares
subject to the Warrant are eligible for registration on such form, and
provided further that the Special Conditions described in Section 12 below
have been satisfied.
<PAGE>
10. Restrictive Legends. Black acknowledges that:
THE WARRANTS ARE RESTRICTED AND ARE BEING ACQUIRED BY THE RECIPIENT
FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO FURTHER
DISTRIBUTION.
No transfer shall be permitted without the foregoing legend being
placed on or added to the Warrants and without establishing to the Company's
satisfaction that the transfer is exempt from registration under applicable
state and federal securities laws.
The holder will acquire Warrant Shares only for his own account, for
investment, and not with a view to any distribution in violation of the
registration requirements of the Securities Act of 1933 or any state
securities law, and the certificates representing Warrant Shares shall bear
an appropriate investment legend as referenced in the Election to Exercise
attached hereto as Exhibit A. At the time of exercise, the holder shall
execute an Investment Agreement in the form attached hereto as Exhibit B
stating that the Warrant Shares have not been registered under the federal or
state securities laws and that such shares may not be transferred without
either (i) the shares being registered or (ii) an opinion of counsel for the
holder of the Warrants reasonably satisfactory to the Company, that such
registration is not required.
Notwithstanding the foregoing, this Warrant, or any interest
therein, may not be transferred by the holder thereof prior to the
satisfaction of the Special Conditions described in Section 12 below, and
Warrant Shares may not be transferred by the holder thereof prior to (i)
satisfaction of the Special Conditions, or (ii) February 27, 2003, whichever
first occurs.
11. Expiration. To the extent not exercised prior to such time, the
Warrants evidenced by this Certificate shall be wholly void for all purposes
after 5:00 p.m., Eastern Time, on February 28, 2003.
12. Special Conditions. It shall be a condition ("Special Conditions")
to certain actions hereunder (in each case as indicated by reference to this
Section 12) that the Company has sold and installed a minimum of two (2)
software licenses in each of two (2) consecutive years, which licenses shall
relate to software based on the technology which is the subject of the
Assignment and Transfer of Patent Rights and Other Intellectual Property
Rights dated March 1, 1996 between David Black and the Company.
13. Amendment and Restatement. This agreement constitutes an amendment
and restatement of that certain Warrant Certificate issued by the Company to
Black on March 1, 1996 with respect to the purchase of 110, 411 shares of
Common Stock (the "First Warrant
<PAGE>
Certificate"). This Amendment and Restated Warrant Certificate amends and
restates in its entirety the First Warrant Certificate. Black agrees to
deliver the original First Warrant Certificate to the Company.
IN WITNESS WHEREOF, the parties have entered into this agreement and
restatment effective as of August 5, 1997.
________________________________
DAVID B. BLACK
PAYSYS INTERNATIONAL, INC.
________________________________
By:
________________________________
Name:
Title:
[CORPORATE SEAL]
ATTEST:
By:
________________________________
Name:
Title:
<PAGE>
EXHIBIT A
TO
WARRANT CERTIFICATE
Election to Exercise
The undersigned hereby elects to purchase ________ shares of the $.01
par value Common Stock of PaySys International, Inc. under and pursuant to
the provisions of the Warrant Certificate dated ______ 1996 evidencing
Warrants to purchase 110,411 shares of the Company's Common Stock. The
Company is hereby requested to issue Certificate(s) representing said shares
of Common Stock in the name of the undersigned at the address set forth
following its signature, in denominations as indicated.
The undersigned has delivered herewith an executed Investment Agreement
in the form attached to the Warrant Certificate as Exhibit B. The
undersigned acknowledges that all shares of Common Stock to be issued as a
result of this exercise of the Warrants shall bear an appropriate investment
legend in substantially the form set forth in such Investment Agreement.
Initial here if this is to be a Cashless
Exercise.
Dated this ____day of _____________,
19___.
_______________________________________ ____________________________________
Name or Company Name
____________________________________
Signature
____________________________________
Title
____________________________________
Address
____________________________________
<PAGE>
Issue Certificate(s) as Follows:
______________ Certificates for _________ Shares
each.
______________ Certificates for _________ Shares
each.
______________ Certificates for _________ Shares
each.
______________ Certificates for _________ Shares
each.
<PAGE>
EXHIBIT B
TO
WARRANT CERTIFICATE
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO PAYSYS
INTERNATIONAL INC. ALONG WITH THE ELECTION TO EXERCISE FORM BEFORE THE COMMON
STOCK ISSUABLE UPON EXERCISE OF THE AMENDED AND RESTATED WARRANT CERTIFICATE
EFFECTIVE AUGUST 5, 1997 WILL BE TRANSFERRED.
INVESTMENT AGREEMENT
__________________________, 19 _____
PaySys International Inc.
900 Winderley Place
Maitland, FL 32751
Gentlemen:
The undersigned, ______________________________________ ("Purchaser")
intends to acquire up to ___________ shares of the $.01 par value Common
Stock (the "Common Stock") of PaySys International, Inc. (the "Company") from
the Company pursuant to the exercise of certain Warrants to purchase Common
Stock held by Purchaser. The Common Stock will be issued to Purchaser in a
transaction not involving a public offering and pursuant to an exemption from
registration under the Securities Act of 1933, as amended (the "1933 Act")
and applicable state securities laws. In connection with such purchase and
in order to comply with the exemptions from registration relied upon by the
Company, Purchaser represents, warrants and agrees as follows:
Purchaser is [circle one and complete] (i) [a corporation, partnership
or other entity organized under the laws of ____________________ (state)
with its principal office located in ________________________________ (state)]
, (ii) [an individual resident of _______________________ (state)], and
Purchaser is acquiring the Common Stock for its own account, to hold for
investment, and Purchaser shall not make any sale, transfer or other
disposition of the Common Stock in violation of the 1933 Act or the General
Rules and Regulations Promulgated thereunder by the Securities and Exchange
Commission (the "SEC") or in violation of any applicable state securities law.
Purchaser has been advised that the Common Stock is not being registered
under the 1933 Act or state securities laws on the ground that this
transaction is exempt
<PAGE>
from registration, and that reliance by the Company on such exemptions is
predicated in part on Purchaser's representations set forth in this letter.
Purchaser has been informed that under the 1933 Act, the Common Stock
must be held indefinitely unless it is subsequently registered under the 1933
Act or unless an exemption from such registration (such as Rule 144) is
available with respect to any proposed transfer or disposition by Purchaser
of the Common Stock. Purchaser further agrees that the Company may refuse to
permit Purchaser to sell, transfer or dispose of the Common Stock (except as
permitted under Rule 144) unless there is in effect a registration statement
under the 1933 Act and any applicable state securities laws covering such
transfer, or unless Purchaser furnishes an opinion of counsel, reasonably
satisfactory to counsel for the Company, to the effect that such registration
is not required.
Purchaser also understands and agrees that there will be placed on the
certificate(s) for the Common Stock, or any substitutions therefor, a legend
stating in substance:
"This Security has been acquired for investment and has not
been registered under the Securities Act of 1933 (the "1933
Act") or under the securities laws of any state. This
Security may not be sold or transferred except in transactions
(a) registered under the 1933 Act or exemption from
registration thereunder, and (b) registered or exempt from
registration under any applicable state securities law."
Purchaser has carefully read this letter and has discussed its
requirements and other applicable limitations upon Purchaser's resale of the
Common Stock with Purchaser's counsel.
Very truly yours,
__________________________________
(Name of Purchaser)
Accepted and agreed to as of the _____ day of ______________________,
19___.
<PAGE>
PaySys International, Inc.
By:
____________________________________
Title:
____________________________________
<PAGE>
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT, made and entered into this 1st
day of March, 1996, by and between PAYSYS INTERNATIONAL, INC., a Florida
corporation (the "Corporation") and David Black (the "Optionee"),
W I T N E S S E T H :
- - - - - - - - - - -
WHEREAS, the Board of Directors of the Corporation (the
"Board") has adopted the PaySys International, Inc. 1995 Stock
Incentive Plan (the "Plan");
WHEREAS, the Plan provides for the granting of incentive
stock option by the Board to directors, officers and key
employees of the Corporation or any subsidiary of the Corporation
to purchase shares of the Common Stock of the Corporation, par
value $.01 per share (the "Stock") in accordance with the terms
and provision thereof; and
WHEREAS, the Board considers the Optionee to be a person who
is eligible for a grant of incentive stock options under the
Plan, and has determined that it would be in the best interest of
the Corporation to grant the incentive stock options documented
herein;
NOW, THEREFORE, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. Grant of Option.
----------------
Subject to the terms and conditions hereinafter set forth,
the Corporation hereby grants to the Optionee, as of the date
hereof (the "Date of Grant"), an option to purchase up to 38,046
shares of Stock at a price of $4.00 per share, the fair market
value as of the Date of Grant. Such option is hereinafter
referred to as the "Option" and the shares of stock purchasable
upon exercise of the option are hereinafter sometimes referred to
as the "Option Shares." The Option is intended by the parties
hereto to be, and shall be treated as, an incentive stock option,
as such term is defined under section 422 of the Internal Revenue
Code of 1986 (the "Code").
2. Installment Exercise.
---------------------
Subject to such further limitations as are provided herein,
the Option shall become vested as follow:
1/3 of the option shall become exercisable on June 30, 1996
1/3 of the option shall become exercisable on January 1,
1997
1/3 of the option shall become exercisable on January 1,
1998.
<PAGE>
Notwithstanding the above, in the event that the Corporation
sells substantially all of its assets, or more than fifty percent
of the then outstanding voting stock of the Corporation is
acquired by a person or entity not currently a shareholder, or
the Corporation completes an initial public offering prior to
January 1, 1998, the Option shall vest in its entirety and become
completely exercisable immediately prior to the event.
3. Termination of Option.
----------------------
(a) The Option and all rights hereunder with respect
thereto, to the extent such rights shall not have been exercised,
shall terminate and become null and void after the expiration of
ten years from the Date of Grant (the "Option Term").
(b) In the event of termination of Optionee's employment
after the date or dates for vesting of the Option, other than
termination that is (a) for cause, (b) voluntary on the part of
the Optionee and without the written consent of the Corporation
or (c) due to death or disability or retirement in accordance
with normal retirement policies as in effect from time to time,
the Optionee may exercise the Option at any time within a period
ending at the earlier of the Expiration Date or 5:00 P.M. eastern
time, on the day preceding the expiration of three months from
the date of termination of employment, to the extent of the
number of shares which were purchasable hereunder at the date of
termination. As to the shares which were not purchasable on such
date, the Option shall terminate on such date of termination of
employment and shall not thereafter be or become exercisable.
Upon a termination of the Option's employment by reason of
retirement, disability, or death, the Option may be exercised
during the following periods, but only to the extent that the
Option was outstanding and exercisable on any such date of
retirement, disability or death: (i) the one-year period
following the date of such termination of the Optionee's
employment in the case of a disability (within the meaning of
Section 22(e)(3) of the Code), (ii) the six-month period
following the date of issuance of letters testamentary or letters
of administration to the executor or administrator of a deceased
Optionee, in the case of the Optionee's death during his
employment by the Employer, but not later than one year after the
Optionee's death, and (iii) the three-month period following the
date of such termination in the case of retirement on or after
attainment of age 65, or in the case of disability other than as
described in (i) above. In no event, however, shall any such
period extend beyond the Option Term.
(c) In the event of the death of the Optionee, the Option
may be exercised by the Optionee's legal representative(s), but
only to the extent that the Option would otherwise have been
exercisable by the Optionee at the time of his death.
(d) A transfer of the Optionee's employment between the
Corporation and any subsidiary of the Corporation, or between any
subsidiaries of the Corporation, shall not be deemed to be a
termination of the Optionee's employment.
2
<PAGE>
(e) Notwithstanding any other provisions set forth herein
or in the Plan, if the Optionee shall (i) voluntarily terminate
employment without the Corporation's consent, (ii) commit any act
of malfeasance or wrongdoing affecting the Corporation or any
subsidiary of the Corporation, (iii) breach any covenant not to
compete, or employment contract, with the Corporation or any
subsidiary of the Corporation, or (iv) engage in conduct that
would warrant the Optionee's discharge for cause (excluding
general dissatisfaction with the performance of the Optionee's
duties, but including any act of disloyalty or any conduct
clearly tending to bring discredit upon the Corporation or any
subsidiary of the Corporation), any unexercised portion of the
Option shall immediately terminate and be void.
4. Exercise of Options.
--------------------
(a) The Optionee may exercise the Option with respect to
all or any part of the number of Option Shares then exercisable
hereunder by giving the Secretary of the Corporation written
notice of intent to exercise. The notice of exercise shall
specify the number of Option Shares as to which the Option is to
be exercised and the date of exercise thereof, which date shall
be at least five days after the giving of such notice unless an
earlier time shall have been mutually agreed upon.
(b) Full payment (in U.S. dollars) by the Optionee of the
option price for the Option Shares purchased shall be made on or
before the exercise date specified in the notice of exercise in
cash, or, with the prior written consent of the Board, in whole
or in part through the surrender of previously acquired shares of
Stock at their fair market value on the exercise date.
On the exercise date specified in the Optionee's notice or
as soon thereafter as is practicable, the Corporation shall cause
to be delivered to the Optionee, a certificate or certificates
for the Option Shares then being purchased (out of theretofore
unissued Stock or reacquired Stock, as the Corporation may elect)
upon full payment for such Option Shares. The obligation of the
Corporation to deliver Stock shall, however, be subject to the
condition that if at any time the Board shall determine in its
discretion that the listing, registration or qualification of the
Option Shares upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or
in connection with, the Option or the issuance or purchase of
Stock thereunder, the Option may not be exercised in whole or in
part unless such listing, registration, qualification, consent,
or approval shall have been effected or obtained free of any
conditions not acceptable to the Board.
(c) If the Optionee fails to pay for any of the Option
Shares specified in such notice or fails to accept delivery
thereof, the Optionee's right to purchase such Option Shares may
be terminated by the Corporation. The date specified in the
Optionee's notice as the date of exercise shall be deemed the
date of exercise of the Option, provided that payment in
3
<PAGE>
full for the Option Shares to be purchased upon such exercise shall have
been received by such date.
5. Adjustment of and Changes in Stock of the Corporation.
------------------------------------------------------
In the event of a reorganization, recapitalization, change
of shares, stock split, spin-off, stock dividend,
reclassification, subdivision, or combination of shares, merger,
consolidation, rights offering, or any other change in the
corporate structure or shares of capital stock of the
Corporation, the Board shall make a proportional adjustment in
the number and kind of shares of Stock subject to the Option or
in the option price; provided, however, that no such adjustment
shall give the Optionee any additional benefits under the Option.
In the event that, within five years from the Date of Grant,
the Corporation sells shares of its common stock at a price per
share which is less than the option price per share, then the
number of shares subject to the Option shall be increased such
that the ratio of the Option Shares to the total shares
outstanding after the sale is the same as such ratio would have
been had the number of shares issued in such transaction been
equal to the total consideration paid divided by the option
price. The option price per share shall be decreased so that the
total purchase price for all option shares (as increased) is the
same as before the sale.
6. No Rights of Stockholders.
--------------------------
Neither the Optionee nor any personal representative shall
be, or shall have any of the rights and privileges of, a
stockholder of the Corporation with respect to any shares of
Stock purchasable or issuable upon the exercise of the Option, in
whole or in part, prior to the date of exercise of the Option.
7. Non-Transferability of Option.
------------------------------
During the Optionee's lifetime, the Option hereunder shall
be exercisable only by the Optionee or any guardian or legal
representative of the Optionee, and the Option shall not be
transferable except, in case of the death of the Optionee, by
will or the laws of descent and distribution, nor shall the
Option be subject to attachment, execution or other similar
process. In no event of (a) any attempt by the Optionee to
alienate, assign, pledge, hypothecate or otherwise dispose of the
Option, except as provided for herein, or (b) the levy of any
attachment, execution or similar process upon the rights or
interest hereby conferred, the Corporation may terminate the
Option by notice to the Optionee and it shall thereupon become
null and void.
4
<PAGE>
8. Registration of Option Shares.
------------------------------
The Corporation will file a registration on Form S-8 (or any
successor form) covering the Option Shares prior to the exercise
of the Option, provided that the Option shares are eligible for
registration on such form.
9. Employment Not Affected.
------------------------
Neither the granting of the Option nor its exercise shall be
construed as granting to the Optionee any right with respect to
continuance of employment by the Corporation or any parent or
subsidiary. Except as may otherwise be limited by a written
agreement between the Corporation or a parent or subsidiary
thereof and the Optionee, the right of the Optionee's employer to
terminate at will the Optionee's employment with it at any time
(whether by dismissal, discharge, retirement or otherwise) is
specifically reserved by the Corporation, as the employer or on
behalf of the employer (whichever the case may be), and
acknowledge by the Optionee.
10. Amendment of Option.
--------------------
The Option may be amended by the Board at any time (i) if
the Board determines, in its sole discretion, that amendment is
necessary or advisable in the light of any addition to or change
in the Code or in the regulations issued thereunder, or any
federal or state securities law or other law or regulation, which
change occurs after the Date of Grant and by its terms applies to
the Option; or (ii) other than in the circumstances described in
clause (i), with the consent of the Optionee.
11. Notice.
-------
Any notice to the Corporation provided for in this
instrument shall be addressee to it in care of its Secretary at
its executive offices at The Spectrum Building, 900 Winderley
Place, P.O. Box 5575, Maitlana, Florida 32751-5575, and any
notice to the Optionee shall be addressed to the Optionee at the
current address shown on the payroll records of the Corporation
or any parent or subsidiary employing Optionee. Any notice shall
be deemed to be duly given if and when properly addressee and
posted by registered or certified mail, postage prepaid.
12. Incorporation of Plan by Reference.
-----------------------------------
The Option is granted pursuant to the terms of the Plan, the
terms of which are incorporated herein by reference, and the
Option shall be in all respects interpreted in accordance with
the Plan. The Board shall interpret and construe the Plan and
this instrument, and its interpretations and determination shall
be conclusive and binding on the
5
<PAGE>
parties hereto and any other person claiming an interest hereunder, with
respect to any issue arising hereunder or thereunder.
13. Governing Law.
--------------
The validity, construction, interpretation and effect of
this instrument shall exclusively be governed by and as
determined in accordance with the law of the State of Florida.
IN WITNESS WHEREOF, the Corporation has caused its duly
authorized officer to execute this Agreement and the Optionee has
placed his signature hereon, effective as of the Date of Grant.
PAYSYS INTERNATIONAL, INC.
By: /s/ Stephen B. Grubb
-------------------------------
ACCEPTED AND AGREED TO:
By: /s/ David B. Black
-------------------------
Optionee
6
<PAGE>
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT, made and entered into this 1st day
of March, 1996, by and between PAYSYS INTERNATIONAL, INC., a Florida
corporation (the "Corporation") and David Black (the "Optionee"),
W I T N E S S E T H:
-------------------
WHEREAS, the Board of Directors of the Corporation (the "Board") has
adopted the PaySys International, Inc. 1995 Stock Incentive Plan (the "Plan");
WHEREAS, the Plan provides for the granting of incentive stock options by
the Board to directors, officers and key employees of the Corporation or any
subsidiary of the Corporation to purchase shares of the Common Stock of the
Corporation, par value $.01 per share (the "Stock") in accordance with the
terms and provisions thereof; and
WHEREAS, the Board considers the Optionee to be a person who is eligible
for a grant of incentive stock options under the Plan, and has determined
that it would be in the best interest of the Corporation to grant the
incentive stock options documented herein;
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
agree as follows:
1. Grant of Option.
---------------
Subject to the terms and conditions hereinafter set forth, the
Corporation hereby grants to the Optionee, as of the date hereof (the "Date
of Grant"), an option to purchase up to 16,194 shares of Stock at a price of
$4.00 per share, the fair market value as of the date hereof. Such option is
hereinafter referred to as the "'Option" and the shares of stock purchasable
upon exercise of the Option are hereinafter sometimes referred to as the
"Option Shares." The Option is intended by the parties hereto to be, and
shall be treated as, an incentive stock option, as such term is defined under
section 422 of the Internal Revenue Code of 1986 (the "Code").
2. Installment Exercise.
--------------------
Subject to such further limitations as are provided herein, the Option
shall become vested as follow:
100% of the options become exercisable on the earlier to occur of February
28, 2003 or the Milestone Date, but in no event shall any options become
exercisable before January 1, 1998. For purposes of this agreement, the
Milestone Date is the date on which the Corporation has sold and installed a
minimum of two (2) software licenses in each of two (2) consecutive years,
such licenses relating to software based on the technology which is the of
the
<PAGE>
Assignment and Transfer of Patent Rights and Other Intellectual Property
Rights dated March 1, 1996 between Optionee and the Corporation.
Notwithstanding anything to the contrary in the above paragraph, in the event
that the Corporation sells substantially all of its asset, or more than fifty
percent of the voting stock of the Corporation is acquired by any person or
entity not currently a shareholder, or the Corporation completes an initial
public offering prior to January 1, 1998, the Option shall vest in its
entirety and become completely exercisable immediately prior to the event.
3. Termination of Option.
---------------------
(a) The Option and all rights hereunder with respect thereto, to the
extent such rights shall not have been exercised, shall terminate and become
null and void after the expiration of ten years from the Date of Grant (the
"Option Term").
(b) In the event of termination of Optionee's employment after the date
or dates for exercise of the Option, other than termination that is (a) for
cause, (b) voluntary on the part of the Optionee and without the written
consent of the Corporation or (c) due to death or disability or to retirement
in accordance with normal retirement policies as in effect from time to time,
the Optionee may exercise the Option at any time within a period ending at
the earlier of the Expiration Date or 5:00 P.M. eastern time, on the day
preceding the expiration of three months from the date of termination of
employment, to the extent of the number of shares which were purchasable
hereunder at the date of termination. As to the shares which were not
purchasable on such date, the Option shall terminate on such date of
termination of employment and shall not thereafter be or become exercisable.
Upon a termination of the Optionee's employment by reason of retirement,
disability, or death, the Option may be exercised during the following
periods, but only to the extent that the Option was outstanding and
exercisable on any such date of retirement, disability or death: (i) the
one-year period following the date of such termination of the Optionee's
employment in the case of a disability (within the meaning of Section
22(e)(3) of the Code), (ii) the six-month period following the date of
issuance of letters testamentary or letters of administration to the executor
or administrator of a deceased Optionee, in the case of the Optionee's death
during his employment by the Employer, but not later than one year after the
Optionee's death, and (iii) the three-month period following the date of such
termination in the case of retirement on or after attainment of age 65, or in
the case of disability other than as described in (i) above. In no event,
however, shall any such period extend beyond the Option Term.
(c) In the event of the death of the Optionee, the Option may be
exercised by the Optionee's legal representative(s), but only to the extent
that the Option would otherwise have been exercisable by the Optionee at the
time of his death.
2
<PAGE>
(d) A transfer of the Optionee's employment between the Corporation and
any subsidiary of the Corporation, or between any subsidiaries of the
Corporation, shall not be deemed to be a termination of the Optionee's
employment.
(e) Notwithstanding any other provisions set forth herein or in the
Plan, if the Optionee shall (i) voluntarily terminate employment without the
Corporation's consent, (ii) commit any act of malfeasance or wrongdoing
affecting the Corporation or any subsidiary of the Corporation, (iii) breach
any covenant not to compete, or employment contract, with the Corporation or
any subsidiary of the Corporation, or (iv) engage in conduct that would
warrant the Optionee's discharge for cause (excluding general dissatisfaction
with the performance of the Optionee's duties, but including any act of
disloyalty or any conduct clearly tending to bring discredit upon the
Corporation or any subsidiary of the Corporation), any unexercised portion of
the Option shall immediately terminate and be void.
4. Exercise of Options.
-------------------
(a) The Optionee may exercise the Option with respect to all or any part
of the number of Option Shares then exercisable hereunder by giving the
Secretary of the Corporation written notice of intent to exercise. The
notice of exercise shall specify the number of Option Shares as to which the
Option is to be exercised and the date of exercise thereof, which date shall
be at least five days after the giving of such notice unless an earlier time
shall have been mutually agreed upon.
(b) Full payment (in U.S. dollars) by the Optionee of the option price
for the Option Shares purchased shall be made on or before the exercise date
specified in the notice of exercise in cash, or, with the prior written
consent of the Board, in whole or in part through the surrender of previously
acquired shares of Stock at their fair market value on the exercise date.
On the exercise date specified in the Optionee's notice or as soon
thereafter as is practicable, the Corporation shall cause to be delivered to
the Optionee, a certificate or certificates for the Option Shares then being
purchased (out of theretofore unissued Stock or required Stock, as the
Corporation may elect) upon full payment for such Option Shares. The
obligation of the Corporation to deliver Stock shall, however, be subject to
the condition that if at any time the Board shall determine in its discretion
that the listing, registration or qualification of the Option Shares upon any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the Option or the issuance or purchase
of Stock thereunder, the Option may not be exercised in whole or in part
unless such listing, registration, qualification, consent, or approval shall
have been effected or obtained free of any conditions not acceptable to the
Board.
3
<PAGE>
(c) If the Optionee fails to pay for any of the Option Shares specified
in such notice or fails to accept delivery thereof, the Optionee's right to
purchase such Option Shares may be terminated by the Corporation. The date
specified in the Optionee's notice as the date of exercise shall be deemed
the date of exercise of the Option, provided that payment in full for the
Option Shares to be purchased upon such exercise shall have been received by
such date.
5. Adjustment of and Changes in Stock of the Corporation.
-----------------------------------------------------
In the event of a reorganization, recapitalization, change of shares,
stock split, spin-off, stock dividend, reclassification, subdivision, or
combination of shares, merger, consolidation, rights offering, or any other
change in the corporate structure or shares of capital stock of the
Corporation, the Board shall make a proportional adjustment in the number and
kind of shares of Stock subject to the Option or in the option price;
provided, however, that no such adjustment shall give the Optionee any
additional benefits under the Option.
In the event that, within five years from the date of grant, the Company
sells shares of its common stock at a price per share which is less than the
option price per share, then the number of shares subject to this option
shall be increased such that the ratio of the Option Shares to the total
shares outstanding after the sale is the same as such ratio would have been
had the number of shares issued in such transaction been equal to the total
consideration paid divided by the option price. The option price per share
shall be decreased so that the total purchase price for the Option Shares (as
increased) is the same as before the sale.
6. No Rights of Stockholders.
-------------------------
Neither the Optionee nor any personal representative shall be, or shall
have any of the rights and privileges of, a stockholder of the Corporation
with respect to any shares of Stock purchasable or issuable upon the exercise
of the Option, in whole or in part, prior to the date of exercise of the
Option.
7. Non-Transferability of Option.
-----------------------------
During the Optionee's lifetime, the Option hereunder shall be exercisable
only by the Optionee or any guardian or legal representative of the Optionee,
and the Option shall not be transferable except, in case of the death of the
Optionee, by will or the laws of descent and distribution, nor shall the
Option be subject to attachment, execution or other similar process. In no
event of (a) any attempt by the Optionee to alienate, assign, pledge,
hypothecate or otherwise dispose of the option, except as provided for
herein, or (b) the levy of any attachment, execution or similar process upon
the rights or interest hereby conferred, the Corporation may terminate the
Option by notice to the Optionee and it shall thereupon become null and void.
4
<PAGE>
8. Registration of Option Shares.
-----------------------------
The Corporation will file a registration on Form S-8 (or any successor
form) covering the Option Shares prior to the exercise of the Option,
provided that the Option Shares are eligible for registration on such form.
9. Employment Not Affected.
-----------------------
Neither the granting of the Option nor its exercise shall be construed as
granting to the Optionee any right with respect to continuance of employment
by the Corporation or any parent or subsidiary. Except as may otherwise be
limited by a written agreement between the Corporation or a parent or
subsidiary thereof and the Optionee, the right of the Optionee's employer to
terminate at will the Optionee's employment with it at any time (whether by
dismissal, discharge, retirement or otherwise) is specifically reserved by
the Corporation, as the employer or on behalf of the employer (whichever the
case may be), and acknowledged by the Optionee.
10. Amendment of Option.
-------------------
The Option may be amended by the Board at any time (i) if the Board
determines, in its sole discretion, that amendment is necessary or advisable
in the light of any addition to or change in the Code or in the regulations
issued thereunder, or any federal or state securities law or other law or
regulation, which change occurs after the Date of Grant and by its terms
applies to the Option; or (ii) other than in the circumstances described in
clause (i), with the consent of the Optionee.
11. Notice.
------
Any notice to the Corporation provided for in this instrument shall be
addressed to it in care of its Secretary at its executive offices at The
Spectrum Building, 900 Winderley Place, P.O. Box 5575, Maitland, Florida
32751-5575, and any notice to the Optionee shall be addressed to the Optionee
at the current address shown on the payroll records of the Corporation or any
parent or subsidiary employing Optionee. Any notice shall be deemed to be
duly given if and when properly addressed and posted by registered or
certified mail, postage prepaid.
5
<PAGE>
12. Incorporation of Plan by Reference.
----------------------------------
The Option is granted pursuant to the terms of the Plan, the terms of
which are incorporated herein by reference, and the Option shall be in all
respects interpreted in accordance with the Plan. The Board shall interpret
and construe the Plan and this instrument, and its interpretations and
determinations shall be conclusive and binding on the parties hereto and any
other person claiming an interest hereunder, with respect to any issue
arising hereunder or thereunder.
13. 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 State of Florida.
IN WITNESS WHEREOF, the Corporation has caused its duly authorized
officer to execute this Agreement and the Optionee has placed his signature
hereon, effective as of the Date of Grant.
PAYSYS INTERNATIONAL, INC.
By: /s/ Stephen B. Grubb
---------------------
ACCEPTED AND AGREED TO:
By: /s/ David B. Black
------------------
Optionee
6
<PAGE>
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT, made and entered into this 1st day
of March, 1996, by and between PAYSYS INTERNATIONAL, INC., a Florida
corporation (the "Corporation") and Steven Grubb (the "Optionee"),
W I T N E S S E T H :
- - - - - - - - - - -
WHEREAS, the Board of Directors of the Corporation (the "Board") has
adopted the PaySys International, Inc. 1995 Stock Incentive Plan (the "Plan");
WHEREAS, the Plan provides for the granting of incentive stock options
by the Board to directors, officers and key employees of the Corporation or
any subsidiary of the Corporation to purchase shares of the Common Stock of
the Corporation, par value $.01 per share (the "Stock") in accordance with
the terms and provisions thereof; and
WHEREAS, the Board considers the Optionee to be a person who is eligible
for a grant of incentive stock options under the Plan, and has determined
that it would be in the best interest of the Corporation to grant the
incentive stock options documented herein;
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Grant of Option.
----------------
Subject to the terms and conditions hereinafter set forth, the
Corporation hereby grants to the Optionee, as of the date hereof (the "Date
of Grant"), an option to purchase up to 16,194 shares of Stock at a price of
$4.00 per share, the fair market value as of the date hereof. Such option is
hereinafter referred to as the "Option" and the shares of stock purchasable
upon exercise of the Option are hereinafter sometimes referred to as the
"Option Shares." The Option is intended by the parties hereto to be, and
shall be treated as, an incentive stock option, as such term in defined under
section 422 of the Internal Revenue Code of 1986 (the "Code").
2. Installment Exercise.
---------------------
Subject to such further limitations as are provided herein, the Option
shall become vested as follow:
100% of the options become exercisable on the earlier to occur of
February 28, 2003 or the Milestone Date, but in no event shall any options
become exercisable before January 1, 1998. For purposes of this agreement,
the Milestone Date is the date on which the Corporation has sold and
installed a minimum of two (2) software licenses in each of two (2)
<PAGE>
consecutive years, such licenses relating to software based on the technology
which is the subject of the Assignment and Transfer of Patent Rights and
Other Intellectual Property Rights dated March 1, 1996 between David Black
and the Corporation.
Notwithstanding anything to the contrary in the above paragraph, in the event
that the Corporation sells substantially all of its assets, or more than
fifty percent of the voting stock of the Corporation is acquired by any
person or entity not currently a shareholder, or the Corporation completes an
initial public offering prior to January 1, 1998, the Option shall vest in
its entirety and become completely exercisable immediately prior to the event.
3. Termination of Option.
----------------------
(a) The Option and all rights hereunder with respect thereto, to the
extent such rights shall not have been exercised, shall terminate and become
null and void after the expiration of ten years from the Date of Grant (the
"Option Term").
(b) In the event of termination of Optionee's employment after the date
or dates for exercise of the Option, other than termination that is (a) for
cause (b) voluntary on the-part of the Optionee and without the written
consent of the Corporation or (c) due to death or disability or retirement in
accordance with normal retirement policies as in effect from time to time,
the Optionee may exercise the Option at any time within a period ending at
the earlier of the Expiration Date or 5:00 P.M. eastern time, on the day
preceding the expiration of three months from the date of termination of
employment, to the extent of the number of shares which were purchasable
hereunder at the date of termination. As to the shares which were not
purchasable on such date, the Option shall terminate on such date of
termination of employment and shall not thereafter be or become exercisable.
Upon a termination of the Optionee's employment by reason of retirement,
disability, or death, the Option may be exercised during the following
periods, but only to the extent that the Option was outstanding and
exercisable on any such date of retirement, disability or death: (i) the
one-year period following the date of such termination of the Optionee's
employment in the case of a disability (within the meaning of Section
22(e)(3) of the Code), (ii) the six-month period following the date of
issuance of letters testamentary or letters of administration to the executor
or administrator of a deceased Optionee, in the case of the Optionee's death
during his employment by the employer, but not later than one year after the
Optionee's death, and (iii) the three-month period following the date of such
termination in the case of retirement on or after attainment of age 65, or in
the case of disability other than as described in (i) above. In no event,
however, shall any such period extend beyond the Option Term.
(c) In the event of the death of the Optionee, the Option may be
exercised by the Optionee's legal representative(s), but only to the extent
that the Option would otherwise have been exercisable by the Optionee at the
time of his death.
2
<PAGE>
(d) A transfer of the Optionee's employment between the
Corporation and any subsidiary of the Corporation, or between any
subsidiaries of the Corporation, shall not be deemed to be a
termination of the Optionee's employment.
(e) Notwithstanding any other provisions set forth herein or in the
Plan, if the Optionee shall (i) voluntarily terminate employment without the
Corporation's consent, (ii) commit any act of malfeasance or wrongdoing
affecting the Corporation or any subsidiary of the Corporation, (iii) breach
any covenant not to compete, or employment contract, with the Corporation or
any subsidiary of the Corporation, or (iv) engage in conduct that would
warrant the Optionee's discharge for cause (excluding general dissatisfaction
with the performance of the Optionee's duties, but including any act of
disloyalty or any conduct clearly tending to bring discredit upon the
Corporation or any subsidiary of the Corporation), any unexercised portion of
the Option shall immediately terminate and be void.
4. Exercise of Options.
--------------------
(a) The Optionee may exercise the Option with respect to all or any
part of the number of Option Shares then exercisable hereunder by giving the
Secretary of the Corporation written notice of intent to exercise. The
notice of exercise shall specify the number of Option Shares as to which the
Option is to be exercised and the date of exercise thereof, which date shall
be at least five days after the giving of such notice unless an earlier time
shall have been mutually agreed upon.
(b) Full payment (in U.S. dollars) by the Optionee of the option price
for the Option Shares purchased shall be made on or before the exercise date
specified in the notice of exercise in cash, or, with the prior written
consent of the Board, in whole or in part through the surrender of previously
acquired shares of Stock at their fair market value on the exercise date.
On the exercise date specified in the Optionee's notice or as soon
thereafter as is practicable, the Corporation shall cause to be delivered to
the Optionee, a certificate or certificates for the Option Shares then being
purchased (out of theretofore unissued Stock or reacquired Stock, as the
Corporation may elect) upon full payment for such Option Shares. The
obligation of the Corporation to deliver Stock shall, however, be subject to
the condition that if at any time the Board shall determine in its discretion
that the listing, registration or qualification of the Option Shares upon any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the Option or the issuance or purchase
of Stock thereunder, the Option may not be exercised in whole or in part
unless such listing, registration, qualification, consent, or approval shall
have been effected or obtained free of any conditions not acceptable to the
Board.
3
<PAGE>
(c) If the Optionee fails to pay for any of the Option Shares specified
in such notice or fails to accept delivery thereof, the Optionee's right to
purchase such Option Shares may be terminated by the Corporation. The date
specified in the Optionee's notice as the date of exercise shall be deemed
the date of exercise of the Option, provided that payment in full for the
Option Shares to be purchased upon such exercise shall have been received by
such date.
5. Adjustment of and Changes in Stock of the Corporation.
------------------------------------------------------
In the event of a reorganization, recapitalization, change of shares,
stock split, spin-off, stock dividend, reclassification, subdivision, or
combination of shares, merger, consolidation, rights offering, or any other
change in the corporate structure or shares of capital stock of the
Corporation, the Board shall make a proportional adjustment in the number and
kind of shares of Stock subject to the Option or in the option price;
provided, however, that no such adjustment shall give the Optionee any
additional benefits under the Option.
In the event that, within five years from the Date of Grant, the
Corporation sells shares of its common stock at a price per share which is
less than the option price per share, then the number of shares subject to
this option shall be increased such that the ratio of the Option Shares to
the total shares outstanding after the sale is the same as such ratio would
have been had the number of shares issued in such transaction been equal to
the total consideration paid divided by the option price. The option price
per share shall be decreased so that the total purchase price for the Option
Shares (as increased) is the same as before the sale.
6. No Rights of Stockholders.
--------------------------
Neither the Optionee nor any personal representative shall be, or shall
have any of the rights and privileges of, a stockholder of the Corporation
with respect to any shares of Stock purchasable or issuable upon the exercise
of the Option, in whole or in part, prior to the date of exercise of the
Option.
7. Non-Transferability of Option.
------------------------------
During the Optionee's lifetime, the Option hereunder shall be
exercisable only by the Optionee or any guardian or legal representative of
the Optionee, and the Option shall not be transferable except, in case of the
death of the Optionee, by will or the laws of descent and distribution, nor
shall the Option be subject to attachment, execution or other similar
process. In no event of (a) any attempt by the Optionee to alienate, assign,
pledge, hypothecate or otherwise dispose of the Option, except as provided
for herein, or (b) the levy of any attachment, execution or similar process
upon the rights or interest hereby conferred, the
4
<PAGE>
Corporation may terminate the Option by notice to the Optionee and it shall
thereupon become null and void.
8. Registration of Option Shares.
------------------------------
The Corporation will file a registration on Form S-8 (or any successor
form) covering the Option Shares prior to the exercise of the Option,
provided that the Option Shares are eligible for registration on such form.
9. Employment Not Affected.
------------------------
Neither the granting of the Option nor its exercise shall be construed
as granting to the Optionee any right with respect to continuance of
employment by the Corporation or any parent or subsidiary. Except as may
otherwise be limited by a written agreement between the Corporation or a
parent or subsidiary thereof and the Optionee, the right of the Optionee's
employer to terminate at will the Optionee's employment with it at any time
(whether by dismissal, discharge, retirement or otherwise) is specifically
reserved by the Corporation, as the employer or on behalf of the employer
(whichever the case may be), and acknowledged by the Optionee.
10. Amendment of Option.
--------------------
The Option may be amended by the Board at any time (i) if the Board
determines, in its sole discretion, that amendment is necessary or advisable
in the light of any addition to or change in the Code or in the regulations
issued thereunder, or any federal or state securities law or other law or
regulation, which change occurs after the Date of Grant and by its terms
applies to the Option; or (ii) other than in the circumstances described in
clause (i), with the consent of the Optionee.
11. Notice.
-------
Any notice to the Corporation provided for in this instrument shall be
addressed to it in care of its Secretary at its executive offices at The
Spectrum Building, 900 Winderley Place, P.O. Box 5575, Maitland, Florida
32751-5575, and any notice to the Optionee shall be addressed to the Optionee
at the current address shown on the payroll records of the Corporation or any
parent or subsidiary employing Optionee. Any notice shall be deemed to be
duly given if and when properly addressed and posted by registered or
certified mail, postage prepaid.
5
<PAGE>
12. Incorporation of Plan by Reference.
-----------------------------------
The Option is granted pursuant to the terms of the Plan, the terms of
which are incorporated herein by reference, and the Option shall be in all
respects interpreted in accordance with the Plan. The Board shall interpret
and construe the Plan and this instrument, and its interpretations and
determinations shall be conclusive and binding on the parties hereto and any
other person claiming an interest hereunder, with respect to any issue
arising hereunder or thereunder.
13. 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 State of Florida.
IN WITNESS WHEREOF, the Corporation has caused it duly authorized
officer to execute this Agreement and the Optionee has placed his signature
hereon, effective as of the Date of Grant.
PAYSYS INTERNATIONAL, INC.
By: /s/ J. Leland Strange
-----------------------
Vice Chairman
ACCEPTED AND AGREED TO:
By: /s/ Stephen B. Grubb
-----------------------
Optionee
6
<PAGE>
ASSET PURCHASE AGREEMENT
BY AND AMONG
CCS COMMERCIAL CREDIT SYSTEMS, INC.
AND
TRANSYS CORPORATION
AND ITS
SHAREHOLDERS
<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT ("Agreement") effective as of January 1,
1994, is made and entered into by and among CCS COMMERCIAL CREDIT SYSTEMS,
INC., a Florida corporation ("Purchaser"), and TRANSYS CORPORATION, a
Florida corporation ("Seller") and DANIEL STAVROS and D.J. YOUNGBLOOD
STAVROS (hereinafter collectively and individually referred to as
"Shareholders").
WHEREAS, upon the terms hereinafter set forth, Purchaser desires to
acquire, and Seller desires to sell to Purchaser, certain assets representing
all of the assets utilized by Seller in connection with the operation of
Seller's Business; and
NOW, THEREFORE, in consideration of the mutual agreements, covenants,
representations and warranties contained herein, the parties hereby agree as
follows:
1. DEFINITIONS. The following terms, when used in capitalized form within
this Agreement, or within any exhibit or schedule to this Agreement in which
the terms are not otherwise defined, shall have the following meanings:
Agreement shall mean this Asset Purchase Agreement, and all
exhibits, schedules, letters, certificates and instruments attached hereto or
referred to herein.
Assets shall mean all those assets owned by Seller and utilized in
the operation of the Business other than Excluded Assets listed and described
on Exhibit 2, including, without limitation, the assets listed and described
on Exhibit 1, which assets represent substantially all of the material assets
used by Seller in connection with the conduct of the Business other than the
Excluded Assets listed and described on Exhibit 2.
Business shall mean the business of the Seller conducted as of the
date hereof, being (1) the TRAMS software systems and modules which, includes
but it not limited to, collecting, editing, warehousing, correcting,
reformatting, settling and routing transactions between one or more sources
or destinations ("TRAMS"); and (2) the SPA business which includes, but it
not limited to, the maintenance and processing activities for the Simplicity
Payment Association ("SPA"), and all other business activities of the
Seller, all as further represented by the Financial Records.
Closing shall mean that certain Closing consummated pursuant to the
provisions of Section 4.
Closing Date shall mean the date of the Closing to be held pursuant
to the provisions of Section 4.
<PAGE>
Environmental Law shall mean any law, statute, regulation, rule,
order, consent decree, settlement agreement or governmental requirement,
which relates to or otherwise imposes liability or standards of conduct
concerning discharges, releases or threatened releases of noises, odors or
any pollutants, contaminants or hazardous or toxic wastes, substances or
materials into ambient air, water or land, or otherwise relating to the
manufacture, processing, generation, distribution, use, treatment, storage,
disposal, cleanup, transport or handling of pollutants, contaminants or
hazardous or toxic wastes, substances or materials, including (but not
limited to) the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, the Resource Conservation and Recovery Act
of 1976, as amended, any other so called "Superfund" or "Superlien" law, the
Toxic Substances Control Act, or any other similar Federal, state or local
statutes.
Environmental Permit shall mean any of the Permits required by or
pursuant to any applicable Environmental Law.
Facility or Facilities shall mean those certain real properties and
improvements thereon from which the Business has been transacted as more
fully described within that schedule of real property set forth on Schedule
7.3(ii).
Financial Records shall mean, for purposes of this Agreement, those
Financial Statements and other documents attached to Schedule 7.4 of this
Agreement.
Governmental Authority shall mean the government of the United
States or any state or political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
Intellectual Property shall mean all trademarks, service marks, and
trade names, together with all trade secrets, inventions, formulations,
programs, designs, or drawings, including without limitation, software
relating to the Business, owned or registered in the name of the Seller or to
which Seller has rights as licensee, including without limitation, TRAMS or
SPA, and any name or names derived therefrom, and any other trade names used
by Seller and the goodwill associated therewith.
Permits shall mean all of the licenses, permits, variances, interim
permits, permit applications, approvals or other authorizations under any
law, statute, rule, regulation, order or ordinance applicable to the Company
or otherwise required by any Governmental Authority in connection with the
operation of the Business.
Seller's Knowledge or words of similar import shall mean the actual
knowledge of the Seller's directors and the Seller's shareholders as well as
the actual knowledge of the Seller's president, all vice presidents,
secretary, treasurer after due investigation and inquiry.
-2-
<PAGE>
Waste or Contamination Site shall mean any site or location,
wherever located (including, but not limited to, any waste storage container,
drain, landfill, trench, ditch, well, pit, pond, lagoon, impoundment, or
warehouse) where pollutants, contaminants or hazardous or toxic wastes,
substances or materials used or generated by the Seller shall have been
deposited, stored, treated, reclaimed, disposed of, placed or otherwise come
to be located.
2. PURCHASE AND SALE OF ASSETS.
2.1. Assets to be Purchased and Sold. On the terms and conditions set
forth herein, at the Closing, the Seller agrees to sell and transfer to
Purchaser all right, title and interest of Seller in and to all of the
Assets, free and clear of all liens, charges, restrictions and encumbrances
of every kind and nature whatsoever except for the permitted liens,
restrictions and encumbrances reflected on Schedule 7.2.
2.2. Manner of Transfer. The transfer of the Assets to Purchaser at
Closing shall be effected by bills of sale, certificates of title,
assignments, endorsements, licenses, registrations and other good and
sufficient instruments of transfer and conveyance in form reasonably
requested by Purchaser.
2.3. Excluded Assets. All of the assets listed and described on Exhibit
2 are hereby expressly excluded from the Assets and are not being acquired by
Purchaser or transferred by Seller hereunder.
3. ASSUMPTION OF ONLY SPECIFIED LIABILITIES. Except for the liabilities
expressly assumed by the Purchaser as set forth on Exhibit 3, the Purchaser
shall not assume or take subject to, and shall not have any liability for any
obligations, liabilities or indebtedness of the Seller with respect to the
Assets or the operation of the Business, whether absolute, accrued, fixed or
contingent, known or unknown or otherwise. All liabilities and obligations of
Seller not expressly hereby assumed shall continue to be liabilities and
obligations of Seller following the Closing.
As to any liabilities or obligations expressly assumed by the Purchaser
that are guaranteed by the Shareholders, the Purchaser shall either satisfy
such liabilities or obligations or cause the Shareholders' guarantee to be
canceled, at Purchaser's election, at the Closing.
4. THE CLOSING. Subject to the waiver or the satisfaction of all
conditions to Closing set out in Sections 11, 12 and 13 herein, the sale and
purchase provided in this Agreement shall be consummated at a Closing to be
held at the offices of Morris, Manning & Martin, at 10:00 a.m., local time,
on July 13, 1994, or at such other place and time, or on such other prior
date as the parties hereto shall mutually agree upon; time being of the
essence.
<PAGE>
5. PURCHASE PRICE.
5.1. In consideration of the sale and transfer by the Seller to the
Purchaser of the Assets, Purchaser shall pay and deliver the purchase price
as follows ("Purchase Price"):
(a) Cash at Closing. Purchaser shall pay and deliver to Seller the
sum of Fifty Thousand and No/100 Dollars ($50,000.00), payable by
Purchaser to Seller at Closing in readily available funds.
(b) Installment Payments. Purchaser shall pay and deliver to Seller
installment payments in the aggregate amount of Three Hundred
Thousand and No/100 ($300,000.00), payable in twelve (12) monthly
installments of $25,000.00 each, beginning on August 1, 1994, and
ending on July 1, 1995, evidenced by a promissory note in the form
attached as Exhibit 7. Such note shall either be made by or
guaranteed by CCS Technology Group, Inc.
5.1. [Reserved!
5.2. [Reserved!
5.3. Allocation of Purchase Price. Purchaser and Seller acknowledge
and agree that the payment of the Purchase Price shall be allocated among the
Assets in the manner set forth in Exhibit 4 attached hereto.
5.4. Sales and Transfer Taxes and Fees. Seller and Purchaser agree to
cooperate reasonably to do all things necessary to ensure that appropriate
exemptions are obtained from payment of any sales or use tax with respect to
any sale, conveyance, assignment, transfer or delivery of the Assets. All
applicable sales, use, transfer, documentary, or other similar taxes and fees
that are determined to be payable by reason of or in connection with the
sale, conveyance, assignment, transfer or delivery of the Assets, whether
levied on Seller or Purchaser, shall be borne and paid by Seller.
6. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby represents
and warrants, and agrees to represent and warrant at Closing, that:
6.1. Formation, Good Standing and Power. Purchaser has been or will be
at Closing duly formed and validly existing as a corporation in good standing
under the laws of the State of Florida, with power to own its properties and
conduct its business as now being conducted and is or will be at Closing duly
qualified for the transaction of business and in good standing under the laws
of the State of Florida.
<PAGE>
6.2. Due Authorization. This Agreement and the performance by the
Purchaser hereunder and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate actions of
Purchaser. This Agreement has been or will be at Closing duly authorized,
executed and delivered by Purchaser, and is a valid and binding obligation of
Purchaser enforceable in accordance with its terms, except as the enforcement
hereof may be limited by bankruptcy and other laws affecting the rights of
creditors generally and except that the enforceability of the obligations
hereunder is subject to general principles of equity (regardless of whether
such enforceability is considered in a proceeding at equity or at law).
6.3. No Breach of Conflicting Laws or Agreements. The execution and
delivery of this Agreement by Purchaser does not and the performance of this
Agreement and the consummation of the transactions herein contemplated will
not result in any breach or violation of any of the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed of trust, note
or agreement, lease or other agreement or instrument to which Purchaser or
any of its properties is a party or by which Purchaser is bound, Purchaser's
articles of incorporation or bylaws, or any statute, order, rule or
regulation of any court or governmental agency or body having jurisdiction
over Purchaser or any of its properties; and no consent, approval,
authorization or order of any court or governmental agency or body is
required for the consummation by Purchaser of the transactions contemplated
by this Agreement.
7. REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS. Seller and
the Shareholders hereby, jointly and severally, represent and warrant, and
agree to represent and warrant at Closing, that:
7.1. Corporate Statue of Seller; Due Authorization; No Conflict.
(a) Incorporation, Good Standing and Power. Seller has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of the State of Florida with corporate
power to own its properties and conduct its business as now being
conducted, and has been duly qualified as a foreign corporation
for the transaction of business and is in good standing under the
laws of each other jurisdiction in which it owns or leases
properties or conducts any business so as to require such
qualification, except where failure to be so qualified would not
materially and adversely affect the business properties or
condition (whether financial or otherwise) of Seller. Complete and
correct copies of Seller's Articles of Incorporation and Bylaws,
as amended to date, have been delivered to Purchaser and are
included in Schedule 7.3(i) hereto. Seller has no subsidiaries or
equity interest in any other entity.
(b) Due Authorization. This Agreement, and the performance by the
Seller hereunder and the consummation of the transactions
contemplated hereby have
<PAGE>
been duly authorized by all necessary corporate action of the
Seller. This Agreement has been duly executed and delivered by
Seller, and the Agreement is a valid and binding obligation of
Seller and Shareholders enforceable in accordance with its terms,
except as the enforcement hereof may be limited by bankruptcy and
other laws affecting the rights of creditors generally and except
that the enforceability of the obligations hereunder is subject to
general principles of equity (regardless of whether such
enforceability is considered in a proceeding at equity or at law).
No other corporate action on the part of the Seller is necessary
to authorize the execution and delivery of this Agreement and the
performance by the Seller of its obligations hereunder.
(c) No Breach or Conflict With Laws or Agreements; No Approvals or
Notices Required. The execution and delivery of this Agreement by
Seller does not, and the performance by Seller of Seller's
obligations under this Agreement and the consummation by Seller of
the transactions herein contemplated will not, (i)violate (without
the giving of notice or lapse of time or both) any provision of
law applicable to Seller, (ii)violate Seller's certificate of
incorporation or bylaws, as amended to date, or any statute,
order, or regulation currently in force or of any court or
governmental agency or body having jurisdiction over Seller or any
properties of Seller, (iii)result in any breach or violation of
any terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, promissory note, lease or
other agreement or instrument to which Seller is a party or by
which Seller or any of its properties are bound, result in
acceleration of (or give anyone the right to accelerate) the
performance of, any obligation of Seller, or result in the
creation of any lien or charge upon any of the Assets, and
(iv)except as specified on Schedule 10.3 require consent,
approval, filing or notice under any agreement or provision of law
applicable to the Seller.
7.2. Title to Assets, Powers to Convey and Condition.
(a) Assets. Exhibit 1 comprises a complete and accurate list of
substantially all of the material Assets and Exhibit 2 comprises a
complete and accurate list of the Excluded Assets. Subject to the
consents specified on Schedule 10.3, Seller has the right, power
and authority to enter into this Agreement and, at Closing, will
have the right, power and authority to sell, convey, assign,
transfer and deliver the Assets. The Assets constitute and
represent all of the assets that are utilized by Seller to conduct
the Business. Except as set forth on Schedule 7.2, Seller has good
and valid title to the Assets free and clear of all mortgages,
pledges, liens, security interests, encumbrances and restrictions
of every kind and nature. Except as specified on Schedule 7.2,
upon transfer of the Assets to the Purchaser and payment therefor
pursuant hereto, Purchaser shall have good and marketable title to
the Assets or, in the case of leasehold interest, valid and
enforceable leasehold interest, free and clear of all mortgages,
deeds of trust, pledges, liens, charges, security interests,
encumbrances, claims and restrictions whatsoever.
<PAGE>
(b) Real Property Owned or Leased: Permitted Liens. Schedule 7.3(ii)
contains a list and a brief description of all real estate
relating to or used in the operation of the Business, and the
improvements (including buildings and other structures) located on
such real estate (including a brief description of the use to
which such property is being employed) and the termination date or
notice requirement with respect to termination, annual rental and
renewal or purchase options. All of such real estate and
improvements thereon are in good condition and working order,
ordinary wear and tear excepted. Seller owns no real property.
With respect to real estate leased (as listed on Schedule
7.3(ii!): (i)all such leases are in full force and effect and
constitute valid and binding obligations of Seller, and to
Seller's knowledge, the other parties thereto, (ii)there have not
been any and there currently are no material defaults thereunder
by Seller or to Seller's knowledge any other party, (iii)no event
has occurred which (whether with or without notice, lapse of time
or the happening or occurrence of any other event) would
constitute a material default thereunder entitling the lessor
thereof to terminate any such lease, (iv)the continuation,
validity and effect of all such leases under the current rental
terms and other current material terms thereof will in no way be
affected by the transfer of such leases to Purchaser under this
Agreement or, if any would be affected, Seller will have caused an
appropriate consent as listed on Schedule 10.3 to such transfer to
be delivered to the Purchaser at or prior to the Closing at no
cost or other adverse consequence to the Purchaser, and (v)all
Permitted Liens, to which such leases are subject, are described
in Schedule 7.2. All improvements located on such real estate,
whether owned or leased by Seller, conform in all material
respects to all applicable federal, state and local laws and
regulations and such properties are zoned for the various purposes
for which such real estate is currently being used.
As used herein, the term "Permitted Liens" means any and all
mortgages, pledges, liens, charges, security interests,
encumbrances and restrictions to which any of the Assets are
subject and which are listed on Schedule 7.2.
(c) Personal Property Owned or Leased. Exhibit 1 contains a list of
each material item of machinery, equipment, office furniture,
automobiles, trucks and other personal property (collectively, the
"Personal Property") of the Business being transferred to the
Purchaser as part of the Assets, including a description of all
Permitted Liens to which such Personal Property is subject. All
such Personal Property is in good condition and working order and
the operation or use thereof is not in violation of any applicable
building code, zoning ordinance, lease, law or regulation.
Schedule 7.3(ix) contains a list and brief description of each
lease or other agreement under which Seller leases, licenses,
holds or operates any item of Personal Property in connection with
the Business. With respect to such leases or other agreements,
(i)all such leases and agreements are in full force and effect and
constitute legal, valid and binding obligations of Seller, and to
Seller's knowledge,
<PAGE>
the other parties thereto, (ii)there have not been and there
currently are not any material defaults thereunder by Seller, or
to Seller's knowledge, any other party, (iii)no event has occurred
which (whether with or without notice, lapse of time or the
occurrence of any other event) would constitute a material default
thereunder, (iv)the continuation, validity and effectiveness of
all such leases and agreements under the current rental terms and
other current material terms thereof will in no way be affected by
the transfer of such leases and agreements to Purchaser under this
Agreement or, if any would be affected, Seller has caused
appropriate consent as listed on Schedule 10.3 to such transfer to
be delivered to Purchaser at or prior to the Closing at no cost or
other adverse consequences to the Purchaser, and (v)all Permitted
Liens to which such leases and agreements are subject, are
described in Schedule 7.2. Inventory transferred as part of the
Assets hereunder comprises only stock of quantity and quality
consistent with the quantity and quality of inventory historically
maintained by the Seller.
7.3. Contracts, Agreements and Other Documents. Attached to Schedule
7.3(i) are complete and correct copies of Seller's Articles of Incorporation
(including all amendments thereto) and Bylaws. Prior to Closing, Seller will
provide to Purchaser and its counsel complete and accurate copies or
originals of all minutes of Shareholders' and Board of Directors' meetings or
other meetings of any governing group, board, body or committee, unanimous
consents taken in lieu of formal meetings thereof, and any other written
evidence of action taken by any controlling group of Seller in connection
with the sale contemplated by this Agreement. Schedules 7.3(ii) through
7.3(ix) together with disclosures made pursuant to other Schedules constitute
a complete and correct list of the following described documents which
pertain in any way to the Assets or the Business, complete and correct copies
of which have been provided or made available to Purchaser and its counsel.
Schedule Description
- -------- -----------
7.3 (ii) All deeds of title and other title documents pertaining to
any real property (including a brief description of such documents
and of the use to which such property is being employed), any
interest therein, now or previously owned of record or
beneficially by the Seller and used as a part of the Business,
together with copies thereof; and all lease agreements for all
property, real or personal, to which Seller is a party, including
without limitation lease agreements for all Facilities, together
with complete schedules pertaining thereto listing individually
all such property leased by item.
7.3 (iii) All insurance policies currently in force issued to or in
favor of Seller covering any or all risks of any nature whatsoever.
7.3 (iv) All loan agreements, notes payable or other debt instruments
or obligations issued, guaranteed or assumed by Seller or for
which Seller or the Assets are otherwise obligated or bound
(including any guaranty or obligation of
<PAGE>
any Shareholders on behalf of Seller or in connection with the
Business or Assets).
7.3 (v) All contracts in Seller's possession which pertain in any way
to the conduct or operation of the Business, including without
limitation, union agreements, sale and lease-back agreements,
conditional sale agreements, bids, equipment maintenance
agreements, marketing or advertising agreements, sale or supply
contracts, purchase contracts, joint venture agreements, license
agreements, royalty agreements, secrecy, confidentiality and
non-disclosure agreements, commission brokerage, agency or similar
agreements, escrow agreements, delivery agreements, shipment
agreements, and any other agreement in Seller's possession in any
way pertaining to the Business.
7.3 (vi) All loans or advances (hereinafter "Company Loans")
outstanding from Seller to any officer, director, shareholder,
employee, agent, or independent contractor of the Business, or to
any person related to any of the foregoing, or to any corporation,
partnership or other entity of which any of the foregoing possess
any interest, such list to state the amount of the loan, the
person or entity obligated to repay, the interest rate thereon,
and the terms of repayment.
7.3 (vii) A summary of the terms of all material oral contracts of
which any officer of Seller has knowledge, to the extent that any
such oral contract will be binding upon the Business following the
Closing Date.
7.3 (viii) All franchise or license agreements held or granted by
the Seller or necessary for the operation of the Business of the
Seller.
7.3 (ix) All equipment leases held or granted by the Seller or
necessary for the operation of the Business of the Seller.
7.3 (x) A listing of all material defaults with respect to any of the
matters referenced in Schedules 7.3(ii)-(ix).
To Seller's knowledge, except as set forth in Schedule 7.3(x), all notes
and debt instruments issued, guaranteed or assumed, contracts or agreements,
referred to in this Agreement or any Schedule hereto are valid and in full
force and effect and are enforceable by Seller in accordance with the
respective terms, except as the enforcement thereof may be limited by
bankruptcy and other laws affecting the rights of creditors generally and
except that the enforcement of the obligations thereunder is subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding of equity or at law). Except as set forth on
Schedule 7.3(x), Seller has not breached, or received notice of any claim
that Seller has breached, any provision of, and Seller is not in material
default, and has not received notice of any claim that Seller is in default,
under the terms of any note, debt instrument, contract,
<PAGE>
agreement, plan, lease, policy, franchise or license, and, to Seller's
knowledge, no other party has breached any provision of, or is in default
under the terms of, any note, debt instrument, contract, agreement, plan,
lease, policy, franchise or license, to Seller's knowledge, no facts or
circumstances exist, which with the passage of time or the giving of notice,
will constitute breach or default thereunder, and no claims, defenses or
offsets are available thereunder. Except as set forth on Schedule 7.3(i),
Seller has no outstanding power of attorney.
7.4. Financial Records. Attached for the Seller and the Business as
Schedule 7.4 are: (i) a balance sheet as of December 31, 1992, and related
statements of income for the twelve months ended December 31, 1992, together
with related statements of stockholders' equity and statements of cash flows;
(ii) a balance sheet as of December 31, 1993, and a related statement of
income for the 11 month period ended December 31, 1993, (collectively the
"Financial Statements"). Such Financial Statements have been prepared in
accordance with generally accepted accounting principles, and fairly present
in all material respects the financial position and results of operations of
the Seller and the Business as of the dates thereof, except that the
financial statements do not contain all of the footnotes required by
generally accepted accounting principles are subject to year-end adjustments
and are not necessarily indicative of the results to be expected for the year
ending December 31, 1993. There has been no material adverse change in the
general affairs, management, financial position, stockholders' equity or
results of operations of the Seller and the Business since December 31, 1993,
nor, to Seller's knowledge, has there occurred any event or condition that
might reasonably be expected to result in the future in such a material
adverse change. Purchaser agrees that Purchaser has not relied on any
financial forecast or projections provided to Purchaser by Seller, or
Seller's officers, directors or employees.
7.5. Actions After the Financial Statements. Except as set forth on
Schedule 7.5, since December 31, 1993, Seller has not, with respect to the
Assets or the Business (i)discharged or satisfied any lien or encumbrance,
other than in the ordinary course of business, (ii) mortgaged, pledged or
subjected to lien, charge or other encumbrance any Assets, other than in the
ordinary course of business, (iii)sold or transferred any Assets or canceled
or forgiven any debts or claims other than in the ordinary course of
business, (iv)waived any rights to receive financial compensation or other
income, other than in the ordinary course of business, (v)changed any
accounting methods or practices, (vi)granted to any officer or employee any
increase in compensation in excess of the amounts thereof in effect as of
December 31, 1993, or any severance or termination pay, or entered into any
employment agreement with any officer or employee, (vii)adopted or amended
any collective bargaining, bonus, profit sharing, compensation, stock option,
pension, retirement, deferred compensation or other plan, agreement, trust,
fund or arrangement for the benefit of employees, (viii)suffered any material
damage, destruction or loss (whether or not covered by insurance),
(ix)entered into any transactions (including the making of loans) other than
in the ordinary course of its business and other than transactions
contemplated by this Agreement, (x)amended, modified, extended or terminated
any agreement to which Seller is a party, written or oral which is material
to the operation of the Business, or (xi)entered into any agreement to do any
of the things prohibited by clauses(i) through (x) above.
<PAGE>
7.6. No Undisclosed Liabilities. As of December 31, 1993, Seller had no
material obligations or liabilities of any nature, whether absolute, accrued,
fixed, to its knowledge, contingent or otherwise, whether due or to become
due with respect to or in connection with the Business, except and to the
extent disclosed in the Financial Statements. Since December 31, 1993, Seller
has not incurred or become subject to any material liabilities, debts or
obligations of any nature (regardless of when they arose) whether absolute,
accrued, to its knowledge, contingent or otherwise, whether due or to become
due, other than those arising in the ordinary -course of business or
resulting from transactions contemplated by this Agreement.
7.7. Taxes. Seller has filed all material federal, state, county and
local income, withholding, social security, unemployment, payroll, excise, ad
valorem, sales, use, franchise, license and other tax returns which at any
time were required to be filed by Seller in connection with the Business and
such returns were true, accurate, correct and complete, in all material
respects, when filed, and nothing has come to the attention of Seller which
would indicate that any such returns are not now true, accurate, correct or
complete. Seller has paid all taxes, licenses, assessments, fees, penalties,
interest and other governmental charges and assessments which have become due
prior to Closing, or are required to have been deposited pursuant to such
returns or otherwise, or pursuant to any assessments against and received by
Seller with respect to the Assets or the Excluded Assets. Neither the Seller
nor any predecessor to the Seller has waived any statute of limitation in
connection with, or granted any extension of a period for assessment of any
such taxes, licenses, assessments, fees, penalties, interest or other
governmental charges and assessments. No federal, state or local tax
elections have been made other than as specifically reflected on the
Financial Statements.
7.8. Governmental Regulation and Compliance With Law.
(a) Seller has neither received nor failed to comply with any notice
of violation of any applicable zoning, employee safety (including
OSHA), environmental, toxic substance, hazardous waste or other
statute, law, ordinance, rule, regulation or order relating to the
Business or the facilities used in connection with the conduct of
the Business, the Assets or otherwise. To Seller's knowledge,
there is presently no such violation or grounds therefor which
would materially adversely affect the continued operation of the
Business or the Assets or the Facilities of the Business. Seller
is not in material violation of any law, regulation, ordinance or
rule applicable to it or the Business. All permits, concessions,
grants, franchises, licenses and other governmental authorizations
and approvals material to the conduct of the Business have been
duly obtained and are in full force and effect, and, to Seller's
knowledge, there are no proceedings pending or threatened that may
result in a revocation, cancellation or suspension or any adverse
modification, of any thereof.
(b) Except as disclosed on Schedule 7.8: (a) Neither the Business or
operation of the Business nor any of the Assets or Real Property
as currently used violate, in any material respect, any applicable
Environmental law in effect as of the date hereof
<PAGE>
and, to Seller's knowledge, no condition or event has occurred
which, with notice or the passage of time or both, would
constitute a material violation of any such law; (b) the Seller
has not stored or used any pollutants, contaminants or hazardous
or toxic wastes, substances or materials on or at the Real
Property, except for inventories of chemicals which are to be used
in the ordinary course of the conduct of the Business (which
inventories has been stored or used in accordance with all
applicable Environmental permits and all Environmental Laws); (c)
neither the Seller nor any of its Affiliates has received any
notice from any Governmental Authority or private entity advising
it that the Real Property or the operation of the Business is in
violation of any Environmental Law or any applicable Environmental
Permit or that any of them is responsible (or potentially
responsible) for the cleanup of any pollutants, contaminants or
hazardous or toxic wastes, substances or materials at, on or
beneath the Real Property or at, on or beneath any land adjacent
thereto or in connection with any Waste or Contamination Site; (d)
neither the Seller nor the operation of the Business is the
subject of Federal, state, local or private litigation or
proceedings involving a demand for damages or other potential
liability with respect to violations of Environmental Laws; (e)
the Seller has not buried, dumped, disposed, spilled or released
any pollutants, contaminants or hazardous or toxic wastes,
substances or materials on, beneath or about the Real Property or
any property adjacent thereto; and (f) no byproducts of any
manufacturing process or operation of the Business which may
constitute pollutants, contaminants or hazardous or toxic wastes,
substances or materials under any Environmental Law are currently
stored or otherwise located at the Real Property. The Seller has
timely filed all reports required to be filed under any applicable
Environmental Laws with respect to the Real Property and the
operation of the Business, and has generated and maintained all
required data, documentation and records, under any applicable
Environmental Laws with respect thereto.
7.9. Employee Benefit Plans.
(a) Employment Policies and Benefit Plans. Attached hereto as
Schedule 7.9 is a complete and accurate list of all written plans,
programs, practices, policies and other individual and group
arrangements and agreements of any kind or description (including
any multi-employer plans) of Seller with respect to the Business
or its employees which provide or describe (i)the employment and
payroll policies and practices for employees and officers of the
Business, including any affirmative action plans or programs,
(ii)current and deferred compensation, commission, reimbursement,
severance, vacation, stock purchase, stock option, bonus and
incentive compensation benefits for employees, officers,
directors, agents and independent contractors of the Business and
(iii)the medical, hospital, life, health, accident, disability,
death and other fringe and welfare benefits for employees,
officers, directors, agents and independent contractors of the
Business, including any split-dollar life insurance policies. All
of such plans,
<PAGE>
programs, practices, policies and other individual and group
arrangements and agreements and any trust, custodial, investment,
indemnification or other arrangements, oral or written, which are
a part of, or which are entered into by Seller as a result of,
such plans, programs, practices, policies and other individual and
group arrangements and agreements are referred to hereinafter as
"Benefit Programs." In addition, all written reimbursement,
compensation, commission, trust, fringe benefit, payroll or
employment practices, procedures, policies or agreements of any
kind or description of the Business (hereinafter referred to as
"Employment Policies") are described fully and accurately on
Schedule 7.9. Except as listed or described on Schedule 7.9,
there are no Employment Policies or Benefit Programs relating to
employees, directors, agents and independent contractors of the
Business.
(b) ERISA and Code. Except as set out on Schedule 7.9, Seller does not
have a profit sharing, pension plan, or any other Benefit Programs
or Employment Policies subject to regulation under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). To
Seller's knowledge there are no violations of ERISA under such
Benefit Programs or Employment Policies or under any other
employee benefit plans. No such Benefit Programs or Employee
Policies, nor any trustee or administrator thereof, has engaged in
any transaction or practice that would subject the Purchaser to a
tax or penalty under ERISA or the Internal Revenue Code of 1986,
as amended (the "Code") as a result of such transaction or
practice. There have been no withdrawals from any multi-employer
pension plan which would subject the Business or the Assets to
withdrawal liability (as defined in ERISA or the Code).
7.10. [Reserved]
7.11. Collective Bargaining Agreements. None of the employees of the
Seller are members of a union, and Seller is not a party to any collective
bargaining agreement. Within the past three (3) years, Seller has not been
the subject of any union activity or labor dispute, nor has there been any
strike of any kind called, or threatened against Seller in any way effecting
the operation of the Business; and Seller has not violated any applicable
federal or state law or regulation relating to labor or labor practices with
respect to the Business. To Seller's knowledge, Seller is not subject to any
efforts by any union or other labor group to establish or organize a union or
other collective bargaining group.
7.12. Legal and Governmental Proceedings Except as set forth on Schedule
7.12, there is no action, suit, investigation or proceeding pending or, to
the best of Seller's and Shareholder's knowledge, threatened, against Seller
or its officers, directors or Shareholders, with respect to the Shareholders
individually, or the Business or the Assets or of which the Business or the
Assets are subject. Schedule 7.12 comprises an accurate list of the name of
the court or agency in which any such proceeding is pending, the date
instituted, the principal parties thereto, a description of the factual basis
alleged to underlie the proceeding and the relief sought.
<PAGE>
7.13. Accounts Receivable. All Accounts Receivable reflected on the
Financial Statements represent sales actually made or services actually
performed in the ordinary course of business in bona fide transactions
completed in accordance with the terms and provisions contained in the
documents related thereto. Except as set out on Schedule 7.13 which provides
for an age listing of Accounts Receivable, as of the closing date, all
Accounts Receivable will be collected in full. Furthermore, except as set out
on Schedule 7.13, there are no setoffs, counterclaims and disputes asserted
against, and no discounts or allowances from, the Accounts Receivable as of
the closing date. As provided on Schedule 7.13, the Seller shall assign all
net receivables through December 31, 1993 to Daniel Stavros and D.J.
Youngblood Stavros, collectively, including but not limited to: (a) all
invoiced but uncollected amounts of existing purchaser customer accounts
receivable as of December 31, 1993 for work performed prior to such date; (b)
all non-invoiced remaining, license and installation fees owed by G.E.
Capital pursuant to written contracts; and (c) the SPA deferral license fee
(including interest) as stated in the SPA Agreement referenced on Schedule
7.13. The Purchaser will use reasonable best efforts to assist Dan Stavros
and D.J. Youngblood Stavros in the collection of such amounts, so long as
such efforts do not detract from ongoing Business.
7.14. Customers and Prospects. The customers and identified, material
prospects of the Seller and any compensation or arrangements with respect
thereto, are set out on Schedule 7.14 attached hereto.
7.15. Intellectual Property. Schedule 7.15 contains a true and accurate
list of all material Intellectual Property used in the Business of the
Seller. To Seller's knowledge, no Intellectual Property infringes upon or
conflicts with any rights claimed therein by third parties. Other than as
described on Schedule 7.15, Seller and Shareholders do not manufacture or
sell products or services which are the subject of patents, patent
applications, copyrights, copyright applications, trademarks, trademark
applications, trade styles, service marks, or trade secrets owned by or
licensed to third parties. Seller has not received notice that the
manufacture, use or sale by Seller of its products or services violates or
infringes upon any claims of any United States or foreign patent or patent
application owned or licensed or held by any third party. Except as set on
Schedule 7.15, the Seller and Shareholders have not granted any person, firm
or corporation the right to use such Intellectual Property.
7.16. Disclosure. No covenant, representation or warranty made by Seller
or Shareholder in this Agreement knowingly contains or will contain any
untrue statement of a material fact, or omits or will omit to state a
material fact, necessary to make the statements contained herein or therein
not misleading. The information provided and to be provided by Seller or
Shareholders to Purchaser in this Agreement or in the Schedules or Exhibits
or in any other statement, certificate or writing delivered to Purchaser by
Seller or Shareholders, does not and will not knowingly contain any untrue
statement of a material fact, or omit to state a material fact required to be
stated herein or therein or necessary to make the statements and facts
contained herein or therein, in light of the circumstances in which they are
made, not false or misleading. Copies of all
<PAGE>
documents heretofore or hereafter delivered or made available to Purchaser
were or will be complete and accurate copies of such documents.
7.17. Adequacy of Assets Purchased. The Assets purchased by Purchaser
include all rights, properties, interest in properties and assets (except for
Excluded Assets) necessary for Purchaser to carry on the Business of the
Seller as presently conducted by the Seller. The foregoing notwithstanding,
Purchaser hereby acknowledges termination of that Heads of Agreement dated
December 1, 1992, by and between Seller, Shareholders and CCN Management
Systems, Inc. ("Heads of Agreement") and further acknowledges that Seller
no longer has any rights pursuant to the Heads of Agreement.
8. COVENANTS OF SELLER. Seller and Shareholders hereby, jointly and
severally, covenant and agree as follows:
8.1. Best Efforts to Effect Closing. From and after the date of this
Agreement and prior to the Closing Date, Seller will promptly advise
Purchaser in writing of any material change in the general affairs,
management, financial position, or results of operations of the Business, and
Seller will:
(a) carry on the Business in, and only in, the usual, regular and
ordinary course in substantially the same manner as heretofore and
use all reasonable efforts to preserve intact its present business
organization, keep available the services of its present officers,
employees and independent contractors, and preserve its
relationship with others having business dealings with it to the
end that its good will and going business shall be unimpaired at
the Closing Date;
(b) maintain all of its structures, equipment and other tangible
personal property as it now exists, normal wear and tear excepted;
(c) keep in full force and effect insurance comparable in amount and
scope of coverage to insurance now carried by it;
(d) perform, in all material respects, all of its respective obligations
under agreements, contracts and instruments relating to or
effecting its properties, assets and businesses including but not
limited to the Business and the Assets;
(e) maintain its books of account and records in an accurate and
complete manner consistent with prior practice;
(f) comply in the same manner as heretofore with all statutes, laws,
ordinances, rules and regulations applicable to it and to the
conduct of its Business;
<PAGE>
(g) not create, incur, assume, guarantee or otherwise become liable with
respect to any indebtedness with respect to the Business or the
Assets, without the prior consent of the Purchaser;
(h) not amend its Articles of Incorporation or Bylaws in any manner
affecting the Business or Assets;
(i) not make any material expenditures, additions or capital
improvements with respect to the Assets or the Business without
the prior written consent of the Purchaser;
(j) not take, or permit to be taken, any action, which is represented
and warranted in clauses (i) through (xi) of Section 7.5 hereof
not to have been taken since December 31, 1992;
(k) not modify any real property lease to which it is a party, or sell,
refinance or accept payment with respect to any Asset or the
Business, or modify, alter or extend any real or personal property
lease to which Seller is a party, or make any acquisition by means
of a merger or otherwise, or a material amount of assets of
securities, or enter into an agreement for any sale, lease,
encumbrance or other disposition of a material amount of assets or
securities, or enter into any material contract or give any
release or relinquishment of any material contract rights;
(1) obtain Purchaser's prior written consent before engaging in any
activity beyond the regular and ordinary course of the Business;
(m) at Purchaser's expense, give to Purchaser and its representatives
full access to its properties, books, records, contracts,
commitments and all such information and documents relating to the
Assets and the Business, as Purchaser may from time to time
reasonably request, permit Purchaser to make such inspections as
it may reasonably require, and cause its officers and employees to
assist Purchaser with gaining access to and understanding such
financial and operating data and other information with respect to
the Assets and the Business as the Purchaser may from time to time
request.
8.2. Legal Opinion. Seller shall cause counsel engaged by it to execute
and deliver at Closing an opinion in the form attached hereto as Exhibit 5.
8.3. Transfer of Assets. At Closing, Seller agrees to transfer the
Assets to Purchaser free and clear of all liens, claims, encumbrances,
security interests or restrictions of any kind except as set forth on
Schedule 7.2, and to execute and deliver to Purchaser documents of
conveyance, including, but not limited to, bills of sale, assignments,
consents, registrations and general warranty deeds, in form reasonably
requested by Purchaser.
<PAGE>
8.4. Release of Liens, Claims, Encumbrances, etc. At closing, Seller shall
provide to Purchaser, in form reasonably satisfactory to Purchaser's counsel,
written documents fully releasing and terminating the rights of any and al
persons or entities having any claim, right, lien, security interest or
encumbrance in or to any of the Assets excepting only those items representing
claims with respect to liabilities specifically assumed by Purchaser.
8.5. Update of Schedules or Exhibits. Seller agrees that from time to time
and on the Closing Date, Seller shall update all such Schedules or Exhibits to
this Agreement so that each such Schedule or Exhibit is true, complete and
accurate in all material respects at all times and as of the Closing Date, and
Seller shall advise Purchaser promptly of any materially adverse changes in the
financial affairs of Seller or the financial status of the Assets or the
Business.
8.6. Employees of Seller. Purchaser shall extend an offer of employment to
those current full-time employees of the Seller in the Business as set out on
Schedule 8.6 attached hereto on or immediately following the Closing Date.
Seller agrees at all times to encourage all such employees to make application
for and seek employment with Purchaser.
(a) The terms for employment of all employees hired by the Purchaser,
including compensation and other employee benefits, shall be
determined solely by agreement between the Purchaser and each such
employee; provided, however, that each full-time employee who
accepts employment with the Purchaser shall receive a commitment
for a monthly salary as set out on Schedule 8.6 with credit for the
previous term of that full-time employee's employment with the
Seller for the purposes of determining vacation benefits to which
such employee shall be entitled with Purchaser.
(b) Accrued vacation time for all employees showing the total accrued
dollar amount owed to each such employee for accrued vacation shall
be set out on Schedule 8.6. Schedule 8.6 shall be certified by the
chief executive officer or chief financial officer of Seller.
(c) Jeff Walker, Mary Sackett, Dan Devaney, Michael Lyn and Hal Smith,
upon acceptance of employment offers by the Purchaser, shall
receive performance review sessions on or before December 31, 1993.
As a part of such performance review sessions, Daniel Stavros and
President of the Purchaser shall determine bonus payments, if any.
(d) All employees who are offered and accept employment with the Purchaser
shall receive those benefits granted to the current employees of
the Purchaser in accordance with those benefit programs provided by
such Purchaser, from time to time. Such employees, however, shall
receive credit for their prior full-time employment by the Seller.
In addition, Daniel Stavros, D.J. Youngblood Stavros, Hal Smith and
Mary Sackett shall receive credit for time worked for Purchaser's
parent corporation prior to their employment by Seller.
<PAGE>
(e) Subject to Purchaser's management discretion and direction, Seller's
employees who accept employment with the Purchaser shall be assigned
to TRAMS or SPA products or services.
(f) D.J. Youngblood Stavros shall receive a five percent (5%) commission
on gross revenues from those TRAMS sales as set forth on Schedule 8.6
if contracts relating to such transactions are executed within one
hundred eighty (180) days from December 31, 1993. Such commission
shall be paid as revenue is received by Purchaser from such
transaction.
(g) Except as provided above in this Section 8.6, Purchaser shall assume
no responsibility whatsoever for any liabilities or obligations of
Seller with respect to any compensation, benefit programs, or
employment policies or claims of any sort of any current or former
officer, director, employee or consultant who are or were employed
by the Seller or otherwise compensated in connection with the
activities involving the Business and the Assets being purchased,
or to which the Seller is a party or by which Seller otherwise may
have any liability to any such employee.
8.7. Inventory Adjustment. Purchaser and Seller agree that Seller shall
deliver to Purchaser at Closing a list of inventory of Seller, certified by
the chief financial officer of Seller, which specifically shall set forth and
certify the inventory, suitable according to industry standards for sale in
the Business, Seller's actual net costs for such inventory on the date
immediately prior to the Closing Date attached hereto as Schedule 8.7.
8.8. Prepaid Expenses and Deposits. Seller shall deliver to Purchaser at
Closing a list of Seller's prepaid expenses and deposits as set out on
Schedule 8.8 and certified by the Seller's chief financial officer which
specifically shall set forth and certify the amount of all the prepaid expenses
and deposits which are transferred to Purchaser as part of the Assets, and which
shall certify that the amount of all prepaid expenses and deposits represent
sums prepaid or deposited by Seller in connection with Assets transferred by
Seller to Purchaser. Seller shall further certify that Purchaser shall have
acquired all right, title and interest in and to such prepaid expenses and
deposits, that there exists no default by Seller with respect to any of the
contracts or agreements related to such prepaid expenses or deposits, and that
no person holding any such prepaid expenses or deposits shall have indicated any
reason to claim or retain such deposits, or indicated that they are not
obligated to provide the materials or services contracted.
8.9. Sales Tax. Seller agrees to provide to Purchaser at Closing any
requested certificates, including without limitation certificates of the
State of Florida, if available, certifying that Seller has paid all sales and
use taxes at any time due by Seller to such State, (provided, however, Seller's
inability to obtain any of such certificates shall not release Purchaser from
its obligations to close, Purchaser acknowledging and agreeing that such
certificates are not a condition to Closing) and Seller agrees to file all
applicable sales and use
<PAGE>
tax returns with respect to the period ending on the Closing Date within
fifteen (15) days following the Closing.
8.10. Intellectual Property. At Closing, Seller shall convey, assign, and
register in the U.S. Patent and Trademark Office, or cause to be assigned and
conveyed and registered in the U.S. Patent and Trademark Office, to Purchaser,
by documents or instruments in form satisfactory to counsel for the Purchaser,
all of its rights to and in, and recognize in the Purchaser, as between Seller,
Seller's Shareholders and Purchaser, the exclusive perpetual right and license
to conduct its business operations under the Intellectual Property, including
but not limited to, trademarks or trade names and any other names or
combinations thereof substantially similar thereto. Promptly upon Purchaser's
request, Seller and Shareholders shall change or cause to be changed the
registered corporate name, trade name, assumed name, trademarks, logos, trade
styles of the Seller and any other entities having similar or confusingly
similar names, assumed names, trade styles, logos or marks and no longer use
such Intellectual Property anywhere in the United States. Purchaser, pursuant
to this transfer of Intellectual property shall hold, as between Seller,
Seller's Shareholders and Purchaser, perpetual right and license to use all
Intellectual Property, copyrights, logos, trade styles, labels and other
advertising media or devices which have been adopted or used by Seller or
Shareholders solely in connection with the marketing or sale of the services
and/or products of the Business.
Seller and Shareholders acknowledge and agree that neither will have
the right to and covenant that neither shall, either directly or through any
business association or entity controlled by either party or under common
control, in any way make any reference, orally or in writing, to the
Intellectual Property, including but not limited to trademarks or trade names,
or any combination thereof, or similar or confusingly similar name, in any
manner whatsoever, in connection with the solicitation of business.
8.11. Banking Relationships. Seller shall deliver to Purchaser at Closing
a list of Seller's banking relationships as set out on Schedule 8.11 certified
by the chief financial officer of the Seller which shall specifically set
forth as of the Closing Date account numbers and amounts on deposit, credit
cards and outstanding balances, or other banking relationships which are
transferred to the Purchaser as part of the Assets, and which shall certify that
the amount of all such deposits represents sums deposited under the account of
the Seller in connection with the Assets transferred by Seller to Purchaser.
8.12. Additional Provisions with respect to Daniel Stavros and
D.J. Youngblood Stavros.
(a) Daniel Stavros and D.J. Youngblood Stavros shall be entitled to
participate in any stock or stock option plan granted to key
personnel of the Purchaser in accordance with such terms and
conditions as approved by the Board of Directors of the Purchaser
from time to time.
<PAGE>
(b) Daniel Stavros shall receive a salary calculated on an annual basis
that is equal to One Hundred Thousand and No/100 Dollars ($100,000.00)
and serve as the Chief Technical Officer of the Purchaser.
(c) D.J. Youngblood Stavros shall receive a salary that will be calculated
on an annual basis and is equal to Eighty Thousand and No/100
Dollars ($80,000.00) and shall serve in connection with marketing
and sale support as agreed from time to time with the chief
executive officer of CCS Technology Group, Inc.
(d) The terms and conditions of employment of Daniel Stavros and D.J.
Youngblood Stavros shall be subject to the direction, from time to
time, of the president of the Purchaser or its board of directors.
Duties for Daniel Stavros and D.J. Youngblood Stavros shall be
substantially similar to those undertaken by such individuals on
behalf of the Seller as of December 31, 1993, subject to the
discretion and direction, from time to time, of the president or the
board of directors of the Purchaser.
(c) The parties hereto acknowledge that nothing in this Agreement,
particularly Sections 8.6 and 8.12 hereof, constitutes or is
intended to constitute an employment agreement or a promise of
employment between the Purchaser or its affiliates and the
employees of the Seller, including but not limited to, the
Shareholders. Furthermore, the parties acknowledge that
notwithstanding the terms of this Agreement or any related
documents, or the past practices or agreements of the Seller, the
Shareholders or the Purchaser, that all employment extended by the
Purchaser to employees of the Seller, including but not limited to,
the Shareholders, is on a terminable at will basis, for cause or no
cause at all, and that all compensation of continuing employees,
including but not limited to, the Shareholders, may be adjusted up
or down at the discretion of the chief executive or board of
directors of the Purchaser.
9. COVENANTS OF PURCHASER
9.1. Tender of Purchase Price. At Closing, Purchaser agrees to tender the
Purchase Price as provided in Section 5.1 above.
9.2. Legal Opinion. Purchaser shall cause counsel engaged by it to execute
and deliver at Closing an opinion in the form attached hereto as Exhibit 6.
9.3. [Reserved]
9.4. TRAMS Product Marketing and Customer Support. Subject to the
discretion of the president and board of directors of the Purchaser, the TRAMS
product will be marketed as a
<PAGE>
stand alone product as well as in combination with new or existing products of
the Purchaser. In addition, subject to the discretion and direction of the
president and board of directors of the Purchaser, the Purchaser will honor
those previous commitments by the Seller to the existing client base as set out
on Schedule 9.4, including hourly rates for consulting services.
9.5. Office Expenses. Purchaser shall assume and pay for all office
expenses of the Seller as of December 1, 1993, including without limitation, for
rent, telephone, maintenance, communication costs as set on Schedule 9.5
attached hereto.
10. MUTUAL COVENANTS.
10.1. Confidentiality. Purchaser and Seller each agree to refrain from
releasing or disclosing any information, regarding this Agreement or any of the
transactions contemplated hereby (including without limitation purchase price
information) without the prior consent of the other party. In the event the
transactions contemplated hereby are not consummated on or before the Closing
Date, both Purchaser and Seller agree to return to the other all written
material furnished to them by such other party.
10.2. Bulk Sales Compliance and Indemnification. The parties hereto agree
to waive the provisions of that certain law known as the "Uniform Commercial
Code - Bulk Transfers," (Article 6 of the U.C.C. as adopted by the State of
Florida), to the extent applicable, and Seller and Shareholders, jointly and
severally, agree to indemnify and hold Purchaser harmless with respect to any
claims, liabilities, actions, causes of action incurred to or alleged by any
creditor of the Seller with respect to which Purchaser would have been protected
had such provisions of the "Uniform Commercial Code - Bulk Transfers" law been
fully complied with.
10.3. Required Consents. Prior to Closing, Purchaser and Seller agree to
cooperate with each other and exercise best efforts to obtain all consents or
assignments necessary to consummate the transactions contemplated by this
Agreement required by governmental authorities, lessors, lenders, partners or
otherwise, including without limitation those consents listed and described on
Schedule 10.3. It is understood and agreed that Seller shall engage in the
principal efforts to seek all such consents, but Purchaser agrees to fully
cooperate with Seller or its designee and their agents in Seller's efforts to
obtain all necessary approvals, consents or assignments, including but not
limited to consents or assignments of any lenders, lessors, or landlords set out
on Schedule 10.3.
10.4. Further Assurances. From time to time after the Closing, (i)at
Seller's own expense, Seller and Shareholders will each use its best efforts to
execute and deliver such other instruments of conveyance, assignment, transfer
and delivery and will take such other actions as Purchaser reasonably requests
in order to more effectively transfer, convey, assign and deliver to Purchaser,
and to place in possession and control of, any of the Assets, or to enable
Purchaser to exercise and enjoy all rights and benefits of Seller with respect
thereto; and (ii)at its expense, Purchaser will execute and deliver instruments
of assumption and will otherwise use its best
<PAGE>
efforts to take such actions as Seller reasonably requests in order to assure
the assumption by Purchaser of the liabilities set forth in Exhibit 3.
11. CLOSING CONDITIONS TO OBLIGATIONS OF PURCHASER. The obligations of
Purchaser to consummate the Closing hereunder shall be subject, in its sole
discretion, to the satisfaction at or prior to Closing of each of the following
conditions any one or more of which Purchaser, in its sole discretion, may
waive:
11.1. Representations and Warranties; Covenants, Agreements and Conditions.
All the representations and warranties of Seller and Shareholders
contained in this Agreement and in any certificates, Schedules or Exhibits
delivered pursuant hereto shall be true and correct in all material respects as
if made at and as of the Closing Date. Seller and Shareholders shall have
performed and complied with in all material respects all covenants, agreements
and conditions required by this Agreement to be performed or complied with by
Seller or Shareholders prior to or at the Closing Date.
11.2. Required Consents or Assignments. All consents, approvals,
assignments, -registrations of each person or entity whose consent, approval,
assignment or registration is necessary to consummate the transactions
contemplated in this Agreement, including, without limitation, those listed on
Schedule 10.3 shall have been obtained.
11.3. Transfer of Assets. At Closing, Seller, shall: (i) deliver to
Purchaser such general deeds, bills of sale, endorsements, assignments,
registrations and other sufficient instruments of conveyance and assignment, in
form satisfactory to Purchaser and its counsel, as shall be effective to
transfer such Assets to Purchaser and to vest in the Purchaser all right, title
and interest in and to the Assets, and (ii)deliver to Purchaser all of Seller's
contracts and commitments, books, records and other data relating to the Assets
in the Business. Simultaneously with such delivery, Seller shall take all of the
additional steps as may be necessary to put Purchaser in possession of the
operating control of the Assets and the Business, and Purchaser shall take all
such additional steps as may be necessary for it to assume the liabilities set
out in Exhibit 3.
11.4. Release of Liens, Claims, Encumbrances, Etc. Seller and Shareholder
shall provide to Purchaser, in form satisfactory to Purchaser's counsel, written
documents fully releasing and terminating the rights of any and all persons or
entities having any claim, right, lien, security interest or encumbrance in or
to any of the Assets which are not assumed pursuant to Exhibit 3.
11.5. Compliance With Law; No Litigation. Seller shall have provided to
Purchaser evidence, satisfactory to Purchaser's counsel, of compliance in full
with all applicable laws. Except as set out in Schedule 11.5, no action, suit or
other proceeding shall be pending before any court, tribunal or governmental
authority seeking or threatening to restrain or prohibit the
<PAGE>
consummation of the transactions contemplated by this Agreement, or seeking to
obtain substantial damages or allocations in respect thereof, or involving a
claim that consummation thereof would result in violation of any law, decree or
regulation of any governmental authority having appropriate jurisdiction.
11.6. No Material Adverse Change. There shall have been no material adverse
change since December 31, 1992, in the financial condition or results of
operations of the Business, except such changes contemplated, permitted or
required by this Agreement.
11.7. Due Diligence. Upon execution of this Agreement by both parties,
Purchaser and/or its agents and representatives will be afforded complete access
to the employees, agents, representatives, files, customers, supplies, documents
and financial books and records of the Seller in connection with the Business
and the Assets for the purpose of engaging in a detailed investigation of the
Business, the Assets and the financial position of the Seller (the
"Inspection"). Closing, pursuant to Section 4 of this Agreement, shall only
occur upon the complete and sole satisfaction of the Purchaser as to the results
of the Inspection; provided however, nothing herein is intended to extend or
shall be construed to extend the date by which the Closing is to occur as
provided in Section 4 of this Agreement. All costs of Inspection shall be borne
by the Purchaser.
11.8. Financial Statements. If the Financial Statements are not audited by
a firm of independent certified public accountants acceptable to Purchaser,
then Purchaser shall have determined to its satisfaction, upon counsel with its
independent certified public accountants, that the Financial Statements for the
period ended December 31, 1992 and December 31, 1993, shall be auditable in
accordance with generally accepted auditing standards such that Purchaser's
accountants shall be able to perform all procedures and do all things necessary
and appropriate to issue its standard audit opinion thereon. Seller and
Shareholders agree to cooperate in all respects with Purchaser and its
accountants to perform and finalize the audit on such Financial Statements,
including without limitation, to sign and deliver management's representation
letters with respect to such Financial Statements.
11.9. Other Agreements. Purchaser shall have obtained and delivered all
other agreements, documents, certificates, or registrations required or
necessary pursuant to this Agreement.
12. CLOSING CONDITIONS TO OBLIGATIONS OF SELLER AND SHAREHOLDER. The
obligations of Seller and Shareholders to consummate the Closing shall be
subject, in the sole discretion of each of them, to the satisfaction at or
prior to Closing of the condition that all of the representations and warranties
of Purchaser contained in this Agreement shall be true and correct in all
respects as if made at and as of the Closing Date, and Purchaser shall have
performed and complied with in all respects all covenants and conditions
required by this Agreement to be performed or complied with by it prior to or at
the Closing Date.
<PAGE>
13. CLOSING CONDITIONS TO OBLIGATIONS OF PURCHASER, SELLER AND SHAREHOLDER. The
obligations of Purchaser, Seller and Shareholder hereunder shall be subject, at
the option of any one of them, in its, his, or her discretion, to the following
conditions:
13.1. Injunction. There shall not be pending or threatened any proceeding
before any agency, court, commission or tribunal seeking to enjoin or prevent
the transactions contemplated by this Agreement.
13.2. Illegality. No United States statute, rule, regulation, executive
order, decree or injunction shall have been enacted, entered, promulgated or
enforced by any court or government authority which is in effect and has the
effect of making the purchase of the Assets illegal or otherwise prohibiting the
consummation of the transactions contemplated hereby.
14. INDEMNIFICATION AND OFFSET.
14.1. Seller's Indemnification. Seller and Shareholders, jointly and
severally, agree from and after the Closing Date, to indemnify, defend and hold
harmless Purchaser and Purchaser's officers, partners, employees and agents
from any loss, damage, expense, liability claim or controversy, including
without limitation attorneys' fees, expenses of litigation and any and all
commissions, fees or payments owing to any broker who represented Seller or
Shareholders, to which Purchaser or any of Purchaser's officers, partners,
employees or agents may become subject arising out of any one or more of the
following:
(i) any inaccuracy or breach of any representation, warranty or
covenant of Seller or Shareholders contained in this Agreement
(but not otherwise); or
(ii) any person asserting any claim against Purchaser to any rights in
and to the Assets following the Closing Date to the extent that
such claim arises or is alleged to arise by, through or under
Seller or Shareholder (but not otherwise), including without
limitation claims to ownership of a security interest in or to
any of the Assets; or
(iii) any obligation or liability of Seller or Shareholders not
expressly assumed by Purchaser pursuant to this Agreement whether
or not such obligation or liability is fixed or contingent, or
liquidated or unliquidated, and whether or not such liability or
obligation was known to Seller or its officers, directors or
Shareholders on the Closing Date; or
(iv) any claim, action, suit or investigation (collectively "Claims")
which is made, threatened or asserted on or after the Closing Date
against the Purchaser with respect to acts or omissions of Seller
or its officers, directors or shareholders, employees,
contractors, or agents occurring before or on the Closing Date; or
<PAGE>
(v) any liability of Seller for any and all taxes for any period
ending on or before the Closing Date with respect to any item or
matter occurring prior to the Closing Date.
14.2. Purchaser's Indemnification. Purchaser agrees from and after the date
hereof to indemnify, defend and hold harmless Seller and Seller's officers,
directors, shareholders, employees and agents from any loss, damage, expense,
liability claim or controversy, including, without limitation, attorneys' fees,
expenses of litigation and any and all commissions, fees or payments owing to
any broker who represented or claims to have represented Purchaser, to which
Seller or any of Seller's officers, directors, shareholders, employees or agents
may become subject arising out of any one or more of the following:
(i) any inaccuracy or breach of the representation, warranty or
covenant of Purchaser contained in this Agreement
(but not otherwise); or
(ii) any obligation or liability arising from and after the Closing
Date which is expressly assumed by Purchaser pursuant to this Agreement; or
(iii) any claim, action, suit, investigation or proceeding
(collectively "Claims") which is pending, threatened or asserted
after the Closing Date against Seller with respect to the acts or
omissions of Purchaser or its officers, partners or employees,
contractors or agents occurring after the Closing Date.
14.3. Limitation of Liability. In no event shall the liability of the
Shareholders or Seller, or both, pursuant to this Section 14 exceed a total of
$500,000.
14.4. Independence. The Purchaser shall be or shall establish a wholly-
owned subsidiary corporation of CCS Technology Group, Inc. pursuant to which
the current business of the Seller shall be undertaken. Such entity shall serve
as its own profit center. The Purchaser and CCS Technology Group, Inc. make no
representations as to the future profitability of such entity or the provision
of assets or assistance.
15. BROKERAGE. Except as set out on Schedule 15 attached hereto, each of the
parties to this Agreement represent and warrant to the others that all
negotiations relating to this Agreement and the transactions contemplated hereby
have been carried on by them individually, by their counsel or by officers of
them directly with the other parties individually or with officers of or counsel
for the other party, and further represent and warrant that they have not dealt
with or employed any broker, finder or financial adviser in connection with or
on account of this Agreement or any transaction herein contemplated and, insofar
as they have knowledge, no broker, finder or financial adviser is entitled to
any commission or broker's, finder's or adviser's fee in connection with any of
these transactions.
<PAGE>
16. NOTICES. All notices, consents, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given or
delivered if (i) delivered personally; or (ii) five days after mailed by
certified mail, return receipt requested, with proper postage prepaid; or
(iii) delivered by facsimile; or (iv) delivered by recognized courier
contracting for same day or next day delivery:
(a) To Purchaser:
CCS Technology Group, Inc.
900 Winderley Place
Maitland, Florida 32751
Attn.: President
Facsimile Number: (407) 660-0483
With a copy to:
Morris, Manning & Martin
3343 Peachtree Road, N. E.
1600 Atlanta Financial Center
Atlanta, GA 30326
Attn.: John F. Smith, Esq.
Facsimile Number: (404) 365-9532
(b) To Seller:
TranSys Corporation
Suite 2001
225 South Westmonte Drive
Altamonte Springs, Florida 32714-1218
Attn.: Daniel Stavros
Facsimile Number: (407) 774-9813
With a copy to:
Boroughs, Grimm & Bennett
201 East Pine Street
500 Southeast Bank Building
Orlando, Florida 32801
Attn.: Susan Abramson, Esq.
Facsimile Number: (407)843-9587
<PAGE>
(c) To Shareholders:
TranSys Corporation
Suite 2001
225 South Westmonte Drive
Altamonte Springs, Florida 32714-1218
Attn.: Daniel Stavros
D.J. Youngblood Stavros
Facsimile Number: (407) 774-9813
With a copy to:
Boroughs, Grimm & Bennett
201 East Pine Street
500 Southeast Bank Building
Orlando, Florida 32801
Attn.: Susan Abramson, Esq.
Facsimile Number: (407) 843-9587
or at such other address as the parties hereto shall have last designated by
notice to the other parties. Any item delivered personally or by recognized
courier contracting for same day or next day delivery shall be deemed delivered
on the date of delivery. Facsimile deliveries shall be deemed delivered on the
date of transmission by the sender provided sender has evidence of successful
transmission and receipt. Any item mailed shall be deemed to have been delivered
on the date evidenced on the return receipt.
17. ENTIRE AGREEMENT; MODIFICATIONS. This Agreement together with the
schedules and exhibits herein referenced together contain the entire agreement
among the parties hereto with respect to the transactions contemplated herein,
and all prior understandings, and agreements and the letter of intent among the
parties hereto are hereby terminated in their entirety and are of no further
force or effect. This Agreement shall not be modified or otherwise amended
except by an instrument in writing signed by or on behalf of the parties hereto.
18. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Florida.
19. WAIVER. At any time prior to or on the Closing Date any party hereto may
waive in writing compliance with any condition to its obligations hereunder. No
waiver shall be effective unless given in writing. No waiver by any party hereto
of its rights under any provisions of this Agreement shall constitute a waiver
of such party's rights under such provision at any other time or a waiver of
such party's rights under any other provision of this Agreement. No failure by
any party to take any action against any breach of this Agreement or default by
another party hereto shall constitute a waiver of the former party's rights to
enforce any provision of this Agreement or to take action against such breach
or default or any subsequent breach or default by such party.
<PAGE>
20. ASSIGNMENT. This Agreement shall not be assignable by any party hereto,
provided that Purchaser may assign this Agreement and its rights hereunder to
any entity controlled by it or which it controls.
21. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
22. HEADINGS. The section headings in this Agreement are for convenience of
reference only and shall not be deemed to alter or affect any provision hereto.
23. EXPENSES. Each party shall bear its own costs and expenses, including but
not limited to fees and expenses of counsel, accountants investment bankers,
bankers and advisors.
24. SURVIVAL. All of the representations, warranties, covenants, agreements
and indemnifications made by Purchaser, Seller and Shareholders in or pursuant
to this Agreement shall survive the Closing for the period beginning on the date
of this Agreement and continuing until two (2) years from the date of this
Agreement.
25. TIME OF ESSENCE. Time is of the essence of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto duly executed this Agreement under
seal effective as of the date first hereinabove written.
PURCHASER:
----------------------------------
a Florida corporation
By:
-------------------------------
Title:
-----------------------
Attest:
Title:
-----------------------
(CORPORATE SEAL)
SELLER:
TRANSYS CORPORATION,
a Florida corporation
By:
-------------------------------
Title:
-----------------------
Attest:
Title:
-----------------------
(CORPORATE SEAL)
SHAREHOLDERS:
--------------------------------- (SEAL)
Daniel Stavros
--------------------------------- (SEAL)
D.J. Youngblood Stavros
<PAGE>
INDEX TO EXHIBITS AND SCHEDULES
<TABLE>
<CAPTION>
Exhibit Description Item Number
- ------- ----------- -----------
<S> <C> <C>
1 Asset List 1
2 Excluded Assets 2
3 Liabilities to be Assumed 3
4 Allocation of Purchase Price 4
5 Legal Opinions of Seller's Counsel and Shareholders' Counsel 5
6 Legal Opinion of Purchaser's Counsel 6
7 Form of Note 7
Schedule Description Item Number
- -------- ----------- -----------
7.2 Permitted Liens, Encumbrances, Etc. 7
7.3(i) Articles of Incorporation; Bylaws; Powers of Attorney 8
7.3(ii) All deeds of title and other title documents 9
pertaining to any real property (including a brief
description of such documents and of the use to which
such property is being employed), any interest
therein, now or previously owned of record or
beneficially by the Seller and used as a part of the
Business, together with copies thereof; and all lease
agreements for all property,real or personal, to
which Seller is a party, including without limitation
lease agreements for all Facilities, together with
complete schedules pertaining thereto listing
individually all such property leased by item.
7.3(iii) All insurance policies currently in force issued to or 10
in favor of Seller covering any or all risks of any
nature whatsoever.
7.3(iv) All loan agreements, notes payable or other debt 11
instruments or obligations issued, guaranteed or
assumed by Seller or for which Seller or the Assets
are otherwise obligated or bound (including any
guaranty or obligation of Shareholder on behalf of
Seller or in connection with the Business or Assets).
<PAGE>
7.3(v) All contracts in Seller's possession which pertain in 12
any way to the conduct or operation of the Business,
including without limitation, union agreements, sale
and lease-back agreements, conditional sale
agreements, bids, equipment maintenance agreements,
marketing or advertising agreements, sale or supply
contracts, purchase contracts, joint venture agreements,
license agreements, royalty agreements, secrecy,
confidentiality and non-disclosure agreements,
commission brokerage, agency or similar agreements,
escrow agreements, delivery agreements, shipment
agreements, and any other agreement in Seller's
possession in any way pertaining to the Business.
7.3(vi) All loans or advances (hereinafter "Company Loans") 13
outstanding from Seller to any officer, director,
Shareholder, employee, agent, or independent
contractor of the Business, or to any person related
to any of the foregoing, or to any corporation,
partnership or other entity of which any of the
foregoing possess any interest, such list to state
the amount of the loan, the person or entity obligated
to repay, the interest rate thereon, and the terms of
repayment.
7.3(vii) A summary of the terms of all material oral contracts 14
of which any officer of Seller has knowledge, to the
extent that any such oral contract will be binding
upon the Business following the Closing Date
7.3(viii) All franchise or license agreements held or granted 15
by the Seller or necessary for the operation of the
Business of the Seller.
7.3(ix) All equipment leases held or granted by the Seller 16
or necessary to operate the Business of the Seller.
7.3(x) Defaults 17
7.4 Financial Statements 18
7.5 Actions After December 31, 1992 19
7.8 Environmental Concerns 20
7.9 Benefit Programs, Employment Policies, Etc. 21
7.12 Legal and Governmental Proceedings 22
7.13 Accounts Receivable 23
<PAGE>
7.14 Customers and Prospects 24
7.15 Intellectual Property 25
8.6 Employees Salaries, Accrued Vacation 26
8.7 Closing Inventory Amount 27
8.8 Prepaid Expenses and Deposits 28
8.11 Banking Relationships and Accounts 29
9.4 TRAMS Product Marketing and Customer Support 30
9.5 Office Expenses 31
10.3 Consents 32
11.5 Certain Litigation 33
15 Brokers, Etc. 34
</TABLE>
<PAGE>
SOFTWARE LICENSE AND DISTRIBUTION AGREEMENT
THIS SOFTWARE LICENSE AND DISTRIBUTION AGREEMENT is made as of this 1st day
of January, 1994 (the "Effective Date"), by and between CCS TECHNOLOGY GROUP,
Inc. ("CCS"), a Florida corporation, and CCN MANAGEMENT SYSTEMS, INC. ("CCNMS"),
a Florida corporation.
BACKGROUND
CCNMS desires to grant license rights to CCS and to appoint CCS as a
distributor of certain software products identified in paragraph 1.1 below,
throughout the Territory, as described below, and CCS desires to accept such
license and appointment.
AGREEMENT
NOW, THEREFORE, in consideration of the promises and covenants of the
parties herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Definitions.
1.1. When used herein the term "TRAMS Software" shall mean the following
specific software products in executable object code and in source
code in a form of magnetic media designated by CCS, including
without limitation, all future versions of, and revisions, upgrades,
corrections, bug fixes, enhancements and modifications to such
software that are prepared by CCNMS and delivered to CCS, and that
CCS accepts to become part of the TRAMS Software:
(a) That certain software known as "TRAMS," used for basic editing,
warehousing, reject correction, suspense, settlement,
reformatting, and routing capabilities.
(b) That certain software known as "TRAMS/BC," used to perform
reporting and settlement functions for files received from or
sent to VISA and MasterCard bank card associations.
(c) That certain Software known as "TRAMS/DE"' used to enter, edit,
and balance transactions through non-programmable IBM 3270
terminals (or compatible equipment).
(d) That personal computer based system for the IBM OS/2 operating
system, known as "TRAMS/AG" used to allow the entry of record
formats, code segments. and other information necessary to
generate programs and tables which form a part of the modules
used with this system.
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1.2. When used herein the term "CCS" shall mean CCS Technology Group,
Inc., a Florida corporation. Such term shall also include any entity
of which CCS owns at least fifty percent (50%) of the voting stock
or in which CCS has at least a fifty percent (50%) voting interest,
upon such entire agreement in writing to be bound by the provisions
of this Agreement to the same extent as CCS.
1.3. When used herein the term "Documentation" shall mean all written
instructional materials and other documents in both a printed form
and stored in a magnetic media delivered to CCS by CCNMS explaining
the operation of the TRAMS Software which shall be delivered by
CCNMS in a form suitable for good quality reproduction.
1.4. When used herein the term "Service Bureau" shall mean a company that
processes transactions for third parties.
2. Appointment of CCS.
2.1. CCNMS hereby appoints CCS, and CCS hereby accepts such appointment,
as a non-exclusive distributor of the TRAMS Software everywhere in
the world ("Territory").
3. Term of Appointment.
This Agreement shall commence on the Effective Date and shall continue
perpetually, unless terminated strictly in accordance with the provisions of
paragraph 12 below.
4. License of TRAMS Software.
4.1. Subject to the provisions of this Agreement, CCNMS hereby grants to
CCS a non-exclusive, transferable license (the "License"):
(a) To use and reproduce the TRAMS Software for internal purposes,
or in a Service Bureau environment for its customers throughout
the Territory. The foregoing shall include reproduction and
operations of the TRAMS Software on the equipment of others,
pursuant to contracts with CCS, provided that the TRAMS Software
is used for CCS's internal purposes or in a Service Bureau
environment.
(b) To sublicense and distribute the TRAMS Software, in part or in
whole, in a standalone environment, or integrated into or
otherwise made a part of other products to end user/licensees
located anywhere in the world;
(c) To use the TRAMS Software for demonstration purposes to any
party whatsoever:
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(d) To create derivative works and to modify, rewrite, improve or
borrow from the TRAMS Software in any way;
(e) To reproduce the TRAMS Software, Documentation and marketing
materials of CCNMS for demonstration purposes and to distribute
the TRAMS Software and Documentation to licensee/ end users
through CCS' employees, or through CCS' contractors,
distributors, sales agents or dealers (collectively, "Dealers");
provided, however, except as currently used to protect
proprietary rights of CCNMS, or its affiliates, that the name of
CCNMS or any of its affiliates shall not be included or
reproduced on any of such materials unless specifically
authorized or required by CCNMS, or its affiliates, in writing.
Except for the marks identified in Schedule A, in no event shall
CCS use the name of CCNMS or any of its affiliates, or any of
their respective marks. names or logos, in connection with the
license, distribution or marketing of the TRAMS Software or any
other product, unless specifically approved in advance by CCNMS
or such affiliate in writing.
(f) To use the TRAMS Software for support and sales services; and
(g) To distribute the TRAMS Software and Documentation through CCS's
Dealers.
4.2. The License shall terminate only as provided in paragraph 12.1
below.
4.3. Within twenty (20) days after execution of this Agreement, CCNMS
shall provide to CCS one (1) copy of the computer codes (source
codes and object codes) for the TRAMS Software and all of the
Documentation and other operational material for the TRAMS Software
that is in the possession of CCNMS, through May 31, 1994, which
codes shall be maintained in accordance with the confidentiality
provisions of this Agreement.
4.4 In conjunction with the licenses granted in paragraph 4.1 above:
(a) CCNMS shall provide to CCS computer codes (source code and
object code) for all revisions, bug-fixes, updates,
improvements, modifications, and enhancements (the
"Updates") that may be made to the TRAMS Software or
Documentation by or on behalf of CCNMS during the term of this
Agreement, promptly after the creation of such Update and
release thereof to other customers. CCNMS, however, shall be
under no obligation to maintain, correct or fix the TRAMS
Software, or to maintain its compatibility with any other
programs or any equipment.
(b) Notwithstanding anything to the contrary in Sections 4(a)
above, CCNMS shall not be required, under any circumstances,
to perform in accordance
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with such provisions with respect to CCNMS customized client
specific enhancements
5. Trademark License.
5.1. CCS is hereby granted a non-exclusive license to use the trade
names, trademarks, and logos of CCNMS that relate to the TRAMS
Software and identified in Schedule A, but only in connection with
the advertisement, promotion, and license of TRAMS Software and
Documentation (the "Trademark License"). CCNMS hereby agrees to
reasonably attempt to register the "TRAMS" mark promptly in all
jurisdictions in which it is used.
5.2. The Trademark License shall terminate only upon, and simultaneously
with, the termination of all of the licenses granted herein.
6. Manner of Distribution; Other Matters.
6.1. In the event an end user/licensee licenses the TRAMS Software from
CCS or from any of its Dealers, CCS shall make a copy of the TRAMS
Software for delivery to such end user/licensee. CCS shall only make
those copies of the TRAMS Software, which in its sole discretion
reasonably exercised, are necessary for deliveries to the end
user/licensee for those purposes described in paragraph 4.1 above,
or for archival or backup purposes.
6.2 Subject to paragraph 6.4, CCS shall have exclusive authority and
control over the establishment of all (a) license fees and
maintenance fees charged to end user/licensees of the TRAMS
Software, who license the TRAMS Software from CCS and (b) terms and
conditions of all license agreements and maintenance agreements
between CCS and the end user/licensee of the TRAMS Software.
6.3 Subject to paragraph 6.4, CCS shall have exclusive control over the
methods employed by CCS to market, promote, and distribute the TRAMS
Software.
6.4. Any distribution or license of the TRAMS Software, Documentation, or
any part thereof, to a Dealer or to any end user/licensee, shall be
pursuant to written agreements ("Distribution or License
Agreements") which provide, among other things, that the Dealer or
end user/licensee (as applicable) will maintain the confidentially
of the distributed software and documentation, and that the Dealer
or end user/licensee will reproduce any and all confidentiality,
copyright and other notices on the distributed software or
documentation to the extent that copies thereof are permitted. All
Distribution and License Agreements shall contain confidentiality
and other provisions regarding the protection of software and
documentation distributed thereunder which are no less favorable
than distribution and license agreements for other products of CCS.
CCS further agrees that any distribution or license of the TRAMS
Software, Documentation, or any part
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thereof, will be for license or distribution fees that have not been
reduced by a corresponding increase in other fees (including,
without limitation, installation, training, maintenance, support,
development, or other services) the effect of which is merely to
lower the amounts due to CCNMS under this Agreement.
6.5. Daniel Stavros, D.J. Youngblood Stavros, TranSys Corporation and
CCNMS, and their affiliates, hereby agree to cooperate and use their
best efforts to obtain the consent, approval and assignment of all
contracts identified on Schedule C ("Third Party Contracts") to CCS
from all persons or entities executing such Third Party Contracts
and as are reasonably requested by CCS. It is understood that CCNMS
may engage in the principal efforts to seek all such consents,
but TranSys Corporation agrees to cooperate fully and assist all
parties in obtaining such approvals, consents and assignments with
respect to the Third Party Contracts to the reasonable satisfaction
of CCS and its counsel.
6.6. Upon receipt by CCS of a third party consent (the "Consent Date") to
the assignment and assumption of a Third Party Contract set out on
Schedule C to CCS in executed in form reasonably satisfactory to CCS
and its counsel ("Third Party Consent"), CCS agrees to assume and
perform all obligations of CCNMS under such Third Party Contract
through the termination of such Third Party Contract. CCS hereby
indemnifies and holds harmless CCNMS, CCN Group, Ltd. and their
affiliates, and their respective officers, directors, employees and
agents, against and in respect of any and all loss, damage,
liability, cost and expense, including reasonable attorneys' fees,
suffered or incurred by all or any of them on and after each
applicable Consent Date resulting from any claims, liabilities,
obligations, damages and expenses with respect to the Third Party
Contract to which the Third Party Consent relates, including without
limitation, that specific Guaranty under the General Electric
Company Contract which CCN Group, Ltd. executed as guarantor in
favor of a licensee and those specific CCN Group, Ltd. guarantees
set out on Schedule D, copies of which are attached thereto.
CCNMS represents and warrants to CCS that it has not breached or
caused a default under any of the Third Party Contracts to which it
is a party. CCNMS hereby indemnifies and holds harmless CCS, TranSys
Corporation and their respective affiliates and their respective
officers, directors, employees, and agents, against and in respect
of any and all loss, damage, liability, cost and expense, including
reasonable attorneys' fees, suffered or incurred by all or any of
them, and
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arising out of any claims, liabilities, obligations, damages and
expenses with respect to a breach by CCNMS or its affiliates of a
Third Party Contract prior to the applicable Consent Date, provided
however, with respect to CCS, only to the extent such breach does
not arise out of any action or non-action by CCS pursuant to Section
6.7 below. TranSys Corporation, Dan Stavros, and D. J. Stavros
hereby jointly and severally indemnify and hold harmless CCNMS and
its respective affiliates and their respective officers, directors,
employees and agents, against and in respect of any and all loss,
damage, liability, cost and expense, including reasonable attorneys'
fees suffered or incurred by all or any of them, and arising out of
any claims, liabilities, obligations, damages and expenses with
respect to the breach by all or any of them under any Third Party
Contract prior to the Consent Date, including, without limitation,
Third Party Contracts entered into by CCNMS and serviced and
maintained by TranSys Corporation. TranSys Corporation, Dan Stavros,
and D.J. Stavros hereby jointly and severally indemnify and hold
harmless CCS and its respective affiliates and their respective
officers, directors, employees and agents, against and in respect
of any and all loss, damage, liability, cost and expense, including
reasonable attorneys' fees suffered or incurred by all or any of
them, and arising out of any claims, liabilities, obligations,
damages and expenses with respect to the breach by all or any of
them under any Third Party Contract prior to the Consent Date,
including, without limitation, Third Party Contracts entered into
by CCNMS and serviced and maintained by TranSys Corporation.
6.7. Notwithstanding anything contained in this Section 6.6 to the
contrary, CCS hereby agrees, as solely between CCS and CCNMS,
beginning July 1, 1994, to perform the maintenance responsibilities
on behalf of CCNMS with respect to the Third Party Contracts through
and including termination of such Third Party Contracts.
6.8. All maintenance fees due from First Star Information Services
Corporation through April 28, 1995, and all fees with respect to
Toronto Dominion Bank through July 15, 1995 (April 28, 1995 and
July 15, 1995, respectively, "Paid Through Dates"), shall remain
due and payable to CCNMS and any part thereof received by CCS,
TranSys Corporation, Dan Stavros or D. J. Stavros shall be
immediately remitted to CCNMS. All other maintenance and other
fees due with respect to Third Party Contracts shall be collected
by and paid to CCS and any party coming into possession of such
fees shall immediately remit them to CCS. Daniel Stavros, D. J.
Stavros and TranSys Corporation jointly and severally warrant that,
all Third Party Contracts are in full force and effect without
default, and all fees due under all Third Party Contracts have been
collected through the respective Paid Through Dates and no other
fees have been paid or received for services after the Paid Through
Dates for the respective agreements.
6.9. Dan Stavros, D.J. Stavros, TranSys Corporation and CCNMS, and their
affiliates, jointly and severally, hereby release, acquit and
forever discharge CCS, from and against any and all claims,
demands, suits, controversies, losses, damages, costs, expenses
(including without limitation, attorneys' fees and expenses of
litigation), debts, obligations or liabilities, of any sort
whatsoever, contingent or fixed, known or unknown, arising directly
or indirectly out of, or in any way in connection with that certain
Heads of Agreement dated December 1, 1992, or the relationships
created thereby from the beginning of time through and for all time.
6.10.From time to time after the execution of this Agreement, Dan
Stavros, D. J. Stavros, TranSys Corporation, and CCNMS and its
affiliates agree to use their
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best efforts to execute and deliver such other instruments of
conveyance, assignment, consent, transfer and delivery and
will take such other actions as reasonably requested by any other
party in order to more effectively obtain the approval, consent,
transfer, convey, assign and deliver to CCS, and permit CCS to
take possession and control, of the Third Party Contracts or to
enable CCS to exercise and enjoy all rights and benefits and to
assume the obligations under such Third Party Contracts.
7. Royalties.
7.1 Within the earlier of: (i) thirty (30) days after invoicing or
(ii) ten (10) days after receipt by CCS of the license fee charged
by CCS or a Dealer to the end user/licensee of TRAMS Software
(exclusive of reasonable fees that may be charged for installation,
training, maintenance, and support) CCS shall pay to CCNMS
royalties as provided for in Schedule B, attached hereto. Invoicing
shall occur no later than the date of the TRAMS Software is used in
a production environment by an end user. In the event CCS fails to
make a Royalty payment within twenty-one (21) days after such
payment is due, such overdue amount shall bear interest from the
date such payment was due at the U.S.A. prime rate as announced in
the Wall Street Journal on the date twenty-one (21) days after the
day such payment was due. In the event an audit conducted pursuant
to paragraph 11 below reveals the failure of CCS to make a Royalty
payment, the interest provisions of Paragraph 11.2 below shall
supersede the provisions of this paragraph relating to the payment
of interest.
7.2 Notwithstanding CCS' right to establish the license fee to be paid
by any particular end user/licensee, the Royalty to be paid on
account of a sublicense granted by CCS of TRAMS Software shall be
in accordance with Schedule B attached hereto and made a part
hereof.
7.3 The parties acknowledge and agree that CCS intends to enhance and
modify the TRAMS Software code on an ongoing basis and that the
Royalties provided for should be adjusted to reflect the CCS
contributions to the TRAMS Software code functionality and
capabilities. The method for adjusting the Royalties owed by CCS
shall be as follows:
(a) Royalties shall be reduced only as a result of modifying the
TRAMS Software, not by attaching the TRAMS Software, or parts
thereof, to another CCS application;
(b) The minimum Royalties provided for in Schedule B shall not
change until the TRAMS Software has been modified and enhanced
so that the number of lines of code contained in the Base Line
Release constitutes less than six percent (60%) of the
enhanced version;
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(c) Modifications and enhancements to the Base Line Release shall
be measured on a module-by-module basis (the modules being
defined in Section 1.1 hereof) or combinations thereof. For
example, if TRAMS/BC has 1,000 lines of code in the Base Line
Release and CCS adds an additional 1,000 lines of code to the
TRAMS/BC, then the Base Line Release shall constitute fifty
percent (50%) of the new TRAMS/BC.
(d) When the Base Line Release code of a given module no longer
constitutes at least sixty percent (60%) of the new module,
the Royalties owed pursuant to Schedule B shall be calculated
based on the percentage that the Base Line Release code is of
the enhanced module code.
For example:
Base Line Release code (whether
or not used in the enhanced model) = 1,000 lines
Enhanced Module Percentage = 2,000 lines
Percentage = 50%
So that fifty percent (50%) of the Royalty calculated pursuant
to Schedule B shall be owed. "Base Line Release" means (i) the
U.S. and U.K. version of Release 1.3 of the TRAMS Software
delivered to CCS by CCNMS as it existed on May 31, 1994;
(ii) the duplicate header module under development by Dan
Stavros but not released as of May 31, 1994; and (iii)
modifications, enhancements and changes to the TRAMS Software
for the U.K. market delivered by CCN to CCS as of May 31, 1994.
7.4. For purposes only of computing the Royalty due under this
Agreement. the parties acknowledge and agree that any translation
of the Base Line Release TRAMS Software from the computer
language in which it is currently coded, into another computer
language, shall also be deemed to be Base Line Release TRAMS
Software. Nothing herein shall be used to construe the ownership
of any of such software, which shall be determined in accordance
with Section 8 below.
7.5 With each initial Royalty payment for a TRAMS Software module
according to Schedule B made under this Agreement, CCS shall
prepare and deliver to CCNMS a report showing the name of the
licensee or end user, the manner in which the TRAMS Software was
distributed (by direct license or through a Dealer), the
licensee fees charged for the Software, the amount charged for
other services, the amount of Royalty payments withheld as taxes,
if any, the rate of exchange used in calculating such Royalties
(if applicable), any adjustments in the Royalty pursuant to
paragraph 7.3 and the basis for calculating the adjustment. and
such other information and details as CCNMS may reasonably require
to verify the amounts due hereunder. For all subsequent royalty
payments, CCS shall be required to remit such Royalty Payment with
documentation sufficient to
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identify it as being made pursuant to the original documentation
submitted. CCNMS is obligated to maintain confidentiality of all
data or information provided to it under this Paragraph 7.5 and
Paragraph 7.6 below.
7.6 If any reoccurring Royalties are due to CCNMS pursuant to
Schedule B then such payments shall be remitted to CCNMS within
ten (10) days of the end of each calendar quarter, along with
an initial report showing the name of the licensee or end user,
the manner in which the reoccurring Royalties were calculated
and the basis for such calculation, together with such other
information and details as CCNMS may reasonably require to
verify the amounts due hereunder. For all subsequent royalty
payments, CCS shall be required to remit such royalty payment
with documentation sufficient to identify all necessary
calculations as being made pursuant to the original documentation
submitted.
7.7. If the governing authority of any country shall impose any
withholding tax on any payment due hereunder, and shall require
that such tax be deducted from such payment, then CCS shall be
authorized to deduct from such payment the applicable tax and shall
pay the tax so deducted to the proper governmental authority, and
shall supply CCNMS with proof of such payment.
7.8. CCS shall, and shall require its Dealers, for a period of three
(3) years after the receipt of each Royalty payment, to keep true
and accurate records in such form and manner that with respect
thereto, Royalties owed hereunder to CCNMS may be readily and
accurately determined. Such records shall include, without
limitation, all information necessary for CCNMS's auditors to
prepare the reports provided for in paragraph 11.1 below. CCS
shall also keep copies of all license agreements entered into
between CCS or its Dealers with respect to TRAMS Software for
at least three (3) years from execution of such agreement. This
paragraph shall survive any termination of this Agreement. On
written notice, officers of CCNMS shall have the right to arrange
for a mutually agreeable time to inspect and make copies of all
such license agreements at the office of CCS during normal business
hours at the expense of CCNMS.
8. CCS Software Development.
8.1. The parties hereto agree that all modifications, enhancements or
other changes to the Base Line Release TRAMS Software made or
caused to be made by CCS or its affiliates are solely owned by and
are hereby assigned to CCS. Furthermore, the calculations or
allocations of Royalties made pursuant to Section 7.3 are made
solely with respect to such payments and have no bearing whatsoever
on ownership.
8.2 All software developed by CCS shall be and remain the exclusive
property of CCS.
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9. Proprietary Rights; Indemnification.
9.1. The parties acknowledge and agree that CCS is only granted the
right to use, reproduce. sublicense, create derivative works,
modify and distribute TRAMS Software and in accordance with
Section 8.1 above and subject to the provisions of this Agreement
and that CCNMS has and will retain all proprietary rights relating
to the Base Line Release. including any and all patent rights,
copyrights, copyright registrations, trade secrets, trademarks,
trademark registrations. related goodwill, and confidential and
proprietary information, except as otherwise set forth herein.
9.2. The parties acknowledge that two individuals, D.J. Stavros, and
Daniel Stavros (collectively the "Primary Developers"), have
been the primary developers of the TRAMS Software, and that they
have not been employed by CCNMS since the latter part of 1992.
Since that time, the TRAMS Software has been developed and
marketed by the Primary Developers and TranSys Corporation, a
Florida corporation. Accordingly, based in part on the
representations of the Primary Developers in Section 9.8 below,
CCNMS warrants to CCS, to the best of its knowledge (including the
knowledge of its current officers and directors), that (a) the
TRAMS Software does not infringe upon the U.S. copyrights or any
other copyrights worldwide of any other person or entity, (b) the
TRAMS Software was not misappropriated from another person or
entity, and (c) CCNMS has not granted a security interest, lien
or other encumbrance on the TRAMS Software (other than under that
certain Heads of Agreement, dated December 1, 1992, among TranSys
Corporation, the Primary Developers and CCNMS). EXCEPT AS EXPRESSLY
PROVIDED IN THIS SECTION 9.2, CCNMS MAKES NO REPRESENTATIONS OR
WARRANTIES OF ANY KIND, NATURE OR DESCRIPTION, EXPRESS OR IMPLIED,
WITH RESPECT TO THE TRAMS SOFTWARE OR THE DOCUMENTATION LICENSED
UNDER THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY
OF MERCHANTABILITY OR FITNESS OF THE TRAMS SOFTWARE OR
DOCUMENTATION FOR ANY PARTICULAR PURPOSE, AND CCNMS HEREBY
EXPRESSLY DISCLAIMS THE SAME. Without limiting the foregoing,
CCNMS disclaims any warranty regarding the operation or
functionality of the TRAMS Software, or any warranty regarding
any virus, hidden program, or intentionally harmful destructive or
disabling mechanism or device contained in the TRAMS Software.
9.3. In no event shall any party be liable to any other party for any
indirect, incidental or consequential damages arising in connection
with this Agreement, the TRAMS Software, or any license or
distribution thereof, except to the extent arising out of a breach
of Section 10 below.
9.4. CCNMS shall defend, indemnify and hold harmless CCS and its
affiliates and subsidiaries and their respective officers,
directors, employees and agents from all
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damages, liabilities and reasonable expenses (including reasonable
expenses and settlements resulting from any action or claim),
arising out of, connected with, or resulting in any way from:
(i) any representation made by CCNMS to the public or third parties
regarding the TRAMS Software; (ii) TRAMS Software licensed,
distributed or used not through or by CCS, or (iii) CCNMS's breach
of any warranties, undertakings or agreements in Sections 2, 3, 4,
5, 9.2 and 10.2. If any such claim or proceeding arises, any party
seeking indemnification hereunder shall give written notice of the
claim to CCNMS in a timely manner after it receives actual notice
of the existence thereof. CCNMS shall have the right at its
expense to employ counsel reasonably acceptable to such party to
defend against the claim, and to compromise. settle or otherwise
dispose of the claim, all at the expense of CCNMS; provided, that
no compromise or settlement of any claim admitting liability of or
imposing duties of performance upon any party entitled to
indemnification may be affected without the prior written consent
of such party. CCS will cooperate fully in any such action, making
available to CCNMS, at CCNMS's expense, books or records reasonably
necessary for the defense of the claim. If CCNMS does not avail
itself of the opportunity to defend against or resist the claim
within twenty (20) days after timely notice of such claim from
any party seeking indemnification hereunder (or such shorter time
specified in the notice as circumstances may dictate), such party
shall be free to investigate, defend, compromise. settle or
otherwise dispose of the claim in a reasonable manner, and incur
other reasonable costs in connection therewith, including
reasonable attorneys' fees, and CCNMS shall be responsible
therefor.
9.5 CCS acknowledges that except as specifically provided in this
Agreement, CCNMS has no control over the manner in which the TRAMS
Software, or any part thereof, is used, licensed or distributed
by CCS or its Dealers, and that CCNMS has no responsibility to
any person regarding the same. CCS shall defend, indemnify and
hold harmless CCNMS, its affiliates, and their respective officers,
directors, employees and agents from all damages, liabilities and
reasonable expense (including reasonable expenses and settlements
resulting from any action or claim), resulting from or arising out
of (i) any use, license, distribution, modification, enhancement
or change to the TRAMS Software or the Documentation, or any
derivative work thereof, except to the extent caused by a breach
by CCNMS of its warranties specified in paragraph 9.2 above, and
(ii) any claim that any Software provided by CCS to CCNMS or its
affiliates pursuant to this Agreement infringes any copyrights or
proprietary rights of any other person. If any such claim or
proceeding arises, CCNMS and the party seeking indemnification
hereunder shall give written notice of the claim to CCS in a
timely manner after it receives actual notice of the existence
thereof. CCS shall have the right at its expense to employ counsel
reasonably acceptable to such party to defend against the claim,
and to compromise, settle or otherwise dispose of the claim, all
at the expense of CCS; provided, that no compromise or settlement
of any claim admitting indemnification may be affected without the
prior written consent of CCNMS. CCNMS will cooperate fully in any
such
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action, making available to CCS at CCS's expense, books or records
reasonably necessary for the defense of the claim. If CCS does
not avail itself of the opportunity to defend against or resist
the claim within twenty (20) days after timely notice of such
claim from CCNMS seeking indemnification hereunder (or such shorter
time specified in the notice as circumstances may dictate), CCNMS
shall be free to investigate, defend compromise, settle or
otherwise dispose of the claim in a reasonable manner, and incur
other reasonable costs in connection therewith, including
reasonable attorney's fees, and CCS shall be responsible therefor.
9.6. Within ten (10) days of the date hereof, TranSys Corporation and
CCS shall deliver to CCNMS or its affiliated designee. the source
code (human readable) and all related documentation required to
utilize and maintain the same (the "Source Code Copies") for each
version of the TRAMS Software licensed under the Third Party
Contracts. CCS further agrees to promptly deliver to CCNMS all
modifications or enhancements which are licensed as part of the
TRAMS Software after the date hereof, after the delivery thereof
to any licensee. CCNMS hereby acknowledges that parts of the Source
Code Copies developed by CCS after the date hereof, may constitute
confidential and proprietary information of CCS, and CCNMS will,
or will cause its designee to, keep all of the Source Code Copies
in a secure access location. CCS grants CCNMS and its affiliates
a nonexclusive license to: (i) use, modify and copy and otherwise
utilize the Source Code Copies for its own use or for use in
connection with its Service Bureau processing; and (ii) use,
modify, copy and otherwise utilize the Source Code Copies to
provide maintenance to Third Party Contract licensees of the TRAMS
Software, if, and only if, (a) CCS fails to maintain the TRAMS
Software in accordance with the Third Party Contracts where
CCNMS has direct and then current liability to such sublicensees
pursuant to the Third Party Contracts, and (b) as a result thereof,
CCS is in breach of Third Party Contracts, and (c) CCS fails to
cure the breach of the Third Party Contracts within ten (10) days
of express written notice from CCNMS or its affiliate. Provided,
however, that nothing contained in this paragraph 9.6 shall be
interpreted to limit the right of CCNMS in any TRAMS Software
delivered to CCS pursuant to this Agreement.
9.7. Upon thirty (30) days' written notice of merger or sale of CCNMS,
or sale of the TRAMS Software and all assets related thereto to a
bona fide unaffiliated third party, if expressly requested at such
time by the licensee of a Third Party Contract and subject to the
terms and conditions set out above in subparagraph 9.6(ii), CCS
shall provide all CCS Source Code to a mutually agreeable third
party escrow holder on terms mutually agreeable which will permit
the Third Party Contract licensee to use the same under the
specified terms and conditions of the applicable Third Party
Contract, this Agreement and such escrow agreement, but only with
respect to the Third Party Contracts set out on Schedule C.
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9.8. In order to permit CCNMS to provide the warranties in paragraph
9.2 above, TranSys Corporation and the Primary Developers jointly
and severally hereby represent and warrant to CCNMS that (a)
the TRAMS Software does not infringe upon the U.S. copyrights or
any other copyrights worldwide of any other person or entity,
(b) the TRAMS Software was not misappropriated from another person
or entity, and (c) none of them have granted a security interest,
lien or other encumbrance on the TRAMS Software.
10. Confidentiality.
10.1. (a) As used herein, the term "CCNMS Confidential Information" shall
mean any and all information of, about, or relating to the
TRAMS Software or the business of CCNMS, except for any such
information (i) that is or becomes known publicly or known
generally within the industry in which CCNMS operates by some
reason other than unauthorized disclosures, (ii) for which
CCNMS does not take reasonable efforts to protect its secrecy,
(iii) that is disclosed by CCNMS to a third party without
restrictions on use or disclosure, (iv) that is developed by
or for CCS independent from the knowledge of any CCNMS
Confidential Information, as evidenced by written documents and
records of CCS or (v) that is obtained from a third party who,
to the knowledge of CCS is not subject to obligations of
confidentially. CCNMS Confidential Information includes,
without limitation, the TRAMS Software and the Documentation.
(b) Except as permitted by this Agreement, CCS shall never make
any commercial use of any CCNMS Confidential Information, or
disclose to any third party, except as may be required by
law, any CCNMS Confidential Information.
10.2. (a) As used herein, the term "CCS Confidential Information" shall
mean any and all information of, about, or relating to the
CCS Software or the business of CCS, or updates or
enhancements TRAMS Software made by CCS after May 31, 1994,
except for any such information (i) that is or become known
publicly or known generally within the industry in which CCS
operates by some reason other than unauthorized disclosures,
(ii) for which CCS does not take reasonable efforts to
protect its secrecy, (iii) that is disclosed by CCS to a
third party without restrictions on use or disclosure, (iv)
that is developed by or for CCNMS independent from the
knowledge any CCS Confidential Information, as evidenced by
written documents and records of CCNMS, or (v) that is
obtained from a third party who, to the knowledge of CCNMS,
is not subject to obligations of confidentiality.
(b) Except as permitted by this Agreement, CCNMS shall never make any
commercial use of any CCS Confidential Information. or
disclose to any third party, except as may be required by
law, any CCS Confidential Information.
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<PAGE>
11. Audit Obligations.
11.1. Within one hundred twenty (120) days after the end of CCNMS
fiscal year, for each fiscal year in which payments are to be
made by CCS to CCNMS pursuant to this Agreement, CCNMS may retain
an independent audit firm to audit the records of CCS and to
prepare a report to be delivered to both parties simultaneously,
which report shall set forth the amounts paid and/or due but not
paid by CCS and to CCNMS pursuant to this Agreement during the
fiscal year. Subject to paragraph 11.2 below, CCNMS shall pay for
its own audit and the preparation of the report on its own
records.
11.2. In the event an audit reveals that additional amounts are owed by
CCS to CCNMS, the audit report shall specify the amount owed.
Within ten ( 10) days after receipt of the report, CCS shall pay
such amounts to CCNMS together with interest from the date the
audit report disclosing the underpayment is delivered at the rate
of eight percent (8%) per annum, together with the reasonable
costs of CCNMS for the audit. If such additional amounts owed by
CCS to CCNMS for such period are in excess of ten percent (10%)
of all amounts owed by CCS to CCNMS as determined by the audit
for such period, then CCS shall also reimburse CCNMS for the
reasonable cost of the audit.
12. Termination.
12.1. CCNMS may terminate this Agreement, including the appointment of
CCS as a distributor of the TRAMS Software and the License upon
written notice to CCS only in the event CCS materially breaches
any provision of this Agreement and such breach is not cured
within (i) thirty (30) days after receipt by CCS of notice from
CCNMS specifying nonpayment (with respect to a payment default)
or (ii) within sixty (60) days after receipt by CCS of notice
from CCNMS specifying such breach (with respect to any other
default).
12.2. All sublicenses granted to end users by CCS or the Dealers
pursuant to this Agreement prior to termination of this Agreement
and the license of CCS to continue using the TRAMS Software and
Documentation for supporting such end users shall continue
notwithstanding any termination of the licenses and this
Agreement for any reason.
12.3. The provisions of Sections 4.2(f) (with respect to support
services), 4.4, 6.6, 6.7, 7.5, 7.8, 8.1 and 9, 10, 11, and 12.2,
and any amounts due under this Agreement (including Royalties for
recurring license fee payments) and the right of CCNMS and its
affiliates to use CCS Source Code developed up to the date of
14
<PAGE>
termination pursuant to paragraph 9 6 above, shall survive any
termination of this Agreement for any reason.
13. Third party Compliance. CCN Group Limited agrees to comply with
the terms of this Agreement, agrees to cause all entities
included within the definition of CCNMS to comply with the terms
of this Agreement. and hereby guarantees the performance of all
obligations required of CCNMS and such affiliates.
14. Applicable Law, Jurisdiction, Venue and Forum. The rights and
obligations of the parties under this Agreement shall not be
governed by the U.N. Convention on Contracts for the
International Sale of Goods. This Agreement shall be construed
and governed under and by the laws of the State of Florida. CCNMS
and CCS hereby agree that venue for any legal action authorized
hereunder shall be in Orange County, Florida. U.S.A., and that
jurisdiction shall be vested exclusively in the Circuit Court of
the Ninth Judicial Circuit in and for Orange County, Florida, or,
if appropriate, in the Federal District Court for the Middle
District of Florida, Orlando Division.
15. Currency. All monetary amounts described herein are based on
United States currency and all payments due hereunder shall be
made in United States currency to CCNMS, in care of MDS Decision
System, Inc. at the address specified in paragraph 22 below. All
Royalties due hereunder shall be calculated in U.S. dollars as
the same is booked by CCS for financial reporting purposes.
16. Arbitration.
16.1. Informal disputes between CCS and CCNMS shall be handled first by
referring the dispute to CCS' Chief Operating Officer or his
successor and CCNMS'S Chief Operating Officer or his successor to
resolve the dispute.
16.2. Notwithstanding paragraph 16.1 herein to the contrary, all
disputes of every kind and nature between and arising out of or
in connection with this Agreement as to the negotiation,
existence, construction, validity, interpretation or meaning,
performance, non-performance, enforcement, operation, breach,
continuance. or termination thereof shall be submitted to binding
arbitration pursuant to the then existing, commercial arbitration
rules of the American Arbitration Association.
(a) Each party shall select one disinterested arbitrator from a
list submitted by the American Arbitration Association, and
the two selected shall select a third arbitrator from the
list.
(b) Each party shall bear its own costs of arbitration.
(c) Arbitration hearings shall be conducted in Atlanta, Georgia,
and the award rendered by the arbitrators shall be in
writing and shall be final and binding on all parties to the
proceeding, and judgment on such award may be entered by
15
<PAGE>
either party in the highest court of competent jurisdiction,
state or federal, in such jurisdiction.
(d) The parties agree that the provisions hereof shall be a
complete defense to any suit, action, or proceeding
instituted in any federal, state or local court or before
any administrative tribunal with respect to any controversy
or dispute arising during the period of this Agreement and
which is arbitrable as herein set forth. The arbitration
provisions hereof shall, with respect to such controversy or
dispute, survive the termination of this Agreement.
(e) Nothing herein contained shall be deemed to give the
arbitrators any authority, power, or right to alter, change,
amend, modify, add to, or subtract from any of the
provisions of this Agreement.
(f) The parties expressly agree that all trade secrets,
proprietary or confidential information of either party
shall be disclosed during arbitration only upon the issuance
of appropriate protective orders or agreements limiting the
disclosure or discoverability of such information outside of
the arbitration of this Agreement.
(g) Nothing in this Section 16 shall prevent the parties from
seeking or obtaining an injunction, preliminary or
otherwise, in a court of competent jurisdiction, against
infringement or unauthorized disclosure of a party's
intellectual or proprietary rights.
17. Assignment. Neither party may sell, assign, transfer, or otherwise
convey any of its rights (or delegate any of its duties) under this Agreement
without the prior written consent of the other which consent will not be
unreasonably withheld. Provided, however, that this Agreement may be assigned
to a subsidiary of CCS as provided in paragraph 1.2 above without prior
consent. and provided further that this Agreement may be assigned by CCNMS to
any of its affiliates under the same conditions and qualifications to be an
affiliate applicable to the assignment of a CCS affiliate without such
consent, provided that the affiliate agrees to be bound by the provisions of
this Agreement. (For purposes of the foregoing, an affiliate of CCNMS is any
entity of which the Great Universal Stores PLC owns, directly or indirectly,
at least fifty percent (50%) of the voting stock or in which it owns,
directly or indirectly, at least fifty percent (50%) of the voting interest.)
Any attempted sale, assignment, transfer, conveyance, or delegation in
violation of this paragraph shall be void and shall relieve the party not
making such attempt of any further liability hereunder.
18. Attorney's Fees. In the event any litigation, arbitration, or
controversy between the parties hereto arises out of, or relates to, this
Agreement, the prevailing party in such litigation arbitration, or
controversy shall be entitled to recover from the other party or parties all
reasonable attorneys' fees, expenses and suit costs, including those
associated with any appellate proceedings or post-judgment collection
proceedings.
16
<PAGE>
19. Binding Effect. This Agreement shall be binding upon and shall inure to
the benefit of the parties and their permitted successors and assigns (as the
case may be).
20. Entire Agreement. This Agreement constitutes the entire agreement of
the parties hereto with respect to the subject matter of this Agreement and
supersedes any and all previous agreements between the parties, whether
written or oral, with respect to such subject matter.
21. Invalid Provision. The invalidity, or unenforceability of any term or
provision of this Agreement or the nonapplication of any such term or
provision to any person or circumstance shall not impair or affect the
remainder of this Agreement, and the remaining terms and provisions hereof
shall not be invalidated but shall remain in full force and effect and shall
be construed as if such invalid, unenforceable, or nonapplicable provision
were omitted.
22. Notices. All notices, requests, waivers, and other communications
required or permitted to be given pursuant to this Agreement shall be in
writing and shall be deemed to have been duly given (i) at time of receipt of
by hand, or facsimile transmission, confirmed received by the recipient, (ii)
on the day of receipt if sent by prepaid telegram, or (iii) three (3)
business days (or seven (7) business days if to a foreign address) after
deposited in the U.S. mail, certified first-class mail, postage prepaid,
return receipt requested, sent or addressed, as the case may be, or by the
most nearly comparable method if mailed from or to a location outside of the
United States. as follows:
(a) If to CCS: CCS Technology Group, Inc.
900 Winderley Place, Suite 200
Maitland, FL 32751
Attention: President
Fax: 407/660-0483
with a copy to Morris, Manning & Martin
1600 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, GA 30326
Attention: John F. Sandy Smith
Fax: 404/365-9532
17
<PAGE>
(b) If to CCNMS: CCN Management Systems, Inc.
c/o MDS Decision Systems, Inc.
945 E Paces Ferry Road
Suite 2600
Atlanta, GA 30326
Attention: President
Fax: 404/841-1455
with a copy to: CCN Group, Ltd.
Talbot House
Talbot Street
Nottingham NG1 5HF
England
Attention: Mr. John Saunders
Fax: 011-44-602-415416
Any party may change its address for purposes of this paragraph by giving
the other party or parties written notice of the new address in the manner
set forth above.
23. Relationship of Parties. Nothing contained in this Agreement shall
authorize, empower, or constitute any party as agent of any other party in
any manner; authorize or empower one party to assume or create any obligation
or responsibility whatsoever, express or implied, on behalf of or in the name
of any other party; or authorize or empower a party to bind any other party
in any manner or make any representation, warranty, covenant, agreement, or
commitment on behalf of any other party.
24. Section and Paragraph Headings. Section and paragraph headings used
throughout this Agreement are for reference and convenience and in no way
define, limit or describe the scope or intent of this Agreement or affect its
provisions.
25. Waiver or Modification. No waiver or modification of this Agreement or of
any covenant, condition, or limitation herein contained shall be valid unless
in writing and duly executed by the party to be charged therewith.
Furthermore, no evidence of any waiver or modification shall be offered or
received in evidence in any proceeding arbitration, or litigation between the
parties arising out of or affecting this Agreement or the rights or
obligations of any party hereunder, unless such waiver or modification is in
writing and duly executed as aforesaid. The provision of this paragraph may
not be waived except as herein set forth.
26. Drafting. The parties acknowledge and confirm that each of their
respective attorneys have participated jointly in the review and the revision
of this Agreement and that it has not been written solely by counsel for one
part. Therefore, the parties stipulate and agree that the rule of
construction, to the effect that any ambiguities are to be, or may be
resolved or construed against the drafting party, shall not be employed in
the interpretation of this Agreement to favor any party against another.
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the Effective Date.
CCS TECHNOLOGY GROUP, INC. CCN MANAGEMENT SYSTEMS, INC.
By: /s/ Stephen B. Grubb By:
------------------------- ---------------------------
Title: President Title:
------------------------ ----------------------------
For value received, the undersigned hereby agrees to the provision of
paragraph 13 above.
CCN GROUP, LTD.
By:
-----------------------------
Title:
-----------------------------
For value received, the undersigned hereby agrees to the provisions of
this Agreement.
/s/ Daniel P. Stavros (SEAL)
-----------------------------------
DANIEL STAVROS
/s/ D.J. Youngblood Stavros (SEAL)
-------------------------------------
D. J. YOUNGBLOOD STAVROS
TRANSYS CORPORATION
By: /s/ Daniel P. Stavros
--------------------------------------
Title: President
19
<PAGE>
SCHEDULE A
TRAMS SOFTWARE--TRADEMARKS AND TRADE NAMES
- -------------------------------------------
TRAMS
TRAMS/BC
TRAMS/DE
TRAMS/AG
20
<PAGE>
SCHEDULE B
LICENSE FEES
CCS shall pay CCNMS license fees on sublicense of TRAMS SOFTWARE based on
the nature of the sales and the nature of the sublicensee. This Agreement
contemplates six different categories of sublicensees. They are as follows:
(1) Sublicenses to customers that do not provide Service Bureau Services
("Non-Service Bureau Sublicenses"), and
(2) Sublicenses to customers that provide Service Bureau Services ("Service
Bureau Sublicenses") and
(3) Other Platform Based Products
(4) Multiple Sites
(5) Enterprise License
(6) Service Bureau
For purposes of this Schedule B, "Net Selling Price" shall mean the gross
sales sublicensed price pursuant to sublicensing TRAMS to third parties less
sales and foreign withholding taxes actually paid by CCS in connection with
the granting of the sublicense and shall not include any reasonable sums paid
for installation, support, training, maintenance, support software, changes
or modifications or any other similar services.
Category 1--Non-Service Bureau Sublicense royalties shall be determined
as follows:
(1) Stand Alone Product. If TRAMS Software is licensed as a stand alone
product to a third party (without enhancement by a non-TRAMS Software
product which is licensed separately by CCS, hereinafter, "Stand Alone
Product), royalty fee payable to CCNMS shall be equal to twenty percent
(20%) of the Net Selling Price, subject to the following minimums:
<TABLE>
<CAPTION>
TRAMS SOFTWARE MODULES MINIMUM ROYALTY PAYMENT
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
(a): TRAMS (including TRAMS/AG)......................... $40,000*
(b): TRAMS/BC........................................... $50,000**
(c): TRAMS/DE........................................... $5,000*
(d): TRAMS/AG (without TRAMS)........................... No minimum twenty percent (20%) of the
Net Selling Priceof TRAMS/AG
</TABLE>
* If sublicensed with another TRAMS module, the minimum fee for all TRAMS
modules licensed in the aggregate to the same sublicensee shall not exceed
$50,000.
** If TRAMS/BC is licensed to an existing TRAMS customer, then the Minimum
Royalty Payment would be $ 10,000.
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<PAGE>
(2) Integrated Product. If the TRAMS software is sublicensed as part of an
integrated product, e.g., a TRAMS Software module combined with a
non-TRAMS Software module creating an integrated marketable product which
is licensed separately by CCS for a single license fee (hereinafter
"Integrated Product"), then notwithstanding any facts to the contrary,
the Royalty payment due from CCS to CCNMS as follows:
<TABLE>
<CAPTION>
TRAMS SOFTWARE MODULES NET SELLING PRICE ROYALTY PAYMENT
- ------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
(a)TRAMS and TRAMS/AG............... $200,000 $40,000
(b)TRAMS/BC......................... $250,000 $50,000**
(c)TRAMS/DE......................... $25,000 $5,000
(d)TRAMS/AG......................... No Minimum No Minimum
</TABLE>
** If TRAMS/BC is licensed to an existing TRAMS customer, then the Royalty
Payment would be $10.000.
The Net Selling Price shall be deemed to be $250,000.00 and the minimum
Royalty Payment shall be deemed to be $50,000,000 where all modules are
licensed to a third party in the single agreement.
Category 2--Service Bureau Sublicense royalties shall be determined as
follows:
(1) Stand Alone Product. The Royalty Payment based on Net Selling Price due
from CCS to CCNMS for each sublicense issued to a Service Bureau shall be
computed based on the same terms and conditions described in Category 1
for Stand Alone Products. In addition, if the end-user license agreement
provides for recurring fees based on either an account or transaction
basis ("Recurring Fees"), then an additional Royalty Payment shall be due
from CCS to CCNMS equal to twenty percent (20%) of the Recurring Fees;
provided however, that the Recurring Fees on which the additional Royalty
Payment is calculated shall not include any reasonable installation.
support. training, maintenance, support software, changes, modifications
or any other similar service.
(2) Integrated Product. The assumed Net Selling Price and corresponding
Royalty Payment due from CCS to CCNMS for each sublicense issued to a
Service Bureau shall be computed based on the same terms and conditions
described in Category 1 for Integrated Products. In addition, if the
end-user license agreement provides for Recurring Fees, then an
additional Royalty Payment shall be due from CCS to CCNMS based on the
Recurring Fees which shall be determined by multiplying: (a) twenty
percent (20%) by (b) the percentage that the assumed Net Selling Price of
the TRAMS Software module constitutes of the total Net Selling Price for
the Integrated Product by (c) the Recurring Fees; provided however, that
the Recurring Fees on which the additional Royalty Payment is calculated
shall not include any reasonable installation, support. training.
maintenance, support Software, changes, modifications or any other
similar service.
22
<PAGE>
CATEGORY 2 EXAMPLE:
CALCULATION OF ADDITIONAL AMOUNT TO BE PAID WITH RESPECT
TO RECURRING FEES:
RECURRING FEES
<TABLE>
<CAPTION> Additional Amount
% % OF LICENSE FEE COST PER TRANSACTION NUMBER OF TRANSACTIONS of Royalry Fee
- ------------------------------- ----------------------- ------------------------------------------------- ----------------
<S> <C> <C> <C> <C>
20% X.......................... ($250,000/$1,000,000) X ($.01 per transaction X 5,000,000 transactions) = $2,500
</TABLE>
ASSUMPTIONS:
License Fee: $1,000,000; Transactions: 5.000,000; Cost per Transaction:
$.01.
If the licensed customer provides Service Bureau services, then Category
2 shall apply and Category 1 shall not apply.
Category 3--Other Platform Based Product.
The parties will reasonably work together to agree to separate prices for
other platform based (e.g. PC based system) with respect to the
implementation of systems for the TRAMS Software if developed by either
or both parties. Prior to setting of the price for such PC based product,
the parties shall review the price structure together.
Category 4--Multiple Sites:
For subsequent sites, the Royalty due from CCS to CCNMS shall be computed
as follows:
(a) Stand Alone Product. The Royalty payment shall be twenty percent
(20%) of the actual Net Selling Price and shall not be subject to a
Minimum Royalty Payment.
(b) Integrated Product. The Royalty payment shall be calculated by
multiplying: (i) twenty percent (20%) by (ii) the percentage that the
assumed Net Selling Price of the TRAMS Software module listed in Category
1, paragraph (2) constitutes of the total Net Selling Price for the
Integrated Product for the first site license by (iii) the Net Selling
Price for the subsequent site.
23
<PAGE>
CATEGORY 4 EXAMPLE--Integrated Product
<TABLE>
<CAPTION>
FIRST SITE SECOND SITE
% LICENSETRAMS/TOTAL LICENSE ROYALTY
- ----------------------------------------------------- ---------------------------- ------------------ ---------
<S> <C> <C> <C>
20% X................................................ ($250,000/$1,000,000) $800,000 = $40,000
</TABLE>
c) Recurring Fees. If the end-user license agreement for a Service Bureau
provides for Recurring Fees for a second or subsequent site, the Royalty
payment shall be calculated using the same formulas defined under
Category 2 for Stand Alone Products or Integrated Products, as applicable
Category 5--Enterprise License:
The parties will reasonably cooperate in setting an enterprise license
fee (a company-wide fee for multiple sites) which shall generally
reflect the relative scope and scale of such enterprise in proportion to
the number of sites and products utilized.
Category 6--Service Bureau:
At some future date, should CCS desire to use TRAMS Software in its
internal Service Bureau processing, it will enter into negotiations for
CCNMS to license the TRAMS Software for such use, and CCNMS agrees to
license such TRAMS Software on terms no less favorable than granted to
other users or licensees for use in Service Bureau processing.
24
<PAGE>
SCHEDULE C
THIRD PARTY CONTRACTS
1. GENERAL ELECTRIC COMPANY
2. FIRST STAR INFORMATION SERVICES
3. Toronto Dominion Bank
25
<PAGE>
SCHEDULE D
CCN Group, Ltd. Guarantees
26
<PAGE>
Page 1
AGREEMENT FOR PROFESSIONAL SERVICES
UT Agreement No. UB0169
This Agreement for Professional Services is made by and between BULL HN
INFORMATION SYSTEMS INC. by its UniKix Technologies Division, having a place
of business at 13400 N. Black Canyon Highway, Building B, Suite 100, Phoenix,
AZ 85029, (hereinafter "UT") and CCS TECHNOLOGY GROUP, INC., having a place
of business at 900 Winderley Place, Maitland, FL 32751 (hereinafter
"CUSTOMER").
W I T N E S S E T H:
WHEREAS, UT provides professional services related to the current
business needs of CUSTOMER; and
WHEREAS, UT is willing to provide such profession services to CUSTOMER in
accordance with the terms and conditions of this Agreement; and
WHEREAS, CUSTOMER desires to authorize UT to provide professional
services in accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the covenants contained herein, and
other good and valuable considerations, the parties hereto agree as follows:
Article 1 - Mutual Commitment and Cooperation
1.1 Subject to the terms and conditions of this Agreement, UT shall provide
professional migration services (the "Services") as necessary to migrate
CUSTOMER selected CICS/COBOL application programs (the "Programs") from
CUSTOMER's mainframe to its UNIX open system environment (the
"Deliverables"). UT shall commit the reasonable effort of its
organization and personnel to cause such Services to meet the priorities,
delivery schedules, and objectives mutually developed by UT and CUSTOMER,
which shall be documented and set forth in a project plan (the "Statement
of Work"), attached hereto as Exhibit A.
1.2 Prior to the commencement of Services, each party shall appoint a
qualified technical coordinator (the "Project Manager"), who shall have
authority to act for and on behalf of the party represented, to make
binding technical decisions with respect to the specifications of the
Statement of Work, to reduce such technical decisions to writing, and to
supervise and coordinate all responsibilities of the parties under this
Agreement. UT and CUSTOMER agree that Project Managers shall not have
authority to modify or otherwise amend the terms and conditions of this
Agreement, except as provided in Article 5 hereto. Either party may make
<PAGE>
Page 2
changes in its assigned personnel upon written notice to the other party.
1.3 The Statement of Work shall include, among other things, a specification
detailing the Deliverables contemplated under this Agreement, and test
criteria (the Test Plan), against which, UT or CUSTOMER or both, will
measure and test the Deliverables to ensure conformance to the Statement
of Work. Prior to the commencement of Services by UT, each Project
Manager shall indicate concurrence with the final Statement of Work by
placement of a signature thereto.
1.4 CUSTOMER agrees to cooperate with UT in every reasonable way by, among
other things, (a) providing UT access to CUSTOMER's computing system
environment, providing UT object and source code copies of the Programs
to be migrated, and (c) promptly responding to UT requests for CUSTOMER
information, data, operating procedures, and such other materials and
assistance as may be necessary to enable UT to successfully perform
Services.
1.5 CUSTOMER acknowledges it may incur additional charges under this
Agreement, in the event CUSTOMER makes changes to its Programs after the
date of UT commencement of Services, if such changes render the
Deliverables non-conforming with the specifications contained in the
Statement of Work, and if such changes necessitate additional work by UT
to synchronize the Deliverables to ensure conformance with CUSTOMER
Program changes.
1.6 Performance of this Agreement shall be accomplished at the facilities of
UT, Phoenix, AZ or at CUSTOMER's site, or at other facilities mutually
agreeable to the parties as specified during the performance of this
Agreement.
1.7 Nothing in this Agreement shall transfer ownership of methodology,
software programs or other intellectual property of UT, or limit in any
way, UT's ownership or right to use the methodologies or design concepts
employed or produced under this Agreement, except as may be provided in
Article 9.2.
Article 2 - Payment Terms
2.1 CUSTOMER agrees to pay UT $57,500, for the Services provided under this
Agreement, in accordance with the following milestone payment schedule:
Milestone Amount
2.1.1 Upon Project Initiation $17,500
2.1.2 Upon UT Delivery of the Verification
Documents $17,500
<PAGE>
Page 3
2.1.3 Upon Completion of Training and Consulting
Services (2 Weeks) $17,500
2.1.4 Upon Completion of Test Grace Period $ 5,000
Total $57,500
2.2 UT shall invoice CUSTOMER in installments, the amount associated with
each payment milestone set forth in Article 2.1. CUSTOMER payments to
UT shall not be contingent upon any testing of the Deliverables
performed by CUSTOMER following UT conveyance of the completed
Deliverables to CUSTOMER.
2.3 For purposes of the payment at Article 2.1.1, UT will invoice CUSTOMER
upon initiation of the Project.
2.4 For purposes of the payments at Articles 2.1.2, and 2.1.3, UT shall
invoice upon UT delivery to CUSTOMER of the completed Deliverables in
accordance with the Statement of Work.
2.5 For purposes of the payment at Article 2.1.4, UT shall invoice CUSTOMER
following the test grace period defined in Article 2.1.4.
2.6 The payments specified herein shall not be construed to include local,
county, state or federal sales, use, excise, personal property, or other
similar taxes, if applicable (but excluding taxes based upon UTs
income), and all such applicable taxes shall be assumed and paid for by
Motorola.
2.7 In addition to the amounts set forth in Article 2.1, if applicable, UT
will invoice CUSTOMER on a monthly basis for the reasonable travel and
living expenses of UT personnel for any travel outside the State of
Arizona, requested and authorized by CUSTOMER related to UTs performance
of Services under this Agreement.
2.8 CUSTOMER shall pay all UT invoices within thirty (30) days of CUSTOMER
receipt thereof.
2.9 Services requested by CUSTOMER which are in addition to those defined
and mutually agreed in the Statement of Work, when agreed to by UT, will
be invoiced by UT at its then current rates for such Services, plus any
reasonable out-of-state travel and living expenses of UT personnel which
may be required and authorized by CUSTOMER to enable UT to perform the
additional Services.
2.10 In the event of termination or expiration of this Agreement, CUSTOMER
shall be obligated to pay UT any outstanding payments for Services work
completed up
<PAGE>
Page 4
to the date of such termination or expiration, or as otherwise specified
herein, and CUSTOMER's obligation of payment shall survive any such
termination or expiration of this Agreement.
2.11 Payment terms set forth in this Article 2.0, are subject to change
pending UT's verification and approval of CUSTOMER's financing
arrangements and credit status.
Article 3 - Term
3.1 This Agreement shall become effective upon execution by the parties, and
shall continue to be in effect until completion of the Services by UT,
unless otherwise terminated in accordance with this Article 12.
Article 4 - License
4.1 CUSTOMER hereby grants to UT, and UT accepts, a non-exclusive,
non-transferable, royalty free license under CUSTOMER's intellectual
property rights, to use, reproduce, modify, and if applicable, prepare
derivative works of the Programs, be they CUSTOMER developed Programs or
Programs licensed by CUSTOMER from a third party, solely for the purpose
of enabling UT to perform Services. Such license shall include both
object and source code, including any instruction or operating
documentation related thereto.
Article 5 - Change Orders
5.1 It is mutually acknowledged that changes in the configuration,
specifications, time and place of delivery, pricing and payment terms
for Services, or which otherwise require additional or diminished work,
may be desirable in light of actual experience gained in the course of
UT performance of Services, or as CUSTOMER redefines its needs.
Accordingly, either party shall be entitled to propose changes to such
terms by written notice at any time delivered to the other party. The
parties agree to consider such a proposed change in good faith, and to
make a faithful effort to accept equitable adjustments where appropriate
to accomplish the mutual objectives of the parties. If such a proposed
change is accepted, it shall be reduced to a formal, written order
("Change Order"), signed by both parties Project Managers prior to
execution thereof. Change Orders shall amend, and be affixed to, the
Statement of Work.
5.2 If CUSTOMER proposes a change upon which the parties cannot reach
agreement, and CUSTOMER in good faith believes its change is feasible
and necessary for its operational objectives, CUSTOMER may (in its
discretion), terminate this Agreement, provided that CUSTOMER
compensates UT on a prorated basis for Services rendered and items
procured or delivered through the
<PAGE>
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date of such termination. In no event, however, shall CUSTOMER be
required to pay UT more than the amounts that have become due and
payable through the actual date of termination.
Article 6 - Delays
6.1 UT shall be entitled, at its sole discretion, to adjust its delivery
schedules, and reassign idled UT personnel, for delays of five (5) days
duration caused by (a) CUSTOMER non-responsiveness to its obligations
hereunder, including but not limited to, CUSTOMER failure to deliver
Programs and/or other requisite software, files, and documentation in
the form and manner specified in the Statement of Work, or (b) contract
employees or other third party service providers of CUSTOMER who are
performing services having cross dependencies to UT's performance, and
which will impede UT's timely performance if such cross dependencies are
not delivered within the timeframe specified by CUSTOMER in the
Statement of Work. In the event such delays as stated in the foregoing
exceed ten (10) days duration, UT shall have the right to assess
downtime fees on a time and materials basis for those UT personnel idled
by such delays, and UT may invoice project milestones in accordance with
the original delivery dates as agreed by the parties prior to such
delays.
Article 7 - Development Tools
7.1 Subject to the restrictions set forth in this Article 7.1, UT will, upon
completion of Services, provide CUSTOMER an undocumented, data migration
tool in machine executable form (hereinafter the "Tool"), at no charge,
for use by CUSTOMER for its internal business purposes only, and further
restricted to use by CUSTOMER only with Programs running on UT Programs,
and/or for migration of CUSTOMER's application programs to run on UT
Programs. CUSTOMER acknowledges that the Tool is provided "AS IS". UT
makes no warranty or representation, express or implied, with respect to
the completeness, reliability, accuracy, effectiveness, performance or
operation of the Tool, or regarding merchantability, or fitness for a
particular purpose. UT does not support the Tool, or provide training
in use of the Tools. CUSTOMER waives any and all claims it may have
against UT arising out of CUSTOMER's use of the Tools, or any results
obtained therefrom.
Article 8 - Deliverables Warranty
8.1 UT warrants that Services provided hereunder will be performed in a
professional manner by UT, using well qualified individuals and in
accordance with generally recognized commercial practices and standards.
8.2 UT further warrants for a period of sixty (60) days from the date of UT
delivery of
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the migrated source code to CUSTOMER (the "Warranty Period"), that all
source code delivered will be "clean compiled" and verified for
successful execution as provided in Section 2.2 of Exhibit A, Statement
of Work. UT does not warrant, and expressly disclaims, that the source
code provided by UT will execute in CUSTOMER's environment with
CUSTOMER's data. If during the Warranty Period CUSTOMER demonstrates to
UT that the source code subject of this warranty is not clean compiled,
UT will remedy, without charge to CUSTOMER, any and all parts of the
source code found to be defective or nonconforming to the Statement of
Work. UT will begin to correct defective or nonconforming code
immediately upon CUSTOMER's notice to UT, and shall continue diligently
until the defect or nonconforming code is corrected.
8.3 UT's entire liability and CUSTOMER's exclusive remedy as it relates to
the warranty respecting delivered source code shall be as set forth in
Article 8.2.
8.4 EXCEPT AS STATED IN THIS ARTICLE 8.0 UT MAKES NO OTHER REPRESENTATIONS
OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED
TO WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE OR INTENDED USE OR OF
MERCHANTABILITY. UT ASSUMES NO RESPONSIBILITY WITH RESPECT TO THE USE
BY CUSTOMER OR ITS EMPLOYEES OR CLIENTS OF THE SERVICES OR DELIVERABLES.
Article 9 - Indemnification
9.1 CUSTOMER shall defend or settle at its expense any action brought
against UT to the extent that it is based on a claim that any Program
used within the scope of this Agreement infringes a patent, copyright or
trade secret, or other proprietary rights of third parties, provided
that UT notifies CUSTOMER promptly in writing of the claim, allows
CUSTOMER fully to control the defense or settlement of such claim, and
does not agree to any settlement of such claim without CUSTOMER's prior
written consent. Should any Program become; or in CUSTOMER's opinion be
likely to become, the subject of any claim of infringement, CUSTOMER
shall notify UT and UT shall promptly discontinue any use of the
Program. CUSTOMER will pay any costs and damages finally awarded or for
any settlement made with CUSTOMER's prior written consent and will
reimburse UT for its reasonable attorney's fees incurred in connection
therewith.
9.2 Each party shall indemnify the other and hold the other harmless from
and against any and all damages, expenses, liabilities and claims for
any injuries to or death of each parties' personnel arising from the
other party's negligence or intentional misconduct while present on the
premises of either party in connection with the performance of the
Services.
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Article 10 - Ownership and Confidentiality
10.1 CUSTOMER represents and warrants that it has all rights and licenses
necessary to grant UT the license in Article 4.1 hereto.
10.2 UT agrees that any Deliverables created by UT hereunder shall be deemed
a "work made for hire" under the United States copyright laws (17 U.S.C.
Section 101), as such may be amended. If any court of competent
jurisdiction determines that such derivative work is not a "work made
for hire", UT hereby agrees to irrevocably assign and hereby irrevocably
assigns its copyright rights to CUSTOMER.
10.3 Expressly excluded from the provisions of Article 10.2 are any
preexisting development tools of any kind which UT may provide for
purposes of performing Services, and UT shall retain any and all right,
title, and ownership it may have to UT's preexisting development tools
and material.
10.4 UT has no right, title or interest in the Programs except as provided
herein. UT acknowledges CUSTOMER's representation that the Programs
constitute, contain and embody valuable confidential information, trade
secrets and proprietary rights of CUSTOMER and its licensors. UT agrees
to protect and maintain the complete confidentiality of the Programs,
including but not limited to agreeing (i) to restrict access to the
Programs to those employees, including contract employees, who require
such access to enable UT to use the Programs hereunder and who have
executed a nondisclosure agreement with UT and (ii) to secure and
protect the Programs, including erasure thereof prior to disposing the
media, consistent with the maintenance of CUSTOMER's and others' rights
therein. UT will ensure that all of CUSTOMER's and other third party's
proprietary notices, including but not limited to any trademark,
copyright or other proprietary rights notices, are reproduced and
maintained on all copies of the Programs, and UT will not remove any
such markings from the Programs. UT shall have no right to affix its
own copyright notices to the Programs. UT will promptly notify CUSTOMER
in the event that any unauthorized party obtains access to the Programs
through UT.
10.5 All written information provided by CUSTOMER to UT in connection with
Services performed under this Agreement, including that information and
material which was delivered to UT prior to the execution of this
Agreement, and which is identified in writing as proprietary information
will be safeguarded by UT during the term of this Agreement, and for a
period of two (2) years thereafter, to the same extent that UT
safeguards like information relating to its own business. UT bears no
responsibility for safeguarding information which is publicly available,
already in UT's possession or known to UT, or rightfully obtained by
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UT through third parties.
Article 11 - Limitations of Liability
11.1 NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT AND
NOTWITHSTANDING THE FORUM IN WHICH ANY LEGAL OR EQUITABLE ACTION MAY BE
BROUGHT BY CUSTOMER AGAINST UT, CUSTOMER AGREES THAT UT'S AGGREGATE
LIABILITY, IF ANY, TO CUSTOMER FOR ANY LOSS, DAMAGE, CLAIM, LIABILITY OR
EXPENSES OF ANY KIND (INCLUDING WITHOUT LIMITATION, LOSS OF BUSINESS OR
SAVINGS TO CUSTOMER) CAUSED DIRECTLY OR INDIRECTLY BY THE PERFORMANCE OR
NONPERFORMANCE OF SERVICES PURSUANT TO THIS AGREEMENT OR BY THE
NEGLIGENCE, ACTIVE OR PASSIVE OF UT, SHALL BE EXCLUSIVELY LIMITED TO
ACTUAL MONEY DAMAGES IN AN AMOUNT NOT TO EXCEED THE TOTAL DOLLAR AMOUNT
ACTUALLY PAID BY CUSTOMER TO UT UNDER THIS AGREEMENT. UNDER NO
CIRCUMSTANCES SHALL UT BE LIABLE FOR SPECIAL, INCIDENTAL, CONSEQUENTIAL,
EXEMPLARY OR PUNITIVE DAMAGES, OR FOR REPROCUREMENT COSTS OR LOST
PROFITS, DESPITE THE POSSIBILITY THAT SUCH DAMAGES MAY BE KNOWN TO UT.
11.2 In no event shall UT be liable for any loss, injury, or damage resulting
in whole or in part from acts of God or civil or military authorities,
fire, communications or transmission problems, computer malfunctions, or
any cause of a similar or different nature beyond the control of UT to
prevent or provide against.
11.3 CUSTOMER agrees that the Services provided hereunder are wholly advisory
in nature and are based on information, judgments and decisions made by
CUSTOMER. The parties further agree that any Deliverables provided by
UT are designed to be utilized by CUSTOMER's professionals and managers
and that such use shall be solely CUSTOMER's responsibility and the
product of CUSTOMER's professional judgment.
11.4 No action in any form arising out of this Agreement shall be instituted
more than two (2) years after the cause of action has arisen.
Article 12 - Term and Termination
12.1 CUSTOMER may terminate this Agreement upon ten (10) days written notice.
In such event, however, CUSTOMER shall be required to pay UT the amounts
that have become due and payable through the actual date of termination,
plus the amounts that would otherwise have become due and payable
through the date of the next milestone scheduled to be accomplished.
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12.2 UT may terminate this Agreement by written notification to CUSTOMER that
CUSTOMER failed to comply with any material term or material condition
of this Agreement and has failed to cure such default within ten (10)
days after its receipt of notice thereof.
12.3 CUSTOMER agrees to return the original and any copy of Programs licensed
hereunder to UT within five (5) days after any termination of this
Agreement or the license granted herein.
12.4 Termination of this Agreement shall not relieve CUSTOMER or UT of those
obligations under this Agreement that, by their terms, survive any
termination.
Article 13 - Independent Contractor
13.1 It is mutually understood and agreed that in the performance of this
Agreement, UT will not be subject to the control or direction of
CUSTOMER as to the means or method of performing Services, and that UT
is acting as an independent contractor and shall not for any purpose be
deemed an employee of CUSTOMER.
Article 14 - Waiver, Severability and Non-Assignability
14.1 All rights of each party hereunder are separate and cumulative, and no
one of them, whether exercised or not exercised, will be deemed to be an
exclusion of any other right, and will not limit or prejudice any other
legal or equitable right which it may have.
14.2 Should any part of this Agreement for any reason be declared invalid or
void, such decision shall not affect the remaining portion which will
remain in full force and effect as if the Agreement had been executed
with the invalid portion eliminated.
14.3 CUSTOMER may assign this Agreement in whole or in part only with the
prior written consent of UT. UT may assign this Agreement in whole or
part and all or part of the payments to the extent that UT's obligations
to CUSTOMER are not affected.
Article 15 - Governing Law
15.1 This Agreement shall be governed by the laws of the Commonwealth of
Massachusetts. UT and CUSTOMER agree that with respect to any dispute
or claim arising out of or relating to this Agreement or any alleged
breach thereof, jurisdiction and venue shall lie exclusively in the
United States District Court for Massachusetts (Boston) and UT and
CUSTOMER hereby irrevocably agree to
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submit to the jurisdiction of such court.
Article 16 - Entire Agreement
16.1 This Agreement, shall constitute and define the entire and complete
rights of the parties hereto and supersedes all prior oral and written
proposals and communications. In no event shall there be any implied
contract asserted by either party except as herein stipulated.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
signed and executed with the intention of becoming legally bound thereby.
CUSTOMER:
CCS TECHNOLOGY GROUP, INC. BULL HN INFORMATION SYSTEMS INC.,
by its UniKix Technologies Unit
/s/ Daniel P. Starros /s/ Alfred W. Randall
- ---------------------------------- --------------------------------------
(Signature with Authority) (Signature with Authority)
Daniel P. Starros Alfred W. Randall
- ---------------------------------- --------------------------------------
(Printed Name) (Printed Name)
Chief Information Officer Director, Contract Administration
- ---------------------------------- --------------------------------------
(Title) (Title)
12/13/95 12/11/95
- ---------------------------------- --------------------------------------
(Date) (Date)
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EXHIBIT A
STATEMENT OF WORK
CCS Technology Group, Inc.
Migration Project
Revised 12/11/95
Prepared by UniKix Technologies
13400 N. Black Canyon Highway
Bldg. B, Suite 100
Phoenix, Arizona 8S029
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Table of Contents
PROJECT OVERVIEW 1
SECTION 1: SCOPE OF PROFESSIONAL SERVICES 2
SECTION 1.1: PROGRAM QUANTITIES FOR MIGRATION 2
SECTION 1.2: TRAINING 3
SECTION 1.3: PROFESSIONAL CONSULTING SERVICES 3
SECTION 1.4: PROJECT MANAGEMENT 3
SECTION 1.5: PAYMENT MILESTONES 3
SECTION 2: MIGRATION STRATEGY 4
SECTION 2.1: DEFINITION OF THE MIGRATION PROCESS 4
SECTION 2.2: DEFINITION OF THE TESTING PROCESS 5
SECTION 2.3: ENVIRONMENTS 5
SECTION 2.4: PROJECT RESPONSIBILITIES 6
SECTION 2.5: DELIVERABLES 7
SECTION 2.6: RESOURCE ALLOCATION 8
SECTION 3: ASSUMPTIONS 9
SECTION 4: APPROVALS 10
APPENDIX A: CCS APPLICATION INVENTORY LISTING 11
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APPENDIX B: INITIAL PROJECT PLAN 12
<PAGE>
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PROJECT OVERVIEW
This document presents a Statement of Work for the migration of 4 modules
within CCS Technology Group, Inc.'s VISION PLUS Release 2.1 financial system
to a UNIX-based SUN hardware platform for the purpose of downsizing the
application. UniKix Technologies (UT) is providing its professional migration
to CCS Technologies Group, Inc. under the Professional Service Agreement
#UB0169.
CCS Technology Group, Inc. (CCS) will determine a functionally representative
BASELINE of the 4 modules, to include all batch and on-line programs,
copybooks, maps, and JCL. This BASELINE will serve as the definition of all
source to be included in the migration. CCS Technologies Group, Inc. will
present a detail document referred to as Appendix A - CCS Application
Inventory Listing containing a list of all programs, naming conventions,
transaction codes, and copybooks that are part of the BASELINE.
The four modules to be migrated were identified during the initial audit
process and include:
Customer Authorization System (CAS)
Credit Management System (CMS)
Security Sub System and Common Routines (SSC)
Accounts Services Management (ASM)
CCS Technology Group, Inc. will create tapes, containing the BASELINE when
the VISION PLUS Release 2.1 is available on November 6, 1995, according to
the tape requirements provided by UniKix Technologies and forward the
application tapes to UniKix Technologies in Phoenix, Arizona, where the
application programs will be unloaded, analyzed and migrated to run on the
UNIX platform using the UniKix OLTP product. During this migration project
there will be NO file conversion and subsequently NO Acceptance Testing.
Online testing will be limited to a review of the screen format against the
CCS provided documentation. Batch testing will be limited to running the
provided and specified JCL/ARZJCL2 (limited to 98 steps) and ARZJCL2C
(limited to 45 steps) through EBM in verify mode to a condition code of 0.
One batch program will be executed to test the I/O module to ensure that it
will write out a header and trailer record. CCS is required to provide UT a
document describing the content of the header and trailer record.
The CCS Technology Group. Inc.'s Source Management functionality will not be
converted as part of the professional services agreement. All programs, JCL
and control cards pertaining to the Source Management will not be migrated.
When the source code migration is complete, CCS personnel will have 1 week of
UniKix Product Training to be followed by 1 week of consulting service at
UT's Phoenix
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Facility using the CCS source code.
UniKix Technologies will offer their services for the subsequent tasks beyond
the source code migration as Professional Consulting Services to be requested
by the client for those tasks when they need assistance. Once the
Professional Consulting Services Contract has been authorized, CCS can
utilize the environment set up for the migration at the UniKix Phoenix
facility for testing, along with UT consulting services for the time period
established in the consulting services contract.
Section 1: Scope of Professional Services
This section describes the services to be included in the migration related
to the professional services estimate provided.
Section 1.1: Program Quantities for Migration
The VISION PLUS Release 2.1 source programs that will be migrated are defined
in detail in Appendix A - CCS Application Inventory Listing supplied by CCS
Technology Group, Inc. at the onset of the project. The following list
quantifies the number of programs and files; and the cost of the migration
for the items that were presented during the initial audit process dated
8/14/95 and the additional ASM module dated 9/27/95.
The intent of CCS Technology Group, Inc. is to use the VISION 2.1 product
line as the BASELINE for initial Fixed Price Quote. However, CCS
Technologies Group, Inc. wishes to migrate the VISION PLUS Release 2.1
beginning on December 18, 1995. At the time of delivery, the VISION PLUS
Release 2.1 source will be compared with the VISION 2.1 source previously
received by UT and a change order will be created for any additional
programs, maps, copybooks, or JCL.
PRICE
----------
Migration Preparation and Setup $10,000.00
CICS Table Setup $ 2,000.00
Migration of 263 On-line COBOL programs to the UniKix environment $ 8,876.00
Migration of 227 BMS mapsets to function with the migrated
programs $ 2,270.00
Migration of 502 Batch COBOL programs to the UniKix environment $16,943.00
Migration of 145 MVS JCL Jobsteps to UNIX shell scripts
(JCL/ARZJCL2 and ARZJCL2C) $ 1,000.00
Online comparison of screens to CCS documentation $ 5,000.00
JCL EBM verification (run in verify mode to condition code 0) $ 5,000.00
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__________
SUBTOTAL for the Basic Migration Service for the CCS application
as described above. $51,089.00
Section 1.2: Training
With the purchase of the UniKix 4.1 license software, UT will provide
standard UniKix Training, consisting of a one week training class at
our Phoenix facility for one individual. The following topics are
included:
UNIX
Micro Focus COBOL
UniKix On-line
UniKix Batch
Migrating EBM Applications to UniKix
NOTE: Additional training is based on $300.00 per day per student plus
T&L if the training is provided on the customer site. Minimum class
size for customer site training is 6 people. It is CCS's desire to
have UniKix Product Training (1 week) and Migration Training (I Week)
for 3 CCS personnel at the Phoenix Facility.
SUBTOTAL for the Standard UniKix Training ( 1 Week) $ 3000.00
First individual free, second two at $300.00 per day
Section 1.3: Professional Consulting Services
UT will provide one week of Migration Services Consulting.
SUBTOTAL for ( 1 Week) Consulting Services $ 5000.00
Section 1.4: Project Management
UT will provide project management services throughout the duration of
the project to act as the focal point for all project related issues,
coordinate resources, and assure timely transfer of deliverables
according to the project plan. Status meetings will be conducted via
telephone conference calls to monitor the progress of the project.
SUBTOTAL for Project Management $ 5,609.00
TOTAL Migration Services Fixed Price $64,698.00
Less Discount $(7,198.00)
-----------
NET Migration services Fixed Price $57,500.00
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Section 1.5: Payment Milestones
Payment Milestones
1.0 Initial Payment for Migration Services upon project
initiation $17,500.00
2.0 Delivery of the verification documents $17,500.00
3.0 Completion of Training and consulting Service (2 Weeks) $17,500.00
4.0 Completion of test grace period (30 days after item
3.0 above) $ 5,000.00
-----------
TOTAL $57,500.00
Section 2: Migration Strategy
Section 2.1: Definition of the Migration Process
[CHART]
The picture above represents the suggested migration process. Within each
task the designation of CCS means CCS Technology Group, Inc. responsibility
and UT means UniKix Technologies responsibility.
UniKix Technologies will provide the professional services as part of the
fixed price agreement up to and including the-verification of the migrated
source code. CCS Technology Group, Inc. will be required to provide
application knowledge during the migration. CCS Technologies Group, Inc.
resource(s) will be required onsite at the UT Phoenix facility for
verification of the migrated source before delivery to CCS. The verification
will be conducted by UT personnel in order to demonstrate to CCS personnel
the comparison of the online screens with the documentation and the JCL EBM
verification.
UniKix Technologies will offer their services for the remaining tasks as
Professional Consulting Services to be requested by the client for those
tasks when they need assistance.
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Section 2.2: Definition of the Testing Process
There will be no formal Acceptance Testing as part of the Professional
Services Contract. To verify that the source code has been migrated
successfully UT will compare all online screens against the documentation
provided by CCS, and will run the Job ARZJCL2 (limited to 98 steps) through
the EBM process in verify mode to a successful completion of condition codes
of 0 and will execute Job ARZJCL2C / Program ARU900 which will write a header
and trailer record to a file in order to test the I/O Module. CCS resource
will be available onsite in Phoenix during this verification as described
above The completion of the verification serves as acceptance of the source
code migration by CCS.
All further testing will be the responsibility of CCS and be performed
initially at UT's Phoenix facility and subsequently at CCS's facility Upon
the initiation of a Professional Services Consulting Agreement and Work
Order, UT will provide consulting services to assist CCS in their testing
effort and help resolve any product or migration discrepancies that may arise
from testing.
Section 2.3: Environments
Current Environment Migration Environment Target Environment
Hardware: Hardware: Hardware:
IBM 3090 HP T500 Sparc/20
Software: Software: Software:
MVS HP UX Operating System Solaris 2.4
9.0.4
Microfocus COBOL 3.2 Microfocus COBOL 3.2
Oracle 7 Ver. 7.1 UniKix Ver. 4.1
Syncsort Ver. 1.5 EBM Ver. 8.0
UniKix Ver. 4.1
EBM Ver. 8.0
KixScan
KixWorld
BRIXTON PU4/PU5
ISC
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Section 2.4: Project Responsibilities
CCS Technology Group, Inc. Statement of Work
The initial project plan is described in Appendix B - Initial Project Plan.
This project plan will be determined after the delivery of VISION PLUS
Release 2.1 on December 20, 1995 and agreed upon by both parties at the onset
of the project. The milestones and project responsibilities are outlined in
this section.
Project Preparation
CCS Technologies Group, Inc. will provide a detailed document describing
the application inventory as Appendix A - CCS Application Inventory
Listing which lists all programs, naming conventions, transaction
codes, BMS Mapsets, and CopyBooks. Appendix A should be received and
reviewed by UniKix Technologies by the project start date.
CCS Technologies Group, Inc. will provide UT the documentation for each
of the 4 modules.
CCS Technologies Group, Inc. will provide tapes that include the
following items from the BASELINE:
On-line source programs.
Batch source programs.
Copybook members.
Batch JCL.
JCL procedures.
Control Cards used in JCL.
BMS Maps.
Macros or RDO used for the CICS: FCT, PPT, PCT, TCT tables.
UT will establish a BASELINE migration environment at the UT Phoenix
Facility for CCS Technologies Group, Inc. migration project.
UT and CCS Technologies Group, Inc. will allocate appropriate resources
for the time periods defined in Section 2.6 of this Statement of Work.
Project Management
UT and CCS Technologies Group, Inc. will provide project management
services throughout the duration of the project to act as the focal
point for all project related issues, coordinate resources, and assure
timely transfer of
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deliverables according to the project plan.
Status meetings will be conducted via telephone conference calls to
monitor the progress of the project. The frequency and timing of
status meetings will be mutually agreed after commencement of the
project.
Conversion
UT will be NOT be responsible for converting CCS Technology Group, Inc.
data.
Migration
UT will be responsible for migrating CCS Technologies Group, Inc. source
programs included Appendix A - CCS Application Inventory Listing.
On-line COBOL TO Micro Focus COBOL/2 programs
Batch COBOL TO Micro Focus COBOL/2 programs
MVS JCL TO EBM Batch Shell Scripts
Procs TO EBM Batch Shell Scripts
Control Cards TO UNIX Sequential Line sequential files
BMS Maps TO UniKix BMS Maps
Section 2.5: Deliverables
Project Deliverables
Deliverable Responsible Party
- ----------- ------------------
Appendix A - CCS Application Inventory Listing CCS
BASELINE Application Tapes CCS
Module Documentation CCS
COBOL programs representing the Assembler Language
Programs CCS
Appendix B - Initial Project Plan UT
Delivery of the UniKix licensed software UT
Verification of the Migrated Source code UT/CCS
Completion of comparison of migrated online screens UT
against CCS Documentation
Completion of JCL execute in verify mode using EBM UT
- condition code 0 for Job ARZJCL2 (limited to 98
steps)
Completion of JCL ARZJCL2C/ program execution ARU900 UT
(limited to 45 steps)
Completion of UniKix Product Training (1 Week) UT
Completion of UniKix Migration Training (1 Week) UT
Delivery of Migrated Source (On-line and Batch) UT/CCS
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Project Management Deliverables
Deliverable Responsible Party
- ----------- ------------------
Status Reports UT
Status Conference Calls UT and CCS Technology Group, Inc.
Section 2.6: Resource Allocation
UT will provide the following resources for the migration project:
One (1) Project Manager.
One (1) Migration Services Technical Lead.
Adequate Analysts as defined in the detail project plan, agreed upon by
both parties at the onset of the project.
CCS Technology Group, Inc. will provide the following resources for the
migration project:
One (1) Project Manager.
One (1) Application Technical Analyst - with sufficient knowledge of the 4
modules to answer questions related to the migration of the application. CCS
Technology Group, Inc. resource(s) will be available by phone for the initial
period of the migration and will be onsite at the UT facility in Phoenix,
Arizona for the verification of the migrated source code.
During the two weeks training and consulting services period, CCS will
send a maximum of 3 CCS personnel. One (1) of the three (3) must be a
technical analyst with application knowledge.
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Section 3: Assumptions
The following assumptions have been made in preparing this statement of work
and project plan.
1.) UT assumes that CCS Technology Group, Inc.'s application programs will be
forwarded to UT in a timely manner in compliance with the schedule.
Cumulative delays caused by client of 5 days duration may result in
UT's adjustment of the project delivery schedule. Delays caused by
client of 10 days duration may result in UT's readjustment of the
delivery schedule and/or the development of a new project plan,
and/or the reassignment of project personnel. Delays subject of
this section shall include, but not be limited to:
(1) client's failure to provide application programs as agreed,
(2) client's failure to provide a dedicated technical resource with
sufficient knowledge of the project and application to facilitate
UT's completion of the project,
2.) UT assumes that the information provided in Appendix A - CCS Application
Inventory Listing is a complete and functional application. Any
additional time required to acquire a complete system will be submitted
as a change order and be added to the estimate detailed in Section 1.1.
3.) UT assumes that the applications to be migrated to UniKix will follow
normal standards that eliminate a need for significant modifications on
the part of UT. If for any reasons a CCS Technology Group, Inc.'s
application needs significant modifications, such modification will
impact the project schedule.
4.) UT assumes that CCS Technology Group, Inc. is providing a system platform
sufficient to complete all tasks associated with the Migration effort of
CCS Technologies Group, Inc.'s modules upon delivery.
5.) UT assumes that if the scope of the project changes during the period of
the project plan, UT will analyze the impact of such change on the
project and will present revised schedules and costs.
6.) UT agrees and assumes that CCS Technology Group, Inc. also agrees, to
their respective responsibilities as outlined in this document, to
achieve successful completion of the project. If in the course of
performing its responsibilities, UT becomes aware of a better way of
providing the functionality of the system, UT will so advise CCS
Technologies Group, Inc. so that each potential improvement can be
evaluated.
<PAGE>
Page 24
8.) Re-engineering of approximately 5% of the source may be required for
performance considerations. This activity will be charged as
Professional Consulting Services.
9.) UT's standard training within a Migration Project does not include
education on performance tuning, sizing, or disk optimization.
10.) All T&L associated with the Migration Services will be charged to CCS
Technology Group, Inc. with prior approval by CCS Technologies Group,
Inc.
11.) UT' s assumes that CCS will convert the assembler routines identified in
the conforming to the delivery dates specified in the project plan -
Appendix B. Failure to deliver programs to replace the assembler
routines, will impact the project schedule and be subject to the delay
penalty in assumption 1.
12.) UT assumes that without complete acceptance testing, UT is unable to
provide a warrantee period for the migrated source.
Section 4: Approvals
By signature below, the respective representative has agreed to this
Statement of Work.
CCS Technology Group, Inc. UniKix Technologies
The Spectrum Building 13400 N. Black Canyon Highway
900 Winderley Place Bldg. B., Suite 100
Maitland, Florida 32751 Phoenix, Arizona 85029
Phone (407) 660-0343 Phone (602) 862-445S
By: /s/ Gerald L. Vaughn By: Ralph E. Tomerlin
- ---------------------------------- -----------------------------
Name: Gerald L. Vaughn Name: /s/ Ralph E. Tomerlin
--------------------------- ----------------------
Project Manager Project Manager
Date: 12/13/95 Date: 12/11/95
--------------------------- ----------------------
<PAGE>
Page 25
By: /s/ Daniel P. Stavros By: Brian Newlove
----------------------------- ------------------------
Name: Daniel P. Stavros Name: /s/ Brian Newlove
--------------------------- ----------------------
Signature with Authority Director, Migration
Services
Date: 12/13/95 Date: 12/11/95
--------------------------- ----------------------
<PAGE>
Page 26
Appendix A: - CCS Application Inventory Listing
CCS APPLICATION
INVENTORY LISTING
<PAGE>
Appendix B: Initial Project Plan
Project plan must be determined after the delivery of VISION PLUS Release 2.1
expected by December 20, 1995.
DRAFT IN PROCESS
<PAGE>
Page 28
Appendix A: - CCS Application Inventory Listing
CCS APPLICATION
INVENTORY LISTING
<PAGE>
Page 29
Appendix B: Initial Project Plan
Project plan must be determined after the delivery of VISION PLUS Release 2.1
expected by December 20, 1995.
DRAFT IN PROCESS
<PAGE>
Page 30
AGREEMENT FOR PROFESSIONAL CONSULTING SERVICES
UT Agreement No UB0172
This Agreement for Professional Consulting Services is made by and
between BULL HN INFORMATION SYSTEMS INC. by its UniKix Technologies Unit,
having a place of business at 13400 N. Black Canyon Highway, Building B,
Suite 100, Phoenix, AZ 85029, (hereinafter "Consultant") and CCS TECHNOLOGY
GROUP, INC., having a place of business at 900 Winderley Place, Maitland, FL
32751 (hereinafter "Customer").
W I T N E S S E T H:
WHEREAS, Customer desires to utilize the expert advice and assistance of
Consultant in the field in which Consultant has professional qualifications,
and
WHEREAS, Consultant is willing and able to perform such services in
furtherance of Customer's business under the terms and conditions of this
Agreement,
NOW, THEREFORE, in consideration of the covenants contained herein, and
other good and valuable considerations, the parties hereto agree as follows:
Article 1 - Term and Termination
1.1 This Agreement will become effective on the date executed by Consultant
and will continue in effect through the completion of each mutually
agreed Work Order, as described in Article 3.1. The initial Work Order
is attached hereto as Exhibit A.
1.2 Customer may terminate any Work Order, or any portion thereof, upon ten
(10) days advance written notice. Upon receipt of such notice,
Consultant shall advise Customer of the extent to which performance has
been completed through such date, and collect and deliver to Customer
whatever work product then-exists in the manner requested by Customer.
Consultant shall be paid for all work performed through the date of
termination.
1.3 In the event of any termination of this Agreement, Articles 4 and 5
hereof shall survive and continue in effect.
Article 2 - Independent Contractor Status
2.1 It is the intention of the parties that Consultant be an independent
contractor and not an employee, agent, joint venturer, or partner of
Customer. Nothing in this Agreement shall be interpreted or construed as
creating or establishing the
<PAGE>
Page 31
relationship of employer and employee between Customer and either
Consultant or any employee or agent of Consultant.
2.2 Consultant shall retain the right to perform work for others during the
terms of this Agreement. Customer shall retain the right to cause work
of the same or a different kind to be performed by its own personnel or
other contractors during the term of this Agreement.
Article 3 - Service to be Performed by Consultant
3.1 All work performed by Consultant shall be documented in a mutually
developed and agreed Work Order signed by authorized representatives of
both parties. Each Work Order shall set forth, at a minimum, the work to
be done, the number of Consultant's personnel to be assigned to
Customer's work, the duration of each individual's assignment, and fees
for the work to be performed. Consultant shall have the right to accept
or decline any proposed Work Order.
3.2 Consultant and Customer shall mutually determine the method, details, and
means of performing the work to be carried out by Consultant for
Customer. Customer may require, and Consultant's personnel shall observe
at all times, the security and safety policies of Customer, and the
applicable procedures and standards of Customer relating to the use of,
and development of, software code for Customer. In addition, Customer
shall be entitled to exercise a broad general power of supervision and
control over the results of work performed by Consultant to ensure
satisfactory performance. This power of supervision shall include the
right to inspect, stop work, make suggestions or recommendations as to
the details of the work, and request modifications to the scope of the
Work Order.
3.3 Consultant will try to accommodate work schedule requests of Customer to
the extent possible. Should any personnel of Consultant be unable to
perform scheduled services because of illness, resignation, or other
causes beyond Consultant's reasonable control, Consultant will attempt to
replace such personnel within a reasonable time, but Consultant shall not
be liable for failure if it is unable to do so, giving due regard to its
other commitments and priorities.
3.4 Customer will advise Consultant of the individual to whom consultant's
manager will report progress on day-to-day work. Customer and Consultant
shall develop appropriate administrative procedures for performance of
work at Customer's site. Customer shall periodically prepare an
evaluation of the work performed by Consultant for submission to
Consultant.
3.5 Consultants personnel will perform all work primarily at Customer's
premises except when such projects or tasks may, as mutually determined,
be performed
<PAGE>
Page 32
off-site. Customer agrees to provide working space and facilities, and
any other services and materials Consultant or its personnel may
reasonably request in order to perform their work. Customer recognizes
there may be a need to train Consultant's personnel in the unique
procedures used at Customer's location. When Customer determines that
such training is necessary, Customer shall, unless otherwise agreed in
writing, pay Consultant for its personnel's training time.
Article 4 - Compensation
4.1 The current schedule of fees for work performed by Consultant under Work
Order # 1 shall be on a time and material basis at the rates agreed and
set forth in Work Order # 1. Fees for work performed by Consultant
against subsequent Work Orders shall be those fees mutually negotiated by
Consultant and Customer prior to execution of any subsequent Work Order.
4.2 Consultant shall submit invoices to Customer monthly for the services
furnished and other expenses incurred hereunder. Each invoice will
provide a breakdown and distribution of charges by name of individual and
expense items.
4.3 In addition to the payment of fees as mutually agreed, Consultant shall
invoice Customer on a monthly basis, at actual cost, the reasonable
travel (including airfare and consultant "in-transit time"), and living
expenses of Consultant's personnel for any Customer authorized travel to
and from Customer's work location, and other travel as may be determined
by Customer and specified within a Work Order.
4.4 The payments specified herein shall not be construed to include local,
county, state or federal sales, use, excise, personal, property, or other
similar taxes, if applicable (but excluding taxes based upon Consultant's
income), and any such tax, if applicable, shall be assumed and paid for
by Customer.
4.5 Customer shall pay each invoice in full with thirty (30) days receipt
thereof.
4.6 In the event of termination of this Agreement, Customer shall be
obligated to pay Consultant any outstanding payments for work completed
up to the point of termination. Customer obligation of payment shall
survive any such termination of this Agreement.
4.7 Consultant shall procure and maintain workers' compensation coverage
sufficient to meet the statutory requirements of every state in which
Consultant's personnel are engaged in Customer's work.
Article 5 - License Grant
<PAGE>
Page 33
5.1 In the event consulting services contemplated hereunder require the
evaluation or use of Customer software programs by Consultant, Customer
shall grant, and hereby does grant Consultant, a non-exclusive,
non-transferable, royalty free license under Customer's intellectual
property rights, to use and evaluate any and all such software programs
("Project Software"), in object and source code if applicable, including
any instruction or operating documentation related thereto, for internal
use only, solely for the purposes contemplated in the Work Order.
5.2 Customer represents and warrants that it has all rights and licenses
necessary to grant the license-to Consultant in Article 5.1. Customer
agrees to indemnify, hold harmless and defend Consultant, and Consultant
employees, from and against any and all suits, proceedings at law or in
equity, and any and all liability, loss, claims, costs, damages or
expenses, including reasonable attorney's fees, arising out of or in
connection with any claims by a licensor of Project Software, that any
aspect of Consultant's performance pursuant to the license granted
Consultant in Article 5.1.
5.3 Consultant shall not acquire any right, title or interest in the Project
Software except as provided herein.
Article 6 - Intellectual Property Rights
6.1 Consultant shall maintain in strict confidence and shall use and disclose
only as authorized by Customer, all information of a competitively
sensitive or proprietary nature that it receives in connection with the
work performed for Customer pursuant to each Work Order. Consultant
shall require its personnel to agree to do likewise. Customer shall take
necessary steps to identify for the benefit of Consultant and its
personnel any information of a competitively sensitive or proprietary
nature, by affixing confidentiality notices to written material. These
restrictions shall not be construed to apply to (1) information generally
available to the public, (2) information released by Customer generally
without restriction, (3) information independently developed or acquired
by Consultant or its personnel without reliance in any way on other
protected information of Customer, or (4) information approved for the
use and disclosure of its personnel without restriction. Notwithstanding
the foregoing restrictions, Consultant and its personnel may use and
disclose any information (1 ) to the extent required by an order of any
court of other governmental authority of (2) as necessary for it or them
to protect their interest in this Agreement, but in each case only after
Customer has been so notified and has had the opportunity, if possible,
to obtain reasonable protection for such information in connection with
such disclosure.
6.2 All copyrights, patents, trade secrets, or other intellectual property
rights associated with any ideas, concepts, techniques, inventions,
processes, or works
<PAGE>
Page 34
of authorship developed or created by Consultant or its personnel during
the course of performing Customer's work (collectively the "Work
Product") shall belong exclusively to Customer and shall, to the extent
possible, be considered a work made for hire for Customer within the
meaning of Title 17 of the United States Code. Consultant automatically
assigns, and shall cause its personnel automatically to assign, at the
time of creation of the Work Product, without any requirement of further
consideration, any right, title, or interest it or they may have in such
Work Product, including any copyrights or other intellectual property
rights pertaining thereto. Upon request of Customer, Consultant shall
take such further actions, and shall cause its personnel to take such
further actions, including execution and delivery of instruments of
conveyance, as may be appropriate to give fully and proper effect to such
assignment.
6.3 Expressly excluded from the provisions of Article 6.2 is any preexisting
development tool of any kind which Consultant may provide for purposes of
performing the services contemplated by the Work Order, and Consultant
shall retain any and all right, title and ownership it may have to such
preexisting tools and material.
6.4 Notwithstanding anything to the contrary herein, Consultant and its
personnel shall be free to use and employ its and their general skills,
know-how, methods, techniques, or skills gained or reamed during the
course of any assignment, so long as it or they acquire and apply such
information without disclosure of any confidential or proprietary
information of Customer and without any unauthorized use or disclosure of
Work Product.
Article 7 - Limitations
7.1 CONSULTANT DOES NOT MAKE ANY WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT
TO THE SERVICES RENDERED BY ITS PERSONNEL OR THE RESULTS OBTAINED FROM
THEIR WORK, INCLUDING WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL
CONSULTANT BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, SPECIAL, OR INDIRECT
DAMAGES, OR FOR ACTS OF NEGLIGENCE THAT ARE NOT INTENTIONAL OR RECKLESS
IN NATURE, REGARDLESS OF WHETHER IT HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES.
7.2 Customer agrees that Consultant's aggregate liability hereunder for
damages, regardless of the form of action, shall not exceed the total
amount actually paid by Customer for such services.
7.3 Consultant shall not be liable to Customer for any failure or delay
caused by events beyond Consultant's control, including, without
limitation, Customer's failure to furnish necessary information, failures
or delays in transportation or
<PAGE>
Page 35
communication, failures or substitutions of equipment, or technical
failures.
Article 8 - General
8.1 All rights of each party hereunder are separate and cumulative, and no
one of them, whether exercised or not exercised, will be deemed to be an
exclusion of any other right, and will not limit or prejudice any other
legal or equitable right which it may have. Should any art of this
Agreement for any reason be declared invalid or void, such decision shall
not affect the remaining portion which will remain in full force and
effect as if the Agreement had been executed with the invalid portion
eliminated.
8.2 Neither party may assign any right or obligation of this Agreement
without the prior written consent of the other, which consent shall not
be unreasonably withheld.
8.3 Neither party shall, without the prior written consent of the other,
recruit or hire any personnel of the other party who are or have been
assigned to perform work until one (1) year after the completion of the
last Work Order in effect between the parties.
8.4 All notices required to be sent hereunder shall be in writing and shall
be deemed given five (5) days after deposited in the U.S. Mail, or faxed,
receipt acknowledged, however, no action adverse to the other party may
be taken unless the party taking action ascertains by any reasonable
method that notice has been received.
8.5 To the extent that Consultant's personnel may perform work at Customer's
premises, Customer shall maintain comprehensive general liability
insurance, including broad form property damage coverage, with limits of
at least $1 million combined single limit for personal injury and
property damage for each occurrence.
8.6 This Agreement shall be governed by the laws of the Commonwealth of
Massachusetts. Customer and Consultant agree that with respect to any
dispute or claim arising out of this Agreement or any alleged breach
thereof, jurisdiction and venue shall be exclusively in the United States
District Court for Massachusetts (Boston) and Customer and Consultant
hereby irrevocably agree to submit to the jurisdiction of such court.
8.7 This Agreement supersedes any and all agreements, either oral or written,
between the parties hereto with respect to the rendering of services by
Consultant for Customer. Any modification of this Agreement will be
effective only if it is in writing signed by the parties hereto.
<PAGE>
Page 36
The parties hereto acknowledge reading this Agreement, agree to be bound by
its terms and conditions, and Customer's signature hereto signifies
Customer's acceptance of, and obligation to pay, the fees mutually agreed in
the attached Work Order.
CUSTOMER: CONSULTANT:
CCS Technology Group, Inc. Bull HN Information Systems Inc.
by its UniKix Technologies Unit
/s/ Daniel P. Stavros /s/ Alfred W. Randall
- ---------------------------------- --------------------------------------
(Signature with Authority) Alfred W. Randall
Daniel P. Stavros, Chief Director, Contract Administration
Information Officer
- ---------------------------------- --------------------------------------
(Name and Title) (Name and Title)
12/13/95 12/11/95
- ---------------------------------- --------------------------------------
(Date) (Date)
<PAGE>
Page 37
EXHIBIT A
Work Order #1
Consulting Services
CCS Technologies Group, Inc.
8/28/95
Revised 12/11/95
Consulting Strategy
Consultant shall provide the services of a migration analyst to support and
assist CCS Technologies Group, Inc.'s migration effort, under the direct
supervision and control of CCS Technologies Group, Inc. (CCS). During the
support period UT personnel will be available to answer any UniKix Product
related questions and to assist in the migration of the following modules:
Customer Authorization System (CAS), Credit Management System (CMS), Security
sub-System and Common Routines (SSC, and Accounts Services Management (ASM).
This work order is subject to the terms and conditions of the Professional
Consulting Agreement #UB0172.
Period of Performance
February 27, 1996 through March 22, 1996
Estimated at (4 weeks) $ 25,000.00
UT will provide CCS Technologies Group, Inc., with a time card at the end of
each week for concurrence of services.
If at any time after the end of the Period of Performance stated in this work
order, CCS Technologies Group, Inc. desires to obtain additional Consultant
services under the terms of this Consulting Agreement, CCS Technologies
Group, Inc. shall provide UT a minimum of two (2) weeks advance notice of
such request, and CCS Technologies Group, Inc. and UT shall mutually develop
and execute a new Work Order, subject to the terms of the Consulting
Agreement and availability of Consultant personnel.
Fees
Consultant fees for services are as follows:
Standard Fee: $ 90.00 per hour
Overtime Fee: $180.00 per hour
Remote Consultation Fee $ 75.00 per hour
Standard service is defined as those services provided, during a normal
business week,
<PAGE>
Page 38
Monday through Friday, not to exceed forty five (45) hours in any given week.
Standard services shall be charged at Consultant's standard fee.
Overtime service is defined as those services which exceed forty five (45)
hours in any given week. Overtime Services must be authorized by signature
of an CCS Technologies Group, Inc. representative prior to the work being
performed by Consultant. Services authorized by CCS Technologies Group, Inc.
which exceed forty five (45) hours per week shall be charged at Consultant's
overtime fee. Any services performed outside the normal business week
("Weekends"), must be a minimum of eight hours duration, and will be charged
at Consultant's overtime fee. Weekend work must be requested by CCS
Technologies Group, Inc. at least five (5) days in advance in order to
accommodate Consultant personnel travel plans.
Remote consultation is defined as those support efforts which can not be
performed by Consultant's on-site personnel, and are beyond the scope of the
support provided by Consultant under this Consulting Agreement, and therefore
must be performed at Consultant's Phoenix, AZ, development center. Remote
consultation services shall be charged at the remote consultation fee.
Expenses:
CCS Technologies Group, Inc. agrees to pay, and hereby authorizes, the
airfare and incidental expenses of Consultant personnel as defined in the
Professional Consulting Agreement #UB0172. Expenses will enable such
personnel weekend travel to and from their respective homebase. In addition,
CCS Technologies Group, Inc. agrees to pay the actual living expenses of
Consultant's personnel, if such personnel elect to remain at client site
during a given weekend, even though no professional services are rendered
during such weekend.
IN WITNESS WHEREOF, the parties duly authorized representatives execute this
Work Order as follows:
CCS Technologies Group, Inc. CONSULTANT
Bull HN Information Systems Inc.
by Its Unikix Technologies Unit
/s/ Daniel P. Stavros /s/ Brian Newlove 12/11/95
- ---------------------------------- --------------------------------------
(Signature with Authority) (Signature with Authority)
<PAGE>
LICENSE AGREEMENT
BETWEEN
ACCESS TO INFORMATION
AND
PAYSYS INTERNATIONAL INC.
ACCESS TO INFORMATION
799 Roosevelt Road, Bldg. 4
Glen Ellyn, IL 60137
(630~858-9400
<PAGE>
LICENSE AGREEMENT
DATE OF ISSUE: OCTOBER 1, 1996
This agreement is executed between the following parties:
ACCESS TO INFORMATION
799 ROOSEVELT ROAD,
BUILDING 4, SUITE 301
GLEN ELLYN, IL 61037
LICENSOR
and
PAYSYS INTERNATIONAL INCORPORATED
900 WINDERLEY PLACE, SUITE 200
MAITLAND, FL 32751
LICENSEE
WHEREAS, LICENSOR has developed software topics useful for converting software
programs originally designed for operation in a CICS COBOL VSAM type environment
into a form suitable for operation on AS/400 type computer equipment, and
WHEREAS, LICENSEE has one or more programs which are designed for operation in a
CICS COBOL VSAM type environment, and desires to make use of the aforesaid
software tools to convert such programs to run on AS/400 type computer
equipment,
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein. and the performances thereof, LICENSOR and LICENSEE do hereby
agree to the following terms and conditions:
<PAGE>
LICENSE GRANT, DELIVERY, PRICE & PAYMENT, TERM & TERMINATION
LICENSE GRANT. LICENSOR hereby grants the LICENSEE a non exclusive license to
use the software tools identified in Schedule A, attached hereto (hereinafter
referred to as licensed programs). for the sole purpose of converting programs
or systems developed or licensed by LICENSEE originally designed to run in a
CICS COBOL VSAM type environment. This license is a non-exclusive limited-site
license as identified and limited in Schedule A.
DELIVERY. Promptly on the delivery of each IBM AS/400 to be used for
conversion, LICENSOR shall deliver to LICENSEE one copy of each of the
licensed programs in object code format (machine executable). A copy
of the licensed programs. in source code format will be maintained in
escrow by LICENSOR'S escrow agent, Cisar & Mrofka, Attorneys at Law,
1550 Spring Road, Oak Brook, IL 60521
Conditions for release of source code are:
a) LICENSOR, its successors or assigns, has to have been dissolved, OR
b) LICENSOR, its successors or assigns, fails to provide the required
control module referred to on Schedule B within 15 days of the receipt
of CPU placement charges (royalties) as required by Schedule B., OR
c) LICENSOR, its successors or assigns fails to supply support for 30
consecutive days.
PRICE AND PAYMENT. In consideration for this license, LICENSEE shall pay
to LICENSOR a one-time KIlCS400 License Fee of $60,000 and an annual Charge
of $15,000 for a Maintenance Support Module (optional). Also an additional
$5,000 is to be paid to the LICENSOR for each runtime requested by the
LICENSEE for installation of the converted system on a clients AS/400.
Amounts and discounts of said charges, fees and the Payment Schedule for
same shall conform to Schedule B attached hereto.
TERM AND TERMINATION. This license shall become effective upon execution
of this Agreement by LICENSOR and LICENSEE, and shall be perpetual, but
shall terminate:
A. Thirty (30) days after LICENSOR gives LICENSEE notice of LICENSEE's
material breach of any provision of this license, including thirty
(30) or more days delinquency in the LICENSEE's payment of any fees
due
<PAGE>
hereunder, unless LICENSEE has cured the breach.
B. Immediately upon any attempt by LICENSEE to assign, delegate,
sublicense (except to CPUs as permitted), or otherwise transfer this
license, the license programs, the documentation thereof, or any of
its rights or obligations under this license in violation of the
agreement; or any attempt by LICENSEE to convert programs or systems
not developed or licensed by LICENSEE.
CONFIDENTIALITY
CONFIDENTIALITY. LICENSEE acknowledges that the licensed software, source
code and documentation is the property and trade secret of LICENSOR, and
that any publication or disclosure to third parties of such confidential
information may cause immediate and irreparable harm to LICENSOR. LICENSEE
acknowledges the right of LICENSOR to take reasonable steps to protect its
own proprietary and confidential information. Therefore, LICENSEE will
take all reasonable steps to maintain the confidentiality of the
confidential information.
A. LICENSEE shall not, without LICENSOR's prior written consent, disclose
or make available any of the confidential information in any form to
anyone, except to employees or consultants of LICENSEE whose access is
necessary for LICENSEE's permitted use of the licensed programs.
B. LICENSEE shall require any employee and consultant having such access
to agree to maintain the confidentiality of the confidential
information.
C. LICENSEE shall make only that number of copies of the software program
and documentation which are necessary under the conditions specified
in Schedule A attached hereto.
D. LICENSEE shall not permit any other person or organization to copy any
of the licensed conversion utility programs or documentation, except
for a single copy to be held off-site for standard disaster recover
support.
E. Upon termination of this license, LICENSEE shall immediately cease
using the license programs, and return the licensed software and
documentation to LICENSOR, and destroy all copies of such software and
documentation which are maintained in non-removable memory or storage.
Within one (1) month after termination of this license, LICENSEE shall
certify in writing to LICENSOR that to the best of LICENSEE's
knowledge, all copies of the software and documentation have been
returned or destroyed.
<PAGE>
F. LICENSOR acknowledges that the source code, documentation, property,
and trade secrets of LICENSEE are invaluable and that any publication
or disclosure to third parties of such confidential information may
cause immediate and irreparable harm to LICENSEE.
G. LICENSOR will take reasonable steps to maintain the confidentiality of
the confidential information such steps being those taken by LICENSOR
to protect its own proprietary and confidential information.
H. LICENSOR shall not disclose or make available any confidential
information of the LICENSEE in any form to anyone, except to employees
or consultants of LICENSOR whose access is necessary to fulfill the
obligations of this agreement.
I. LICENSOR shall require any employee and consultant having such access
to agree to maintain the confidentiality of the confidential
information.
J. LICENSOR shall make only that number of copies of any source code
necessary to fulfill the obligations of this agreement. LICENSOR shall
not permit any other person or organization to copy any confidential
information of the LICENSEE.
K. Upon termination of this license, LICENSOR shall immediately return
confidential information to LICENSEE and destroy all copies of source
and object code which are maintained in non-removable memory or
storage. Within one (1) month after termination of this license,
LICENSOR shall certify in writing to LICENSEE, that all copies have
been destroyed.
<PAGE>
WARRANTY
WARRANTY. Except as stated in this agreement, its schedules and addenda
LICENSOR grants no expressed or implied warranty on any of the software or
documentation.
A. LlCENSOR warrants that the licensed programs, as delivered, are in
good working order and free from defects in design, materials and
workmanship when used without material alteration in accordance with
the instructions included in the documentation.
B. LICENSOR warrants to LICENSEE that LICENSOR has the right to license
the programs ant software as provided in this Agreement. If notified
of any judicial action or other claim against LICENSEE based on an
allegation that LICENSEE's use of the licensed programs infringes a
United States patent or copyright, or any property rights of a third
party or constitutes a misuse or appropriation of a trade secret,
LICENSOR will defend or resolve such action or claim at its expense
and will pay the costs and damages award in any such action or the
cost of settling such action or claim. In the event that any licensed
program is, in LlCENSOR's opinion, likely to or does become the
subject of infringement of a patent or copyright or other proprietary
rights, LICENSOR may at its option and expense procure for LICENSEE
the right to continue using the licensed programs, modify the licensed
programs to make them non-infringing or substitute other materials of
similar capability in order that LICENSEE may enjoy uninterrupted use
of the licensed programs.
<PAGE>
LIABILITIES, AGREEMENT DISCLOSURE, NOTICE, ASSIGNMENTS
LIMITATION Of LLIABILITY: In no event will LICENSOR be liable for any
lost profits, or any claim or demand for consequential damages even if
LICENSOR has been advised of the possibility of such damages.
LICENSOR shall provide LICENSEE with proper instruction and support, as
stated in the Educational Module and Support Module outlined in Schedule B,
attached hereto. However, LICENSEE shall be solely responsible for assuring
proper use of the licensed programs and documentation.
AGREEMENT DISCLOSURE. Neither party will disclose the terms and
conditions of this Agreement without the prior written consent of the other
party.
NOTICE: Any notice required or permitted by this Agreement shall be
sufficiently given when sent by registered or certified mail, and receipt
requested, postage prepaid, to the other party at the addresses shown on
page 1 of this Agreement.
ASSIGNMENTS: Neither party shall assign or transfer this Agreement
without the prior written consent of the other party, which consent shall
not be unreasonably withheld, provided that no consent shall be required if
such assignment or transfer arises solely from a merger or consolidation
involving a party under circumstances wherein the surviving party of such
merger or consolidation is a party hereto.
<PAGE>
ARBITRATION
ARBITRATION: The parties agree to submit disputes between them relating
to this license and its formation, breach, performance, interpretation and
application to arbitration under the following terms and conditions:
A. LOCATION. Arbitration will be in Dupage County, Illinois, or any
other mutually acceptable location, administered by the American
Arbitration Association.
B. RULES & DISCOVERY. Arbitration will be under the Commercial
Arbitration Rules of the American Arbitration Association. Each party
will be entitled to discovery by requests for admission, by
depositions of no more than ten (10) individuals, but by no other
means.
C. ARBITRATORS. There will be three (3) arbitrators, and each will have
knowledge of and expedience in dealing with the computer software
industry.
D. TIME LIMITS. All discovery will be completed, and the arbitration
hearing will commence within ninety (90) days after appointment of the
arbitrators. Unless the arbitrators find that exceptional
circumstances justify delay, the hearing will be completed and an
award will be rendered in writing, within one-hundred twenty (120)
days after commencement of the hearing.
E. LANGUAGE. The arbitration will be conducted and all evidence will be
submitted to the arbitrators in the English language.
F. BINDING EFFECT. The award rendered in arbitration will be final and
binding and may be enforced in any court of competent jurisdiction.
G. COST AND ATTORNEY'S FEES. Unless the arbitrators find that
exceptional circumstances require otherwise, the arbitrators will
include in the award the prevailing party's costs of arbitration and
reasonable attorney's fees.
MISCELLANEOUS
12. MISCELLANEOUS.
A. CHOICE OF LAW. This license will be governed by and construed
according to the laws of the State of Illinois, without regard to
principles of conflicts of law.
<PAGE>
B. AMENDMENT. This License may be amended or supplemented only by a
writing signed on behalf of both parties. No purchase order, invoice,
or similar document will amend this License, even if accepted by the
receiving party in writing.
C. WAIVER. No waiver will be implied from conduct or failure to enforce
rights. No waiver will be effective unless in a writing signed on
behalf of the party claimed to have waived.
D. CONTINGENCIES. Neither party will have the right to claim damages or
to terminate this License as a result of the other's failure or delay
in performance due to circumstances beyond its reasonable control,
such as labor disputes, strikes, lockouts, shortage of or inability to
obtain labor, fuel, raw materials or supplies, war, riot,
insurrection, epidemic, act of God, or governmental action not the
fault of the non-performing party.
E. SEVERABILITY. If any part of this Agreement is found invalid or
unenforceable, it will be enforced to the maximum extent permitted by
law, and other parts of this License will remain in force.
F. EQUITABLE RELIEF. Either party may have injunctive, preliminary or
other equitable relief to remedy any actual or threatened unauthorized
disclosure of confidential information or unauthorized disclosure of
confidential information or unauthorized use, copying, marketing,
distribution or sub-licensing of the software.
G. ENTIRE AGREEMENT. This document represents the entire agreement
between the parties relating to the pertinent programs and
documentation and supersedes all prior representations, discussions,
negotiations, and agreements, whether written or oral. This document
includes the Business Terms, Payment Terms, and other matters set
forth in Schedules A, B. and C, attached hereto.
H. NOTICES. All notices, reports, requests and other communications
required or permitted hereunder must be in writing. They will be
deemed given when (1) delivered, (ii) sent by telex with confirmation
by mail, (iii) sent by commercial overnight courier with written
verification of receipt, or (iv) scat by registered or certified mail,
postage prepaid in each case to the receiving party's Initial Address
for Notice set forth above or to any other address that the receiving
party may have provided for purposes of notice by notice hereunder.
I. ATTORNEYS FEES. In any suit to enforce this agreement, the prevailing
party will have the right to recover its costs and reasonable
attorney's fees and expenses, including cost, fees and expenses on
appeal.
<PAGE>
J. RELATIONSHIP OF PARTIES. The parties to this License are independent
contractors. There is no relationship of partnership, agency,
employment, franchise or joint venture between the parties. Neither
party has the authority to bind the other or incur any obligation on
its behalf.
NON-HIRING
NON-HIRING. During the term of this Agreement and for a period of one (1)
year thereafter, neither party shall employ, or attempt to employ any
employee of the other, or induce or attempt to induce any employee to leave
the employ of the other.
<PAGE>
SCHEDULE A STATEMENT OF PRODUCTS AND SERVICES
1) LlCENSOR will provide one (1) copy of the KIKS400 convention utility
(Licensed Programs) for the conversion of the Vision PLUS package, to be
installed at the address of LICENSEE stated on Page 1. The utility will be
installed on one IBM AS/400, as stated on Schedule B, attached hereto, for
which LICENSEE must provide the Serial Number(s).
2) LICENSEE will provide to LICENSOR, (30) days written notice prior to a
physical relocation of software and hardware, or replacement of hardware.
Replacement hardware is required to be primary support platform
SCHEDULE B CHARGES AND PAYMENT SCHEDULE
CHARGES:
KIKS TOOLBOX (LICENSED PROGRAMS) for Vision
PLUS conversion: $60,000.00 (For Model __)
KIKS EDUCATIONAL MODULE (See Note 1): $2,500.00 ( Per resource )
KIKS CONVERSION SUPPORT MODULES (See Note 2): $15,000.00 ( Per Year)
KIKS400 RUNTIME LIBRARY INSTALL (See Note 3):
PAYMENT DUE 30 DAYS AFTER INSTALLATION $5,000.00 ( Each )
EXTRA CPU CHARGES: (See Note 4): $7,500.00 (For Model___)
NOTES:
The (optional) Educational Module ($2,500 per resource) is a 5-day hands-on
instruction in conversion methodology. During the educational sessions,
Licensee resources submit programs for conversion and clean compile,
followed by unit testing Licensee resources also receive instruction in
JCL-to-AS/400-CL conversion. Education takes place at ATI. Education is
available at client site, when travel and related out-of-pocket expenses
for attending ATI resources is borne by Licensee. To be billed and decided
upon, under a separate document.
<PAGE>
The Maintenance Module provides updates and support on an annual basis.
Information and support is supplied on standard KlKS400 conversion-related
issues and/or those enhancements made to the tool identified during the
conversion of the 150 online programs selected by the Licensee. The
Conversion support model is renewable annually, at the client's option.
CHARGES AND PAYMENT SCHEDULE (CONTINUED)
A. It grants unlimited technical phone support, during ATI standard
business hours, to Licensee resources pertaining to the functionality
embedded within that version of KIKS400.
B. It provides for electronic linkage between Licensee and Licensor CPUs.
Line Charges for this service must be done by Licensee.
C. It entitles the Licensee to any enhancements made to the base
Conversion Utility or its documentation.
This is a royalty charge for every additional AS/400 beyond the Destination
AS/400 on which the CLIENT locates converted code (i.e., on the AS/400s of
CLIENT'S customers).
This is an additional charge if the Licensee decides to locate the
conversion utility on multiple AS/400's for the conversion of the Vision
PLUS system
CHARGES TOTALS and DISCOUNTS cont.
1. $60,000.00 License
1. $15,000.00 Support, ONE YEAR
-----------
$75,000.00 Sub Total
1. -$30.000.00 Preferred customer discount for
multiple licenses
1. -$5,000.00 Discount as long as the
----------- maintenance on the CardPac
system is in force
$40,000.00 Total license cost and first
year's maintenance
SCHEDULE of PAYMENT
$ 30,000.00 with signed License agreement
$10,000.00 100% due upon signing of one
years maintenance agreement
THIS LICENSE OFFER EXPIRES 30 DAYS AFTER DATE OF ISSUE.
<PAGE>
SIGNATURES OF AGREEMENT PARTIES:
FOR LlCENSOR:
Signature: /s/ John Paolollo
--------------------------------
Name: John Paolollo
--------------------------------
Title: Senior Vice President
--------------------------------
Date: September 30, 1996
--------------------------------
FOR LICENSEE:
Signature: /s/ Paul M. Skurecki
--------------------------------
Name: Paul M. Skurecki
--------------------------------
Title: Controller / Assistant Secretary
---------------------------------
Date: October 1, 1996
--------------------------------
<PAGE>
TERMINATION AGREEMENT
THIS TERMINATION AGREEMENT, made and entered into as of the 30th day of
June, 1997, by and between PAYSYS INTERNATIONAL, INC., a Florida corporation,
("PAYSYS"), and FERNTREE COMPUTER CORPORATION PTY., LIMITED, an Australian
company number 006 995 893 ("FERNTREE").
W I T N E S S E T H:
WHEREAS, predecessors in interest of the parties hereto have entered
into an Agency Agreement dated March 2, 1989, (the "Agency Agreement"), which
by its terms has expired, but which the parties hereto have continued to
operate under in marketing certain software products; and
WHEREAS, the parties now desire to terminate the Agency Agreement and to
make provision for the continuation of maintenance and support services to
licensees who have obtained licenses pursuant to the Agency Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, and intending to be legally bound,
the parties hereto hereby agree as follows:
1. Capitalized terms used but not defined herein shall have the
meanings assigned to them in the Agency Agreement.
2. The Agency Agreement is hereby terminated. As a result of such
termination, (i) FERNTREE shall have no further right whatsoever to grant any
User Licenses for the Products or to grant any licenses or market or
otherwise distribute and PAYSYS product whatsoever or to use any PAYSYS
trademark or service mark, (ii) each Distributor License Agreement, if any,
shall terminate and be of no further force and effect whatsoever and no
Distributor shall have any right to market any of the Products or to grant
any User Licenses, (iii) User Licenses presently in effect shall remain in
effect until terminated in accordance with their respective terms, (iv) any
amounts due to PAYSYS from FERNTREE as a result of the Agency Agreement
accruing prior to the date hereof shall be paid by FERNTREE promptly, and (v)
FERNTREE shall have no further obligation with respect to Maintenance, the
same being assumed by PAYSYS pursuant to Paragraph 3 below, Section 4 (except
as modified pursuant to the preceding sentence). 12, 15, 16 and 17.2 of the
Agency Agreement shall survive the termination of the Agency Agreement along
with such other provisions thereof which by their nature are intended to
survive such termination.
3. All existing maintenance and support agreements pursuant to which
FERNTREE is currently providing maintenance and support for PAYSYS products
are listed
<PAGE>
on Schedule A attached hereto (the "Maintenance Agreements"). FERNTREE
hereby transfers and assigns the Maintenance Agreements to PAYSYS free and
clear of any liens, security interests, and other encumbrances and free of
any claims or rights of any third party, except rights of the other party to
such agreement set forth therein, to PAYSYS, including, but not limited to,
the right to receive all future payments under the Maintenance Agreements.
FERNTREE has the right to retain all payments made prior to the date hereof
pursuant to the Maintenance Agreements (less amounts payable to PAYSYS
pursuant to the Agency Agreement) notwithstanding that such payments may
relate to periods following the date hereof. Schedule A indicates the
prepayments received pursuant to the Maintenance Agreements and the periods
covered thereby. PAYSYS hereby assumes the obligations of FERNTREE to
provide maintenance and support for PAYSYS products pursuant to the
Maintenance Agreements. PAYSYS does not assume, and FERNTREE retains (i) any
liabilities and other obligations of any nature arising under the Maintenance
Agreements with respect to all periods prior to the date hereof (to the
extent that such liabilities and obligations do not arise out of PAYSYS'
responsibilities in relation to such Maintenance Agreements) and (ii) any
obligation to provide maintenance and support for any non-PaySys software.
4. PAYSYS shall pay to FERNTREE 30% of all future fees received by
PAYSYS for licenses of VisionPlus Products in the Territory until FERNTREE
has received a maximum of U.S. $1 million. These payments shall be based
only on licenses of existing VisionPlus modules and not on any new modules or
any successor products.
5. FERNTREE shall indemnify PAYSYS from, and hold PAYSYS harmless with
respect to, any and all liabilities, claims, damages, obligations, and
expenses of any nature whatsoever arising with respect to the actions of
FERNTREE under the Agency Agreement or arising under the Maintenance
Agreements with respect to actions or omissions of FERNTREE prior to the date
hereof or (i) obligations not assumed hereunder. PAYSYS shall indemnify
FERNTREE from, and hold FERNTREE harmless with respect to, any and all
liabilities, claims, damages, obligations, and expenses of any nature
whatsoever arising under the Maintenance Agreements with respect to
obligations assumed hereunder by PAYSYS and relating to the period beginning
on the date hereof and (ii) obligations of PAYSYS under the Agency Agreement
and any obligations of PaySys for maintenance and support in relation to the
Maintenance Agreement prior to the assignment thereof.
6. Each of PAYSYS and FERNTREE shall bear its own expenses, including
but not limited to, legal fees, incurred in connection with the negotiation,
execution and consummation of this Agreement.
7. PAYSYS is not assuming any obligations or liabilities with respect
to any FERNTREE employees and has not agreed to hire any FERNTREE employee.
-2-
<PAGE>
8. (a) This Agreement may be executed in one or more copies, all of
which shall constitute one and the same Agreement. Execution of this
Agreement may occur via telecopy with original signature pages to follow.
(b) This Agreement shall be governed by and construed in accordance
with the internal Laws of the State of Florida.
(c) This Agreement is solely between the parties hereto and no
person not a party to this Agreement shall have any rights hereunder or as a
third party beneficiary or otherwise.
(d) If it should ever become necessary to interpret or construe
this Agreement, it shall be done without giving any effect or weight to
whichever party may have prepared or drafted this Agreement, the parties
having agreed that each party have participated in the preparation,
negotiation, and drafting of this Agreement.
(c) This Agreement constitutes the complete agreement between the
parties with respect to the termination of the Agency Agreement and the
assignment and assumption of certain rights and responsibilities with respect to
the Maintenance Agreements. This Agreement may not be amended, modified, or
changed except by a writing signed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day first written and the said date shall be deemed the effective date of
this Agreement.
PAYSYS INTERNATIONAL, INC.
By:
___________________________________
FERNTREE COMPUTER CORPORATION PTY, LTD.
By: /s/.
___________________________________
-3-
<PAGE>
SCHEDULE A
Maintenance Agreements
<TABLE>
<CAPTION>
Customer License Maintenance Term Payments Through
<S> <C> <C> <C> <C>
Adelaide Bank CDM $19,500 March 14, 1998 March 14, 1998
ANZ Bank CDM $27,500 June 30, 1997 June 30, 1997
ANZ Bank CP $109,800 Sept 30, 1997 Sept 30, 1997
ANZ Bank CTA June 30, 1997 Unassigned and Unpaid
ANZ Fiji CP400 $30,821 Nov 17, 1997 Nov 17, 1997
AVCO CDM $24,000 Sept 30, 1997 Sept 30, 1997
Bank West MTS $8,100 March 26, 1998 March 26, 1998
Bank West CMP Rel 5 $47,671 March 26, 1998 March 26, 1998
CSB CMP Rel 5 $67,940 Oct 15, 1997 Oct 15, 1997
David Jones Vision 21 $138,712 Dec 31, 1997 Dec 31, 1997
NAB CMP Rel $77,000 April 30, 1997 April 30, 1997
5/CSM
Telstra CDM $45,000 Dec 31, 1997 Dec 31, 1997
Westpac NZ CMP $96,025 June 2, 1997 June 2, 1998
Westpac NZ CSM $18,750 August 9, 1997 August 1, 1997
</TABLE>
-4-
<PAGE>
EXHIBIT 10.17
STANDARD COMMERCIAL LEASE
ARTICLE 1.00 BASIC LEASE TERMS
1.01 PARTIES. This lease agreement ("Lease") is entered into by and
between the following Lessor and Lessee:
SPECTRUM DEVELOPMENT, INC., a Florida corporation ("Lessor")
CREDIT CARD SOFTWARE, INC. ("Lessee")
1.02 LEASED PREMISES. In consideration of the rents, terms, provisions
and covenants of this Lease, Lessor hereby leases, lets and demises to Lessee
the following described premises ("leased premises"):
53,578 rentable/47,527 usable (Approximate sq. ft.) SEE EXHIBIT A FOR DEMISED
PREMISES (Job No.)
THE SPECTRUM (Name of building or project)
900 WINDERLEY PLACE, SUITE 100 (Street address/suite number)
MAITLAND, FLORIDA 32751 (City, State and Zip Code)
1.03 TERM. Subject to and upon the conditions set froth herein, the
term of this Lease shall commence on July 1, 1990 the "commencement date")
(the "completion date" which Lessor shall use its best efforts to establish as
_________________________________________), and shall terminate June 30, 2000.
1.04 BASE RENT AND SECURITY DEPOSIT. Base rent is $ See Article 16 of
Addendum per month. Security deposit is $41,668.96.
1.05 ADDRESSES.
Lessor's Address Lessor's Address
SPECTRUM DEVELOPMENT, INC. CREDIT CARD SOFTWARE, INC.
900 WINDERLEY PLACE, SUITE 100 900 WINDERLEY PLACE, SUITE 200
MAITLAND, FLORIDA 32751 MAITLAND, FLORIDA 32751
1.06 PERMITTED USE. Computer data/processing center and business office
ARTICLE 2.00 RENT
2.01 BASE RENT. Lessee agrees to pay monthly as base rent during the
term of this Lease the sum of money set forth in section 1.04 of this Lease,
which amount shall be payable to Lessor at the address shown above. One
monthly installment of rent shall be due and payable on or before the first
day of each calendar month succeeding the commencement date or completion
date during the term of this Lease; provided, if the commencement date or the
completion date should be a date other than the first day of a calendar
month, the monthly rental set forth above shall be prorated to the end of
that calendar month, and all succeeding installments of rent shall be payable
on or before the first day of each succeeding calendar month during the term
of this
<PAGE>
Lease. Lessee shall pay, as additional rent, all other sums due under this
Lease. See the Addendum, Article 16 for monthly base rental amounts.
2.02 OPERATING EXPENSES. In the event Lessor's operating expenses for
the building and/or parcel of which the leased premises are a part shall in
any calendar year during the term of this Lease, exceed the sum of $5.50 PER
USABLE square foot. Lessee agrees to pay as additional rent Lessee's pro rata
share of such excess operating expenses. Lessor may invoice Lessee monthly
for Lessee's pro rata share of the estimated operating expenses for each
calendar year, which amount shall be adjusted each year based upon
anticipated operating expenses. Within nine months following the close of
each calendar year, Lessor shall provide Lessee an accounting showing in
reasonable detail all computations of additional rent due under this section.
In the event the accounting shows that the total of the monthly payment made
by Lessee exceeds the amount of additional rent due by Lessee under this
section, the accounting shall be accompanied by a refund. In the event the
accounting shows that the total of the monthly payments made by Lessee is
less than the amount of additional rent due by Lessee under this section, the
accounting shall be accompanied by an invoice for the additional rent.
Notwithstanding any other provision in this Lease, during the year in which
the Lease terminates, Lessor prior to the termination date, shall have the
option to invoice Lessee for Lessee's pro rata share of the excess operating
expenses based upon the previous year's operating expenses. If this Lease
shall terminate on a day other than the last day of a calendar year, the
amount of any additional rent payable by Lessee applicable to the year in
which such termination shall occur shall be prorated on the ratio that the
number of days from the commencement of the calendar year to and including
the termination date bears to 365 Lessee shall have the right; at its own
expense and within a reasonable time, to audit Lessor's books relevant to the
additional rent payable under this section. Lessee agrees to pay any
additional rent due under this section within ten days following receipt of
the invoice or accounting showing additional rent due.
2.03 DEFINITION OF OPERATING EXPENSES. The term "operating expenses"
includes all expenses incurred by Lessor with respect to the maintenance and
operation of the building of which the leased premises are a part, including,
but not limited to, the following: maintenance, repair and replacement
costs; electricity, fuel, water, sewer, gas and other utility charges;
security, window washing and janitorial services; trash and snow removal;
landscaping and pest control; management fees, wages and benefits payable to
employees of Lessor whose duties are directly connected with the operation
and maintenance of the building; all services, supplies, repairs,
replacements or other expenses for maintaining and operating the building or
project including parking and common areas, the cost, including interest,
amortized over its useful life, of any capital improvement* made to the
building by Lessor after the date of this Lease which is required under any
governmental law or regulation that was not applicable to the building at the
time it was constructed, the cost, including interest, amortized over its
useful life, of installation of any device or other equipment* which improves
the operating efficiency of any system within the leased premises and thereby
reduces operating expenses; all other expenses which would generally be
regarded as operating and maintenance expenses which would reasonably be
amortized over a period not to exceed five years; all real property taxes and
installments of special assessments, including dues and assessments by means
of deed restrictions and/or owners associations which accrue against the
building of which the leased premises are a part during the term of this
Lease;
<PAGE>
and all insurance premiums Lessor is required to pay or deems necessary to
pay, including public liability insurance, with respect to the building. The
term operating expenses does not include the following repairs; restoration
or other work occasioned by fire, wind, the elements or other casualty;
income and franchise taxes of Lessor, expenses incurred in leasing to or
procuring of lessees, leasing commissions, advertising expenses and expenses
for the renovating of space for new lessees; interest or principal payments
on any mortgage or other indebtedness of Lessor; compensation paid to any
employee of Lessor above the grade of property manager, any depreciation
allowance or expense;** or operating expenses which are the responsibility of
Lessee.
*less depreciation
**legal and collection costs
2.04 LATE PAYMENT CHARGE. Other remedies for nonpayment of rent
notwithstanding, if the monthly rental payment is not received by Lessor on
or before the tenth day of the month for which the rent is due, or if any
other payment due Lessor by Lessee is not received by Lessor on or before the
tenth day of the month next following the month in which Lessee was invoiced,
a late payment charge of five percent of such past due amount shall become
due and payable in addition to such amounts owed under this Lease.
2.05 INCREASE IN INSURANCE PREMIUMS. In an increase in any insurance
premiums paid by Lessor for the building is caused by Lessee's use of the
leased premises in a manner other than as set forth in section 1.06, or if
Lessee vacates the leased premises and causes an increase in such premiums,
then Lessee shall pay as additional rent the amount of such increase to
Lessor.
2.06 SECURITY DEPOSIT. The security deposit set forth above shall be
held by Lessor for the performance of Lessee's covenants and obligations
under this Lease, it being expressly understood that the security deposit
shall not be considered an advance payment of rental or a measure of Lessor's
damage in case of default by Lessee. Upon the occurrence of any event of
default by Lessee or breach by Lessee of Lessee's covenants under this Lease,
Lessor may, from time to time, without prejudice to any other remedy, use the
security deposit to the extent necessary to make good any arrears of rent, or
to repair any damage or injury, or pay any expense or liability incurred by
Lessor as a result of the event of default or breach of covenant, and any
remaining balance of the security deposit shall be returned by Lessor to
Lessee upon termination of this Lease. If any portion of the security
deposit is so used or applied, Lessee shall upon ten days written notice from
Lessor, deposit with Lessor by cash or cashier's check an amount sufficient
to restore the security deposit to its original amount.
2.07 HOLDING OVER. In the event that Lessee does not vacate the leased
premises upon the expiration or termination of this Lease, Lessee shall be a
tenant at will for the holdover period and all of the terms and provisions of
this Lease shall be applicable during that period, except that Lessee shall
pay Lessor as base rental for the period of such holdover an amount equal to
two times the base rent which would have been payable by Lessee had the
holdover period been a part of the original term of this Lease. Lessee
agrees to vacate and deliver the leased premises to Lessor upon Lessee's
receipt of notice from Lessor to vacate. The rental payable during the
<PAGE>
holdover period shall be payable to Lessor on demand. No holding over by
Lessee, whether with or without the consent of Lessor, shall operate to
extend the term of this Lease.
ARTICLE 3.00 OCCUPANCY AND USE
3.01 USE. Lessee warrants and represents to Lessor that the leased
premises shall be used and occupied only for the purpose as set forth in
section 1.06. Lessee shall occupy the leased premises, conduct its business
and control its agents, employees, invitees and visitors in such a manner as
is lawful, reputable and will not create a nuisance. Lessee shall not permit
any operation which emits any odor or matter which intrudes into other
portions of the building, use any apparatus or machine which makes undue
noise or causes vibration in any portion of the building or otherwise
interfere with, annoy or disturb any other lessee in its normal business
operations or Lessor in its management of the building. Lessee shall neither
permit any waste on the leased premises nor allow the leased premises to be
used in any way which would, in the opinion of Lessor, be extra hazardous on
account of fire or which would in any way increase or render void the fire
insurance on the building.
3.02 SIGNS. No sign of any type or description shall be erected, placed
or painted in or about the leased premises or project except those signs
submitted to Lessor in writing and approved by Lessor in writing, and which
signs are in conformance with Lessor's sign criteria establish for the
project.
3.03 COMPLIANCE WITH LAWS, RULES AND REGULATIONS. Lessee, at Lessee's
sole cost and expense, shall comply with all laws, ordinances, orders, rules
and regulations of state, federal, municipal or other agencies or bodies
having jurisdiction over the use, condition or occupancy of the leased
premises. Lessee will comply with the rules and regulations of the building
adopted by Lessor which are set forth on a schedule attached to this Lease.
Lessor shall have the right at all times to change and amend the rules and
regulations in any reasonable manner as may be deemed advisable for the
safety, care, cleanliness, preservation of good order and operation or use of
the building or the leased premises. All changes and amendments to the
rules and regulations of the building will be sent by Lessor to Lessee in
writing and shall thereafter be carried out and observed by Lessee.
3.04 WARRANTY OF POSSESSION. Lessor warrants that it has the right and
authority to execute this Lease, and Lessee, upon payment of the required
rents and subject to the terms, conditions, covenants and agreements
contained in this Lease, shall have possession of the leased premises during
the full term of this Lease as well as any extension or renewal thereof.
Lessor shall not be responsible for the acts or omissions of any other lessee
or third party that may interfere with Lessee's use and enjoyment of the
leased premises.
3.05 INSPECTION. Lessor or its authorized agents shall at any and all
reasonable times have the right to* enter the leased premises to inspect the
same, to supply janitorial service or any other service to be provided by
Lessor, to show the leased premises to prospective purchasers or lessees, and
to alter, improve or repair the leased premises or any other portion of the
building. Lessee hereby waives any claim for damages for injury or
inconvenience to or interference with
<PAGE>
Lessee's business, any loss of occupancy or use of the leased premises, or
use of the leased premises and any other loss occasioned thereby. Lessor
shall at all times have and retain a key with which to unlock all of the
doors in, upon and about the leased premises. Lessee shall not change
Lessor's lock system or in any other manner prohibit Lessor from entering the
leased premises. Lessor shall have the right to use any and all means which
Lessor may deem proper to open any door in an emergency without liability
therefor.
*Entry by Lessor will be at reasonable times with reasonable prior notice
given Lessee.
ARTICLE 4.00 UTILITIES AND SERVICE
4.01 BUILDING SERVICES. Lessor shall provide water and electricity for
Lessee during the term of this Lease, Lessee shall pay all telephone charges.
Lessor shall furnish Lessee hot and cold water at those points of supply
provided for general use of other lessees in the building, central heating
and air conditioning in season (at times Lessor normally provides these
services to other lessees in the building, and at temperatures and in amounts
as are considered by Lessor to be standard or in compliance with any
government regulations, such service on Saturday afternoons, Sundays,
evenings and holidays to be furnished only upon the request of Lessee, who
shall bear the entire cost). Lessor shall also provide routine maintenance,
painting and electric lighting service for all public areas and special
service areas of the building in the manner and to the extent deemed by
Lessor to be standard. Lessor may, in its sole discretion, provide
additional services not enumerated herein. Failure by Lessor to any extent
to provide these defined services or any other services not enumerated, or
any cessation thereof, shall not render Lessor liable in any respect for
damages to either person or property, be construed as an eviction of Lessee,
work an abatement of rent or relieve Lessee from fulfillment of any covenant
in this Lease. Should any of the equipment or machinery break down, or for
any cause cease to function properly, Lessor shall use reasonable diligence
to repair the same promptly, but Lessee shall have no claim for rebate of
rent on account of any interruption in service occasioned from the repairs.
Lessor reserves the right from time to time to make changes in the utilities
and services provided by Lessor to the building.**
**After hour utility usage will be charged at $15.00 per hour. See
Addendum, Article 25 for building hours.
4.02 THEFT OR BURGLARY. Lessor shall not be liable to Lessee for losses
to Lessee's property or personal injury caused by criminal acts or entry by
unauthorized persons into the leased premises or the building.
4.03 JANITORIAL SERVICE. Lessor shall furnish janitorial services to
the leased premises and public areas of the building five times per week
during the term of this Lease, excluding holidays. Lessor shall provide
standard janitorial service to kitchens or storage areas included in the
leased premises. Standard janitorial service in these areas will not
include cleaning of dishes, glasses, or handling of food items.
<PAGE>
4.04 EXCESSIVE UTILITY CONSUMPTION. Lessee shall pay all utility costs
occasioned by electrodata processing machines, telephone equipment,
computers, and other equipment of high electrical consumption, including
without limitation, the cost of installing, servicing and maintaining any
special or additional inside or outside wiring or lines, meters or submeters,
transformers, poles, air conditioning costs, or the cost of any other
equipment necessary to increase the amount or type of electricity or power
available in the leased premises. See Addendum, Article 26.
4.05 WINDOW COVERING. Lessor shall furnish and install window coverings
on all exterior windows to maintain a uniform exterior appearance. Lessee
shall not remove or replace these window coverings or install any other
window covering which would affect the exterior appearance of the building.
Lessee may install lined or unlined over draperies on the interior sides of
the Lessor furnished window coverings for interior appearance or to reduce
light transmission, provided such over draperies do not affect the exterior
appearance of the building or affect the operation of the building's heating,
ventilating or air conditioning systems.
4.06 CHARGE FOR SERVICE. All costs of Lessor for providing the services
set forth in article 4.00 (except those charges paid by Lessee pursuant to
section 4.04) shall be subject to the additional rent provision in section
2.02.
ARTICLE 5.00 REPAIRS AND MAINTENANCE
5.01 LESSOR REPAIRS. Lessor shall not be required to make any
improvements, replacements or repairs of any kind or character to the leased
premises or the project during the term of this Lease except as are set forth
in this section. Lessor shall maintain only the roof, foundation, parking and
common areas, the structural soundness of the exterior walls, doors,
corridors, windows and other structures or equipment serving the leased
premises. Lessor's cost of maintaining and repairing the items set forth in
this section are subject to the additional rent provisions in section 2.02.
Lessor shall not be liable to Lessee, except as expressly provided in this
Lease, for any damage or inconvenience, and Lessee shall not be entitled to
any abatement or reduction of rent by reason of any repairs, alternations or
additions made by Lessor under this Lease.
5.02 LESSEE REPAIRS. Lessee shall, at its own cost and expense, repair
or replace any damage or injury to all or any part of the leased premises
caused by any act or omission of Lessee or Lessee's agents, employees,
invitees, licensees; provided, however, if Lessee fails to make the repairs
or replacements promptly, Lessor may, at its option, make the repairs or
replacements, and the costs of such repairs or replacements shall be charged
to Lessee as additional rent and shall become payable by Lessee with the
payment of the rent next due hereunder.
5.03 REQUEST FOR REPAIRS. All request for repairs or maintenance that
are the responsibility of Lessor pursuant to any provision of this Lease must
be made in writing to Lessor at the address in section 1.05.
<PAGE>
5.04 LESSEE DAMAGES. Lessee shall not allow any damage to be committed
on any portion of the leased premises or building, and at the termination of
this Lease, by lapse of time or otherwise, Lessee shall deliver the leased
premises to Lessor in as good condition as existed at the commencement date
of this Lease, ordinary wear and tear excepted. The cost and expense of any
repairs necessary to restore the condition of the leased premises shall be
borne by Lessee.
ARTICLE 6.00 ALTERNATIONS AND IMPROVEMENTS
6.01 LESSOR IMPROVEMENTS. If construction to the leased premises is to
be performed by Lessor prior to or during Lessee's occupancy, Lessor will
complete the construction of the improvements to the leased premises in
accordance with plans and specifications agreed to by Lessor and Lessee,
which plans and specifications are made a part of this Lease by reference.
Within fourteen days of receipt of plans and specifications, Lessee shall
execute a copy of the plans and specifications and, if applicable, change
orders setting froth the amount of any costs to be borne by Lessee. In the
event Lessee fails to execute the plans and specifications and change order
within the fourteen day period, Lessor may, at its sole option, declare this
Lease cancelled or notify Lessee that the base rent shall commence on the
completion date even though the improvements to be constructed by Lessor may
not be complete. Any change or modifications to the approved plans and
specifications shall be made and accepted by written change order or
agreements signed by Lessor and Lessee and shall constitute an amendment to
this Lease.
6.02 LESSEE IMPROVEMENTS. Lessee shall not make or allow to be made any
alternations or physical additions in or to the leased premises without first
obtaining the written consent of Lessor, which consent shall not be
unreasonably withheld or delayed. Any alterations, physical additions or
improvements to the leased premises made by Lessee shall at once become the
property of Lessor and shall be surrendered to Lessor upon the termination of
this Lease; provided, however, Lessor, at its option, may require Lessee to
remove any physical additions and/or repairs any alternation in order to
restore the leased premises to the condition existing at the time Lessee took
possession, all*** costs of removal and/or alterations to be borne by Lessee.
This clause shall not apply to moveable equipment or furniture owned by
Lessee, which may be removed by Lessee at the end of the term of this Lease
if Lessee is not then in default and if such equipment and furniture are not
then subject to any other rights, liens and interests of Lessor.
***fair wear and tear expected
ARTICLE 7.00 CASUALTY AND INSURANCE
7.01 SUBSTANTIAL DESTRUCTION. If the leased premises shall be totally
destroyed by fire or other casualty, or if the leased premises should be
damaged so that rebuilding cannot reasonably be completed within ninety
working days after the date of written notification by Lessee to Lessor of
the destruction, this Lease shall terminate and the rent shall be abated for
the unexpired portion of the Lease, effective as of the date of the written
notification.
<PAGE>
7.02 PARTIAL DESTRUCTION. If the leased premises should be partially
damaged by fire or other casualty, and rebuilding or repairs can reasonably
be completed within ninety working days from the date of written notification
by Lessee to Lessor of the destruction, this Lease shall not terminate, and
Lessor shall at its sole risk and expense proceed with reasonable diligence
to rebuild or repair the building or other improvements to substantially the
same condition in which they existed prior to the damage. If the leased
premises are to be rebuilt or repaired and are untenatable in whole or in
part following the damage, and the damage or destruction was not caused or
contributed to by act or negligence of Lessee, its agents, employees,
invitees or those for whom Lessee is responsible, the rent payable under this
Lease during the period for which the leased premises are untenable shall be
adjusted to such an extent as may be fair and reasonable under the
circumstances. In the event that Lessor fails to complete the necessary
repairs or rebuilding within ninety working days from the date of
notification by Lessee to Lessor of the destruction, Lessee may at its option
terminate this Lease by delivering written notice of termination to Lessor,
whereupon all rights and obligations under this Lease shall cease to exist.
The Lessee shall be entitled to rebuild or repair such damages if the Lessor
fails to do so and to claim all reasonable costs from the Lessor.
7.03 PROPERTY INSURANCE. Lessor shall at all times during the term of
this Lease maintain a policy or policies of insurance with the premiums paid
in advance, issued by and biding upon some solvent insurance company,
insuring the building against all risk of direct physical loss in an amount
equal to at least ninety percent of the full replacement cost of the building
structure and its improvements as of the date of the loss; provided, Lessor
shall not be obligated in any way or manner to insure any personal property
(including, but not limited to, any furniture, machinery, goods or supplies)
of Lessee upon or within the leased premises, any fixtures installed or paid
by Lessee upon or within the leased premises, or any improvements which
Lessee may construct on the leased premises. Lessee shall have no right in
or claim to the proceeds of any policy of insurance maintained by Lessor even
if the cost of such insurance is borne by Lessee as set forth in article 2.00.
7.04 WAIVER OF SUBROGATION. Anything in this Lease to the contrary
notwithstanding, Lessor and Lessee hereby waive and release each other of and
from any and all right of recovery, claim, action or cause of action, against
each other, their agents, officers and employees, for any loss or damage that
may occur in the leased premises, improvements to the building of which the
leased premises are a part, or personal property within the building, by
reason of fire or the elements, regardless of cause or origin, including
negligence of Lessor or Lessee and their agents, officers and employees.
Lessor and Lessee agree immediately to give their respective insurance
companies which have issued policies of insurance covering all risk of direct
physical loss, written notice of the terms of the mutual waivers contained in
this section, and to have the insurance policies properly endorsed, if
necessary, to prevent the invalidation of the insurance coverages by reason
of the mutual waivers.
7.05 HOLD HARMLESS. ****Lessor shall not be liable to Lessee's
employees, agents, invitees, licensees or visitors, or to any other person,
for an injury to person or damage to property on or about the leased premises
caused by any act or omission of Lessee, its agents, servants or employees,
or of any other person entering upon the leased premises under express or
<PAGE>
implied invitation by Lessee, or caused by the improvements located on the
leased premises becoming out of repair, the failure or cessation of any
service provided by Lessor (including security service and devices), or
caused by leakage of gas, oil, water or steam or by electricity emanating
from the leased premises. Lessee agrees to indemnify and hold harmless
Lessor of and from any loss, attorney's fees, expenses or claims arising out
of any such damage or injury.
****Save for the negligence of the Lessor or its agents, employees or
sub-contractors
ARTICLE 8.00 CONDEMNATION
8.01 SUBSTANTIAL TAKING. If all or a substantial part of the leased
premises are taken for any public or quasi-public use under any governmental
law, ordinance or regulation, or by right of eminent domain or by purchase in
lieu thereof, and the taking would prevent or materially interfere with the
use of the leased premises for the purpose for which it is then being used,
this Lease shall terminate and the rent shall be abated during the unexpired
portion of this Lease effective on the date physical possession is taken by
the condemning authority Lessee shall have no claim to the condemnation award
or proceeds in lieu thereof. Lessor shall notify Lessee of any proposed
condemnation actions.
[Page missing from original lease]
11.02 REMEDIES FOR LESSEE'S DEFAULT. Upon the occurrence of any event
of default set forth in this Lease, Lessor shall have the option to pursue
any one or more of the remedies set forth herein without any notice or
demand. (1) Lessor may enter upon and take possession of the leased
premises, by picking or changing locks if necessary, and lock out, expel or
remove Lessee and any other person who may be occupying all or any part of
the leased premises without being liable for any claim for damages, and relet
the leased premises on behalf of Lessee and receive the rent directly by
reason of the reletting. Lessee agrees to pay Lessor on demand any
deficiency that may arise by reason of any reletting of the leased premises;
further, Lessee agrees to reimburse Lessor for any expenditures made by it in
order to relet the leased premises, including, but not limited to, remodeling
and repair costs. (2) Lessor may enter upon the leased premises, by picking
or changing locks if necessary, without being liable for any claim for
damages, and do whatever Lessee is obligated to do under the terms of this
Lease. Lessee agrees to reimburse Lessor on demand for any expenses which
Lessor may incur in effecting compliance with Lessee's obligations under this
Lease; further, Lessee agrees that Lessor shall not be liable for any damages
resulting to Lessee from effecting compliance with Lessee's obligations under
this Lease caused by the negligence of Lessor or otherwise. (3) Lessor may
terminate this Lease, in which event Lessee shall immediately surrender the
leased premises to Lessor, and if Lessee fails to surrender the leased
premises, Lessor may, without prejudice to any other remedy which it may have
for possession or arrearages in rent, enter upon and take possession of the
leased premises, by picking or changing locks if necessary, and lock out,
expel or remove Lessee and any other person who may be occupying all or any
part of the leased premises without being liable for any claim for damages.
Lessee agrees to pay on demand the amount of all loss and damage which Lessor
may suffer by reason of the termination of this Lease under this section,
whether through inability to relet the leased premises on satisfactory terms
or otherwise. Notwithstanding any other remedy
<PAGE>
set forth in this Lease, in the event Lessor has made rent concessions of any
type or character, or waived any base rent, and Lessee fails to take
possession of the leased premises on the commencement or completion date or
otherwise defaults at any time during the term of this Lease, the rent
concessions, including any waived base rent, shall be cancelled and the
amount of the base rent or other rent concessions shall be due and payable
immediately as if no rent concessions or waiver of any base rent had ever
been granted. A rent concession or waiver of the base rent shall not relieve
Lessee of any obligation to pay any other charge due and payable under this
Lease including without limitation any sum due under section 2.02.
Notwithstanding anything contained in this Lease to the contrary, this Lease
may be terminated by Lessor only by mailing or delivering written notice of
such termination to Lessee, and no other act or omission of Lessor shall be
construed as a termination of this Lease.
ARTICLE 12.00 RELOCATION
[Original text deleted]
ARTICLE 13.00 DEFINITIONS
13.01 ABANDON. "Abandon" means the vacating of all or a substantial
portion of the leased premises by Lessee. If Lessee continues to pay rental
for a period of nine consecutive months, Lessee will not for that period be
deemed to be in abandonment.
13.02 ACT OF GOD OR FORCE MAJEURE. An "act of God" or "force majeure"
is defined for purposes of this Lease as strikes, lockouts, sitdowns,
material or labor restrictions by any governmental authority, unusual
transportation delays, riots, floods, washouts, explosions, earthquakes,
fire, storms, weather (including wet grounds or inclement weather which
prevents construction), acts of the public enemy, wars, insurrections and any
other cause not reasonably within the control of Lessor and which by the
exercise of due diligence Lessor is unable, wholly or in part, to prevent or
overcome.
13.03 BUILDING OR PROJECT. "Building" or "project" as used in this
Lease means the building and/or project described in section 1.02, including
the leased premises and the land upon which the building or project is
situated.
13.04 COMMENCEMENT DATE. Commencement date" shall be the date set forth
in section 1.03. The commencement date shall constitute the commencement of
the term of this Lease for all purposes, whether or not Lessee has actually
taken possession.
13.05 COMPLETION DATE. "Completion date" shall be the date on which the
improvements erected and to be erected upon the leased premises shall have
been completed in accordance with the plans and specifications described in
article 6.00. The completion date shall constitute the commencement of the
term of this Lease for all purposes, whether or not Lessee shall actually
taken possession. Lessor shall use its best efforts to establish the
completion date as the date set forth in section 1.03. In the event that the
improvements have not in fact been competed as of that date, Lessee shall
notify Lessor in writing of its objections. Lessor shall have
<PAGE>
a reasonable time after delivery of the notice in which to take such
corrective action as may be necessary and shall notify Lessee in writing as
soon as it deems such corrective action has been completed and the
improvements are ready for occupancy. Upon completion of construction,
Lessee shall deliver to Lessor a letter accepting the leased premises as
suitable for the purposes for which they are let and the date of such letter
shall constitute the commencement of the term of this Lease. Whether or not
Lessee has executed such letter of acceptance, taking possession of the
leased premises by Lessee shall be deemed to establish conclusively that the
improvements have been completed in accordance with the plans and
specifications, are suitable for the purposes for which the leased premises
are let, and that the leased premises are in good and satisfactory condition
as of the date possession was so taken by Lessee, except for latent defects,
if any.
13.06 SQUARE FEET. "Square feet" or "square foot" as used in this Lease
includes the area contained within the leased premises together with a common
area percentage factor of the leased premises proportionate to the total
building area.
ARTICLE 14.00 MISCELLANEOUS
14.01 WAIVER. Failure of Lessor to declare an event of default
immediately upon its occurrence, or delay in taking any action in connection
with an event of default, shall not continue a waiver of the default, but
Lessor shall have the right to declare the default of any time and take such
action as is lawful or authorized under this Lease. Pursuit of any one or
more of the remedies set forth in article 11.00 above shall not preclude
pursuit of any one or more of the other remedies provided elsewhere in this
Lease or provided by law, nor shall pursuit of any remedy constitute
forfeiture or waiver of any rent or damages accruing to Lessor by reason of
the violation of any of the terms, provisions or covenants of this Lease.
Failure by Lessor to enforce one or more of the remedies provided upon an
event of default shall not be deemed or construed to constitute a waiver of
the default or of any other violation or breach of any of the terms,
provisions and covenants contained in this Lease.
14.02 ACT OF GOD. Lessee shall not be required to perform any covenant
or obligation in this Lease, or be liable in damages to Lessee, so long as
the performance or non-performance of the covenant or obligation is delayed,
caused or prevented by an act of God, force majeure or by Lessee.
14.03 ATTORNEY'S FEES. In the event Lessee defaults in the performance
of any of the terms, covenants, agreements or conditions contained in this
Lease and Lessor places in the hands of an attorney the enforcement of all or
any part of this Lease, the collection of any rent due or to become due or
recovery of the possession of the leased premises, Lessee agrees to pay
Lessor's costs of collection, including reasonable attorney's fees for the
services of the attorney, whether suit is actually filed or not. The
prevailing party in any litigation will be entitled to recover attorney's
fees and costs.
14.04 SUCCESSORS. This Lease shall be binding upon and inure in the
benefit of Lessor and Lessee and their respective heirs, personal
representatives, successors and assigns. It is hereby covenanted and agreed
that should Lessor's interest in the leased premises cease to exist
<PAGE>
for any reason during the term of this Lease, then notwithstanding the
happening of such event this Lease nevertheless shall remain unimpaired and
in full force and effect, and Lessee hereunder agrees to attorn to the then
owner of the leased premises.
14.05 RENT TAX. If applicable in the jurisdiction where the leases
premises are situated, Lessee shall pay and be liable for all rental, sales
and use taxes or other similar taxes, if any, levied or imposed by any city,
state, county or other governmental body having authority, such payments to
be in addition to all other payments required to be paid to Lessor by Lessee
under the terms of this Lease. Any such payment shall be paid concurrently
with the payment of the rent, additional rent, operating expenses or other
charge upon which the tax is based as set forth above.
14.06 CAPTIONS. The captions appearing in this Lease are inserted only
as a matter of convenience and in no way define, limit, construe or describe
the scope or intent of any section.
14.07 NOTICE. All rent and other payments required to be made by Lessee
shall be payable to Lessor at the address set forth in Section 1.05. All
payments required to be made by Lessor to Lessee shall be payable to Lessee
at the address set forth in Section 1.05, or at any other address within the
United States as Lessee may specify from time to time by written notice. Any
notice or document required or permitted to be delivered by the terms of this
Lease shall be deemed to be delivered (whether or not actually received) when
deposited in the United States Mail, postage prepaid, certified mail, return
receipt requested, addressed to the parties at the respective addresses set
forth in section 1.05.
14.08 SUBMISSION OF LEASE. Submission of this Lease to Lessee for
signature does not constitute a reservation of space or an option to lease.
This Lease is not effective until execution by and delivery to both Lessor
and Lessee.
14.09 CORPORATE AUTHORITY. If Lessee executes this Lease as a
corporation, each of the persons executing this Lease on behalf of Lessee
does hereby personally represent and warrant that Lessee is a duly authorized
and existing corporation, that Lessee is qualified to do business in the
state in which the leased premises are located, that the corporation has full
right and authority to enter into this Lease, and that each person signing on
behalf of the corporation is authorized to do so. In the event any
representation or warranty is false, all persons who execute this Lease shall
be liable, individually, as Lessee.
14.10 SEVERABILITY. If any provision of this Lease or the application
thereof to any person or circumstance shall be invalid or unenforceable to
any extent, the remainder of this Lease and the application of such
provisions to other persons or circumstances shall not be affected thereby
and shall be enforced to the greatest extent permitted by law.
14.11 LESSOR'S LIABILITY. If Lessor shall be in default under this
Lease and, if as a consequence of such default, Lessee shall recover a money
judgment against Lessor, such judgment shall be satisfied only out of the
right, title and interest of Lessor in the building as the same may then be
encumbered and neither Lessor nor any person or entity comprising Lessor
shall be liable for any deficiency. In no event shall Lessee have the right
to levy execution against
<PAGE>
any property of Lessor nor any person or entity comprising Lessor other than
its interest in the building as herein expressly provided.
14.12 INDEMNITY. Lessor agrees to indemnify and hold harmless Lessee
from and against any liability or claim, whether meritorious or not, arising
with respect to any broker whose claim arises by, through or on behalf of
Lessor. Lessee agrees to indemnify and hold harmless Lessor from and against
any liability claim, whether meritorious or not, arising with respect to any
broker whose claim arises by, through or on behalf of Lessee.
ARTICLE 15.00 AMENDMENT AND LIMITATION OF WARRANTIES
15.01 ENTIRE AGREEMENT. IT IS EXPRESSLY AGREED BY LESSEE, AS A MATERIAL
CONSIDERATION FOR THE EXECUTION OF THIS LEASE, THAT THIS LEASE, WITH THE
SPECIFIC REFERENCES TO WRITTEN EXTRINSIC DOCUMENTS, IS THE ENTIRE AGREEMENT
OF THE PARTIES; THAT THERE ARE, AND WERE, NO VERBAL REPRESENTATIONS,
WARRANTIES, UNDERSTANDINGS, STIPULATIONS, AGREEMENTS OR PROMISES PERTAINING
TO THIS LEASE OR TO THE EXPRESSLY MENTIONED WRITTEN EXTRINSIC DOCUMENTS NOT
INCORPORATED IN WRITING IN THIS LEASE.
15.02 AMENDMENT. THIS LEASE MAY NOT BE ALTERED, WAIVED, AMENDED OR
EXTENDED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY LESSOR AND LESSEE.
15.03 LIMITATION OF WARRANTIES. LESSOR AND LESSEE EXPRESSLY AGREE THAT
THERE ARE AND SHALL BE NO IMPLIED WARRANTIES OF MERCHANTABILITY,
HABITABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OF ANY OTHER KIND ARISING
OUT OF THIS LEASE, AND THERE ARE NO WARRANTIES WHICH EXTEND BEYOND THOSE
EXPRESSLY SET FORTH IN THIS LEASE.
ARTICLE 16.00 OTHER PROVISIONS
The Addendum attached hereto is incorporated herein and
by this reference made a part hereof.
<PAGE>
ARTICLE 17.00 SIGNATURES
SIGNED at Maitland, Florida this 28 day of June, 1990.
LESSOR LESSEE
VRS REALTY SERVICES - FLORIDA, INC. CREDIT CARD SOFTWARE, INC.
AS AGENT FOR:
SPECTRUM DEVELOPMENT, INC.
By: /s/ Donald L. DeVane, Jr. By: /s/ Robert M. Klinger
------------------------------------ --------------------------------
Donald L. DeVane, Jr. as President Robert M. Klinger, EVP
of VRS REALTY SERVICES - (Type Name and Title)
FLORIDA, INC.
(Type Name and Title)
Two Witnesses Two Witnesses
/s/ Carol A. Mercado /s/ Carol A. Mercado
- --------------------------------------- -----------------------------------
/s/ Rolland E. Hunter /s/ Rolland E. Hunter
- --------------------------------------- -----------------------------------
<PAGE>
ADDENDUM TO STANDARD COMMERCIAL LEASE
16. BASE RENTAL RATES: The following rates of rentable space shall
apply during the term of
Rate per Rentable
Lease Years Square Foot
----------- -----------------
1 & 2 $17.75
3 & 4 $18.46
5 & 6 $19.20
7 & 8 $19.97
9 & 10 $20.77
However, Lessee shall be granted free rent for the first nine months of the
lease term with the free rent being spread over the first 24 months of the
lease term which will result in a net effective rate of $11 per square foot
of rentable space. If Lessee increases the leased premises by taking
expansion space within the first nine months of the lease term, Lessee shall
receive free rent for the remaining number of months left in the first nine
months of the lease term and the credit shall be spread over the balance of
the first 24-month period of the lease term. For example, when Suite 105 is
added as of October 1, 1990, Lessee will receive the benefit of six months of
free rent spread over the remaining 18 months of the Initial 24-month period
of the lease term.
Additionally for the first 24 months of the lease term, Landlord shall
decrease the amount of base rent due by $5,593.75 a month ($134,250 over 24
months).
17. OPTION TO RENEW: Lessee has the option to renew this Lease for one
5-year term. Lessee must give Lessor written notice at least 120 days prior
to the end of the initial term that Lessee has elected to exercise its option
to renew the Lease. If Lessee elects to renew the Lease after the initial
term, Lessee shall pay rent to Lessor at the following rates per year at the
extended term:
Rate per Rentable
Option Year Square Foot
----------- -----------------
1 $22.22
2 $23.78
3 $25.45
4 $27.23
5 $29.14
<PAGE>
18. MANDATORY EXPANSIONS: Lessee agrees it shall lease from Lessor the
following designated suites in the Spectrum at the time the current tenant's
leasee term, as extended if applicable, expires.
Rentable Date
Suite Square Footage Available
----- -------------- ---------
105 2,617 10/1/90 or
10/1/96
Lessee's right to expand into the above-listed suite is subject to any
illegal holdovers by the current tenant. If current tenant illegally
holdover, Lessor shall take appropriate action to remove the current tenant
from the above-designated suite. Lessor and Lessee shall execute a lease
amendment each time expansion space is added. All rent on the expansion space
shall be due and payable to Lessor from Lessee on the day following the
expiration date of the current tenant's lease or such earlier date as the
expansion space is delivered to Lessee.
19. PARTIAL CANCELLATION OF SUITE 140: If Lessee is not in default
hereunder, Lessee shall have the option to cancel approximately 3,500
rentable square feet out of a total of 11,770 rentable square feet as
indicated of Exhibit A. Cancellation would become effective 90 days after
the following event occurs:
Suite 105 (mandatory expansion) is made available to Lessee per
Article 18.
Lessee agrees to pay for 50% of the cost to install a demising wall in
order to separate the 3,500 square feet from the balance of Suite 140, with
Lessee's contribution not to exceed $3,500.00.
20. OPTIONAL EXPANSION SPACE: If Lessee is not in default hereunder,
Lessee shall have the option to lease Suites 113, 115, 215, 100, 110, 114,
126, 148, 228, 122, 240, 230, 130, and 250. Lessor shall notify Lessee at
least 120 days prior to the expiration of the leases currently in place of
the existing suites. Lessee shall have 15 days from the delivery of said
notice to notify Lessor whether it shall exercise its option to expand into
the space described in the notice from Lessor. If Lessee does not respond
within 15 days after the delivery of said notice that it desires to expand
into the space described in the notice, Lessee shall be deemed to have not
accepted to expand into the space and Lessor shall have full right to lease
the space to another entity.
21. TENANT IMPROVEMENT ALLOWANCE: If Lessee is not in default
hereunder, Lessor shall pay Lessee $15,264.24 tenant improvement allowance to
improve the leased premises. Within 45 days of the commencement date of this
Lease, Lessor shall deliver $15,264.21 of the tenant improvement allowance to
Lessee.
Additionally, Lessor shall provide Lessee tenant improvement allowances
and space planning allowances for the expansion areas Lessee adds to the
leased premises. The tenant
<PAGE>
improvement and space planning allowance shall be payable within 60 days
after the commencement date of the Amendment to the Lease adding the
expansion space to the Lease. The tenant improvement and space planning
allowance will be determined by the calendar year during which the expansion
space was added to the leased premises. The following chart indicates the
amount of tenant improvement and space planning allowance payable for the
expansion areas during each calendar year:
Allowance per
Rentable Space Planning Allowance
Year Square Foot Per Rentable Square Foot
---- ----------- ------------------------
1990 $4.00 $.50
1991 $4.50 $.50
1992 $5.00 $.50
1993 $5.50 $.50
1994 $6.00 $.50
1995 $6.50 $.50
Suite 120 (7,035 square feet) which is part of the 53,578 rentable square
feet in Article 1.02 will be considered as an expansion area and subject to
tenant improvement and space planning allowance in this Article 21.
22. REFURBISHING ALLOWANCE: If Lessee is not in default hereunder,
Lessor shall provide Lessee with a refurbishing allowance at the end of the
fifth year of the lease term. The amount of the refurbishing allowance shall
be calculated by the Rentable Square Footage of leased premises as of July 1,
1995 times $150 per square foot. Lessor shall pay the amount so calculated
to Lessee no later than September 30, 1995.
23. RELEASE OF SECURITY DEPOSIT: If Lessee is not in default hereunder,
Lessor shall release the security deposit of $41,668.96 to Lessee within 30
days after the second year anniversary date of the Lease Term.
24. LESSEE'S SIGNAGE: Subject to the land use restrictions of Maitland
Center and applicable governmental sign restrictions and criteria, Lessor
shall, at Lessor's expense, install Lessee's name on the ground-mounted
entrance sign now located at the north entrance to the building. The sign
shall be subject to Lessor's approval and Lessor shall pay for the initial
sign only. If Lessee subsequent changes its name, Lessee shall be
responsible for any expense incurred in changing the sign.
Lessor agrees to allow Lessee to install a mutually agreed upon
identification on or about the south entrance of the building. Lessor agrees
to allow Lessee to install certain agreed upon interior signage and/or
graphics for directional purposes to Lessee's various premises within the
building. South entrance signage and interior directional signage and/or
graphics will be at the expense of the Lessee and will require prior written
approval which will not be unreasonably withheld.
<PAGE>
25. STANDARD BUILDING HOURS: Standard building hours will be from 7:00
a.m. to 6:00 p.m., Monday through Friday and on Saturday from 8:00 a.m. to
1:00 p.m. excluding the computer room.
26. EXCESSIVE UTILITY CONSUMPTION: Lessor acknowledges that standard
office equipment such as electric typewriters, personal computers, and
copiers will not be considered to use high electrical consumption, and Lessee
will not be required to pay the utility cost on the above types of equipment.
As a part of Lessee's leasehold improvements, Lessor has had installed
separate electrical metering of the Lessee's computer room (approximately
1,200 square feet) and separate stand alone heating and air conditioning
equipment appropriate for the computer room. Lessee shall be responsible for
the payment of the electrical charges for the computer room.
Lessor shall credit Lessee $1,500 each year for payment of electrical
charges made by Lessee for the 1,200 square foot computer room. Said credit
shall be deducted from excess operating expenses (see 2.02) due from Lessee.
If the total excess operating expenses due from Lessee is less than $1,500,
Lessor shall remit the difference to Lessee
27. AMENDMENT TO 5.01: 5.01, Lessor's Repairs, shall be amended with
the following additions:
Lessor, will exercise due diligence in maintaining Lessee's premises.
Lessor will allow the Lessee to make repairs if Lessor fails to do so within
a reasonable period of time after Lessor's receipt of notice of the need for
repairs. Lessee's cost of effecting the repairs will be reimbursed by Lessor.
28. REQUIRED CONSENT: All consents required under this Lease will not
be unreasonably withheld or delayed, unless otherwise stated.
29. AFTER HOURS ACCESS: After hours access to the leased premises by
Lessee's employees shall be provided by Lessor, at no cost to Lessee, through
secured common area doors, by an automated security system. The security
system will also allow Lessee to access the heating and air conditioning
units controlling the leased premises which Lessee shall pay for pursuant to
paragraph 4.01 of the Lease.
30. BROKERAGE COMMISSION: Lessor shall pay Keystone Business Investment
Corporation $76,500.00 as a brokerage commission in connection with the
execution of this Lease. Lessee agrees to indemnify and hold harmless Lessor
from and against any additional brokerage commission, costs, expenses
(including attorneys' fees) and damages incurred by Lessor as a result of any
claims or suits brought on behalf of (i) Kaystone Business Investment
Corporation claiming that it was owed more brokerage commission that the
$76,500.00 or (ii) any other real estate broker.
<PAGE>
31. PARKING. There will be approximately 409 surface parking spaces.
Parking will be provided at no charge to the Lessee.
32. RADON GAS. Radon is a naturally occurring radio-active gas that,
when it has accumulated in a building in sufficient quantities, may present
health risks to persons who are exposed to it over time. Levels of radon
that exceed federal and state guidelines have been found in buildings in
Florida. Additional information regarding radon and radon testing may be
obtained from your county public health unit.
33. LEASE TERMINATION: Lessor and Lessee agree that the certain
Standard Commercial Lease executed between Lessor and Lessee and dated
February 26, 1986, as amended, shall become null and void simultaneously with
the execution of this Lease.
34. NET PROFIT PARTICIPATION AGREEMENT: Tenant shall receive 5% of any
net proceeds upon sale (or refinance) of The Spectrum office building, after
repayment of the mortgage encumbering The Spectrum, all equity contributions
owed by Landlord to Landlord's lenders, and related costs, fees, commission,
etc., including, but not limited to, title insurance, broker's commission,
surveys, legal expenses, costs and documentary stamp taxes. For the purposes
of this agreement the fixed value of The Spectrum will be $14,500,000.
This participation does not apply to any transfer of ownership from the
current owner (Spectrum Development, Inc.) to Landlord's lenders (First Union
and Chemical Bank) or an assignee of the Landlord's lenders.
Signed in the presence of: VRS REALTY SERVICES-FLORIDA, INC.
as Agent for
SPECTRUM DEVELOPMENT, INC.
a Florida corporation
/s/ Carol A. Mercado By: /s/ Donald L. DeVane, Jr.
- ------------------------------------- ------------------------------------
Donald L. DeVane, Jr.
/s/ Rolland E. Hunter as VRS Realty Services -
- ------------------------------------- Florida, Inc.'s President
Two witnesses
CREDIT CARD SOFTWARE, INC.
a Florida corporation
/s/ Carol A. Mercado By: /s/ Robert M. Klinger
- ------------------------------------- ------------------------------------
Robert M. Klinger as its EVP
/s/ Rolland E. Hunter
- -------------------------------------
<PAGE>
RULES AND REGULATIONS
1. Lessor agrees to furnish Lessee two keys without charge. Additional keys
will be furnished at a nominal charge. Lessee shall not change locks or
install daditional locks on doors without prior written consent of Lessor.
Lessee shall not make or cause to be made duplicates of keys procured from
Lessor without prior approval of Lessor. All keys to leased premises shall
be surrendered to Lessor upon termination of this Lease.
2. Lessee will refer all contractors, contractor's representatives and
installation technicians rendering any service on or to the leased premises
for Lessee to Lessor for Lessor's approval before performance of any
contractual service. Lessee's contractors and installation technicians shall
comply with Lessor's rules and regulations pertaining to construction and
installation. This provision shall apply to all work performed on or about
the leased premises or project, including installation of telephones,
telegraph equipment, electrical devices and attachments and installations of
any nature affecting floors, walls, woodwork, trim, windows, ceilings and
equipment or any other physical portion of the leased premises or project.
3. Lessee shall not at any time occupy any part of the leases premises or
project as sleeping or lodging quarters.
4. Lessee shall not place, install or operate on the leased premises or in
any part of the building any engine, stove or machinery, or conduct
mechanical operations or cook thereon or therein, or place or use in or about
the leases premises or project any explosives, gasoline, kerosene, oil,
acids, caustics, or any flammable, explosive or hazardous material without
written consent of Lessor.
5. Lessor will not be responsible for lost or stolen personal property,
equipment, money or jewelry from the leased premises or the project
regardless of whether such loss occurs when the area is locked against entry
or not.
6. No dogs, cats, fowl, or other animals shall be brought into or kept in or
about the leased premises or project.
7. Employees of Lessor shall not receive or carry messages for or to any
Lessee or other person or contract with or render free or paid services to
any Lessee or to any of Lessee's agents, employees or invitees.
8. None of the parking, plaza, recreation, or lawn areas, entries, passages,
doors, elevators, hallways or stairways shall be blocked or obstructed or any
rubbish, litter, trash, or material of any nature placed, emptied or thrown
into these areas or such area used by Lessee's agents, employees or invitees
at any time for purposes inconsistent with their designation by Lessor.
<PAGE>
9. The water closets and other water fixtures shall not be used for any
purpose other than those for which they were constructed, and any damage
resulting to them from misuse or by the defacing or injury of any part of
the building shall be borne by the person who shall occasion it. No person
shall waste water by interfering with the faucets or otherwise.
10. No person shall disturb occupants of the building by the use of any
radios, record players, tape recorders, musical instrument, the making of
unseemly noises or any unreasonable use.
11. Nothing shall be thrown out of the windows of the building or down the
stairways or other passages.
12. Lessee and its employees, agents and invitees shall park their vehicles
only in those parking areas designated by Lessor. Lessee shall furnish
Lessor with state automobile license numbers of Lessee's vehicles and its
employees' vehicles within five days after taking possession of the leased
premises and shall notify Lessor of any charges within five days after such
change occurs. Lessee shall not leave any vehicle in a state of disrepair
(including without limitation, flat tires, out of date inspection stickers
or license plates) on the leased premises or project. If Lessee or its
employees, agent or invitees park their vehicles in areas other than the
designated parking areas or leave any vehicle in a state of disrepair,
Lessor, after giving written notice to Lessee of such violation, shall have
the right to remove such vehicles at Lessee's expense.
13. Parking in a parking garage or area shall be in compliance with all
parking rules and regulations including any sticker or other
identification system established by Lessor. Failure to observe the
rules and regulations shall terminate Lessee's right to use the parking
garage or area and subject the vehicle in violation of the parking rules
and regulations to removal and impoundment. No termination of parking
privileges or removal of impoundment of a vehicle shall create any
liability on Lessor or be deemed to interfere with Lessee's right to
possession of its leased premises. Vehicles must be parked entirely
within the stall lines and all directional signs, arrows and posted speed
limits must be observed. Parking is prohibited in areas not striped for
parking, in aisles, where "No Parking" signs are posted, on ramps, in
cross hatched areas, and in other areas as may be designated by Lessor.
Parking stickers or other forms of identification supplied by Lessor
shall remain the property of Lessor and not the property of Lessee and
are not transferable. Every person is required to park and lock his
vehicle. All responsibility for damage to vehicles or persons is assumed
by the owner of the vehicle or its driver.
14. Movement in or out of the building of furniture or office supplies
and equipment, or dispatch or receipt by Lessee of any merchandise or
materials which requires use of elevators or stairways, or movement
through the building entrances or lobby, shall be restricted to hours
designated by Lessor. All such movement shall be under supervision of
Lessor and carried out in the manner agreed between Lessee and Lessor by
prearrangement before performance. Such prearrangement will include
determination by Lessor of time, method, and routing of movement and
limitations imposed by safety or other concerns which may prohibit any
article, equipment or any other item from being brought into the
<PAGE>
building. Lessee assumes, and shall indemnify Lessor against, all risks
and claims of damage to persons and properties arising in connection with
any said movement.
15. Lessor shall not be liable for any damages from the stoppage of
elevators for necessary or desirable repairs or improvements or delays of
any sort or duration in connection with the elevator service.
16. Lessee shall not lay floor covering within the leased premises
without written approval of the Lessor. The use of cement or other
similar adhesive materials not easily removed with water is expressly
prohibited.
17. Lessee agrees to cooperate and assist Lessor in the prevention of
canvassing, soliciting and peddling within the building or project.
18. Lessor reserves the right to exclude from the building or project,
between the hours of 6:00 p.m. and 7:00 a.m. on week days and all hours
on Saturday, Sunday and legal holidays, all persons who are not known to
the building or project security personnel and who do not present a pass
to the building signed by the Lessee. Each Lessee shall be responsible
for all persons for whom he supplies a pass.
19. It is Lessor's desire to maintain in the building or project the
highest standard of dignity and good taste consistent with comfort and
convenience for Lessees. Any action or condition not meeting this high
standard should be reported directly to Lessor. Your cooperation will be
mutually beneficial and sincerely appreciated. Lessor reserves the right
to make such other and further reasonable rules and regulations as in its
judgment may from time to time be necessary, for the safety, care and
cleanliness of the leased premises and for the preservation of good order
therein.
<PAGE>
BROKERAGE COMMISSION AGREEMENT
THIS BROKERAGE COMMISSION AGREEMENT (the "Agreement") is executed this
____ day of June, 1990, by and between VRS REALTY SERVICES - FLORIDA, INC., a
Delaware Corporation as agent for SPECTRUM DEVELOPMENT, INC., a Florida
corporation (the "Landlord"), and KEYSTONE CORPORATION (the "Broker").
1. BACKGROUND. Landlord is about to enter into a 10-year Standard
commercial Lease with Credit Card Software, Inc., as a tenant, for space in
The Spectrum Office Building located at 900 Winderley Place, Maitland,
Florida 32751 (the "Lease"). Landlord has previously paid Broker brokerage
commissions pursuant to a letter dated December 30, 1985, from Donald L.
DeVane, Jr., to Peter Lewis (sic) Louis (the "Letter"). Landlord and Broker
have agreed upon a brokerage commission to be payable to Broker in connection
with the Lease, which brokerage commission shall be due and payable on the
day of the execution of the Lease by both parties.
2. BROKERAGE COMMISSION. In consideration of the premises contained
herein, Landlord agrees to pay Broker a brokerage commission in the amount of
$76,500.00 on the day after the full execution of the Lease.
3. RELEASE OF LANDLORD. Broker hereby releases (i) Landlord, (ii) VRS
Realty Services - Florida, Inc., (iii) Credit Card Software, Inc., and (iv)
Vantage Properties, Inc. (n/k/a OVPI, Inc.), for itself, and its successors
and assigns, from any and all claims, demands, and causes of action against
Landlord by reason of Credit Card Software's renewing its Lease (as defined
in paragraph 1 above), exercising expansion rights under the Lease, or
exercising an option included in the Lease. Broker and Landlord hereby agree
that the Letter is of no further force and effect, and Broker hereby agrees
that Landlord has no further obligation to pay Broker a commission in
connection with space in The Spectrum Office Building, 900 Winderley Place,
Maitland, Florida 32751.
4. RELEASE OF BROKER. Except for a default hereunder, VRS Realty
Services -Florida, Inc. and Landlord hereby release Broker from any and all
claims, demands and causes of action against Broker by reason of this
Agreement and the Lease.
<PAGE>
5. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between Landlord and Broker for the brokerage commission due Broker in
connection with the full execution of the Lease. All prior negotiations,
correspondence and agreements of the parties hereto relative to the brokerage
commission due in connection with the Lease are hereby superseded and
declared null and void.
Signed in the presence of: SPECTRUM DEVELOPMENT, INC.
a Florida corporation
By: VRS REALTY SERVICES - FLORIDA, INC.,
A Delaware corporation, as its agent
/s/ [Illegible]
- ------------------------------------
/s/ [Illegible] By: /s/ Donald L. DeVane, Jr.
- ------------------------------------ -------------------------------------
Two witnesses Donald L. DeVane, Jr.
as its president
KEYSTONE CORPORATION
/s/ [Illegible]
- -----------------------------------
/s/ [Illegible] By: /s/ Peter S. Louis
- ------------------------------------ -------------------------------------
Two witnesses Peter S. Louis
as its president
<PAGE>
ADDENDUM ONE (Dated November 5, 1990)
Lease Dated June 28, 1990 Between Spectrum Development, Inc.,
and Credit Card Software, Inc.
1. MANDATORY EXPANSIONS: Mandatory expansions as detailed in
Article 18 of the Addendum will be changed as follows:
The effective date of the mandatory expansion of Suite 105
(2617 rentable square feet) will be changed from October 1, 1990 to
April 1, 1991. All other terms and conditions in Article 18 concerning
mandatory expansion will remain the same.
2. PARTIAL CANCELLATION OF SUITE 140: The partial cancellation of
Suite 140 which is detailed in Article 19 of the Addendum will be
changed as follows:
Cancellation would be effective ninety (90) days after Suite
105 (Mandatory Expansion) is made available to LESSEE which is
April 1, 1991, (as amended above).
All other terms and conditions of Article 19 will remain the same.
Signed in the presence of: VRS REALTY SERVICES-FLORIDA, INC.
as Agent for
SPECTRUM DEVELOPMENT, INC.
a Florida corporation
/s/ Anne Glover By: /s/ Donald L. DeVane, Jr.
- ------------------------------------- ---------------------------------
Donald L. DeVane, Jr.
/s/ Carolyn Buzzo as VRS Realty Services -
- ------------------------------------- Florida, Inc.'s President
Two witnesses
CREDIT CARD SOFTWARE, INC.
a Florida corporation
/s/ Jenny Musser By: /s/ Robert M. Klinger
- ------------------------------------- ---------------------------------
Robert M. Klinger
/s/ Missy Fisher as Credit Card Software, Inc.'s
- ------------------------------------ as its Executive Vice President
Two witnesses
<PAGE>
ADDENDUM TWO TO LEASE
This Addendum Two to Lease is entered into this 6th day of September,
1991 by and between SPECTRUM DEVELOPMENT, INC., a Florida corporation
("Landlord") and CREDIT CARD SOFTWARE, INC. ("Tenant").
1. BACKGROUND. Pursuant to a Lease, dated June 28, 1990 between
Landlord and Tenant, as amended on November 5, 1990 (the "Lease"), Tenant
leased space from Landlord at The Spectrum, 900 Winderley Place, Maitland,
Florida. Tenant and Landlord desire to amend the Lease as set forth below to
allow Tenant to install an uninterruptible power supply in the main
electrical switch room (the "Switch Room") at The Spectrum building (the
"Spectrum").
2. INSTALLATION OF POWER SUPPLY. Landlord agrees to allow Tenant to
install an uninterruptible power supply in the Switch Room at the Spectrum
with some limitations as to the scope of the work. Landlord agrees to the
installation of only the following: 1) an 85 KVA power supply weighing 7,520
pounds with dimensions of 72 inches in length by 31 inches in width by 65
inches in height; 2) one bypass switch; 3) one 480 volt circuit breaker
panel; and 4) one meter base and meter (hereinafter collectively referred to
as the "Equipment"). This Equipment shall be located on and against the
north wall of the Switch Room as indicated on attached Exhibit "A". The
purpose of the meter base and meter are for the purpose of metering K.W.H.
consumption of the Suite 200 computer systems.
3. INSTALLATION OF A/C UNIT. Landlord agrees to allow Tenant to install
a 3 1/2 ton air conditioning unit (the "A/C Unit"). The A/C Unit will have
the condensing unit located on the roof of the Spectrum and the evaporator
unit located in the Switch Room, as indicated on Exhibit A. The electrical
supply to the A/C Unit will be metered through the existing computer room
electrical meter. Tenant shall install safety switches and a five inch deep
drain pan (the "Drain Pan") to help prevent water spillage from the
evaporator unit. The Drain Pan shall have a pump that will pump water into
the floor drain of the adjacent mechanical room as indicated on attached
Exhibit "A".
4. AMENDMENTS. Tenant shall obtain Landlord's prior written approval as
to any alterations to the scope of the work as identified in this Amendment.
5. COSTS. Tenant shall pay for the following: 1) Equipment; 2) A/C
Unit; 3) all costs, including, but not limited to, installation, permits, and
electrical K.W.H. consumption; 4) maintenance, replacement, or removal of the
Equipment and A/C Unit; 5) any costs necessary to suppress the noise from the
Equipment A/C Unit to an acceptable level to the Landlord; and 6) any other
costs or expenses necessary to be incurred as a result of the provisions of
this Addendum.
6. INDEMNIFICATION. Tenant shall add a rider to all insurance policies
it owns insuring Landlord's equipment and building against damage, down time,
loss of rent, etc. in the event of damage during installation and/or the
operation of the Equipment or A/C Unit. Tenant
<PAGE>
shall indemnify and hold harmless Landlord from and against any liability or
claims, damages, or suits, including reasonable attorney's fees, for any
injuries to person or damage to the property on or about the leased premises
caused by any act or omission of Tenant, its agents, servants, or employees,
resulting from the installation, operation and maintenance of the Equipment
and A/C Unit.
Except as modified, all other terms and conditions of the Lease are
hereby ratified and confirmed by Landlord and Tenant.
LANDLORD
Signed in the presence of two VRS REALTY SERVICES-FLORIDA, INC.
witnesses: as Agent for
SPECTRUM DEVELOPMENT, INC.
/s/ Anne E. Glover a Florida corporation
- -----------------------------------
/s/ Carolyn B. Buzzo By: /s/ Donald L. DeVane, Jr.
- ----------------------------------- ---------------------------------
Donald L. DeVane, Jr.
as VRS Realty Services -
Florida, Inc.'s President
TENANT
CREDIT CARD SOFTWARE, INC.
a Florida corporation
By: /s/ R. P. Monger
- ----------------------------------- ---------------------------------
------------------
- ----------------------------------- as its EVP
Two witnesses
[SCHEMATICS CHART]
<PAGE>
ADDENDUM THREE TO LEASE
This Addendum Three to Lease is entered into this 1st day of February,
1993, by and between ABR SPECTRUM, LTD., a Florida limited partnership as
successor in interest to SPECTRUM DEVELOPMENT, INC., ("Landlord") and CCS
TECHNOLOGY GROUP, INC., a Florida corporation f/k/a CREDIT CARD SOFTWARE,
INC., a Florida corporation ("Lessee").
RECITAL
Whereas, the Landlord and Lessee entered into that certain Lease
Agreement dated June 18, 1990, as amended on November 5, 1990 and September
6, 1991 (hereinafter collectively the "Lease"), wherein the Lessee leased
space from Landlord at The Spectrum Building, 900 Winderley Place, Maitland,
Florida 32751. Lessee and Landlord desire to amend the Lease as set forth
below.
WITNESSETH
1. Lessee shall surrender possession of Suites 105 and 108 at
The Spectrum in good condition to Landlord.
2. Lessee shall lease from Landlord Suite 150 at The Spectrum
containing approximately 3,694 rentable square feet pursuant to the
same terms and conditions as in the current Lease, except as
otherwise modified herein.
3. Lessee shall be entitled to sublease suite 150 to Mr. Wes
Benzing (CUSO Management Group, Inc., a Delaware corporation)
(hereinafter "Sublessee") under the terms and conditions of that
certain Sublease Agreement attached hereto and incorporated herein
by this reference. In no event shall Lessee be excused from
primary liability under the Lease as amended to Landlord.
4. Suite 150 at The Spectrum will be repainted at the expense of
Lessee at a cost not to exceed $1,200.00. Any cost beyond
$1,200.00 shall be borne by the Sublessee. Neither Lessee or
Landlord will be responsible for any improvements or buildouts to
Suite 150 requested by Sublessee under the terms and conditions of
this Addendum, the Sublease or the Lease.
5. Lessee's rent roll payment schedule under the Lease shall be
amended per the attached Schedule "A".
6. The term of the current Lease between the Landlord and Lessee
shall be extended for an additional two (2) years, (i.e. until June
30, 2002). The rental for the additional two (2) years shall be a
rate per square foot equal to the average of the two (2) most
recent rentals
<PAGE>
of 2,500 square feet of space similar in design and nature
to that of the Lessee's leased premises at the Spectrum prior
to June 30, 2000.
7. Landlord grants to Lessee the right of first refusal to
purchase The Spectrum Building. The Landlord shall submit to
Lessee a copy of any viable purchase offer for purchase of The
Spectrum Building acceptable to Landlord. Lessee shall have
fifteen (15) business days from the date of receipt of said
contract to match said offer at that same purchase price, terms and
conditions.
8. In all other respects, except as modified herein, all other
terms and conditions of the Lease are hereby ratified and confirmed
by the Landlord and Lessee.
9. The terms and conditions of this Addendum Three to Lease shall
be effective as of the date first above written.
LANDLORD
ABR SPECTRUM, LTD., a Florida limited
partnership, successor in interest to
Signed in the presence of: SPECTRUM DEVELOPMENT, INC.
a Florida corporation
/s/ Karen L. Lopez By: /s/ Robert M. Reed
- ----------------------------------- ----------------------------------
Robert M. Reed II, as
- ----------------------------------- General Partner
LESSEE
CCS TECHNOLOGY GROUP, INC., a
Florida corporation
f/k/a CREDIT CARD SOFTWARE, INC.,
a Florida corporation
/s/ Connie Spencer By: /s/ P. R. Biondo
- ----------------------------------- ----------------------------------
P. Richard Biondo, Corporate
/s/ Larry Roberts Counsel, Corporate Secretary
- -----------------------------------
Acknowledged and consented to this ____ day of ____________________, 1993.
<PAGE>
SUBLESSEE:
CUSO MANAGEMENT GROUP, INC.,
a _______________ corporation
- ------------------------------------ By:---------------------------------
Wes Benzing, as President
- ------------------------------------
<PAGE>
ADDENDUM FOUR TO LEASE
This Addendum Four to Lease is entered into this ____ day of
____________, 1993, by and between ABR SPECTRUM, LTD., a Florida limited
partnership as successor in interest to SPECTRUM DEVELOPMENT, INC.,
("Lessor") and CCS TECHNOLOGY GROUP, INC., a Florida corporation f/k/a CREDIT
CARD SOFTWARE, INC., a Florida corporation ("Lessee").
RECITAL
Whereas, the Lessor and Lessee entered into that certain Lease Agreement
dated June 28, 1990, as amended on November 5, 1990, September 6, 1991, and
January 29, 1993 (hereinafter referred to collectively as the "Lease"),
wherein the Lessee leased space from Lessor at The Spectrum Building, 900
Winderley Place, Maitland, Florida 32751. Lessee and Lessor desire to amend
the Lease as set forth below, effective October 1, 1993.
WITNESSETH
1. Lessee shall surrender possession of, and all rights to,
Suite 104 containing 2,564 rentable square feet, Suite 116 containing
1,121 rentable square feet and Suite 120 containing 7,035 rentable
square feet for a total of 10,720 rentable square feet, at The
Spectrum in good condition to Lessor.
2. Lessee shall lease from Lessor Suite 215 at The Spectrum
containing approximately 9,070 rentable square feet, and a portion of
Suite 240 containing approximately 1,859 rentable square feet as
indicated on the attached building floor plan, pursuant to the same
terms and conditions as in the current Lease, except as otherwise
modified herein.
3. Construction of the demising wall for Suite 240 shall be at the
sole expense of Lessor. Lessor also shall build out three (3)
offices, recarpet and paint Suite 240. all other Tenant Improvements
shall be the sole responsibility of Lessee.
4. The rental rate for the last two years of the existing Lease Term
(7/1/100 -6/30/02) shall be at a rate per square foot equal to the
average of the two (2) most recent rentals of at least 2,500 square
feet of space similar in design and nature to that of the Lessee's
leased premises at The Spectrum prior to June 30, 2000, but in no
event shall the annual rental rate be less than $16.50 per rentable
square foot.
5. In all other respects, except as modified herein, all other terms
and conditions of the Lease are hereby ratified and confirmed by the
Lessor and Lessee.
<PAGE>
6. The terms and conditions of this Addendum Four to Lease shall be
effective as of the date first above written.
LESSOR:
ABR SPECTRUM, LTD., a Florida limited
partnership, successor in interest to
Signed in the presence of: SPECTRUM DEVELOPMENT, INC.
a Florida corporation
By:
- ----------------------------------- ------------------------------------
Robert M. Reed II, as
- ----------------------------------- General Partner
LESSEE:
CCS TECHNOLOGY GROUP, INC.,
a Florida corporation f/k/a
CREDIT CARD SOFTWARE, INC.,
a Florida corporation
By:
- ----------------------------------- ------------------------------------
- -----------------------------------
<PAGE>
ADDENDUM V
MODIFICATION AND RATIFICATION OF LEASE
THIS MODIFICATION AND RATIFICATION OF LEASE is made and entered into by
and between ABR SPECTRUM, LTD. (Lessor) and CCS TECHNOLOGY GROUP, INC., a
Florida corporation (Lessee) for and in consideration of Ten Dollars ($10.00)
and other good and valuable consideration, receipt of which is hereby
acknowledged.
Lessor and Lessee hereby confirm and ratify, except as modified below,
all of the terms, conditions and covenant in that certain written Addendum
Four to Lease dated November 17, 1993, for the rental of the following
described property:
Suite 215 containing 9,070 rentable square feet; Suite 228
containing 2,016 rentable square; and that portion of Suite 232
containing 893 rentable square feet of office space located at The
Spectrum Building, 900 Winderley Place, Maitland, Florida 32751.
WITNESSETH
1. PARAGRAPH 3, RELOCATION: This Addendum V shall serve as
notice that Lessor is officially relocating Lessee from Suite 232
consisting of 893 rentable square feet, of which Lessee never
occupied, to Suite 240.
2. PARAGRAPH 2: Suite 215, identified as 9,070 rentable square
feet, is hereby modified to reflect that the suite consists of
7,540 rentable square feet, leaving a difference of 1,530 rentable
square feet. This 1,530 rentable square feet shall be provided to
Lessee, along with the relocation space as described in Paragraph 1
of this Modification, in that portion of Suite 240 as indicated on
Exhibit "A" attached hereto and made a part of this Addendum V.
With the provisions of this Addendum, Suite 240 shall now
consist of 2,433 rentable square feet.
All other terms and conditions of Addendum Four to Lease dated November
17, 1993 shall remain in full force and effect.
<PAGE>
SIGNED THIS 14 day of March, 1994.
WITNESSES AS TO LESSOR: LESSOR:
ABR SPECTRUM, LTD.
/s/ Sylvia Damiano By: /s/ Robert M. Reed
- ----------------------------------- -----------------------------------
Robert M. Reed, II
- -----------------------------------
Its: General Partner
----------------------------------
WITNESSES AS TO LESSEE: LESSEE:
CCS TECHNOLOGY GROUP, INC.,
/s/ Rolland E. Hunter a Florida corporation
- -----------------------------------
/s/ P. R. Biondo By: /s/ Jennifer R. Musser
- ----------------------------------- ------------------------------------
Its: Treasurer
----------------------------------
[MAP]
<PAGE>
ADDENDUM VI
MODIFICATION AND RATIFICATION
This modification and ratification of LEASE is made and entered into by and
between ABR SPECTRUM, LTD, a Florida limited partnership, as successor in
interest to SPECTRUM DEVELOPMENT, INC. ("Lessor") and CCS TECHNOLOGY GROUP,
INC., a Florida corporation formerly known as CREDIT CARD SOFTWARE, INC., a
Florida corporation ("Lessee") for and in consideration of ten dollars
($10.00) and other good and valuable consideration, receipt of which is
hereby acknowledged.
RECITAL
Lessor and Lessee hereby confirm and ratify, except as modified below, all of
the terms, conditions, and covenants in that certain written Lease Agreement
dated June 28, 1990, as amended on November 5, 1990, September 6, 1991,
January 29, 1993 and November 17, 1993 (hereinafter referred to collectively
as the "Lease"), wherein the Lessee leased space from Lessor at The Spectrum
Building, 900 Winderley Place, Maitland, Florida 32751. Lessee and Lessor
desire to amend the Lease as set forth below, effective April 1, 1994.
1. Lessee shall surrender possession of, and all rights to, Suite
116, containing 1,121 rentable square feet, at The Spectrum Building.
Lessee has inspected the premises and agrees to accept them "as is".
Lessee agrees to remove all remaining furniture from said premises.
2. Lessee shall lease from Lessor Suite 234 at The Spectrum
Building, containing approximately 653 rentable square feet, and 468
rentable square feet of the existing 526 rentable square feet, currently
known as Suite 248, as indicated on the attached building floor plan,
pursuant to the same terms and conditions as in the current Lease,
except as otherwise modified herein.
3. RELOCATION: Upon thirty (30) days written notice, Lessor may
relocate Lessee from Suite 248 to another available suite in the
building on the Second Floor which is 468 rentable square feet or larger.
4. In all other respects, except as modified herein, all other terms
of the Lease are hereby ratified and confirmed by the Lessor and Lessee.
<PAGE>
Signed this 12 day of April, 1994.
LESSOR
ABR SPECTRUM, LTD., a Florida
limited partnership, successor in interest
Signed in the presence of: to SPECTRUM DEVELOPMENT, INC.
a Florida corporation
/s/ Martin W. Brennan By: /s/ Robert M. Reed
- ----------------------------------- --------------------------------------
Robert M. Reed II, as
- ----------------------------------- General Partner
LESSEE:
CCS TECHNOLOGY GROUP, INC.,
a Florida corporation a/k/a
CREDIT CARD SOFTWARE, INC.,
a Florida corporation
/s/ Carol A. Wordruff By: /s/ Jennifer R. Musser
- ----------------------------------- --------------------------------------
/s/ Rolland E. Hunter
- ----------------------------------
[MAP]
<PAGE>
CREDIT CARD SOFTWARE (SPECTRUM BUILDING)
PROPOSED REVISED RENT PAYMENT SCHEDULE
SCHEDULE A
TOTAL LEASED SPACE . . . . . 56,195
<TABLE>
<CAPTION>
PROPOSED
RENT
YEAR RATE RENT OWNED PAYMENT ANNUAL DIFF CUM. DIFF.
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 $522,233.00 $522,233.00 $0.00
2 $522,233.00 $522,233.00 $0.00
Suite 105 $58,064.70 $58,064.70 $0.00
----------------------------------------------
$1,102,530.70 $1,102,530.70 $0.00
----------------------------------------------
3 $18.46 $1,037,359.70 $636,795.00 ($400,564.70) ($400,564.70)
4 $1,037,359.70 $905,664.00 ($131,695.70) ($532,260.40)
5 $19.20 $1,078,944.00 $1,041,504.00 ($37,440.00) ($569,700.40)
6 $1,078,944.00 $1,174,419.00 $l95,475.00 ($474,225.40)
7 $19.97 $1,122,214.15 $1,230,150.00 $107,935.85 ($366,289.55)
8 $1,122,214.15 $1,251,750.00 $129,535.85 ($235,753.70)
9 $20.77 $1,167,170.15 $1,270,784.00 $103,613.85 ($133,139.85)
10 $1,167,170.15 $1,300,310.00 $133,139.35 $0.00
----------------------------------------------
$8,811,376.00 $8,811,376.00 $0.00
----------------------------------------------
$9,913,906.70 $9,913,906.70 $0.00
----------------------------------------------
----------------------------------------------
* Does not include sales tax
75,000 thru June 30, 1993 starting October 1992
</TABLE>
<PAGE>
EXHIBIT 10.18
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT (this "Agreement") is made and entered into as of
July 1, 1997 at Gwinnett County, Georgia, between QUADRAM CORPORATION, a Georgia
corporation ("Sublessor"), and PAYSYS INTERNATIONAL, INC., a Florida corporation
("Sublessee") with its principal address at 900 Winderly Place, Maitland,
Florida.
1. DEMISE AND DESCRIPTION OF PROPERTY. Sublessor hereby leases to
Sublessee, and Sublessee hereby leases from Sublessor, for the term
and subject to the conditions and covenants hereinafter set forth, the
property located in Gwinnett County, Georgia described as follows:
approximately 25, 000 square feet of office space at One Meca Way,
Norcross, Georgia 30093 (the "Subleased Premises").
2. TERM. The term of this Agreement shall commence on July 1, 1997 and
end on November 30, 2002; PROVIDED, however that this Agreement shall
sooner terminate on sooner termination for any cause of that certain
Lease Agreement (the "Primary Lease") dated December, 1984, between
A.R. Weeks & Associates, as "Landlord" therein, and Quadram
Corporation, as "Tenant" therein, leasing the above-described
property, a copy of which Primary Lease is attached hereto and
incorporated herein by reference as EXHIBIT "B".
3. RENT. For and during the term of this Agreement, Sublessee shall pay
to Sublessor as rent for the Subleased Premises, modular furnishings
and communication services as detailed on Exhibit A1 through A3 as
follows:
For the period 7/1/97 through 11/30/97 $23,920.92
For the period 12/1/97 through 11/30/00 $25,837.92
For the period 12/1/00 through 11/30/02 $26,358.75
(which amounts are subject to adjustment annually to reflect actual
costs incurred on a pro rata basis with Sublessor). Rent shall be
payable by Sublessee on or before the first day of the month in
respect of which such rent is paid. The amount of rent set forth
above includes payment by Sublessee to Sublessor for use of the
Subleased Premises, ordinary and reasonable use of electricity, gas,
water and sanitary sewers, property taxes, property insurance on
property owned by Sublessor, maintenance and trash removal, repairs,
facility and communication personnel, daily cleaning service for the
Subleased Premises and telephone and internet service, all as detailed
on Exhibit A1-A3. At the time of the signing of the Sublease
Agreement, Sublessee shall pay the first month's rent and a deposit of
one month's rent. The rent deposit shall be refunded at the end of
the term of this Agreement, less any amount required to be paid to
compensate Sublessor for unusual damage to the rented facility.
Installation or one-time set-up charges and monthly billings for extra
services shall be due upon invoice. Leasehold improvements shall be
at Sublessee's expense (except for the allowance provided) and shall
be payable upon invoice for work done by Sublessor at Sublessee's
<PAGE>
direction. Sublessor shall provide an allowance of $25,000 for
leasehold improvements for the leased space.
4. USE OF PREMISES. The Subleased Premises shall be used by Sublessee
for the uses set forth in the Primary Lease and for no other.
5. ASSUMPTION AGREEMENT AND COVENANTS.
(a) The Sublessee shall comply with all of the provisions of the
Primary Lease which are required to be complied with during the
term hereof by the Sublessor as Tenant thereunder, EXCEPT THAT
(i) the payment of rent shall be governed by Paragraph 3 hereof;
(ii) the term of this Agreement shall be governed by Paragraph 2
hereof; (iii) the Subleased Premises are as described herein;
(iv) the address for notice to Sublessor shall be as provided
herein; and (v) the provisions of Exhibit B to the Primary Lease
shall be inapplicable to this Agreement; subsections 14.01,
17.01, 17.02, 17.03, 17.04 and 31.01 of the Primary Lease are
inapplicable to the Sublease.
(b) In the event of cancellation or termination of the Primary Lease
prior to the expiration date thereof, then this Agreement shall
terminate and neither party shall have any further obligation
hereunder.
(c) Insofar as the provisions of the Primary Lease do not conflict
with specific provisions herein contained, and except as to those
provisions of the Primary Lease which are inapplicable to or
non-controlling under this Agreement as described at Paragraph
5(a), above, the provisions of the Primary Lease, and each of
them, are incorporated into this Agreement as fully as if
completely rewritten herein, and the Sublessee agrees to be bound
to the Sublessor by all of the terms of the Primary Lease and to
assume toward Sublessor and perform all of the obligations and
responsibilities that Sublessor by the Primary Lease assumes
toward the Landlord. The relationship between the Sublessee and
Sublessor hereunder shall be the same as that between the
Sublessor and the Landlord under the Primary Lease. Sublessee
shall indemnify and hold harmless Sublessor against and from any
and all losses arising from any breach or default of any
obligation of Sublessee under this Agreement.
6. ASSIGNMENT AND SUBLETTING. Sublessee may not assign or sublet or
otherwise transfer any of its interest in or to the Subleased Premises
to it under this Agreement without Sublessor's prior written consent.
7. SECURITY AND ACCESS. Sublessee shall abide by and enforce with
respect to all persons it allows on the Subleased Premises (and any
other property described in the Primary Lease), the existing security
and restricted-access systems and
2
<PAGE>
procedures of Sublessor for other areas of the building other than
the subleased space, the non-smoking restrictions, and any extensions,
revisions or substitutions thereof. Sublesses shall install its own
security system covering the subleased premises and monitor such at
its sole expense.
8. INSURANCE. Sublessee shall maintain in full force and effect on all
of its property, possession, persons and operations in the Subleased
Premises a policy or policies of insurance with respect thereto in
amounts reasonably acceptable to Sublessor and shall provide Sublessor
with a Certificate of Insurance. Sublessor shall be named as
Additional Insured on Sublessee's insurance. Sublessee acknowledges
that Sublessor will not carry any insurance on any of Sublessee's
property, possession, inventory, business, employees, agents or
visitors.
9. GENERAL.
(a) This Agreement embodies the entire agreement between the parties
hereto relative to the subject matter hereof and shall not be
modified, changed, or altered in any respect except in writing.
(b) The covenants, agreements, and obligations herein contained shall
extend to, bind, and inure to the benefit not only of the parties
hereto but their successors and assigns; and where more than one
party shall be Sublessor under this lease; the word "Sublessor"
whenever used in this lease shall be deemed to include all such
parties jointly and severally.
(c) Whenever under this Agreement a provision is made for notice of
any kind, such notice shall be given in the manner prescribed in
the Primary Lease, except that notice to Sublessee shall be given
at the Premises.
(d) This Agreement and the rights and obligations of the parties
hereunder shall be governed by the laws of the State of Georgia.
If any provision of this Agreement or any remedy provided herein
be invalid under any applicable law, such provision shall be
inapplicable and deemed omitted, but the remaining provisions of
this Agreement shall be and remain effective in accordance with
their terms. Sublessee hereby expressly and irrevocably agrees
that Sublessor may bring any action or claim to enforce the
provisions of this Agreement in the State of Georgia, and
Sublessee hereby irrevocably consents to personal jurisdiction in
the State of Georgia in the appropriate state or federal court
therein. Sublessee hereby further irrevocably consents to
service of process in accordance with the provisions of the laws
of the State of Georgia. Nothing herein shall be deemed to
preclude or prevent Sublessor from bringing any action or claim
to enforce the provisions of this Agreement, or enforce any other
rights it may have against Sublessee, in any other appropriate
jurisdictions or forum.
3
<PAGE>
(e) Late payments may, at the Sublessor's option, be subject to a
penalty of 5% of the overdue balance. Payments more than 5 days
past due are considered late. Late or delinquent payments will
be considered an event of default. Sublessee agrees to pay
Sublessor's costs and expenses, including reasonable attorney
fees, related to collection of late or delinquent payments.
(f) In the event that Sublessor fails to vacate the subleased
premises by the expiration date pursuant to Subsection 2 or fails
to extend the term of the lease prior to its expiration date,
then the rent for each month or part thereof beyond the
expiration date shall be payable at one hundred and fifty percent
of the rate specified in Subsection 3.
IN WITNESS WHEREOF the parties hereto do set their hands and seals the day
and year first written above.
SUBLESSOR: SUBLESSEE:
Quadram Corporation, a PaySys International, Inc.
Georgia corporation a Florida corporation
By: /s/ Bonnie L. Herron By: /s/ William J. Pearson
------------------------------- -------------------------------------
Its: VP Its: Chief Financial Officer
------------------------------ ------------------------------------
<PAGE>
EXHIBIT A1 PAYSYS INTERNATIONAL INC.
JULY 1, 1997 THROUGH NOVEMBER 1997
<TABLE>
<CAPTION>
ANNUAL MONTH
---------- ------------
<S> <C> <C>
Office rent 25,000 square feet @8.60 per sq. foot*....... $ 215,000 $17,916.67
- -- credit for PHSS space 6,000 sq. ft through 11/97...... (4,300.00)
-------------
13,616.67
COST-SHARING ESTIMATED COSTS
Maintenance/repair*...................................... 3,750 312.50
Janitorial*.............................................. 16,331 1,360.92
Building mgt.*........................................... 10,896 908.00
Mail room*............................................... 1,385 115.42
HVAC repair/maint.*...................................... 5,050 420.83
Fire ext/sprinkler sve................................... 520 43.33
insurance................................................ 2,200 183.33
Modular workstations rental--as is....................... $ 15,000 1,250.00
Lobby/board rm furniture rental.......................... 1,300 108.00
Amortized leasehold--kitchen............................. 425.00
Amortized leasehold--conf./demo room..................... 1,658.00
Plant service and plant cost amortized................... 300.00
---------- ------------
SUBTOTAL FACILITIES...................................... $20,702.00
COMMUNICATION SYSTEMS
Capital allocation of phone system....................... 5,000 416.67
Capital allocation of voice mail system.................. 3,000 250.00
phone personnel allocation*.............................. 9,900 825.00
local line costs allocation*............................. 15,375 1,281.25
Capital allocation of internet system.................... 1,200 100.00
internet service cost*................................... 4,152 346.00
---------- ------------
SUBTOTAL COMMUNICATION COSTS............................. $ 3,218.92
TOTAL MONTHLY LEASE PAYMENT.............................. $23,920.92
</TABLE>
- ------------------------
*Denotes amount is subject to adjustment at year end based on actual costs
incurred and pro rata % allocation to PaySys.
5
<PAGE>
EXHIBIT A2 PAYSYS INTERNATIONAL INC.
DECEMBER 1, 1997 THROUGH NOVEMBER 2000
<TABLE>
<CAPTION>
ANNUAL MONTH
---------- ------------
<S> <C> <C>
Office rent 25,000 square feet @8.60 per sq. foot*
(rate increases to 8.85 for 12/00-11/02).................. $ 215,000 $17,916.67
COST-SHARING ESTIMATED COSTS
Maintenance/repair*....................................... 3,750 312.50
Janitorial*............................................... 16,331 1,360.92
Building mgt.*............................................ 10,896 908.00
Mail room*................................................ 1,385 115.42
HVAC repair/maint.*....................................... 5,050 420.83
Fire ext/sprinkler sve.................................... 520 43.33
insurance................................................. 2,200 183.33
Modular workstations rental--as is........................ $ 15,000 1,250.00
Lobby/board rm furniture rental........................... 1,300 108.00
SUBTOTAL FACILITIES....................................... $22,619.00
COMMUNICATION SYSTEMS
Capital allocation of phone system........................ 5,000 416.67
Capital allocation of voice mail system................... 3,000 250.00
phone personnel allocation*............................... 9,900 825.00
local line costs allocation*.............................. 15,375 1,281.25
Capital allocation of internet system..................... 1,200 100.00
internet service cost*.................................... 4,152 346.00
----------
SUBTOTAL COMMUNICATION COSTS............................. $ 3,218.92
TOTAL MONTHLY LEASE PAYMENT............................... $25,837.92
</TABLE>
- ------------------------
*Denotes amount is subject to adjustment at year end based on actual costs
incurred and pro rata % allocation to PaySys
6
<PAGE>
EXHIBIT A3 PAYSYS INTERNATIONAL INC.
DECEMBER 1, 2000 THROUGH NOVEMBER 2002
<TABLE>
<CAPTION>
ANNUAL MONTH
---------- -------------
<S> <C> <C>
Office rent 25,000 square feet @8.85 per sq. foot*....... $ 221,250 $18,437,507
COST-SHARING ESTIMATED COSTS*
Maintenance/repair*...................................... 3,750 312.50
Janitorial*.............................................. 16,331 1,360.92
Building mgt.*........................................... 10,896 908.00
Mail room*............................................... 1,385 115.42
HVAC repair/maint.*...................................... 5,050 420.83
Fire ext/sprinkler sve................................... 520 43.33
insurance................................................ 2,200 183.33
Modular workstations rental--as is....................... $ 15,000 1,250.00
Lobby/board rm furniture rental.......................... 1,300 108.00
SUBTOTAL FACILITIES...................................... $ 23,139.83
COMMUNICATION SYSTEMS
Capital allocation of phone system....................... 5,000 416.67
Capital allocation of voice mail system.................. 3,000 250.00
phone personnel allocation*.............................. 9,900 825.00
local line costs allocation*............................. 15,375 1,281.25
Capital allocation of internet system.................... 1,200 100.00
internet service cost*................................... 4,152 346.00
-----------
Subtotal Communication Costs............................ $ 3,218.92
TOTAL MONTHLY LEASE PAYMENT.............................. $ 26,358.75
</TABLE>
- ------------------------
*Denotes amount is subject to adjustment at year end based on actual costs
incurred and pro rata % allocation to PaySys
7
<PAGE>
INTELLIGENT SYSTEMS CORPORATION
PROJECTION OF BUILDING EXPENSES
1997
<TABLE>
<CAPTION>
BACK
COST OUT OFFICE
TOTAL PER WHSE PER
FOR SQ. & ADJUSTED SQ.
DESCRIPTION ALLOCATION YEAR FOOT MFG. COST FOOT
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Water.............................. 100% to Office & Mfg. 13,600 0.14 13,600 0.14
Gas................................ 100% to Office & Mfg. 15,600 0.16 15,600 0.16
Electricity........................ 100% to Office & Mfg. 109,800 1.15 109,800 1.15
Building Rent...................... 100% to Total Bldg. 719,250 5.25 240,471 478,779 6.63
Building CAM....................... 100% to Total Bldg. 18,000 0.13 18,000 0.25
Pest Control....................... 100% to Total Bldg. 816 0.01 816 0.01
Garbage Service.................... 100% to Total Bldg. 6,600 0.05 6,600 0.05
Property Taxes AR Weeks............ 100% to Total Bldg. 28,712 0.21 28,712 0.21
Total Cash Expenses................ 912,378 7.11 240,471 671,907 8.60
-----------------------------------------------------
-----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
COST PER
SQUARE SQUARE TOTAL
FOOTAGE PERCENT FOOT COST
----------------------------------------------
<S> <C> <C> <C> <C>
Office Space.............................. 47,222 34% 8.60 406,109
PaySys Office Space....................... 25,000 18% 8.60 215,000
Warehouse................................. 41,472 30% 3.27 135,613
A/C Manufacturing......................... 23,211 17% 6.72 155,978
-------------------- -------
Total..................................... 136,905 100% 912,701
-------------------- -------
--------------------
</TABLE>
ALLOCATION:
Warehouse is at a fair market rate of $3.00 per square foot.
Manufacturing is at a fair market rate of $5.00 per square foot.
<PAGE>
EXHIBIT B
GEORGIA :
GWINNETT COUNTY :
PARTIES
This Lease Agreement, made this 19th day of December, 1984, by and
between A. R. WEEKS & ASSOCIATES, INC., hereinafter referred to as
"Landlord"; and QUADRAM CORPORATION, hereinafter referred to as "Tenant";
WITNESSETH:
1.01 Landlord hereby releases to Tenant, and Tenant hereby leases from
Landlord, the property hereinafter referred to as the LEASED PREMISES,
described as: 137,100 sq. ft. of office/warehouse, at 4355 Shackelford Road,
Norcross, Georgia 30093, Gwinnett County, Building 2 in Gwinnett Park.
TERM
2.01 TO HAVE AND TO HOLD said Leased Premises for a term of ____________
years, commencing on April 1, 1985 upon the following terms, conditions, and
covenants:
RENTAL
3.01 As rental for the Leased Premises, Tenant agrees to pay to A. R.
WEEKS & ASSOCIATES for the account of Landlord, the sum of _______________
3.02 In addition to the Rentals called for herein, Landlord agrees to
contract for the landscape maintenance service hand Tenant agrees to pay the
Landlord an additional rental of _____ month for said landscaping service,
said fee shall increase 6% each year during the term of the lease.
3.03 The rental provided in paragraph "3. RENTAL" above, includes the
construction of tenant improvements on the basis set forth in the plans and
specifications attached, or to be attached, hereto in Exhibit "A" and "B".
3.04 Tenant agrees to pay as additional rent to Landlord, upon demand,
its pro rata share of any utility surcharges, or any other costs levied,
assessed or imposed by, or at the direction of, or resulting from statutes or
regulations, or interpretations thereof, promulgated by any Federal, State,
Municipal or local governmental authorities in connection with the use or
occupancy of the Leased Premises.
<PAGE>
DELAY IN DELIVERY OF POSSESSION
4.01 If Landlord, for any reason whatsoever, cannot deliver possession of
the Leased Premises to Tenant at the commencement of the term of this Lease,
this Lease shall not be void or voidable, nor shall Landlord be liable to
Tenant for any loss or damage resulting therefrom, but in the event there
shall be a proportionate reduction of rent covering the period between the
commencement of the term and the time when Landlord can deliver possession.
If delay is longer than three (3) months, Landlord will provide Tenant
equivalent space as the lease premise or other such space as Landlord may
have available, until the lease premise can be completed, at no charge to
Tenant. The term of this Lease shall be extended by such delay.
USE OF PREMISES
5.01 The Leased Premises may be used and occupied only for general
manufacturing and assembly, testing, warehousing and distribution, showroom
and offices and for no other purpose or purposes, without Landlord's prior
written consent. Tenant shall promptly comply at its sole expense with all
laws, ordinances, orders, and regulations affecting the Leased Premises and
their cleanliness, safety, occupation and use. Tenant shall not do or permit
anything to be done in or about the Leased Premises, or bring or keep
anything in the Leased Premises that will in any way increase the fire
insurance upon the Building. Tenant will not perform any act or carry on any
practices that may injure the Building or be a nuisance or menace to tenants
of adjoining premises. Tenant shall not cause, maintain or permit any
outside storage on or about the Leased Premises, including pallets or other
refuse. The rear loading areas of the Tenant's unit must be clean and
unobstructed.
UTILITIES
6.01 Landlord shall not be liable in the event of any interruption in the
supply of any utilities. Tenant agrees that it will not install any
equipment which will exceed or overload the capacity of any utility
facilities and that if any equipment installed by Tenant shall require
additional utility, facilities, the same shall be installed by Tenant at
Tenant's expense in accordance with plans and specifications approved in
writing by Landlord. Tenant shall be solely responsible for and shall pay
all charges for use or consumption of sanitary sewer, water, gas, electricity
or any other utility services.
ACCEPTANCE OF PREMISES
7.01 By entry hereunder, Tenant acknowledges that it has examined the
Leased Premises and accepts the same as being in the condition called for by
this Lease, and as suited for the uses intended by tenant.
<PAGE>
ALTERNATIONS, MECHANICS' LIENS
8.01 Alterations may not be made to the Leased Premises without prior
written consent of Landlord, and any alterations of the Leased Premises
excepting movable furniture and trade fixtures shall at Landlord's option
become part of the realty and belong to Landlord.
8.02 Should Tenant desire to alter the Leased Premises and Landlord gives
written consent to such alterations, at Landlord's option, Tenant shall
contract with a contractor approved by Landlord for the construction of such
alterations.
8.03 Notwithstanding anything in paragraph 8.02 above, Tenant may, upon
written consent of Landlord, install trade fixtures, machinery or other trade
equipment in conformance with the ordinances of the applicable city and
county, and the same may be removed upon the termination of this Lease
provided Tenant shall not be in default under any of the terms and conditions
of this Lease, and the Leased Premises are not damaged by such removal.
Tenant shall return the Leased Premises on the termination of this Lease in
the same condition as when rented to Tenant, reasonable wear and tear only
excepted. Tenant shall keep the Leased Premises, the Building and property
in which the Leased Premises are situated free from any liens arising out of
any work performed for, materials furnished to, or obligations incurred by
Tenant. All such work, provided for above, shall be done at such times and
in such manner as Landlord may from time to time designate. Tenant shall
give Landlord written notice five (5) days prior to employing any laborer or
contractor to perform work resulting in an alteration of the Leased Premises
so that Landlord may post a notice of non-responsibility.
WASTE AND QUIET CONDUCT
9.01 Tenant shall not commit, or suffer any waste upon the Leased
Premises, or any nuisance, or other act or thing which may disturb the quiet
enjoyment of any other tenant in the Building containing the premises or any
building in the project in which the premises are located.
FIRE INSURANCE, HAZARDS
10.01 No use shall be made or permitted to be made, of the Leased
Premises, nor acts done which might increase the existing rate of insurance
upon the Building or cause the cancellation of any insurance policy covering
the Building, or any part thereof, nor shall Tenant sell, or permit to be
kept, used or sold, in or about the Leased Premises, any article which may be
prohibited by the Standard form of fire insurance policies. Tenant shall, at
its sole cost and expense, comply with any and all requirement pertaining to
the Leased Premises, of any insurance organization or company, necessary for
the maintenance of reasonable fire and public liability insurance, covering
the Leased Premises, Building and appurtenances. Tenant agrees to pay to
Landlord as additional rent, any increase in premiums on policies which may
be carried and loss of rent caused by fire and the perils normally included
in extended coverage above the rates presently being paid by the Landlord as
of the date hereof.
<PAGE>
10.02 Tenant shall maintain in full force and effect on all of its
fixtures and equipment in the Leased Premises a policy or policies of fire
and extended coverage insurance with standard coverage endorsement to the
extent of at least eighty percent (80%) of their insurable value. During the
term of this Lease the proceeds from any such policy or policies of insurance
shall be used for the repair or replacement of the fixtures, and Landlord
will sign all documents necessary or proper in connection with the settlement
of any claim or loss by Tenant. Landlord will not carry insurance on
Tenant's possessions. Tenant shall furnish Landlord with a certificate of
such policy within thirty (30) days of the commencement of this Lease, and
whenever required, shall satisfy Landlord that such policy is in full force
and effect.
LIABILITY INSURANCE
11.01 Tenant, at its own expense, shall provide and keep in force with
companies acceptable to Landlord public liability insurance for the benefit
of Landlord and Tenant jointly against liability for bodily injury and
property damage in the amount of not less than Three Million Dollars
($3,000,000.00) in respect to injuries to or death of more than one person in
any one occurrence, in the amount of not less than One Million Dollars
($1,000,000.00) in respect to injuries to or death of any one person, and in
the amount of not less than Fifty Thousand Dollars ($50,000) per occurrence
in respect to damage to property, such limits to be for any greater amounts
as may be reasonable indicated by circumstances from time to time existing.
Tenant shall furnish Landlord with a certificate of such policy (which
certificate shall contain the insurer's waiver of subrogation rights
exercisable against the Landlord) within thirty (30) days of the
commencement date of this Lease and whenever required shall satisfy Landlord
that such policy is in full force and effect. Such policy shall name
Landlord as an additional insured and shall be primary and non-contributing
with any insurance carried by Landlord. The policy shall further provide
that it shall not be canceled or altered without twenty (20) days prior
written notice to Landlord.
INDEMNIFICATION BY TENANT
12.01 Tenant shall indemnify and hold harmless Landlord against and from
any and all claims arising form Tenant's use of the Leased Premises (other
than those arising from negligence of Landlord or its agent employees), or
the conduct of its business or from any activity, work, or thing done,
permitted or suffered by the Tenant in or about the Leased Premises, and
shall further indemnify and hold harmless Landlord against and from any and
all claims, arising from any breach or default in the performance of any
obligation on Tenant's part to act, neglect, fault or omission of the Tenant,
or of its agents or employees, and from and against all costs, attorney's
fees, expenses and liabilities incurred in or about such claim or any action
or proceeding brought relative thereto and in case any action or proceeding
be brought against Landlord by reason of any such claim, Tenant upon notice
from Landlord shall defend the same at Tenant's expense by counsel, chosen by
Tenant and who is reasonably acceptable to Landlord. Tenant, as a material
part of the consideration to Landlord, hereby assumes all risk of damage from
any cause whatsoever except that which is caused by the failure of Landlord
to observe any of the terms and conditions of this Lease where such failure
has persisted for an unreasonable period of time after
<PAGE>
written notice of such failure, and Tenant hereby waives all claims in
respect thereof against Landlord. The obligations of Tenant under this
section arising by reason of any occurrence taking place during the term of
this Lease shall survive any termination of this Lease.
WAIVER OF CLAIMS
13.01 Tenant, as a material part of the consideration to be rendered to
Landlord, hereby waives all claims against Landlord for damages to goods,
wares and merchandise in, upon or about the Leased Premises and for injury to
Tenant, its agents, employees, invitees, or third persons in or about the
Leased Premises from any cause arising at any time, other than the
negligence of Landlord, its agents and employees.
REPAIRS
14.01 Tenant shall, at its sole cost, keep and maintain the Leased
Premises and appurtenances and every part thereof (excepting exterior walls
and roofs which Landlord agrees to repair) including by way of illustration
and not by way of limitation all windows and skylights, doors, any store
front and the interior of the Leased Premises, including all plumbing,
heating, air conditioning, sewer, electrical systems and all fixtures and all
other similar equipment serving the Leased Premises in good and sanitary
order, condition, and repair. Tenant shall, at its sole cost, keep and
maintain all utilities, fixtures and mechanical equipment used by Tenant in
good order, condition, and repair. All windows shall be washed and cleaned as
often as necessary to keep them clean and free from smudges and stains. In
the event Tenant falls to maintain the Leased Premises as required herein or
fails to commence repairs (requested by Landlord in writing) within thirty
(30) days after such request, or fails diligently to proceed thereafter to
complete such repairs, Landlord shall have the right in order to preserve the
premises or portion thereof, and/or the appearance thereof, to make such
repairs or have a contractor make such repairs and charge Tenant for the cost
thereof as additional rent, together with interest at the rate of twelve
percent (12%) per annum from the date of making such payments.
14.02 Landlord agrees to keep in good repair the roof, foundations, and
exterior walls of the premises except repairs rendered necessary by the
negligence of Tenant, its agents, employees or invitees. Landlord gives to
Tenant exclusive control of premises and shall be under no obligation to
inspect said premises. Tenant shall promptly report in writing to Landlord
any defective condition known to it which Landlord is required to repair, and
Landlord shall move with reasonable diligence to repair such item. Failure to
report such defects shall make Tenant responsible to Landlord for any
liability incurred by Landlord by reason of such defects.
SIGNS, LANDSCAPING
15.01 Landlord shall have the right to control landscaping and approve
the placing of signs and the size and quality of the same. Tenant shall make
no alterations or additions to the Leased Premises or landscaping and shall
place no exterior signs on the Leased Premises without
<PAGE>
the prior written consent of Landlord. Any signs not in conformity with the
Lease may be immediately removed by Landlord.
ENTRY LANDLORD
16.01 Tenant shall permit Landlord and Landlord's agents to enter the
Leased Premises at all reasonable times for the purpose of inspecting the
same or for the purpose of maintaining the Building, or for the purpose of
making repairs, alterations, or additions to any portion to the Building,
including the erection and maintenance of such scaffolding, canopies, fences
and props as may be required, or for the purpose of posting notices of
non-responsibility for alterations, additions, or repairs, or for the purpose
of showing the premises to prospective tenants, or placing upon the Building
any usual or ordinary "for sale" signs, without any rebate of rent and
without any liability to Tenant for any loss of occupation or quiet enjoyment
of the Leased Premises thereby occasioned; and shall permit Landlord at any
time within thirty (30) days prior to the expiration of this Lease, to place
upon the Leased Premises any usual or ordinary "to let" or "to lease" signs.
For each of the aforesaid purposes, Landlord shall at all times have and
retain a key with which to unlock all of the exterior doors about the Leased
Premises.
TAXES AND INSURANCE INCREASE
17.01 Tenant shall pay before delinquency any and all taxes,
assessments, license fees, and public charges levied, assessed, or imposed
and which become payable during the Lease upon Tenant's fixtures, furniture,
appliances and personal property installed or located in the Leased Premises.
17.02 Tenant shall pay upon demand, as additional rental during the term
of this lease and any extension or renewal thereof, the amount by which all
taxes "including, but not limited to, ad valorem taxes, special assessments
and governmental charges) on the premises for each tax year exceeds all taxes
on the premises for 1985. In the event the premises are less than the entire
property assessed for such taxes for any such tax year, then the tax for any
such year applicable to the premises shall be determined by proration on the
basis that the rentable floor area of the premises bears to the rentable
floor area of the entire property assessed. If the final year of the lease
term falls to coincide with the tax year, then any excess for the tax year
during which the term ends shall be reduced by the pro rata part of such tax
year beyond the lease term. The agent's commission shall not apply to any
such additional rental resulting from the provisions of this paragraph.
17.03 Tenant agrees to pay the amount for all taxes levied upon or
measured by the rent payable hereunder, whether as a so-called sale tax,
transaction privilege tax, excise tax, or otherwise (but no income taxes
shall be payable by Tenant). Such taxes shall be due and payable at the same
time as and in addition to each payment of rent.
17.04 Commencing in the year 1985 and during each remaining year of the
lease term or any extension or renewal thereof, in the event that the
insurance premiums payable by the Landlord for fire and extended coverage on
the property are increased, whether such increase is due to an increase in
the valuation of the building, or in the applicable rate of insurance, then
<PAGE>
Tenant agrees to pay Landlord as additional rental, Tenant's pro rata share
of the increase in said insurance premiums over the base amount paid in the
year 1985. Tenant's pro rata share shall be based on the square footage of
the premises leased to Tenant (as specified in paragraph 1.01 hereof)
compared to the total square footage of leaseable space in the entire
building. Tenant agrees to pay Landlord said increased amount within thirty
(30) days after receipt of a notice in writing from Landlord, of the increase
in said insurance premiums. If during the final year of the Lease, or any
extension or renewal thereof, the term does not coincide with the year upon
which the insurance rate is determined, the increase in premiums for the
portion of that year shall be prorated according to the number of months
during which Tenant was in possession of the Leased Premises.
17.05 The provisions hereof shall survive the termination of the Lease
or any extension or renewal thereof as referred to in the preceding
paragraphs 17.02 and 17.04.
ABANDONMENT
18.01 Tenant shall not vacate nor abandon Leased Premises at any time
during the term of this Lease; and if Tenant shall abandon, vacate or
surrender the Leased Premises, or be dispossessed by process of law, or
otherwise, any personal property belonging to Tenant and left on the Leased
Premises shall, at the option of the Landlord, be deemed abandoned.
DESTRUCTION
19.01 In the event of (a) a partial destruction of the Leased Premises
or the Building during the Lease term which requires repairs to either the
Leased Premises or the Building, or (b) the Leased Premises or the Building
being declared unsafe or unfit for occupancy by any authorized public
authority for any reason other than Tenant's act, use or occupation which
declaration requires repairs to either the Leased Premises or the Building,
Landlord shall forthwith make repairs, provided repairs can be made within
sixty (60) days under the laws and regulations of authorized public
authorities, but partial destruction (including any destruction necessary in
order to make repairs required by any declaration) shall in no way annul or
void this Lease, except that Tenant shall be entitled to a proportionate
reduction of rent while such repairs are being made. The proportionate
reduction is to be based upon the extent to which. the making of repairs
shall interfere with the business carried on by Tenant in the Leased
Premises. In making repairs Landlord shall be obligated to replace only such
glazing as shall have been damaged by fire and other damaged glazing shall be
replaced by Tenant. If repairs cannot be made within sixty (60) days,
Landlord may, at its option, make same within a reasonable time, this Lease
continuing in full force and effect and the rent to be proportionately
abated, as in this paragraph provided. In the event that Landlord does not so
elect to make repairs which cannot be made within sixty (60) days, or repairs
cannot be made under current laws and regulations, this Lease may be
terminated at the option of either party. A total destruction (including any
destruction required by any authorized public authority) of either the Leased
Premises or the building shall terminate this Lease. In the event of any
dispute between Landlord and Tenant relative to the provisions of this
paragraph, they may each select an arbitrator, the two arbitrators so
selected shall select a third arbitrator and the three arbitrators so
selected shall hear and determine the controversy and their decision thereon
shall be final and binding on both Landlord and Tenant who shall bear the
cost of
<PAGE>
such arbitration equally between them. Landlord shall not be required
to repair any property installed in the Leased Premises by Tenant. Tenant
waives any right under applicable laws inconsistent with the terms of this
paragraph and in the event of a destruction agrees to accept any offer by
Landlord to provide tenant with comparable space within the project in which
the Premises are located on the same terms as this Lease.
ASSIGNMENT AND SUBLETTING
20.01 Landlord shall have the right to transfer and assign, in whole or
in part its rights and obligations in the building and property that are the
subject of this Lease. Tenant shall not assign this Lease or sublet all or
any part of the leased premises without the prior written consent of the
Landlord. In the event of any assignment or subletting, Tenant shall
nevertheless at all times, remain fully responsible and liable for the
payment of the rent and for compliance with all of its other obligations
under the terms, provisions and covenants of this Lease. Upon the occurrence
of an "event of default" as defined below, if all or any part of the Leased
Premises are then assigned or sublet, Landlord, in addition to any other
remedies provided by this Lease or provided by law, may at its option,
collect directly from the assignee or subtenant all rents becoming due to
Tenant by reason of the assignment or sublease, and Landlord shall have a
security interest in all properties on the Leased Premises to secure payment
of such sums. Any collection directly by Landlord from the assignee or
subtenant shall not be construed to constitute a novation or a release of
Tenant from the further performance of its obligations under this Lease.
INSOLVENCY OF TENANT
21.01 Either (a) the appointment of a receiver to take possession of
all or substantially all of the assets of Tenant, or (b) a general assignment
by Tenant for the benefit of creditors, or (c) any action taken or suffered
by Tenant under any insolvency or bankruptcy act shall, if any such
appointments, assignments or action continues for a period of thirty (30)
days, constitute a breach of this Lease by Tenant, and Landlord may at its
election without notice, terminate this Lease and in that event be entitled
to immediate possession of the Leased Premises and damages as provided below.
BREACH BY TENANT
22.01 In the event of a default, Landlord besides other rights or
remedies that it may have, shall have the right to either terminate this
Lease or from time to time, without terminating this Lease relet the Leased
Premises or any part thereof for the account and in the name of Tenant or
otherwise, for any such term or terms and conditions as Landlord in its sole
discretion may deem advisable with the right to make reasonable alterations
and repairs to the Leased Premises. Tenant shall pay to Landlord, as soon as
ascertained, the costs and expenses incurred by Landlord in such reletting or
in making such reasonable alterations add repairs. Should such rentals
received from time-to-time from such reletting during any month be less than
that agreed to be paid during that month by Tenant hereunder, the Tenant
shall pay such deficiency to Landlord. Such deficiency shall be calculated
and paid monthly.
<PAGE>
22.02 No such reletting of the Leased Premises by Landlord shall be
construed as an election on its part to terminate this Lease unless a notice
of such intention be given to Tenant or unless the termination thereof be
decreed by a court of competent jurisdiction. Notwithstanding any such
reletting without termination, Landlord may at any time thereafter elect to
terminate this Lease for such previous breach provided it has not been cured.
Should Landlord at any time terminate this Lease for any breach, in addition
to any other remedy it may have, it may recover from Tenant all damages it
may incur by reason of such breach, including the cost of recovering the
Leased Premises, and including (1) all amounts that would have fallen due as
rent between the time of termination of this Lease and the time of judgment,
or other award, less the avails of all relettings and attornments, plus
interest on the balance at the rate of twelve percent (12%) per year; and (2)
the worth at the time of the judgment or other award, of the amount by which
the unpaid rent for the balance of the term exceeds the amount of such rental
loss that Tenant proves could be reasonably avoided; (3) any other amount
necessary to compensate Landlord for all the detriment proximately caused by
Tenant's failure to perform his obligations under this Lease or which in the
ordinary course of events would likely to result therefrom. "Worth" as used
in this provision, is computed by discounting the total at the discount rate
of the Federal Reserve Bank of Atlanta at the time of the judgment, or award,
plus one percent (1%).
ATTORNEYS' FEES/COLLECTION CHARGES
23.01 Should Landlord be named as a defendant in any suit brought
against Tenant in connection with or arising out of Tenant's occupancy
hereunder, Tenant shall pay to Landlord its cost and expenses incurred in
such suit, including reasonable attorneys' fees. If any rent or other sums
of money owed or owing under this lease is collected by or through an
attorney at law, tenant agrees to pay fifteen percent (15%) thereof as
attorneys' fees.
CONDEMNATION
24.01 If, at any time during the term of this lease, title to the entire
Leased Premises should become vested in a public or quasi-public authority by
virtue of the exercise of expropriation, appropriation, condemnation or other
power in the nature of eminent domain, or by voluntary transfer from the
owner of the Leased Premises under threat of such a taking then this lease
shall terminate as of the time of such vesting of title, after which neither
party shall be further obligated to the other except for occurrence
antedating such taking. The same results shall follow if less than the
entire Leased Premises be thus taken, or transferred in lieu of such a
taking, but to such extent that it would be legally and commercially
impossible for Tenant to occupy the portion of the Leased Premises remaining,
and impossible for Tenant reasonable to conduct his trade or business therein.
24.02 Should there be such a partial taking or transfer in lieu thereof,
but not to such an extent as to make such continued occupancy and operation
by Tenant an impossibility, then this lease shall continue on all of its same
terms and conditions subject only to an equitable reduction in rent
proportionate to such taking.
24.03 In the event of any such taking or transfer, whether or the entire
Leased Premises, or a portion thereof, it is expressly agreed and understood
that all sums awarded, allowed or
<PAGE>
received in connection therewith shall belong to Landlord, and any rights
otherwise vested in Tenant are hereby assigned to Landlord, and Tenant shall
have no interest in or claim to any such sums or any portion thereof, whether
the same be for the taking of the property or for damages, or otherwise.
NOTICES
25.01 All notices, statements, demands, requests, consents, approvals,
authorization, offers, agreements, appointments, or designations under this
Lease by either party to the other shall be in writing and shall be
sufficiently given and served upon the other party, if sent by certified
mail, return receipt requested, posted prepaid, and addressed as follows:
(a) To Tenant at the Leased Premises;
(b) To Landlord, addressed to Landlord at 4497 Park Drive,
Norcross, Georgia 30093, with a copy to such other place as Landlord may from
time to time designate by notice to Tenant.
WAIVER
26.01 The waiver by Landlord of any breach of any term, covenant, or
condition herein contained shall not be deemed to be a waiver of such term,
covenant, or condition or any subsequent breach of the same or any other
term, covenant, or conditions herein contained. The subsequent acceptance of
rent hereunder by Landlord shall not be deemed to be a waiver of any
preceding breach by Tenant of any term, covenant, or condition of this Lease,
other than the failure of Tenant to pay the particular rental so accepted,
regardless of Landlord's knowledge of such preceding breach at the time of
acceptance of such rent.
EFFECT OF HOLDING OVER
27.01 If Tenant should remain in possession of the Leased Premises after
the expiration of the Lease term and without executing a new Lease, then such
holding over shall be construed as a tenancy from month-to-month, subject to
all the conditions, provisions, and obligations of this Lease insofar as the
same are applicable to a month-to-month tenancy, except that the rent payable
pursuant to subparagraph 3.01 hereof shall be doubled.
SUBORDINATION
28.01 This Lease, at Landlord's option, shall be subordinate to any
ground lease, mortgage, deed of trust, or any other hypothecation for
security now or hereafter placed upon the real property of which the Premises
are a part and to any and all advances made on the security thereof and to
all renewals, modifications, consolidations, replacements and extensions
thereof.
28.02 Tenant agrees to execute any documents required to effectuate such
subordination or to make this Lease prior to the lien of any ground lease,
mortgage or deed of trust, as the case may be, and failing to do so within 10
days after written demand, does hereby make, constitute and irrevocably
appoint Landlord as Tenant's attorney in fact and in Tenant's
<PAGE>
name, place and stead, to do so. If requested to do so, Tenant agrees to
attorn to any person or other entity that acquires title to the real property
encompassing the Leased Premises, whether through judicial foreclosure, sale
under power, or otherwise, and to any assignee of such person or other entity.
ESTOPPEL CERTIFICATE
29.01 Upon ten (10) days notice from Landlord to Tenant, Tenant shall
deliver a certificate dated as of the 1st day of the calendar month in which
such notice is received, executed by an appropriate officer, partner or
individual, and stating (i) the commencement date of this Lease; (ii) the
space occupied by Tenant hereunder; (iii) the expiration date hereof; (iv) a
description of any renewal or expansion options; (v) the amount of rental
currently and actually paid by Tenant under this lease; (vi) the nature of
any default or claimed default hereunder by Landlord and (vii) that Tenant is
not in default hereunder nor has any event occurred which with the passage of
time or the giving of notice would become a default by Tenant hereunder.
PARKING
30.01 Tenant shall be entitled to park in common with other tenants of
Landlord. Tenant agrees not to overburden the parking facilities and agrees
to cooperate with Landlord and other tenants in the use of parking
facilities. Landlord reserves the right in its absolute discretion to
determine whether parking facilities are becoming crowded and, in such event,
to allocate parking spaces among Tenant and other tenants. There will be no
assigned parking. Tenant agrees to park all Tenant's trucks in the parking
spaces provided at the rear of the building. "Parking" as used herein means
the use by Tenant's employees, its visitors, invitees, and customers for the
parking of motor vehicles for such periods of time as are reasonably
necessary in connection with use of and/or visits to the demised premises.
No vehicle may be repaired or serviced in the parking area and any vehicle
deemed abandoned by Landlord will be towed from the project and all costs
therein shall be borne by the Tenant. All driveways, ingress and egress, and
all parking spaces are for the joint use of all tenants. No area outside of
premises shall be used by Tenant for storage without Landlord's prior written
permission. There shall be no parking permitted on any of the streets or
roadways located in Gwinnett Park.
MORTAGE PROTECTION
31.01 In the event of any default on the part of Landlord, Tenant will
give notice by registered or certified mail to any beneficiary of a deed or
trust or mortgagee of a mortgage covering the Premises whose address shall
have been furnished it, and shall offer such beneficiary or mortgagee a
reasonable opportunity to cure the default, including time to obtain
possession of the Premises by power of sale or a judicial foreclosure, if
such should prove necessary to effect a cure.
<PAGE>
PROTECTIVE COVENANTS
32.01 This lease is subject to the Protective Covenants of Interstate
Industrial Park, attached hereto as Exhibit "C", and to such rules and
regulations pertaining to Gwinnett Park which may hereafter be adopted and
promulgated.
MISCELLANEOUS PROVISIONS
A. Whenever the singular number is used in this Lease and when
required by the context, the same shall include, the plural, and the
masculine gender shall include the feminine and neuter genders, and the word
"person" shall include corporation, firm or association. If there be more
than one tenants, the obligations imposed upon Tenant under this Lease shall
be joint and several.
B. The headings or titles to paragraphs of this Lease are not a part
of this Lease are not a part of this Lease and shall have no effect upon the
construction or interpretation of any part of this Lease.
C. This instrument contains all of the agreements and conditions made
between the parties to this Lease and may not be modified orally or in any
other manner than by agreement in writing signed by all parties to this Lease.
D. Time is of the essence of each term and provision of this Lease.
E. Except as otherwise expressly stated, each payment required to
be made by Tenant shall be in addition to and not in substitution for other
payments to be made by Tenant.
F. Subject to paragraph 20, the terms and provisions of this Lease
shall be binding upon and inure to the benefit of the heirs, executors,
administrators, successors, and assigns of Landlord and Tenant.
G. All covenants and agreements to be performed by Tenant under any of
the terms of this Lease shall be performed by Tenant at Tenant's sole cost
and expense and without any abatement of rent.
H. Where the consent of a party is required, such consent will not be
unreasonably withheld.
I. This Lease shall create the relationship of Lessor and Lessee
between landlord and Tenant; no estate shall pass out of Landlord; Tenant has
only a usufruct, not subject to levy and/or sale and not assignable by Tenant
except as provided in paragraph 20.01 hereof.
J. Tenant acknowledges and agrees that Landlord shall not provide
guards or other security protection for the Leased Premises and that any and
all security protection shall be the sole responsibility of Tenant.
K. This lease shall be governed by Georgia law.
<PAGE>
L. Tenant shall not record this Lease or a memorandum thereof without
the written consent of Landlord. Upon the request of Landlord, Tenant shall
join in the execution of a memorandum or so-called "short form" of this Lease
for the purpose of recordation. Said memorandum or short form of this Lease
shall describe the parties, the Demised Premises and the Lease term, and
shall incorporate this Lease by reference.
IN WITNESS WHEREOF, The parties hereto who are individuals have set
their hands and seals, and the parties who are corporations have caused this
instrument to be duly executed by its proper officers and its corporate seal
to be affixed, as of the day and year first above written.
Signed, sealed and delivered as to A. R. WEEKS & ASSOCIATES, INC.
LANDLORD, in the presence of:
/s/ John C. Atwell /s/ Forrest W. Robinson
- ----------------------------------- ------------------------------------
By: Forrest W. Robinson
/s/ Deborah D. Arledge
- -----------------------------------
Notary Public
[SEAL]
Signed, sealed and delivered as to QUADRAM CORPORATION
TENANT, in the presence of:
/s/ Ann B. Srochi
- ----------------------------------- ------------------------------------
By: Secretary
- -----------------------------------
Notary Public
ATTEST:
- -----------------------------------
(Corporate Seal)
<PAGE>
[LOGO]
Weeks Corporation
4497 Park Drive
Norcross, GA 30093
770-923-4076/Phone
770-717-3310/Fax
Consent of Landlord
With respect to the Lease Agreement by and between Weeks Realty, L.P.
("Landlord") and Quadram Corporation ("Tenant"), Landlord hereby consents to
the sublease of a portion of the facility to PaySys International, Inc.
beginning June 1, 1996 through November 30, 2002 on such terms as are
negotiated between Tenant and PaySys International. Tenant shall remain
fully responsible for the payment of rent and for compliance with all of its
other obligations under the terms, provisions and covenants of the lease.
Weeks Realty, L.P.
By: /s/ Forrest Robinson
--------------------------------
Title: President & C.O.O.
-----------------------------
Date: 8/6/97
------------------------------
<PAGE>
FIRST AMENDMENT TO LEASE AGREEMENT
THIS FIRST AMENDMENT TO LEASE AGREEMENT (hereinafter referred to as the
"First Amendment") is made as of the 16 day of November, 1990, by and between
WWW, LTD. (hereinafter referred to as "Landlord"), and QUADRAM CORPORATION
(hereinafter referred to as "Tenant").
WITNESSETH:
WHEREAS, Landlord is landlord and Tenant is tenant under that certain
Lease Agreement (hereinafter referred to as the "Agreement") dated March 11,
1985 for the lease of 137,100 sq. ft. of office warehouse space at 4355
Shackelford Road, Norcross, in Gwinnett County, Georgia and certain
easements, rights and privileges appurtenant thereto (hereinafter referred to
as the "Leased Premises"); and
WHEREAS, the Lease was to have expired by its terms on March 31, 1995 and
Tenant desires to continue to occupy the Leased Premises beyond the
expiration date; and
WHEREAS, Landlord and Tenant desire to enter into this First Amendment in
order to provide for an extension of the Lease by Tenant upon terms and
conditions mutually acceptable to Landlord and Tenant;
NOW, THEREFORE, for and in consideration of Ten Dollars ($10.00) paid by
Landlord and Tenant to one another, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged
by Landlord and Tenant, Landlord and Tenant amend the Agreement as follows:
1. The Agreement is hereby extended to November 30, 1997, on all of the
same terms, covenants and conditions as the Agreement, with the same base
year as the original term, except that the base monthly rental due under the
Agreement shall be as follows:
December 1, 1990 - November 30, 1991 $4.40 per square foot
December 1, 1991 - November 30, 1992 $4.50 per square foot
December 1, 1992 - November 30, 1993 $4.60 per square foot
December 1, 1993 - November 30, 1994 $4.70 per square foot
December 1, 1994 - November 30, 1995 $4.80 per square foot
December 1, 1995 - November 30, 1996 $4.90 per square foot
December 1, 1996 - November 30, 1997 $5.00 per square foot
The landscaping service fees shall continue at the rate Tenant is currently
paying and shall continue to increase at a rate of six percent (6%) through
the original term of the lease.
2. Except as expressly modified by this First Amendment, all
provisions, terms and conditions of the Agreement shall remain in full force
and effect.
<PAGE>
3. The parties agree that there exist no defaults or events of default
under the Agreement and Landlord waives all claims for late payments of
rental through November, 1990.
4. In the event a provision of this First Amendment conflicts with a
provision of the Agreement, the First Amendment shall supersede and control.
5. All terms and phrases used herein shall have the same meaning as
assigned to them in the Agreement.
6. This First Amendment shall not be of any legal effect or consequence
unless signed by Landlord and Tenant, and once signed by Landlord and Tenant
it shall be binding upon and inure to the benefit of Landlord, Tenant, and
their respective legal representatives, successors and assigns.
7. This First Amendment has been executed and shall be construed under
the laws of the State of Georgia.
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this First Amendment to
be executed under seal and delivered as of the day and year first above
written.
LANDLORD:
Signed, sealed and delivered in WWW, LTD.
the presence of:
By: /s/ A. R. Weeks, Jr.
- ----------------------------------- ----------------------------------
Witness A. R. Weeks, Jr.
/s/ Deborah D. Arledge
- -----------------------------------
Notary Public
[SEAL]
TENANT:
Signed, sealed and delivered in QUADRAM CORPORATION
the presence of:
/s/ Donna McElhannon By: /s/ J. Leland Strange
- ----------------------------------- ----------------------------------
Witness Name:
Its: President
/s/ Marcy P. Holloway
- -----------------------------------
Notary Public
[SEAL]
ATTEST:
By: /s/ Bonnie L. Herron
----------------------------------
Name:
Its: Corporate Secretary
[CORPORATE SEAL]
<PAGE>
SECOND AMENDMENT TO LEASE AGREEMENT
THIS SECOND AMENDMENT TO LEASE AGREEMENT (hereinafter referred to as the
"Second Amendment") is made as of the 19 day of June, 1997, by and between
WEEKS REALTY, L.P. (hereinafter referred to as "Landlord"), and QUADRAM
CORPORATION (hereinafter referred to as "Tenant").
WITNESSETH:
WHEREAS, A.R. Weeks & Associates, Inc. entered into that certain Lease
Agreement dated March 11, 1985, as amended by that certain First Amendment to
Lease Agreement dated November 16, 1990, (hereinafter collectively referred
to as the "Agreement") for the lease of 137,100 sq. ft. of office/warehouse
space at 4355 Shackelford Road, Norcross, Georgia, Building 2 in Gwinnett
Park which is more particularly described in Exhibit "A" to the Agreement and
certain easements, rights and privileges appurtenant thereto (hereinafter
referred to as the "Leased Premises"); and
WHEREAS, the Weeks Realty, L.P. succeeded to the interest of the landlord
under the Agreement and is the Landlord with respect to the Leased Premises;
and
WHEREAS, the Agreement will expire by its terms on November 30, 1997 and
Tenant desires to enter into this Second Amendment in order to extend the
term of the Agreement;
NOW, THEREFORE, for and in consideration of Ten Dollars ($10.00) paid by
Landlord and Tenant to one another, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged
by Landlord and Tenant, Landlord and Tenant amend the Agreement as follows:
1. The Agreement is hereby extended for an additional five (5) year
term effective December 1, 1997 and continuing until midnight on November 30,
2002 on all of the same terms, covenants and conditions as the original
Agreement with the same base year except that the base rental for the new
term shall be as set forth below:
December 1, 1997 - November 30, 2000 $59,981.25/month $719,775.00/year
December 1, 2000 - November 30, 2002 $62,837.50/month $754,050.00/year
The base rental shall be due on or before the first day of each calendar
month during the term together with any other additional rent as set forth in
the Agreement. The landscaping service fee shall continue at its current
rate.
2. As consideration for Tenant's performance of all obligations to be
performed by Tenant under this Lease, Landlord shall contribute the sum of
One Hundred Twelve Thousand One Hundred and 00/100 Dollars ($112,100.00) (the
"Allowance") towards the cost of tenant improvements to the Leased Premises.
The Allowance shall be used for alterations, improvements, fixtures and
equipment which become part of or are attached or affixed to the
<PAGE>
Leased Premises, including walls, wall coverings and floor coverings, but
excluding trade fixtures, furniture and furnishings or other personal
property. In the event the cost of tenant improvements exceeds the cost of
tenant improvement Allowance, the excess shall be paid by Tenant within
thirty (30) days of Tenant's receipt of Landlord's notice.
3. Tenant shall have the option to renew the Agreement for one (1) five
(5) year term provided that Tenant gives written notice to Landlord of its
intention to renew at least one hundred eighty (180) days prior to the end of
the then current term of the Lease. The Extended Term shall be on the same
terms and conditions as the initial term of the Agreement, except as
expressly provided herein to the contrary with respect to Base Rent and
except for such as are, by their terms, inapplicable to an Extended Term.
The Base Rental for the Extended Term shall increase at a rate of seven
percent (7%) above the ending rate for the preceding term, payable in monthly
installments on or before the first day of each calendar month in the
Extended Term.
It is expressly understood that Tenant shall have no option to extend the
term of the Agreement for the Extended Term if at the time of such attempted
exercise of the Extended Term the Agreement is not then in full force and
effect and if Tenant is then in default of any terms and conditions of the
Agreement beyond any applicable notice and cure period provided for herein.
4. Landlord and Tenant hereby agree to cooperate with each other in the
construction of 10 to 12 parking spaces ("Additional Parking") to be added to
the existing parking area per the attached plan marked Exhibit "A". The cost
of constructing the Additional Parking shall be paid by Landlord.
5. Landlord has agreed to renovate the landscaping and sprinkler
system, at Landlord's sole cost and expense per the attached plan marked
Exhibit "B" and to construct a new storefront entrance to the Premises on the
Meca Way side of the Building, per the attached plan marked Exhibit "C".
6. Landlord agrees to provide preventative maintenance on the HVAC
system for the Leased Premises, at its sole cost, provided that Landlord
shall not have any obligation to make any corrections, repairs or
replacements to the systems.
7. Except as expressly modified by this Second Amendment, all
provisions, terms and conditions of the Agreement shall remain in full force
and effect.
8. In the event a provision of this Second Amendment conflicts with a
provision of the Agreement, the Second Amendment shall supersede and control.
9. All terms and phrases used herein shall have the same meaning as
assigned to them in the Agreement.
2
<PAGE>
10. This Second Amendment shall not be of any legal effect or
consequence unless signed by Landlord and Tenant, and once signed by Landlord
and Tenant it shall be binding upon and inure to the benefit of Landlord,
Tenant, and their respective legal representatives, successors and assigns.
11. This Second amendment has been executed and shall be construed under
the laws of the State of Georgia.
IN WITNESS WHEREOF the undersigned have caused this First Amendment to be
executed under seal and delivered as of the day and year first above written.
LANDLORD:
WEEKS REALTY, L.P.,
Signed, sealed and delivered in a Georgia limited partnership
the presence of:
/s/ Kelly A. Kinnary
- ----------------------------------- By: Weeks GP Holdings, Inc.
Witness a Georgia corporation,
its sole general partner
/s/ Stephanie Pongetti By: /s/ Forrest Robinson
- ----------------------------------- ---------------------------------
Notary Public Name: Forrest Robinson
-------------------------------
Its: President/C.O.O.
--------------------------------
[SEAL]
TENANT:
Signed, sealed and delivered in
the presence of: QUADRAM CORPORATION
/s/ Sonja Lee
- -----------------------------------
Witness By: /s/ J. Leland Strange
---------------------------------
Name:
-------------------------------
/s/ Sherry L. Wilhelm Its: President
- ----------------------------------- --------------------------------
Notary Public
[SEAL]
ATTEST:
By: /s/ Bonnie L. Herron
---------------------------------
Name: Bonnie L. Herron
-------------------------------
Its: Secretary
--------------------------------
[Corporate Seal]
<PAGE>
EXHIBIT 10.19
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement"), dated as of the 26th day of September,
1997, is made and entered into on the terms and conditions hereinafter set
forth, by and between PaySys International, Inc., a Florida corporation
("Borrower"), and SIRROM CAPITAL CORPORATION, a Tennessee corporation
("Lender").
RECITALS:
WHEREAS, Borrower has requested that Lender make available to Borrower a
term loan in the original principal amount of Four Million and No/100ths Dollars
($4,000,000) (the "Loan") on the terms and conditions hereinafter set forth, and
for the purpose(s) hereinafter set forth; and
WHEREAS, in order to induce Lender to make the Loan to Borrower, Borrower
has made certain representations to Lender; and
WHEREAS, Lender, in reliance upon the representations and inducements of
Borrower, has agreed to make the Loan upon the terms and conditions hereinafter
set forth.
AGREEMENT:
NOW, THEREFORE, in consideration of the agreement of Lender to make the
Loan, the mutual covenants and agreements hereinafter set forth, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender hereby agree as follows:
<PAGE>
1
THE LOAN
.1 Evidence of Loan Indebtedness and Repayment. Subject to the
terms and conditions hereof, Lender shall make the Loan to Borrower by wire
transfer in immediately available funds. The Loan shall be evidenced by a
Secured Promissory Note in the original principal amount of Four Million and
No/100ths Dollars ($4,000,000), substantially in the form of Exhibit A attached
hereto and incorporated herein by this reference (the "Note"), dated as of the
date hereof, executed by Borrower, in favor of Lender. The Loan shall be
payable in accordance with the terms of the Note. The Note, this Agreement and
any other instruments and documents executed by Borrower, any guarantor of
Borrower, or any shareholder, member, partner, subsidiary, or affiliate of
Borrower, now or hereafter evidencing, securing or in any way related to the
indebtedness evidenced by the Note are herein individually referred to as a
Loan Document" and collectively referred to as the "Loan Documents."
.2 Processing Fee. Borrower shall pay a processing fee of $80,000
to Lender of which $20,000 shall be paid prior to closing and of which $60,000
shall be paid at closing.
.3 Purpose(s) of Loan and Use of Proceeds. The purposes of the Loan
shall be (i) to repay the Secured Promissory Note in the original principal
amount of $900,000 dated May 29, 1992 executed by Borrower in favor of Sirrom
Capital, L.P., as amended by that certain letter agreement dated May 28, 1997,
(ii) to repay certain indebtedness to Intelligent Systems Corporation in the
principal amount not to exceed $430,000, (iii) to provide working capital to
Borrower, and (iv) to pay all costs and expenses incurred by the parties hereto
in connection with the making and documenting of the Loan, including attorneys'
fees and expenses. The proceeds of the Loan shall not be used for any other
purpose.
.4 Prepayment. Borrower may prepay the indebtedness evidenced by
the Note in whole or in part at any time and from time to time without premium
or penalty.
2
<PAGE>
2
REPRESENTATIONS AND WARRANTIES
.1 Borrower's Representations. Borrower hereby represents and
warrants to Lender as follows:
(a) Corporate Status. Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Florida; and has the corporate power to own and operate its properties, to
carry on its business as now conducted and to enter into and to perform its
obligations under this Agreement and the other Loan Documents to which it
is a party. Borrower is duly qualified to do business and in good standing
in Florida and each other state in which a failure to be so qualified and
in good standing would have a material adverse effect on Borrower's
financial positions or its ability to conduct its business in the manner
now conducted.
(b) Subsidiaries. Schedule 2.1(b) hereto is a complete list of
each corporation, partnership, joint venture or other business organization
(the "Subsidiary" or, with respect to all such organizations, the
"Subsidiaries") in which Borrower or any Subsidiary owns, directly or
indirectly, any capital stock or other equity interest, or with respect to
which Borrower or any Subsidiary, alone or in combination with others, is
in a control position, which list shows the jurisdiction of incorporation
or other organization and the percentage of stock or other equity interest
of each Subsidiary owned by Borrower. Each Subsidiary which is a
corporation is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation and is duly qualified to
transact business as a foreign corporation and is in good standing in the
jurisdictions listed in Schedule 2.1(b), which are the only jurisdictions
where the properties owned or leased or the business transacted by it makes
such licensing or qualification to do business as a foreign corporation
necessary, and no other jurisdiction has demanded, requested or otherwise
indicated that (or inquired whether) it is required so to qualify. Each
Subsidiary which is not a corporation is duly organized and validly
existing under the laws of the jurisdiction of its organization. The
outstanding capital stock of each Subsidiary which is a corporation is
validly issued, fully paid and nonassessable. Borrower and the
Subsidiaries have good and valid title to the equity interests in the
3
<PAGE>
Subsidiaries shown as owned by each of them on Schedule 2.1(b), free and
clear of all liens, claims, charges, restrictions, security interests,
equities, proxies, pledges or encumbrances of any kind. Except where
otherwise indicated herein, any reference to Borrower in this Agreement
shall include Borrower and all of its Subsidiaries. All domestic
Subsidiaries are dormant and inactive as of the date hereof.
(c) Authorization. Borrower has full legal right, power and
authority to conduct its business and affairs. Borrower has full legal
right, power and authority to enter into and perform its obligations under
the Loan Documents, without the consent or approval of any other person,
firm, governmental agency or other legal entity. The execution and
delivery of this Agreement, the borrowing hereunder, the execution and
delivery of each Loan Document to which Borrower is a party, and the
performance by Borrower of its obligations thereunder are within the
corporate powers of Borrower and have been duly authorized by all necessary
corporate action properly taken, have received all necessary governmental
approvals, if any were required, and do not and will not contravene or
conflict with any provision of law, any applicable judgment, ordinance,
regulation or order of any court or governmental agency, the articles of
incorporation or bylaws of Borrower, or any agreement binding upon
Borrower. The officer(s) executing this Agreement, the Note and all of the
other Loan Documents to which Borrower is a party are duly authorized to
act on behalf of Borrower.
(d) Validity and Binding Effect. This Agreement and the other
Loan Documents are the legal, valid and binding obligations of Borrower,
enforceable in accordance with their respective terms, subject to
limitations imposed by bankruptcy, insolvency, moratorium or other similar
laws affecting the rights of creditors generally or the application of
general equitable principles.
(e) Capitalization. As of the date hereof, the authorized
capital stock of Borrower consists solely of 10,000,000 shares of
undesignated preferred stock, of which no shares are outstanding and of
30,000,000 shares of common stock, no par value per share ("Common Stock"),
of which 1,340,494 shares are issued and outstanding (the "Shares"), 31,810
shares are issued and held in the treasury and 177,270 shares of which
shall be reserved for issuance upon exercise of the Stock Purchase Warrant
dated as of the date
4
<PAGE>
hereof and issued to Lender (the "Warrant"); provided, however, that the
number of shares reserved for issuance upon exercise ofthe Warrant shall be
increased from time to time in accordance with the terms of the Warrant.
At the date hereof, Borrower does not have outstanding any stock or
securities convertible or exchangeable for any shares of its Common Stock
or containing any profit participation features, nor does it have
outstanding any rights or options to subscribe for or to purchase its
Common Stock or any stock or securities convertible into or exchangeable
for its Common Stock or any stock appreciation rights or phantom stock
plans, except as set forth on Schedule 2.1(e) and for the Warrant.
Schedule 2.1(e) accurately sets forth the following with respect to all
outstanding options and rights to acquire the Borrower's Common Stock from
Borrower: (i) the total number of shares issuable upon exercise of all
outstanding options, (ii) the range of exercise prices for all such
outstanding options, (iii) the number of shares issuable, the exercise
price and the expiration date for each such outstanding option and
(iv) with respect to all outstanding options, warrants and rights to
acquire Borrower's capital stock other than the Warrant, the holder, the
number of shares covered, the exercise price and the expiration date. At
the date hereof, Borrower is not be subject to any obligation (contingent
or otherwise) to repurchase, redeem, retire or otherwise acquire any shares
of its capital stock or any warrants, options or other rights to acquire
its capital stock, except as set forth in the Warrant or on Schedule
2.1(e). At the date hereof, all of the outstanding shares of Borrower's
capital stock are validly issued, fully paid and nonassessable. Except as
set forth on Schedule 2.1(e) or waived as provided below, there are no
statutory or contractual preemptive rights, rights of first refusal,
anti-dilution rights or any similar rights, held by stockholders or option
holders of Borrower, with respect to the issuance of the Warrant or the
issuance of the Common Stock upon exercise of the Warrant. All such rights
granted in the documents listed on Schedule 2.1(e) have been effectively
waived with regard to the issuance of the Warrant, the exercise of the
Warrant and the issuance of the Common Stock upon exercise of the Warrant.
Borrower has not violated any applicable federal or state securities laws
in connection with the offer, sale or issuance of any of its capital stock,
and, based upon Lender's representations in Section 2.2, the offer, sale
and issuance of the Warrant hereunder do not require registration under the
Securities Act or any applicable state securities laws. To the best of
Borrower's knowledge, there are no agreements among
5
<PAGE>
Borrower's stockholders with respect to any other aspect of Borrower's
affairs, except as set forth on Schedule 2.1(e).
(f) Trademarks, Patents, Etc. Schedule 2.1(f) is an accurate
and complete list of all patents, trademarks, tradenames, trademark
registrations, service names, service marks, copyrights, licenses, formulas
and applications therefor owned by Borrower or used or required by Borrower
in the operation of its business, title to each of which is, except as set
forth in Schedule 2.1(f) hereto, held by Borrower free and clear of all
adverse claims, liens, security agreements, restrictions or other
encumbrances. There is no infringement action, lawsuit, claim or complaint
which asserts that Borrower's operations violate or infringe the rights or
the trade names, trademarks, trademark registration, service name, service
mark or copyright of others with respect to any apparatus or method of
Borrower or any adversely held trademark, trade name, trademark
registration, service name, service mark or copyright, nor is Borrower in
any way making use of any confidential information or trade secrets of any
person except with the consent of such person.
(g) No Conflicts. Consummation of the transactions hereby
contemplated and the performance of the obligations of Borrower under and
by virtue of the Loan Documents will not result in any breach of, or
constitute a default under, any mortgage, security deed or agreement, deed
of trust, lease, bank loan or credit agreement, corporate charter or
bylaws, agreement or certificate of limited partnership, partnership
agreement, license, franchise or any other instrument or agreement to which
Borrower is a party or by which Borrower, or its respective properties may
be bound or affected or to which Borrower has not obtained an effective
waiver.
(h) Litigation. There are no actions, suits or proceedings
pending, or, to the knowledge of Borrower, threatened, against or affecting
Borrower or involving the validity or enforceability of any of the Loan
Documents at law or in equity, or before any governmental or administrative
agency; and to Borrower's knowledge, Borrower is not in default with
respect to any order, writ, injunction, decree or demand of any court or
any governmental authority.
6
<PAGE>
(i) Financial Statements. The financial statements of Borrower,
dated June 30, 1997, attached hereto as Schedule 2.1(i)(A), are true and
correct in all material respects have been prepared on the basis of
generally accepted accounting principles ("GAAP") consistently applied, and
fairly present the financial condition of Borrower as of the date(s)
thereof. No material adverse change has occurred in the financial
condition of Borrower since the date(s) thereof, and no additional
borrowings have been made by Borrower since the date(s) thereof other than
as set forth on Schedule 2.1(i)(B).
(j) Other Agreements; No Defaults. Borrower is not a party to
indentures, loan or credit agreements, leases or other agreements or
instruments, or subject to any articles of incorporation or corporate
restrictions that materially restrict the ability of Borrower to carry out
its obligations under the Loan Documents to which it is a party. Except as
set forth on Schedule 2.1(j), Borrower is not in default in any material
respect in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement or
instrument material to its business to which it is a party, including but
not limited to this Agreement and the other Loan Documents, and no other
default or event has occurred and is continuing that with notice or the
passage of time or both would constitute a default or event of default
under any of same.
(k) Compliance With Law. Borrower has obtained all material
licenses, permits and approvals and authorizations necessary or required in
order to conduct its business and affairs as heretofore conducted and as
hereafter intended to be conducted. To Borrower's knowledge, Borrower is
in compliance with all laws, regulations, decrees and orders applicable to
it (including but not limited to laws, regulations, decrees and orders
relating to environmental, occupational and health standards and controls,
antitrust, monopoly, restraint of trade or unfair competition), except to
the extent that noncompliance, in the aggregate, cannot reasonably be
expected to have a material adverse effect on its business, operations,
property or financial condition and will not materially adversely affect
Borrower's ability to perform its obligations under the Loan Documents.
(l) Debt. Schedule 2.1(l) is a complete and correct list of all
credit agreements, indentures, purchase
7
<PAGE>
agreements, promissory notes and other evidences of indebtedness,
guaranties, capital leases and other instruments, agreements and
arrangements presently in effect providing for or relating to extensions of
credit (including agreements and arrangements for the issuance of letters
of credit or for acceptance financing) in respect of which Borrower, or any
of the properties thereof is in any manner directly or contingently
obligated; and the maximum principal or face amounts of the credit in
question that are outstanding and that can be outstanding are correctly
stated, and all liens of any nature given or agreed to be given as security
therefor are correctly described or indicated in such Schedule.
(m) Taxes. Borrower has filed or caused to be filed all tax
returns that to Borrower's knowledge are required to be filed (except for
returns that have been appropriately extended), and has paid, or will pay
when due, all taxes shown to be due and payable on said returns and all
other taxes, impositions, assessments, fees or other charges imposed on
them by any governmental authority, agency or instrumentality, prior to any
delinquency with respect thereto (other than taxes, impositions,
assessments, fees and charges currently being contested in good faith by
appropriate proceedings, for which appropriate amounts have been reserved).
No tax liens have been filed against Borrower, or any of the property
thereof.
(n) [Intentionally Omitted]
(o) Certain Transactions. Except as set forth on Schedule
2.1(o) hereto, Borrower is not indebted, directly or indirectly, to any of
its shareholders, officers, or directors or to their respective spouses or
children, in any amount whatsoever; none of said shareholders, officers or
directors or any members of their immediate families, are indebted to
Borrower or have any direct or indirect ownership interest in any firm or
corporation with which Borrower has a business relationship, or any firm or
corporation which competes with Borrower, except that shareholders,
officers and/or directors of Borrower may own no more than 4.9% of
outstanding stock of publicly traded companies which may compete with
Borrower. No officer or director of Borrower or any member of their
immediate families, is, directly or indirectly, interested in any material
contract with Borrower. Borrower is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
8
<PAGE>
(p) Statements Not False or Misleading. No representation or
warranty given as of the date hereof by Borrower contained in this
Agreement or any schedule attached hereto or any statement in any document,
certificate or other instrument furnished or to be furnished by Borrower to
Lender pursuant hereto, taken as a whole, contains or will (as of the time
so furnished) contain any untrue statement of a material fact, or omits or
will (as of the time so furnished) omit to state any material fact which is
necessary in order to make the statements contained therein not misleading.
(q) Margin Regulations. Borrower is not engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock.
No proceeds received pursuant to this Agreement will be used to purchase or
carry any equity security of a class which is registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended.
(r) Significant Contracts. Schedule 2.1(r) is a complete and
correct list of all contracts, agreements and other documents pursuant to
which Borrower receives revenues in excess of $500,000 per fiscal year.
Each such contract, agreement and other document is in full force and
effect as of the date hereof and Borrower knows of no reason why such
contracts, agreements and other documents would not remain in full force
and effect pursuant to the terms thereof.
(s) Environment. Borrower has duly complied with, and its
business, operations, assets, equipment, property, leaseholds or other
facilities are in compliance with, the provisions of all federal, state and
local environmental, health, and safety laws, codes and ordinances, and all
rules and regulations promulgated thereunder, except to the extent that
failure to do so would not have a material adverse effect on its business.
Borrower has been issued and will maintain all required federal, state and
local permits, licenses, certificates and approvals relating to (1) air
emissions; (2) discharges to surface water or groundwater; (3) noise
emissions; (4) solid or liquid waste disposal; (5) the use, generation,
storage, transportation or disposal of toxic or hazardous substances or
wastes (which shall include any and all such materials listed in any
federal, state or local law, code or ordinance and all rules and
regulations promulgated thereunder as hazardous or potentially hazardous);
or (6) other environmental, health
9
<PAGE>
or safety matters, except to the extent that failure to do so would not
have a material adverse effect on its business. Borrower has not received
notice of, or knows of, or suspects facts which might constitute any
violations of any federal, state or local environmental, health or safety
laws, codes or ordinances, and any rules or regulations promulgated
thereunder with respect to its businesses, operations, assets, equipment,
property, leaseholds, or other facilities. Except in accordance with a
valid governmental permit, license, certificate or approval, Borrower has
made no emission, spill, release or discharge into or upon (1) the air;
(2) soils, or any improvements located thereon; (3) surface water or
groundwater; or (4) the sewer, septic system or waste treatment, storage or
disposal system servicing the premises, of any toxic or hazardous
substances or wastes at or from the premises. To Borrower's knowledge
there has been no complaint, order, directive, claim, citation or notice by
any governmental authority or any person or entity to Borrower or with
respect to which Borrower is an interested party with respect to (1) air
emissions; (2) spills, releases or discharges to soils or improvements
located thereon, surface water, groundwater or the sewer, septic system or
waste treatment, storage or disposal systems servicing the premises;
(3) noise emissions; (4) solid or liquid waste disposal; (5) the use,
generation, storage, transportation or disposal of toxic or hazardous
substances or waste; or (6) other environmental, health or safety matters
affecting Borrower or its business, operations, assets, equipment,
property, leaseholds or other facilities. Except with respect to normal
office refuse and routine cleaning materials, Borrower has no indebtedness,
obligation or liability (absolute or contingent, matured or not matured),
with respect to the storage, treatment, cleanup or disposal of any solid
wastes, hazardous wastes or other toxic or hazardous substances (including
without limitation any such indebtedness, obligation, or liability with
respect to any current regulation, law or statute regarding such storage,
treatment, cleanup or disposal).
(t) Fees; Commissions. Borrower has not agreed to pay any
finder's fee, commission, origination fee (except for the processing and
commitment fees due pursuant to Section 1.2) or other fee or charge to any
person or entity with respect to the Loan and investment transactions
contemplated hereunder.
10
<PAGE>
(u) ERISA. Borrower is in compliance in all material respects
with all applicable provisions of ERISA (as defined in Section 3.11
hereof). Neither a reportable event nor a prohibited transaction (as
defined in ERISA) has occurred and is continuing with respect to any Plan
(as defined in Section 3.11 hereof); no notice of intent to terminate a
Plan has been filed nor has any Plan been terminated; no circumstances
exist which constitute grounds entitling the Pension Benefit Guaranty
Corporation (together with any entity succeeding to any or all of its
functions, the "PBGC") to institute proceedings to terminate, or appoint
a trustee to administer, a Plan, nor has the PBGC instituted any such
proceedings; neither Borrower nor any commonly controlled entity (as
defined in ERISA) has completely or partially withdrawn from a
multiemployer plan (as defined in ERISA); Borrower and each commonly
controlled entity has met its minimum funding requirements under ERISA
with respect to all of its Plans and the present fair market value of all
Plan property exceeds the present value of all vested benefits under each
Plan, as determined on the most recent valuation date of the Plan and in
accordance with the provisions of ERISA and the regulations thereunder
for calculating the potential liability of Borrower or any commonly
controlled entity to the PBGC or the Plan under Title IV of ERISA; and
neither Borrower nor any commonly controlled entity has incurred any
liability to the PBGC under ERISA.
(v) Title to Properties. Borrower has good, indefeasible and
insurable title to, or valid leasehold interests in, all its real
properties and good title to its other assets, free and clear of all liens
other than Permitted Liens (as defined in Section 3.15 hereof).
(w) Material Adverse Effect. Since June 30, 1997, no event has
occurred which has resulted or which Borrower reasonably believes could be
expected to result in a material adverse effect on Borrower or Borrower's
ability to perform its obligations under the Loan Documents. No default or
event of default under any other agreement will occur as a result of the
transactions contemplated by this Agreement or by the Warrant.
(x) Financial Solvency. Borrower is not entering into the
arrangements contemplated by this Agreement and the other Loan Documents
with actual intent to hinder, delay or defraud either present or future
creditors. On and as of the date hereof on a pro forma basis after giving
effect to
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the transactions contemplated by the Loan Documents and to all
debts incurred or to be created in connection herewith:
(i) the present fair salable value of the assets of Borrower (on
a going concern basis) will exceed the probable liability of Borrower on its
debts (including its contingent obligations);
(ii) Borrower has not incurred, nor does it intend to or believe
that it will incur, debts (including contingent obligations) beyond its ability
to pay such debts as such debts mature (taking into account the timing and
amounts of cash to be received from any source, and of amounts to be payable on
or in respect of debts); and the amount of cash available to Borrower after
taking into account all other anticipated uses of funds is anticipated to be
sufficient to pay all such amounts on or in respect of debts, when such amounts
are required to be paid; and
(iii) Borrower will have sufficient capital with which to
conduct its present and proposed business and the property of Borrower does not
constitute unreasonably small capital with which to conduct its current business
at present levels of operations.
For purposes of this Section 2.1(x) "debt" means any liability on a
(i) right to payment whether or not such a right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured, or unsecured; or (ii) right to an
equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such a right to an equitable remedy is reduced to
judgment, fixed, contingent, unmatured, disputed, undisputed, secured, or
unsecured.
(y) Offering of Note and Warrant. Neither Borrower nor anyone acting
on its behalf has offered the Note, the Warrant or any similar securities for
sale to, or solicited any offer to buy any of the same from, or otherwise
approached or negotiated in respect thereof, with, any person other than Lender
and not more than 35 other institutional investors. Neither Borrower nor anyone
acting on its behalf has taken, or will take, any action which would make
unavailable an exemption from the registration requirements of Section 5 of
the Securities Act of 1933, as amended, or from the registration or
qualification
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provisions of the blue sky laws of any state with respect to the issuance
or sale of the Note and Warrant.
(z) Registration Rights. Except as described in the Warrant,
Borrower is not under any obligation to register under the Securities Act
of 1933, as amended, or the Trust Indenture Act of 1939, as amended, any of
its presently outstanding securities or any of its securities that may
subsequently be issued.
(aa) Employees. Borrower has no current labor problems or
disputes which have resulted or Borrower reasonably believes could be
expected to have a material adverse effect.
(bb) Issuance Taxes. All taxes imposed on Borrower in connection
with the issuance, sale and delivery of the Note, the Warrant and the
capital stock issuable upon exercise of the Warrant have been or will be
fully paid, and all laws imposing such taxes have been or will be fully
satisfied by Borrower.
(cc) List of Deposit Institutions. Schedule 2.1(ac) hereto sets
forth a true and complete list of all deposit institutions at which
Borrower has or maintains an account or deposits of any kind.
(dd) Locations and Names. Except as described on Schedule
2.1(ad), Borrower has not, during the five years preceding the date of this
Agreement, been known as or used any other corporate, trade or fictitious
name, nor acquired all or substantially all of the assets, capital stock or
operating units of any person. Borrower has not, during the five years
preceding the date of this Agreement, had a business location at any
address other than addresses set forth on Schedule 2.1(ad).
(ee) Household International, Inc. Borrower has delivered a
complete and accurate copy of its Software Development Agreement with
Household International, Inc., as amended (the "Household Agreement"). The
Household Agreement, Borrower's relationship to Household International,
Inc. pursuant thereto, and Borrower's rights and obligations thereunder are
deemed incorporated as appropriate into any and all Schedules under this
Article 2.
.2 Lender's Representations. Lender hereby represents to Borrower
that Lender is acquiring the Warrant for its own
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account, for investment and not with a view to, or for resale in connection
with any distribution or public offering thereof within the meaning of the
Securities Act of 1933 (the "Securities Act"). Lender acknowledges that the
issuance of the Warrant has not been registered under the Securities Act or
under the securities laws of any state applicable to this transaction, and it
may not be transferred unless the disposition thereof is registered under the
Securities Act and applicable state securities laws or is exempt from
registration thereunder.
3
COVENANTS AND AGREEMENTS
Borrower covenants and agrees that during the term of this Agreement:
.1 Payment of Obligations. Borrower shall pay the indebtedness
evidenced by the Note according to the terms thereof, and shall timely pay or
perform, as the case may be, all of the other obligations of Borrower to Lender,
direct or contingent, however evidenced or denominated, and however and whenever
incurred, including but not limited to indebtedness incurred pursuant to any
present or future commitment of Lender to Borrower, together with interest
thereon, and any extensions, modifications, consolidations and/or renewals
thereof and any notes given in payment thereof.
.2 Financial Statements and Reports. Borrower shall furnish to
Lender (i) as soon as practicable and in any event within ninety (90) days after
the end of each fiscal year of Borrower, an audited balance sheet of Borrower as
of the close of such fiscal year, an audited statement of earnings and retained
earnings of Borrower as of the close of such fiscal year and an audited
statement of cash flows for Borrower for such fiscal year, prepared in
accordance with GAAP consistently applied and accompanied by an unqualified
audit report prepared by an independent certified public accountant acceptable
to Lender showing the financial condition of Borrower at the close of such year
and the results of its operations during such year and accompanied by a
certificate of the President of Borrower, stating that to the best of the
knowledge of such officer, Borrower has kept, observed, performed and fulfilled
each covenant, term and condition of this Agreement and the other Loan Documents
during the preceding fiscal year and that no Event of Default has occurred and
is continuing (or if an Event of Default has occurred and is continuing,
specifying the nature of same, the period of existence of same and the action
Borrower proposes to take in connection therewith), (ii) within thirty (30) days
of
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the end of each calendar month, a status report indicating the financial
performance of Borrower during such month and the financial position of Borrower
as of the end of such month in the format required by Lender (which format will
be delivered to Borrower on a diskette), (iii) within thirty (30) days of the
end of each quarter, other than the fourth quarter, a balance sheet of Borrower
as of the close of such quarter and a statement of earnings and retained
earnings of Borrower as of the close of such quarter, all in reasonable detail,
and prepared substantially in accordance with GAAP consistently applied (except
for the absence of footnotes and subject to year-end adjustments), and (iv) with
reasonable promptness, such other financial data as Lender may reasonably
request. Without Lender's prior written consent, Borrower shall not modify or
change any accounting policies or procedures in effect on the date hereof.
.3 Maintenance of Books and Records; Inspection. Borrower shall
maintain its books, accounts and records in accordance with GAAP consistently
applied, and after reasonable notice from Lender, shall permit Lender, its
officers, employees and any professionals designated by Lender in writing, at
Borrower's expense, to visit, inspect and/or audit any of its properties, books
and financial records, and to discuss its accounts, affairs and finances with
Borrower or the principal officers of Borrower during reasonable business hours,
all at such times as Lender may reasonably request; provided that no such visit,
inspection and/or audit shall materially interfere with the conduct of
Borrower's business.
.4 Insurance. Without limiting any of the requirements of any of
the other Loan Documents, Borrower shall maintain in amounts customary for
entities engaged in comparable business activity (a) to the extent required by
applicable law, worker's compensation insurance (or maintain a legally
sufficient amount of self insurance against worker's compensation liabilities,
with adequate reserves, under a plan approved by Lender, such approval not to be
unreasonably withheld or delayed) and (b) fire and "all risk" casualty insurance
on its properties against such hazards and in at least such amounts as are
customary in Borrower's business. Borrower will make reasonable efforts to
obtain and maintain general liability insurance in an amount, and at a cost,
deemed reasonable to the Borrower's Board of Directors. At the request of
Lender, Borrower will deliver forthwith a certificate specifying the details of
such insurance in effect.
.5 Taxes and Assessments. Borrower shall (a) file all tax returns
and appropriate schedules thereto that are required to be
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filed under applicable law, prior to the date of delinquency, (b) pay and
discharge all taxes, assessments and governmental charges or levies imposed
upon Borrower upon its income and profits or upon any properties belonging to
it, prior to the date on which penalties attach thereto, and (c) pay all
taxes, assessments and governmental charges or levies that, if unpaid, might
become a lien or charge upon any of its properties; provided, however, that
Borrower in good faith may contest any such tax, assessment, governmental
charge or levy described in the foregoing clauses (b) and (c) so long as
appropriate reserves are maintained with respect thereto.
.6 Corporate Existence. Borrower shall maintain its corporate
existence and good standing in the state of its incorporation, and its
qualification and good standing as a foreign corporation in each jurisdiction in
which failure to be so qualified and in good standing would have a material
adverse effect on Borrower's financial positions or its ability to conduct its
business in the manner now conducted.
.7 Compliance with Law and Other Agreements. Except where the
failure to do so would not materially adversely affect Borrower's operations or
its ability to fulfill its obligations under the Loan Documents, Borrower shall
maintain its business, operations and property owned or used in connection
therewith in compliance with (a) all applicable federal, state and local laws,
regulations and ordinances governing such business operations and the use and
ownership of such property, and (b) all agreements, licenses, franchises,
indentures and mortgages to which Borrower is a party or by which Borrower or
any of its properties is bound. Without limiting the foregoing, Borrower shall
pay all of its indebtedness promptly in accordance with the terms thereof.
.8 Notice of Default. Borrower shall give written notice to Lender
of the occurrence of any default, event of default or Event of Default under
this Agreement or any other Loan Document promptly upon the occurrence thereof.
.9 Notice of Litigation. Borrower shall give notice, in writing, to
Lender of (a) any actions, suits or proceedings instituted by any persons
whomsoever against Borrower, or affecting any of the assets of Borrower, wherein
the amount at issue is in excess of Twenty-Five Thousand and No/100ths Dollars
($25,000.00), and (b) any dispute, not resolved within sixty (60) days of the
commencement thereof, between Borrower on the one hand and any governmental
regulatory body on the other hand, which dispute might materially interfere with
the normal operations of Borrower.
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.10 Conduct of Business, Name and Location of Business. Borrower
will continue to engage in a business of the same general type and manner as
conducted by it on the date of this Agreement. Without Lender's prior written
consent, Borrower shall not modify or change any terms or conditions of any
material contracts and/or agreements to which Borrower is a party on the date
hereof. Without ten (10) days' prior written notice to Lender, Borrower shall
not change its name or its location(s) of doing business. In the event Borrower
makes a change of its name or location of business, Borrower shall promptly
execute any and all financing statements, and amendments or continuations
thereof and any other documents that Lender may reasonably request to evidence,
continue, and/or perfect any security interest in or pledge of collateral
securing the Loan.
.11 ERISA Plan. If Borrower has in effect, or hereafter institutes,
a pension plan that is subject to the requirements of Title IV of the Employee
Retirement Income Security Act of 1974, Pub. L. No. 93-406, September 2, 1974,
88 Stat. 829, 29 U.S.C.A. Section 1001 et seq. (1975), as amended from time to
time ("ERISA"), then the following warranty and covenants shall be applicable
during such period as any such plan (the "Plan") shall be in effect: (a)
Borrower hereby warrants that no fact that might constitute grounds for the
involuntary termination of the Plan, or for the appointment by the appropriate
United States District Court of a trustee to administer the Plan, exists at the
time of execution of this Agreement, (b) Borrower hereby covenants that
throughout the existence of the Plan, Borrower's contributions under the Plan
will meet the minimum funding standards required by ERISA and Borrower will not
institute a distress termination of the Plan, and (c) Borrower covenants that it
will send to Lender a copy of any notice of a reportable event (as defined in
ERISA) required by ERISA to be filed with the Labor Department or the Pension
Benefit Guaranty Corporation, at the time that such notice is so filed.
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.12 Dividends, Distributions, Stock Rights, etc. Borrower shall not
declare or pay any dividend of any kind (other than stock dividends payable to
all holders of any class of capital stock), in cash or in property, on any class
of the capital stock of Borrower, or purchase, redeem, retire or otherwise
acquire for value any shares of such stock, nor make any distribution of any
kind in cash or property in respect thereof, nor make any return of capital of
shareholders, nor make any payments in cash or property in respect of any stock
options, stock bonus or similar plan (except as required or permitted
hereunder), nor grant any preemptive rights with respect to the capital stock of
Borrower, without the prior written consent of Lender.
.13 Guaranties; Loans; Payment of Debt. Without Lender's prior
express written consent, Borrower shall not guarantee nor be liable in any
manner, whether directly or indirectly, or become contingently liable after the
date of this Agreement in connection with the obligations or indebtedness of any
person or entity whatsoever, except for the endorsement of negotiable
instruments payable to Borrower for deposit or collection in the ordinary course
of business. Without Lender's prior express written consent, Borrower shall not
(a) make any loan, advance or extension of credit to any person other than in
the normal course of its business, or (b) make any payment on any subordinated
debt.
.14 Debt. Without the express prior written consent of Lender,
Borrower shall not create, incur, assume or suffer to exist indebtedness of any
description whatsoever excluding:
(a) the indebtedness evidenced by the Note;
(b) the endorsement of negotiable instruments payable to Borrower for
deposit or collection in the ordinary course of business;
(c) debts incurred in the ordinary course of business and capital
leases (each of which, individually, does not exceed $50,000); and
(d) the indebtedness listed on Schedule 2.1(l) hereto.
.15 No Liens. Borrower shall not create, incur, assume or suffer to
exist any lien, security interest, security title, mortgage, deed of trust or
other encumbrance upon or with respect to any of its properties, now owned or
hereafter acquired, except the following permitted liens (the "Permitted
Liens"):
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(a) liens in favor of Lender;
(b) liens for taxes or assessments or other governmental charges or
levies if not yet due and payable;
(c) liens in connection with the leasing of equipment in favor of the
lessor of such equipment; and
(d) liens described on Schedule 2.1(l) hereto.
.16 Mergers, Consolidations, Acquisitions; Sales. Without the prior
written consent of Lender, Borrower shall not (a) be a party to any merger,
consolidation or corporate reorganization, nor (b) purchase or otherwise acquire
all or substantially all of the assets or stock of, or any partnership or joint
venture interest in, any other person, firm or entity, nor (c) sell, transfer,
convey, grant a security interest in or lease all or any substantial part of its
assets, nor (d) create any Subsidiaries nor convey any of its assets to any
Subsidiary, nor (e) permit any domestic Subsidiary to become active or do any
business after the date hereof.
.17 Transactions With Affiliates. Borrower shall not enter into any
transaction, including, without limitation, the purchase, sale or exchange of
property or the rendering of any service, with any affiliate, except in the
ordinary course of and pursuant to the reasonable requirements of Borrower's
business and upon fair and reasonable terms no less favorable to Borrower than
Borrower would obtain in a comparable arm's length transaction with a person not
an affiliate. For the purposes of this Section 3.17, "affiliate" shall mean a
person, corporation, partnership or other entity controlling, controlled by or
under common control with Borrower.
.18 Environment. Borrower shall be and remain in compliance with the
provisions of all federal, state and local environmental, health, and safety
laws, codes and ordinances, and all rules and regulations issued thereunder;
notify Lender immediately of any notice of a hazardous discharge or
environmental complaint received from any governmental agency or any other
party; notify Lender immediately of any hazardous discharge by Borrower from or
affecting Borrower's premises; immediately contain and remove the same, in
compliance with all applicable laws; promptly pay any fine or penalty assessed
in connection therewith; permit Lender to inspect the premises, to conduct tests
thereon, and to inspect all books, correspondence, and records pertaining
thereto; and at Lender's request, and at Borrower's expense, provide a report of
a qualified environmental engineer, satisfactory in scope, form, and content to
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Lender, and such other and further assurances reasonably satisfactory to Lender
that the condition has been corrected.
4
CONDITIONS TO CLOSING
.1 Closing of the Loan. The obligation of Lender to fund the Loan
on the date hereof (the "Closing Date") is subject to the fulfillment, on or
prior to the Closing Date, of each of the following conditions:
(a) Borrower shall have performed and complied in all material
respects with all of the covenants, agreements, obligations and conditions
required by this Agreement.
(b) Lender shall have received an opinion of the Borrower's
counsel, Kilpatrick Stockton, LLP, dated the Closing Date, in form and
substance satisfactory to Lender's counsel, Chambliss, Bahner & Stophel,
P.C.
(c) Borrower shall have delivered to Lender the Note executed by
Borrower.
(d) Borrower shall have delivered to Lender a Stock Purchase
Warrant together with a Warrant Valuation Letter, both executed by
Borrower, in form acceptable to Lender.
(e) Borrower shall have delivered to Lender a Security Agreement
executed by Borrower (in form acceptable to Lender) and related UCC-1
Financing Statement(s) (in form acceptable to Lender) executed by Borrower.
(f) Borrower shall have delivered to Lender a Pledge and
Security Agreement (in a form acceptable to Lender) and related stock
proxies, stock powers, and stock certificates (all in form acceptable to
Lender), executed by Borrower, and related stock pledge letters (all in
form acceptable to Lender) executed by each domestic Subsidiary.
(g) Borrower shall have delivered to Lender a Trademark and
Patent Security Agreement executed by Borrower (in a form acceptable to
Lender) and related UCC-1 Financing Statements(s) (in a form acceptable to
Lender) executed by Borrower.
(h) Borrower shall have delivered a Copyright and Royalty
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Security Agreement executed by Borrower (in a form acceptable to Lender)
and related UCC-1 Financing Statement(s) (in a form acceptable to Lender).
(i) Lender shall have received copies of the articles of
incorporation and other publicly filed organizational documents of Borrower
and each Subsidiary, certified by the Secretary of State or other
appropriate public official in the jurisdictions in which Borrower and each
Subsidiary are incorporated.
(j) Lender shall have received certified (as of the date of this
Agreement) copies of all corporate action taken by Borrower, including
resolutions of its Board of Directors, authorizing the execution, delivery
and performance of the Loan Documents.
(k) Lender shall have received a certificate as to the legal
existence and good standing of Borrower and each Subsidiary, issued by the
Secretary of State or other appropriate public official in the
jurisdictions in which Borrower and each Subsidiary are incorporated.
(l) Lender shall have received certificates of the Secretaries
of State or other appropriate public officials as to the qualifications of
Borrower and each Subsidiary to do business and good standing in each
jurisdiction in which a failure to be so qualified would have a material
adverse effect on their financial positions or their ability to conduct
their business in the manner now conducted and as hereafter intended to be
conducted.
(m) Borrower shall have delivered to Lender a Landlord's Consent
and Subordination of Lien, executed by each of Borrower's landlords, all in
a form acceptable to Lender.
(n) Borrower shall have delivered to Lender an Authorization
Agreement for Pre-Authorized Payments (Debit) executed by Borrower, in form
acceptable to Lender.
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5
DEFAULT AND REMEDIES
.1 Events of Default. The occurrence of any of the following shall
constitute an Event of Default hereunder:
(a) Default by Borrower in the payment of the principal of or
interest on the indebtedness evidenced by the Note in accordance with the
terms of the Note, which default is not cured within five (5) days;
(b) Any misrepresentation by Borrower, any guarantor of
Borrower, or any shareholder, member, partner, subsidiary, or affiliate of
Borrower as to any material matter hereunder or under any of the other Loan
Documents, or delivery by Borrower of any schedule, statement, resolution,
report, certificate, notice or writing to Lender that is untrue in any
material respect on the date as of which the facts set forth therein are
stated or certified;
(c) Failure of Borrower, any guarantor of Borrower, or any
shareholder, member, partner, subsidiary, or affiliate of Borrower to
perform any of its material obligations, covenants or agreements under this
Agreement, the Note or any of the other Loan Documents;
(d) Borrower (i) shall generally not pay or shall be unable to
pay its debts as such debts become due; or (ii) shall make an assignment
for the benefit of creditors or petition or apply to any tribunal for the
appointment of a custodian, receiver or trustee for it or a substantial
part of its assets; or (iii) shall commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution
or liquidation law or statute of any jurisdiction, whether now or hereafter
in effect; or (iv) shall have had any such petition or application filed or
any such proceeding commenced against it in which an order for relief is
entered or an adjudication or appointment is made; or (v) shall indicate,
by any act or intentional and purposeful omission, its consent to, approval
of or acquiescence in any such petition, application, proceeding or order
for relief or the appointment of a custodian, receiver or trustee for it or
a substantial part of its assets; or (vi) shall suffer any such
custodianship, receivership or trusteeship to continue undischarged for a
period of sixty (60) days or more;
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(e) Borrower shall be liquidated, dissolved, partitioned or
terminated, or the charter thereof shall expire or be revoked;
(f) A default or event of default shall occur under any of the
other Loan Documents and, if subject to a cure right, such default or event
of default shall not be cured within the applicable cure period;
(g) Borrower shall default in the timely payment or performance
of any material obligation now or hereafter owed to Lender in connection
with any other indebtedness of Borrower now or hereafter owed to Lender;
(h) Borrower shall have defaulted and continue to be in default
in the timely payment or performance of any other indebtedness or
obligation, which in the aggregate exceeds Twenty-Five Thousand and
No/100ths Dollars ($25,000.00) or materially adversely affects Borrower's
financial condition.
With respect to any Event of Default described above that is capable of
being cured and that does not already provide its own cure procedure (a "Curable
Default"), the occurrence of such Curable Default shall not constitute an Event
of Default hereunder if such Curable Default is fully cured and/or corrected
within thirty (30) days (ten (10) days, if such Curable Default results from
default in the payment of a sum of money) of notice thereof to Borrower given in
accordance with the provisions hereof; provided, however, that this provision
shall not require notice to Borrower and an opportunity to cure any Curable
Default of which Borrower has had actual knowledge for the requisite number of
days set forth.
.2 Acceleration of Maturity; Remedies. Upon the occurrence of any
Event of Default described in subsection 5.1(d), the indebtedness evidenced by
the Note as well as any and all other indebtedness of Borrower to Lender shall
be immediately due and payable in full; and upon the occurrence of any other
Event of Default described above, Lender at any time thereafter may at its
option accelerate the maturity of the indebtedness evidenced by the Note as well
as any and all other indebtedness of Borrower to Lender; all without notice of
any kind. Upon the occurrence of any such Event of Default and the acceleration
of the maturity of the indebtedness evidenced by the Note:
(a) Lender shall be immediately entitled to exercise any and all
rights and remedies possessed by Lender pursuant to the terms of the Note
and all of the other Loan Documents; and
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(b) Lender shall have any and all other rights and remedies that
Lender may now or hereafter possess at law, in equity or by statute.
.3 Remedies Cumulative; No Waiver. No right, power or remedy
conferred upon or reserved to Lender by this Agreement or any of the other Loan
Documents is intended to be exclusive of any other right, power or remedy, but
each and every such right, power and remedy shall be cumulative and concurrent
and shall be in addition to any other right, power and remedy given hereunder,
under any of the other Loan Documents or now or hereafter existing at law, in
equity or by statute. No delay or omission by Lender to exercise any right,
power or remedy accruing upon the occurrence of any Event of Default shall
exhaust or impair any such right, power or remedy or shall be construed to be a
waiver of any such Event of Default or an acquiescence therein, and every right,
power and remedy given by this Agreement and the other Loan Documents to Lender
may be exercised from time to time and as often as may be deemed expedient by
Lender.
.4 Proceeds of Remedies. Any or all proceeds resulting from the
exercise of any or all of the foregoing remedies shall be applied as set forth
in the Loan Document(s) providing the remedy or remedies exercised; if none is
specified, or if the remedy is provided by this Agreement, then as follows:
First, to the costs and expenses, including, without limitation,
reasonable attorney's fees incurred by Lender in connection with the exercise of
its remedies;
Second, to the expenses of curing the default that has occurred, in
the event that Lender elects, in its sole discretion, to cure the default that
has occurred;
Third, to the payment of the obligations of Borrower under the Loan
Documents (the "Obligations"), including but not limited to the payment of the
principal of and interest on the indebtedness evidenced by the Note, in such
order of priority as Lender shall determine in its sole discretion; and
Fourth, the remainder, if any, to Borrower or to any other person
lawfully thereunto entitled.
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6
TERMINATION
.1 Termination of this Agreement. This Agreement shall remain in
full force and effect until the later of (a) the Maturity Date (as defined in
the Note), or (b) the payment by Borrower of all amounts owed to Lender, at
which time Lender shall cancel the Note and deliver it to Borrower; provided,
however, that if at any time Borrower has satisfied all obligations to Lender,
Borrower may terminate this Agreement by providing written notice to Lender.
7
MISCELLANEOUS
.1 Performance By Lender. If Borrower shall default in the payment,
performance or observance of any covenant, term or condition of this Agreement,
which default is not cured within the applicable cure period, then Lender may,
at its option, pay, perform or observe the same, and all payments made or costs
or expenses incurred by Lender in connection therewith (including but not
limited to reasonable attorney's fees), with interest thereon at the highest
default rate provided in the Note (if none, then at the maximum rate from time
to time allowed by applicable law), shall be immediately repaid to Lender by
Borrower and shall constitute a part of the Obligations. Lender shall be the
sole judge of the necessity for any such actions and of the amounts to be paid.
.2 Successors and Assigns Included in Parties. Whenever in this
Agreement one of the parties hereto is named or referred to, the heirs, legal
representatives, successors, successors-in-title and assigns of such parties
shall be included, and all covenants and agreements contained in this Agreement
by or on behalf of Borrower or by or on behalf of Lender shall bind and inure to
the benefit of their respective heirs, legal representatives,
successors-in-title and assigns, whether so expressed or not.
.3 Costs and Expenses. Borrower agrees to pay all reasonable costs
and expenses incurred by Lender in connection with the making of the Loan,
including but not limited to filing fees, recording taxes, indebtedness taxes,
and reasonable attorneys' fees, promptly upon demand of Lender. Borrower
further agrees to pay all premiums for insurance required to be maintained by
Borrower pursuant to the terms of the Loan Documents and all of the
out-of-pocket costs and expenses incurred by Lender in connection with the
collection
25
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of the Loan, amendment to the Loan Documents, or prepayment of the Loan,
including but not limited to reasonable attorneys' fees, promptly upon demand of
Lender.
.4 Assignment. The Note, this Agreement and the other Loan
Documents, other than the Warrant, which may be assigned only under its own
terms, may be endorsed, assigned and/or transferred in whole or in part by
Lender, and any such holder and/or assignee of the same shall succeed to and be
possessed of the rights and powers of Lender under all of the same to the extent
transferred and assigned. Lender may grant participations in all or any portion
of its interest in the indebtedness evidenced by the Note, and in such event
Borrower shall continue to make payments due under the Loan Documents to Lender
and Lender shall have the sole responsibility of allocating and forwarding such
payments in the appropriate manner and amounts. Borrower shall not assign any
of its rights nor delegate any of its duties hereunder or under any of the other
Loan Documents without the prior express written consent of Lender.
.5 Time of the Essence. Time is of the essence with respect to each
and every covenant, agreement and obligation of Borrower hereunder and under all
of the other Loan Documents.
.6 Severability. If any provision(s) of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
.7 Interest and Loan Charges Not to Exceed Maximum Allowed by Law.
Anything in this Agreement, the Note or any of the other Loan Documents to the
contrary notwithstanding, in no event whatsoever, whether by reason of
advancement of proceeds of the Loan, acceleration of the maturity of the unpaid
balance of the Loan or otherwise, shall the interest and loan charges agreed to
be paid to Lender for the use of the money advanced or to be advanced hereunder
exceed the maximum amounts collectible under applicable laws in effect from time
to time. It is understood and agreed by the parties that, if for any reason
whatsoever the interest or loan charges paid or contracted to be paid by
Borrower in respect of the indebtedness evidenced by the Note shall exceed the
maximum amounts collectible under applicable laws in effect from time to time,
then ipso facto, the obligation to pay such interest and/or loan charges shall
be reduced to the maximum amounts collectible under applicable laws in effect
from time to time, and any amounts collected by Lender that exceed such maximum
amounts shall be applied to the reduction of the principal balance of the
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indebtedness evidenced by the Note and/or refunded to Borrower so that at no
time shall the interest or loan charges paid or payable in respect of the
indebtedness evidenced by the Note exceed the maximum amounts permitted from
time to time by applicable law.
.8 Article and Section Headings; Defined Terms. Numbered and titled
article and section headings and defined terms are for convenience only and
shall not be construed as amplifying or limiting any of the provisions of this
Agreement.
.9 Notices. Any and all notices, elections or demands permitted or
required to be made under this Agreement or any of the Loan Documents shall be
in writing, signed by the party giving such notice, election or demand and shall
be delivered personally, telecopied, or sent by certified mail or overnight via
nationally recognized courier service (such as Federal Express), to the other
party at the address set forth below, or at such other address as may be
supplied in writing and of which receipt has been acknowledged in writing. The
date of personal delivery, telecopy or telex or two (2) business days after the
date of mailing (or the next business day after delivery to such courier
service), as the case may be, shall be the date of such notice, election or
demand. For the purposes of this Agreement:
The Address of Lender is: Sirrom Capital Corporation
Suite 200
500 Church Street
Nashville, TN 37219
Attention: Elizabeth Lurding
Telecopy: 615/726-1208
with a copy to: Chambliss, Bahner & Stophel, P.C.
1000 Tallan Building
Two Union Square
Chattanooga, TN 37402
Attention: J. Patrick Murphy, Esq.
Telecopy: 423/265-9574
The Address of Borrower is: PaySys International, Inc.
One Meca Way
Norcross, GA 30093
Attention: William J. Pearson, CFO
Telecopy: 770/564-5679
with a copy to: Kilpatrick Stockton, LLP
1100 Peachtree Street
Atlanta, Georgia 30309
Attention: Larry D. Ledbetter
Telecopy: 404/815-6555
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.10 Entire Agreement. This Agreement and the other written
agreements between Borrower and Lender represent the entire agreement between
the parties concerning the subject matter hereof, and all oral discussions and
prior agreements are merged herein; provided, if there is a conflict between
this Agreement and any other document executed contemporaneously herewith with
respect to the Obligations, the provision of this Agreement shall control. The
execution and delivery of this Agreement and the other Loan Documents by the
Borrower were not based upon any fact or material provided by Lender, nor was
the Borrower induced or influenced to enter into this Agreement or the other
Loan Documents by any representation, statement, analysis or promise by Lender.
.11 Governing Law and Amendments. This Agreement and all of the Loan
Documents shall be construed and enforced under the laws of the State of
Tennessee applicable to contracts to be wholly performed in such State except to
the extent certain rights and privileges may be granted Lender under applicable
federal laws in which event federal law shall control. No amendment or
modification hereof shall be effective except in a writing executed by each of
the parties hereto.
.12 Survival of Representations and Warranties. All covenants,
representations and warranties contained herein or in any of the Loan Documents,
or made by or furnished on behalf of the Borrower in connection herewith or any
of the Loan Documents, shall survive the execution and delivery of this
Agreement and all other Loan Documents and shall continue in full force and
effect so long as the Obligations are unpaid.
.13 Jurisdiction and Venue. Borrower hereby consents to the
jurisdiction of the courts of the State of Tennessee and the United States
District Court for the Middle District of Tennessee, as well as to the
jurisdiction of all courts from which an appeal may be taken from such courts,
for the purpose of any suit, action or other proceeding arising out of any of
its obligations arising under this Agreement or any other Loan Documents or with
respect to the transactions contemplated hereby, and expressly waives any and
all objections it may have as to venue in any of such courts.
.14 Waiver of Trial by Jury. LENDER AND BORROWER HEREBY WAIVE TRIAL
BY JURY IN ANY ACTIONS, PROCEEDINGS, CLAIMS OR COUNTER-CLAIMS, WHETHER IN
CONTRACT OR TORT, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATING TO
THIS AGREEMENT OR THE LOAN DOCUMENTS.
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.15 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties to this Agreement in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.
.16 Construction and Interpretation. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption that the
terms hereof shall be more strictly construed against one party by reason of the
rule of construction that a document is to be more strictly construed against
the party that itself or through its agent prepared the same, it being agreed
that the Borrower, Lender and their respective agents have participated in the
preparation hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
have caused this Agreement to be executed by their duly authorized officers, as
of the day and year first above written.
LENDER:
SIRROM CAPITAL CORPORATION, a Tennessee corporation
By:_______________________________
Title:____________________________
BORROWER:
PAYSYS INTERNATIONAL, INC., a Florida corporation
By:_______________________________
Title:____________________________
29
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Index of Schedules and Attachments
Exhibit A - Form of Note
Schedule 2.1(b) - Subsidiaries
Schedule 2.1(e) - Options, Warrants, Stock Rights, Etc.
Schedule 2.1(f) - Trademarks, Patents, Etc.
Schedule 2.1(i)(A) and (B) - Financial Statements
Schedule 2.1(l) - Debt and Liens
Schedule 2.1(o) - Shareholder Loans
Schedule 2.1(r) - Significant Contracts
Schedule 2.1(ac) - Deposit Institutions
Schedule 2.1(ad) - Names and Locations
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EXHIBIT 10.20
SECURED PROMISSORY NOTE
$4,000,000 September 26, 1997
FOR VALUE RECEIVED, the undersigned, PAYSYS INTERNATIONAL, INC., a Florida
corporation ("Maker"), promises to pay to the order of SIRROM CAPITAL
CORPORATION, a Tennessee corporation ("Payee"; Payee and any subsequent
holder[s] hereof are hereinafter referred to collectively as "Holder"), at the
office of Payee at P. O. Box 30378, Nashville, Tennessee 37241-0378, or at such
other place as Holder may designate to Maker in writing from time to time, the
principal sum of FOUR MILLION AND NO/100THS DOLLARS ($4,000,000), together with
interest on the outstanding principal balance hereof from the date hereof at the
rate of thirteen percent and one-half (13.5%) per annum (computed on the basis
of a 360-day year); provided, however, that Holder may charge and receive
interest upon any renewal or extension hereof at the greater of (i) the rate set
out above, or (ii) any rate agreed to by the undersigned that is not in excess
of the maximum rate of interest allowed to be charged under applicable law (the
"Maximum Rate") at the time of such renewal or extension.
Interest only on the outstanding principal balance hereof shall be due and
payable monthly, in arrears, with the first installment being payable on the
first (1st) day of November, 1997, and subsequent installments being payable on
the first (1st) day of each succeeding month thereafter until September 26, 2002
(the "Maturity Date"), at which time the entire outstanding principal balance,
together with all accrued and unpaid interest, shall be immediately due and
payable in full.
The indebtedness evidenced hereby may be prepaid in whole or in part, at
any time and from time to time, without penalty. Any such prepayments shall be
credited first to any accrued and unpaid interest and then to the outstanding
principal balance hereof.
Time is of the essence of this Note. It is hereby expressly agreed that in
the event that any default be made in the payment of principal or interest as
stipulated above, which default is not cured within five (5) days; or in the
event that any default or event of default shall occur under that certain Loan
Agreement of even date herewith, between Maker and Payee (as may be amended from
time to time, the "Loan Agreement"), which default or event of default is not
cured following the giving of any applicable notice and within any applicable
cure period set forth in said Loan Agreement; or should any default by Maker be
made in the performance or observance of any covenants or conditions contained
in any other instrument or document now or hereafter evidencing, securing or
otherwise relating to the indebtedness evidenced hereby (subject to any
applicable notice and cure period provisions that may be set forth therein);
<PAGE>
then, and in such event, the entire outstanding principal balance of the
indebtedness evidenced hereby, together with any other sums advanced hereunder,
under the Loan Agreement and/or under any other instrument or document now or
hereafter evidencing, securing or in any way relating to the indebtedness
evidenced hereby, together with all unpaid interest accrued thereon, shall, at
the option of Holder and without notice to Maker, at once become due and payable
and may be collected forthwith, regardless of the stipulated date of maturity.
Upon the occurrence of any default as set forth herein, at the option of Holder
and without notice to Maker, all accrued and unpaid interest, if any, shall be
added to the outstanding principal balance hereof, and the entire outstanding
principal balance, as so adjusted, shall bear interest thereafter until paid at
an annual rate (the "Default Rate") equal to the lesser of (i) the rate that is
seven percentage points (7.0%) in excess of the above-specified interest rate,
or (ii) the Maximum Rate in effect from time to time, regardless of whether or
not there has been an acceleration of the payment of principal as set forth
herein. All such interest shall be paid at the time of and as a condition
precedent to the curing of any such default.
In the event this Note is placed in the hands of an attorney for
collection, or if Holder incurs any costs incident to the collection of the
indebtedness evidenced hereby, Maker and any indorsers hereof agree to pay to
Holder an amount equal to all such costs, including without limitation all
actual reasonable attorney's fees and all court costs.
Presentment for payment, demand, protest and notice of demand, protest and
nonpayment are hereby waived by Maker and all other parties hereto. No failure
to accelerate the indebtedness evidenced hereby by reason of default hereunder,
acceptance of a past-due installment or other indulgences granted from time to
time, shall be construed as a novation of this Note or as a waiver of such right
of acceleration or of the right of Holder thereafter to insist upon strict
compliance with the terms of this Note or to prevent the exercise of such right
of acceleration or any other right granted hereunder or by applicable laws. No
extension of the time for payment of the indebtedness evidenced hereby or any
installment due hereunder, made by agreement with any person now or hereafter
liable for payment of the indebtedness evidenced hereby, shall operate to
release, discharge, modify, change or affect the original liability of Maker
hereunder or that of any other person now or hereafter liable for payment of the
indebtedness evidenced hereby, either in whole or in part, unless Holder agrees
otherwise in writing. This Note may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.
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<PAGE>
The indebtedness and other obligations evidenced by this Note are further
evidenced by (i) the Loan Agreement and (ii) certain other instruments and
documents, as may be required to protect and preserve the rights of Maker and
Payee as more specifically described in the Loan Agreement.
All agreements herein made are expressly limited so that in no event
whatsoever, whether by reason of advancement of proceeds hereof, acceleration of
maturity of the unpaid balance hereof or otherwise, shall the amount paid or
agreed to be paid to Holder for the use of the money advanced or to be advanced
hereunder exceed the Maximum Rate. If, from any circumstances whatsoever, the
fulfillment of any provision of this Note or any other agreement or instrument
now or hereafter evidencing, securing or in any way relating to the indebtedness
evidenced hereby shall involve the payment of interest in excess of the Maximum
Rate, then, ipso facto, the obligation to pay interest hereunder shall be
reduced to the Maximum Rate; and if from any circumstance whatsoever, Holder
shall ever receive interest, the amount of which would exceed the amount
collectible at the Maximum Rate, such amount as would be excessive interest
shall be applied to the reduction of the principal balance remaining unpaid
hereunder and not to the payment of interest. This provision shall control
every other provision in any and all other agreements and instruments existing
or hereafter arising between Maker and Holder with respect to the indebtedness
evidenced hereby.
This Note is intended as a contract under and shall be construed and
enforceable in accordance with the laws of the State of Tennessee, except to the
extent that federal law may be applicable to the determination of the Maximum
Rate.
As used herein, the terms "Maker" and "Holder" shall be deemed to include
their respective successors, legal representatives and assigns, whether by
voluntary action of the parties or by operation of law.
MAKER:
PaySys International, Inc., a
Florida corporation
By:
------------------------------------------
Title:
---------------------------------------
3
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EXHIBIT 10.21
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement"), dated as of the 26th day of
September, 1997, is made and entered into by and between PAYSYS INTERNATIONAL,
INC., a Florida corporation ("Borrower"), and SIRROM CAPITAL CORPORATION, a
Tennessee corporation ("Lender").
WITNESSETH:
WHEREAS, Lender is making a loan (the "Loan") in the amount of $4,000,000
to Borrower, pursuant to that certain Loan Agreement of even date herewith by
and between Borrower and Lender (the "Loan Agreement"); and
WHEREAS, in connection with the making of the Loan, Lender desires to
obtain from Borrower and Borrower desires to grant to Lender a security interest
in certain collateral more particularly described below.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing premises and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Security Interest. Borrower hereby grants to Lender a
security interest in the following described property and any and all proceeds
(although proceeds are covered, Lender does not authorize the sale of any of the
following, except to the extent permitted under Sections 10 and 11 hereof) and
products thereof and accessions thereto (collectively the "Collateral"):
(a) Equipment. All equipment and other tangible personal
property of Borrower of any kind and description, whether now owned or
hereafter acquired and wherever located, together with all parts,
accessories and attachments and all replacements thereof and additions
thereto;
(b) Inventory, Accounts, Contract Rights, Chattel Paper,
Documents, Instruments and General Intangibles. All of Borrower's
inventory and any agreements for lease of same and rentals therefrom, and
all of Borrower's accounts, accounts receivable, contract rights, chattel
paper,
<PAGE>
software, documents, instruments and general intangibles (including but not
limited to goodwill, patents and trademarks) and the proceeds therefrom,
whether now in existence or owned or hereafter arising or acquired, entered
into or created, and wherever located; and whether held for lease or sale,
or furnished or to be furnished under contracts of service;
(c) Trademarks, Etc. All trademarks, trade names, and service
marks now held or hereafter acquired by Borrower, both those that are
registered with the United States Patent and Trademark Office and any
unregistered marks used by Borrower in the United States, and trade dress,
including logos and designs, in connection with which any such marks are
used, together with all registrations regarding such marks and the rights
to renewals thereof, and the goodwill of the business of Borrower
symbolized by such marks, and all patents, licenses, technology and other
intangible property of Borrower, whether now owned or hereafter acquired;
(d) Copyrights. All copyrights now held or hereafter acquired
by Borrower and any applications for U.S. copyrights hereafter made by
Borrower; and
(e) Proprietary Information, Computer Data, Etc. All
proprietary information and trade secrets of Borrower with respect to
Borrower's business, whether now owned or hereafter acquired, and all of
Borrower's computer programs and the information contained therein and all
intellectual property rights with respect thereto, whether now owned or
hereafter acquired.
2. Secured Indebtedness. The obligations secured hereby shall
include (a) loans to be made concurrently or in connection with this Agreement
or the Loan Agreement as evidenced by one or more promissory notes payable to
the order of Lender that shall be due and payable as set forth in such
promissory notes, and any renewals or extensions thereof, (b) the full and
prompt payment and performance of any and all other indebtednesses and other
obligations of Borrower to Lender, direct or contingent (including but not
limited to obligations incurred as indorser, guarantor or surety), however
evidenced or denominated, and however and whenever incurred, including but not
limited to indebtednesses incurred pursuant to any present or future commitment
of Lender to Borrower and any and all future advances regardless of the class of
such future advances, and (c) all future advances made by Lender for taxes,
levies, insurance and
2
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preservation of the Collateral and all attorney's fees, court costs and expenses
of whatever kind incident to the collection of any of said indebtedness or other
obligations and the enforcement and protection of the security interest created
hereby.
3
<PAGE>
3. Representations, Warranties and Agreements of Borrower. Borrower
represents, warrants and agrees as follows:
(a) Borrower will promptly notify Lender, in writing, of any
change in Borrower's place or places of business if the Collateral is used
in business, or of any change in Borrower's residence if the Collateral is
not used in business, and regardless of use, of any change in the location
of the Collateral or any records pertaining thereto.
(b) Except as set forth on Schedule 2.1(l) of the Loan
Agreement, Borrower is the owner of the Collateral free and clear of any
liens, security interests, claims and encumbrances, contingent or
otherwise. Borrower will defend the Collateral against the claims and
demands of all persons.
(c) Borrower will pay to Lender all amounts secured hereby as
and when the same shall be due and payable, whether at maturity, by
acceleration or otherwise, and will promptly perform all terms of said
indebtedness and this or any other security or loan agreement between
Borrower and Lender, and will promptly discharge all said liabilities.
(d) Borrower will at all times keep the Collateral insured
against all insurable hazards in amounts equal to the full cash value of
the Collateral. Such insurance shall be obtained from such companies as
may be acceptable to Lender, with provisions satisfactory to Lender for
payment of all losses thereunder to Lender as its interests may appear. If
required by Lender, Borrower shall deposit the policies with Lender. If an
Event of Default (as defined in the Loan Agreement) has occurred and is
continuing, any money received by Lender under said policies may be applied
to the payment of any indebtedness secured hereby, whether or not due and
payable, otherwise said money shall be delivered by Lender to Borrower for
the purpose of repairing or restoring the Collateral. Borrower assigns to
Lender all right to receive proceeds of insurance not exceeding the amounts
secured hereby, directs any insurer to pay all proceeds directly to Lender,
and appoints Lender Borrower's attorney in fact to endorse any draft or
check made payable to Borrower in order to collect the benefits of such
insurance. If Borrower fails to keep the Collateral insured as required by
Lender, Lender shall have the right to obtain such insurance at Borrower's
expense and add the cost thereof to the other amounts secured hereby.
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(e) Borrower will pay all costs of filing of financing,
continuation and termination statements with respect to the security
interests created hereby, and Lender is authorized to do all things that it
deems necessary to perfect and continue perfection of the security
interests created hereby and to protect the Collateral.
(f) The address set forth after Borrower's signature on this
Agreement is Borrower's principal place of business and the location where
the records concerning all intangible Collateral are kept and/or
maintained. The addresses set forth on Schedule 2.1(ad) of the Loan
Agreement are all of the locations where Borrower does business and the
locations of all tangible Collateral.
4. Default. Borrower shall be in default upon failure to observe or
perform any of Borrower's agreements herein contained, or upon the occurrence of
a default or Event of Default under the Loan Agreement or any other Loan
Document (as defined in the Loan Agreement) that has not been cured during the
applicable grace period, or if any warranty or statement by Borrower set forth
herein or furnished in connection herewith is false or misleading.
5. Remedies Upon Default. Upon the occurrence of an Event of
Default (as defined in the Loan Agreement), all sums secured hereby shall
immediately become due and payable at Lender's option without notice to
Borrower, and Lender may proceed to enforce payment of same and to exercise any
and all rights and remedies provided by the Uniform Commercial Code (Tennessee)
or other applicable law, as well as all other rights and remedies possessed by
Lender, all of which shall be cumulative. Whenever Borrower is in default
hereunder, and upon demand by Lender, Borrower shall assemble the Collateral and
make it available to Lender at a place reasonably convenient to Lender and
Borrower. Any notice of sale, lease or other intended disposition of the
Collateral by Lender sent to Borrower at the address hereinafter set forth, or
at such other address of Borrower as may be shown on Lender's records, at least
five (5) days prior to such action, shall constitute reasonable notice to
Borrower.
Lender may waive any default before or after the same has been declared
without impairing its right to declare a subsequent default hereunder, this
right being a continuing one.
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Severability. If any provision of this Agreement is held invalid,
such invalidity shall not affect the validity or enforceability of the remaining
provisions of this Agreement.
7. Binding Effect. This Agreement shall inure to the benefit of
Lender's successors and assigns and shall bind Borrower's heirs,
representatives, successors and assigns. If Borrower is composed of more than
one person, firm and/or entity, their obligations hereunder shall be joint and
several.
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8. Termination Statement. Borrower agrees that, notwithstanding the
payment in full of all indebtedness secured hereby and whether or not there is
any outstanding obligation of Lender to make future advances, Lender shall not
be required to send Borrower a termination statement with respect to any
financing statement filed to perfect Lender's security interest(s) in any of the
Collateral, unless and until Borrower shall have made written demand therefor.
Upon receipt of proper written demand, Lender may at its option, in lieu of
sending a termination statement to Borrower, cause said termination statement to
be filed with the appropriate filing officer(s).
9. Protection of Collateral. Borrower will not permit any liens or
security interests other than those created by this Agreement to attach to any
of the Collateral, nor permit any of the Collateral to be levied upon under any
legal process, nor permit anything to be done that may impair the security
intended to be afforded by this Agreement, nor permit any tangible Collateral to
become attached to or commingled with other goods without the prior written
consent of Lender.
10. Special Agreements With Respect to Certain Tangible Collateral.
Borrower additionally agrees and warrants as follows:
(a) Borrower will not permit any of the Collateral to be removed
from the location specified herein, except for temporary periods in the
normal and customary use thereof, without the prior written consent of
Lender, and will permit Lender to inspect the Collateral at any time.
(b) If any of the Collateral is equipment or goods of a type
normally used in more than one state (whether or not actually so used),
Borrower will contemporaneously herewith furnish Lender a list of the
states wherein such equipment or goods are or will be used, and hereafter
will notify Lender in writing (i) of any other states in which such
equipment or goods are so used, and (ii) of any change in the location of
Borrower's principal place of business.
(c) Borrower will not sell, exchange, lease or otherwise dispose
of any of the Collateral or any interest therein without the prior written
consent of Lender.
(d) Borrower will keep the Collateral in good condition and
repair and will pay and discharge all taxes, levies and other impositions
levied thereon as well as the cost of repairs to or maintenance of same,
and will not
7
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permit anything to be done that may impair the value of any of the
Collateral. If Borrower fails to pay such sums, Lender may do so for
Borrower's account and add the amount thereof to the other amounts secured
hereby.
(e) Until default in any of the terms hereof, or the terms of
any indebtedness secured hereby, Borrower shall be entitled to possession
of the Collateral and to use the same in any lawful manner, provided that
such use does not cause excessive wear and tear to the Collateral, cause it
to decline in value at an excessive rate, or violate the terms of any
policy of insurance thereon.
(f) Borrower will not allow the Collateral to be attached to
real estate in such manner as to become a fixture or a part of any real
estate.
11. Special Agreements With Respect to Intangible and Certain
Tangible Collateral. Borrower additionally warrants and agrees as follows:
(a) So long as Borrower is not in default hereunder, Borrower
shall have the right to process and sell Borrower's inventory in the
regular course of business. Lender's security interest hereunder shall
attach to all proceeds of all sales or other dispositions of the
Collateral. If at any time any such proceeds shall be represented by any
instruments, chattel paper or documents of title, then such instruments,
chattel paper or documents of title shall be promptly delivered to Lender
and shall be subject to the security interest granted hereby. If at any
time any of Borrower's inventory is represented by any document of title,
such document of title will be delivered promptly to Lender and shall be
subject to the security interest granted hereby.
(b) By the execution of this Agreement, Lender shall not be
obligated to do or perform any of the acts or things provided in any
contracts covered hereby that are to be done or performed by Borrower, but
if there is a default by Borrower in the payment of any amount due in
respect of any indebtedness secured hereby, then Lender may, at its
election, perform some or all of the obligations provided in said contracts
to be performed by Borrower, and if Lender incurs any liability or expenses
by reason thereof, the same shall be payable by Borrower upon demand and
shall also be secured by this Agreement.
8
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(c) At any time after Borrower is in default hereunder or under
the Loan Agreement, Lender shall have the right to notify the account
debtors obligated on any or all of Borrower's accounts receivable to make
payment thereof directly to Lender, and to take control of all proceeds of
any such accounts receivable. Until such time as Lender elects to exercise
such right by mailing to Borrower written notice thereof, Borrower is
authorized, as agent of the Lender, to collect and enforce said accounts
receivable.
12. Refinancing Prior Debt. Borrower acknowledges and agrees that
the Loan constitutes a refinancing of the debt of Borrower to Sirrom
Investments, Inc. under that certain Loan and Security Agreement dated as of May
29, 1992 (as amended from time to time the "Original Loan Agreement") and that
certain Secured Promissory Note in the original principal amount of One Million
Dollars ($1,000,000) dated as of May 29, 1992 executed by Borrower in favor of
Sirrom Capital, L.P. (as amended from time to time the "Original Note").
Borrower further acknowledges and agrees that the security interest created
under the Original Loan Agreement has been assigned to Lender in connection with
refinancing of debt evidenced by the Original Note.
13. Power of Attorney. Borrower hereby constitutes the Lender or its
designee, as Borrower's attorney-in-fact with power, upon the occurrence and
during the continuance of an Event of Default, to endorse Borrower's name upon
any notes, acceptances, checks, drafts, money orders, or other evidences of
payment or Collateral that may come into either its or the Lender's possession;
to sign the name of Borrower on any invoice or bill of lading relating to any of
the accounts receivable, drafts against customers, assignments and verifications
of accounts receivable and notices to customers; to send verifications of
accounts receivable; to notify the Post Office authorities to change the address
for delivery of mail addressed to Borrower to such address as the Lender may
designate; to execute any of the documents referred to in Section 3(e) hereof in
order to perfect and/or maintain the security interests and liens granted herein
by Borrower to the Lender; and to do all other acts and things necessary to
carry out this Security Agreement. All acts of said attorney or designee are
hereby ratified and approved, and said attorney or designee shall not be liable
for any acts of commission or omission (other than acts of gross negligence or
willful misconduct), nor for any error of judgment or mistake of fact or law;
this power being coupled with an interest is irrevocable until all of the
obligations secured hereby are paid in full and any and all promissory notes
executed in connection therewith are terminated and satisfied.
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14. Governing Law and Amendments. This Agreement and all of the Loan
Documents shall be construed and enforced under the laws of the State of
Tennessee applicable to contracts to be wholly performed in such State. No
amendment or modification hereof shall be effective except in a writing executed
by each of the parties hereto.
15. Survival of Representations and Warranties. All representations
and warranties contained herein or made by or furnished on behalf of the
Borrowers in connection herewith shall survive the execution and delivery of
this Agreement.
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16. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties to this Agreement in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.
17. Construction and Interpretation. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption that the
terms hereof shall be more strictly construed against one party by reason of the
rule of construction that a document is to be more strictly construed against
the party that itself or through its agent prepared the same, it being agreed
that the Borrower, Lender and their respective agents have participated in the
preparation hereof.
IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement, or
have caused this Agreement to be executed as of the date first above written.
BORROWER:
PAYSYS INTERNATIONAL, INC.
By:
Title:
Address: 900 Winderley Place
Maitland, Florida 32751
LENDER:
SIRROM CAPITAL CORPORATION
By:
Title:
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THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. IT HAS BEEN ACQUIRED FOR INVESTMENT
PURPOSES ONLY, WITHOUT A VIEW TO RESALE OR DISTRIBUTION AND MAY NOT BE PLEDGED,
HYPOTHECATED, SOLD, MADE SUBJECT TO A SECURITY INTEREST, OR OTHERWISE
TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OF 1933 AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS.
STOCK PURCHASE WARRANT
This Warrant is issued this 26th day of September, 1997, by PAYSYS
INTERNATIONAL, INC., a Florida corporation (the "Company"), to SIRROM CAPITAL
CORPORATION, a Tennessee corporation (SIRROM CAPITAL CORPORATION and any
subsequent assignee or transferee hereof are hereinafter referred to
collectively as "Holder" or "Holders").
AGREEMENT:
1. Issuance of Warrant; Term. For and in consideration of SIRROM CAPITAL
CORPORATION making a loan to the Company in an amount of Four Million and
no/100ths Dollars ($4,000,000) pursuant to the terms of a secured promissory
note of even date herewith (the "Note") and related loan agreement of even date
herewith (the "Loan Agreement"), and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company hereby
grants to Holder the right to purchase 7,532 shares of the Company's common
stock (the "Common Stock"), which the Company represents equals 0.4% of the
capital stock of the Company on the date hereof, calculated on a fully diluted
basis after exercise ("Base Amount"), provided that in the event that the
indebtedness evidenced by the Note is outstanding on the following dates, the
Base Amount shall be increased to the corresponding number set forth below:
Date Base Amount
---------------- --------------------------------------------------
February 1, 1998 11,320 shares of Common Stock, which the Company
represents equals 0.6% of the capital stock of the
Company on the date hereof calculated on a fully
diluted basis after exercise.
<PAGE>
May 1, 1998 13,220 shares of Common Stock, which the
Company represents equals 0.7% of the capital
stock of the Company on the date hereof calculated
on a fully diluted basis after exercise.
August 1, 1998 15,124 shares of Common Stock, which the
Company represents equals 0.8% of the capital
stock of the Company on the date hereof calculated
on a fully diluted basis after exercise.
November 1, 1998 17,032 shares of Common Stock, which the
Company represents equals 0.9% of the capital
stock of the Company on the date hereof calculated
on a fully diluted basis after exercise.
February 1, 1999 18,944 shares of Common Stock, which the
Company represents equals 1.0% of the capital
stock of the Company on the date hereof calculated
on a fully diluted basis after exercise.
September 26, 2000 38,274 shares of Common Stock, which the
Company represents equals 2.0% of the capital
stock of the Company on the date hereof calculated
on a fully diluted basis after exercise.
September 26, 2001 58,004 shares of Common Stock, which the
Company represents equals 3.0% of the capital
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stock of the Company on the date hereof calculated
on a fully diluted basis after exercise.
September 26, 2002 78,144 shares of Common Stock, which the
Company represents equals 4.0% of the capital
stock of the Company on the date hereof calculated
on a fully diluted basis after exercise.
Notwithstanding the foregoing to the contrary, each of the foregoing Base
Amounts shall be increased by 99,126 shares of Common Stock, which the Company
represents equals 5.0% of the capital stock of the Company on the date hereof
calculated on a fully diluted basis after exercise, if the Company fails to
repay the Note within 30 days of the Company successfully completing an
underwritten public offering of its Common Stock with proceeds of the Company
equal to or greater than $10,000,000 ("IPO"). The shares of Common Stock
issuable upon exercise of this Warrant are hereinafter referred to as the
"Shares." This Warrant shall be exercisable at any time and from time to time
from the date hereof until October 26, 2002. For purposes of this Warrant the
term "fully diluted basis" shall be determined in accordance with generally
accepted accounting principles as of the date hereof.
2. Exercise Price. The exercise price (the "Exercise Price") per share
for which all or any of the Shares may be purchased pursuant to the terms of
this Warrant shall be One Cent ($.01).
3. Exercise. This Warrant may be exercised by the Holder hereof (but
only on the conditions hereinafter set forth) as to all or any increment or
increments of One Hundred (100) Shares (or the balance of the Shares if less
than such number), upon delivery of written notice of intent to exercise to the
Company at the following address: One Meca Way, Norcross, Georgia 30093 or such
other address as the Company shall designate in a written notice to the Holder
hereof, together with this Warrant and payment to the Company of the aggregate
Exercise Price of the Shares so purchased. The Exercise Price shall be payable,
at the option of the Holder, (i) by certified or bank check, (ii) by the
surrender of the Note or portion thereof having an outstanding principal balance
equal to the aggregate Exercise Price or (iii) by the surrender of a portion of
this Warrant having a fair market value equal to the aggregate Exercise Price.
Upon exercise of this Warrant as aforesaid, the Company shall as promptly as
practicable, and in any event within fifteen (15) days thereafter, execute and
deliver to the Holder of this
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Warrant a certificate or certificates for the total number of whole Shares for
which this Warrant is being exercised in such names and denominations as are
requested by such Holder. If this Warrant shall be exercised with respect to
less than all of the Shares, the Holder shall be entitled to receive a new
Warrant covering the number of Shares in respect of which this Warrant shall not
have been exercised, which new Warrant shall in all other respects be identical
to this Warrant. The Company covenants and agrees that it will pay when due any
and all state and federal issue taxes which may be payable in respect of the
issuance of this Warrant or the issuance of any Shares upon exercise of this
Warrant.
4. Covenants and Conditions. The above provisions are subject to the
following:
(a) Neither this Warrant nor the Shares have been registered under
the Securities Act of 1933, as amended ("Securities Act") or any state
securities laws ("Blue Sky Laws"). This Warrant has been acquired for
investment purposes and not with a view to distribution or resale and may
not be pledged, hypothecated, sold, made subject to a security interest, or
otherwise transferred without (i) an effective registration statement for
such Warrant under the Securities Act and such applicable Blue Sky Laws, or
(ii) an opinion of counsel, which opinion and counsel shall be reasonably
satisfactory to the Company and its counsel, that registration is not
required under the Securities Act or under any applicable Blue Sky Laws
(the Company hereby acknowledges that Bass, Berry & Sims is acceptable
counsel). Transfer of the shares issued upon the exercise of this Warrant
shall be restricted in the same manner and to the same extent as the
Warrant and the certificates representing such Shares shall bear
substantially the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES
LAW AND MAY NOT BE TRANSFERRED UNTIL (I) A REGISTRATION
STATEMENT UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES
LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR
(II) IN THE OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY,
REGISTRATION UNDER SUCH SECURITIES ACTS OR SUCH APPLICABLE
STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH
SUCH PROPOSED TRANSFER.
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<PAGE>
The Holder hereof and the Company agree to execute such other documents and
instruments as counsel for the Company reasonably deems necessary to effect the
compliance of the issuance of this Warrant and any shares of Common Stock issued
upon exercise hereof with applicable federal and state securities laws.
(b) The Company covenants and agrees that all Shares which may be
issued upon exercise of this Warrant will, upon issuance and payment
therefor, be legally and validly issued and outstanding, fully paid and
nonassessable, free from all taxes, liens, charges and preemptive rights,
if any, with respect thereto or to the issuance thereof. The Company shall
at all times reserve and keep available for issuance upon the exercise of
this Warrant such number of authorized but unissued shares of Common Stock
as will be sufficient to permit the exercise in full of this Warrant.
(c) The Company covenants and agrees that it shall not sell or issue
any shares of the Company's capital stock at a price below the fair market
value of such shares, without the prior written consent of the Holder
hereof, except pursuant to the exercise of warrants, options or other
rights to purchase capital stock outstanding on the date hereof and
disclosed to the initial Holder. In the event that the Company sells
shares of the Company's capital stock in violation of this Section 4(c),
the number of shares issuable upon exercise of this Warrant shall be equal
to the product obtained by multiplying the number of shares issuable
pursuant to this Warrant prior to such sale by the quotient obtained by
dividing (i) the fair market value of the shares issued in violation of
this Section 4(c) by (ii) the price at which such shares were sold.
5. Transfer of Warrant. Subject to the provisions of Section 4 hereof,
this Warrant may be transferred, in whole or in part, to any person or business
entity, by presentation of the Warrant to the Company with written instructions
for such transfer provided that at any time this Warrant may not be held in part
by more than three persons. Upon such presentation for transfer, the Company
shall promptly execute and deliver a new Warrant or Warrants in the form hereof
in the name of the assignee or assignees and in the denominations specified in
such instructions. The Company shall pay all expenses incurred by it in
connection with the preparation, issuance and delivery of Warrants under this
Section, provided, however, that the Company shall not be liable to pay any
transfer taxes.
6. Warrant Holder Not Shareholder; Rights Offering; Preemptive Rights;
Preference Rights. Except as otherwise provided herein, this Warrant does not
confer upon the Holder, as
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<PAGE>
such, any right whatsoever as a shareholder of the Company. Notwithstanding the
foregoing, if the Company should offer to all of the Company's shareholders the
right to purchase any securities of the Company, then all shares of Common Stock
that are subject to this Warrant shall be deemed to be outstanding and owned by
the Holder and the Holder shall be entitled to participate in such rights
offering. The Company shall not grant any preemptive rights with respect to any
of its capital stock without the prior written consent of the Holder. The
Company shall not issue any securities which entitle the holder thereof to
obtain any preference over holders of Common Stock upon the dissolution,
liquidation, winding-up, sale, merger, or reorganization of the Company without
the prior written consent of the Holder.
7. Observation Rights. A representative of the Holders of this Warrant
appointed by the Holders of a majority in interest in this Warrant (the
"Representative") shall (a) receive notice of and be entitled to attend or may
send a representative to attend all meetings of the Company's Board of Directors
in a non-voting observation capacity, (b) receive copies of all notices,
packages and documents provided to members of the Company's Board of Directors
for each board of directors meeting, and (c) receive copies of all actions taken
by written consent by the Company's Board of Directors, from the date hereof
until such time as the indebtedness evidenced by the Note has been paid in full.
6
<PAGE>
8. Adjustment Upon Changes in Stock.
(a) If all or any portion of this Warrant shall be exercised
subsequent to any stock split, stock dividend, recapitalization,
combination of shares of the Company, or other similar event, occurring
after the date hereof, then the Holder exercising this Warrant shall
receive, for the aggregate price paid upon such exercise, the aggregate
number and class of shares which such Holder would have received if this
Warrant had been exercised immediately prior to such stock split, stock
dividend, recapitalization, combination of shares, or other similar event.
If the cumulative adjustments under this Section 8(a) would create a
fractional share of Common Stock or a right to acquire a fractional share
of Common Stock, such fractional share shall be disregarded and the number
of shares subject to this Warrant shall be the next higher number of
shares, rounding all fractions upward. Whenever there shall be an
adjustment pursuant to this Section 8(a), the Company shall forthwith
notify the Holder or Holders of this Warrant of such adjustment, setting
forth in reasonable detail the event requiring the adjustment and the
method by which such adjustment was calculated.
(b) If all or any portion of this Warrant shall be exercised
subsequent to any merger, consolidation, exchange of shares, separation,
reorganization or liquidation of the Company, or other similar event,
occurring after the date hereof, as a result of which shares of Common
Stock shall be changed into the same or a different number of shares of the
same or another class or classes of securities of the Company or another
entity, then the Holder exercising this Warrant shall receive, for the
aggregate price paid upon such exercise, the aggregate number and class of
shares which such Holder would have received if this Warrant had been
exercised immediately prior to such merger, consolidation, exchange of
shares, separation, reorganization or liquidation, or other similar event.
If any adjustment under this Section 8(b) would create a fractional share
of Common Stock or a right to acquire a fractional share of Common Stock,
such fractional share shall be disregarded and the number of shares subject
to this Warrant shall be the next higher number of shares, rounding all
fractions upward. Whenever there shall be an adjustment pursuant to this
Section 8(b), the Company shall forthwith notify the Holder or Holders of
this Warrant of such adjustment, setting forth in reasonable detail the
event requiring the adjustment and the method by which such adjustment was
calculated.
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<PAGE>
9. Put Agreement.
(a) The Company hereby irrevocably grants and issues to Holder the
right and option to sell to the Company (the "Put") this Warrant for a
period of 30 days immediately prior to the expiration thereof, at a
purchase price (the "Purchase Price") equal to the Fair Market Value (as
hereinafter defined) of the shares of Common Stock issuable to Holder upon
exercise of this Warrant. The Put shall terminate if Company successfully
completes the IPO and repays the Note in full.
(b) The Company shall pay to the Holder, in cash or certified or
cashier's check, the Purchase Price in exchange for the delivery to the
Company of this Warrant within thirty (30) days of the receipt of written
notice, addressed as set forth in Section 3 hereto, from the Holder of its
intention to exercise the Put.
(c) The Fair Market Value of the shares of Common Stock of the
Company issuable pursuant to this Warrant shall be determined as follows:
(i) The Company and the Holder shall each appoint an
independent, experienced appraiser who is a member of a recognized
professional association of business appraisers. The two appraisers
shall determine the value of the shares of Common Stock which would be
issued upon the exercise of the Warrant, taking into consideration
that such shares would constitute a minority interest, and would lack
liquidity, and further assuming that the sale would be between a
willing buyer and a willing seller, both of whom have full knowledge
of the financial and other affairs of the Company, and neither of whom
is under any compulsion to sell or to buy.
(ii) If the highest of the two appraisals is not more than 10%
more than the lowest of the appraisals, the Fair Market Value shall be
the average of the two appraisals. If the highest of the two
appraisals is 10% or more than the lowest of the two appraisals, then
a third appraiser shall be appointed by the two appraisers, and if
they cannot agree on a third appraiser, the American Arbitration
Association shall appoint the third appraiser. The third appraiser,
regardless of who appoints him or her, shall have the same
qualifications as the first two appraisers.
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<PAGE>
(iii) The Fair Market Value after the appointment of the third
appraiser shall be the mean of the three appraisals.
(iv) The fees and expenses of the appraisers shall be paid
one-half by the Company and one-half by the Holder.
10. Registration.
(a) The Company and the holders of the Shares agree that if at any
time after the date hereof the Company shall propose to file a registration
statement with respect to a secondary offering of its Common Stock on a
suitable form, it will give notice in writing to such effect to the
registered holder(s) of the Shares at least thirty (30) days prior to such
filing, and, at the written request of any such registered holder, made
within ten (10) days after the receipt of such notice, will include therein
at the Company's cost and expense (including the fees and expenses of
counsel to such holder(s), but excluding underwriting discounts,
commissions and filing fees attributable to the Shares included therein)
such of the Shares (but not less than 1000 Shares) as such holder(s) shall
request; provided, however, that if the offering being registered by the
Company is underwritten then the selling Holders shall enter into any
underwriting agreement and other customary agreements as described in
Section 10(b)(vii) and if the representative of the underwriters certifies
in writing that the inclusion therein of the Shares would materially and
adversely affect the sale of the securities to be sold by the Company
thereunder, then the Company shall be required to include in the offering
only that number of securities, including the Shares, which the
underwriters determine in their sole discretion will not jeopardize the
success of the offering (the securities so included to be apportioned pro
rata among all selling shareholders according to the total amount of
securities entitled to be included therein owned by each selling
shareholder, but in no event shall the total number of Shares included in
the offering be less than the number of securities included in the offering
by any other single selling shareholder).
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<PAGE>
(b) Whenever the Company undertakes to effect the registration of any
of the Shares, the Company shall, as expeditiously as reasonably possible:
(i) Prepare and file with the Securities and Exchange Commission
(the "Commission") a registration statement covering such Shares and
use its best efforts to cause such registration statement to be
declared effective by the Commission as expeditiously as possible and
to keep such registration effective until the earlier of (A) the date
when all Shares covered by the registration statement have been sold
or (B) two hundred seventy (270) days from the effective date of the
registration statement; provided, that before filing a registration
statement or prospectus or any amendment or supplements thereto, the
Company will furnish to each Holder of Shares covered by such
registration statement and the underwriters, if any, copies of all
such documents proposed to be filed (excluding exhibits, unless any
such person shall specifically request exhibits), which documents will
be subject to the review of such Holders and underwriters, and the
Company will not file such registration statement or any amendment
thereto or any prospectus or any supplement thereto (including any
documents incorporated by reference therein) with the Commission if
(A) the underwriters, if any, shall reasonably object to such filing
or (B) if information in such registration statement or prospectus
concerning a particular selling Holder has changed and such Holder or
the underwriters, if any, shall reasonably object.
(ii) Prepare and file with the Commission such amendments and
post-effective amendments to such registration statement as may be
necessary to keep such registration statement effective during the
period referred to in Section 10(b)(i) and to comply with the
provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement, and cause the
prospectus to be supplemented by any required prospectus supplement,
and as so supplemented to be filed with the Commission pursuant to
Rule 424 under the Securities Act.
(iii) Furnish to the selling Holder(s) such numbers of copies of
such registration statement, each amendment thereto, the prospectus
included in such registration statement (including each preliminary
prospectus), each supplement thereto and such other
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<PAGE>
documents as they may reasonably request in order to facilitate the
disposition of the Shares owned by them.
(iv) Use its best efforts to register and qualify under such
other securities laws of such jurisdictions as shall be reasonably
requested by any selling Holder and do any and all other acts and
things which may be reasonably necessary or advisable to enable such
selling Holder to consummate the disposition of the Shares owned by
such Holder, in such jurisdictions; provided, however, that the
Company shall not be required in connection therewith or as a
condition thereto to qualify to transact business or to file a general
consent to service of process in any such states or jurisdictions.
(v) Promptly notify each selling Holder of the happening of any
event as a result of which the prospectus included in such
registration statement contains an untrue statement of a material fact
or omits any fact necessary to make the statements therein not
misleading and, at the request of any such Holder, the Company will
prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Shares, such prospectus
will not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not
misleading.
(vi) Provide a transfer agent and registrar for all such Shares
not later than the effective date of such registration statement.
(vii) Enter into such customary agreements (including
underwriting agreements in customary form for a primary offering) and
take all such other actions as the underwriters, if any, reasonably
request in order to expedite or facilitate the disposition of such
Shares (including, without limitation, effecting a stock split or a
combination of shares).
(viii) Make available for inspection by any selling Holder or
any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent
retained by any such selling Holder or underwriter, all financial and
other records, pertinent corporate documents and properties of the
Company, and cause the officers, directors, employees and independent
accountants of the Company to supply all information reasonably
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requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement.
(ix) Promptly notify the selling Holder(s) and the underwriters,
if any, of the following events and (if requested by any such person)
confirm such notification in writing: (A) the filing of the
prospectus or any prospectus supplement and the registration statement
and any amendment or post-effective amendment thereto and, with
respect to the registration statement or any post-effective amendment
thereto, the declaration of the effectiveness of such documents, (B)
any requests by the Commission for amendments or supplements to the
registration statement or the prospectus or for additional
information, (C) the issuance or threat of issuance by the Commission
of any stop order suspending the effectiveness of the registration
statement or the initiation of any proceedings for that purpose, and
(D) the receipt by the Company of any notification with respect to the
suspension of the qualification of the Shares for sale in any
jurisdiction or the initiation or threat of initiation of any
proceeding for such purposes.
(x) Make every reasonable effort to prevent the entry of any
order suspending the effectiveness of the registration statement and
obtain at the earliest possible moment the withdrawal of any such
order, if entered.
(xi) Cooperate with the selling Holder(s) and the underwriters,
if any, to facilitate the timely preparation and delivery of
certificates representing the Shares to be sold and not bearing any
restrictive legends, and enable such Shares to be in such lots and
registered in such names as the underwriters may request at least two
(2) business days prior to any delivery of the Shares to the
underwriters.
(xii) Provide a CUSIP number for all the Shares not later than
the effective date of the registration statement.
(xiii) Prior to the effectiveness of the registration statement
and any post-effective amendment thereto and at each closing of an
underwritten offering, (A) make such representations and warranties to
the selling Holder(s) and the underwriters, if any, with respect to
the Shares and the registration
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statement as are customarily made by issuers in primary underwritten
offerings; (B) use its best efforts to obtain "cold comfort" letters
and updates thereof from the Company's independent certified public
accountants addressed to the selling Holders and the underwriters, if
any, such letters to be in customary form and covering matters of the
type customarily covered in "cold comfort" letters by underwriters in
connection with primary underwritten offerings; (C) deliver such
documents and certificates as may be reasonably requested (1) by the
holders of a majority of the Shares being sold, and (2) by the
underwriters, if any, to evidence compliance with clause (A) above and
with any customary conditions contained in the underwriting agreement
or other agreement entered into by the Company; and (D) obtain
opinions of counsel to the Company and updates thereof (which counsel
and which opinions shall be reasonably satisfactory to the
underwriters, if any), covering the matters customarily covered in
opinions requested in underwritten offerings and such other matters as
may be reasonably requested by the selling Holders and underwriters or
their counsel. Such counsel shall also state that no facts have come
to the attention of such counsel which cause them to believe that such
registration statement, the prospectus contained therein, or any
amendment or supplement thereto, as of their respective effective or
issue dates, contains any untrue statement of any material fact or
omits to state any material fact necessary to make the statements
therein not misleading (except that no statement need be made with
respect to any financial statements, notes thereto or other financial
data or other expertized material contained therein). If for any
reason the Company's counsel is unable to give such opinion, the
Company shall so notify the Holders of the Shares and shall use its
best efforts to remove expeditiously all impediments to the rendering
of such opinion.
(xiv) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders earnings statements satisfying the
provisions of Section 11(a) of the Securities Act, no later than
forty-five (45) days after the end of any twelve-month period (or
ninety (90) days, if such period is a fiscal year) (A) commencing at
the end of any fiscal quarter in which the Shares are sold to
underwriters in a firm or best efforts underwritten offering, or (B)
if not sold to underwriters in such an
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offering, beginning with the first month of the first fiscal quarter
of the Company commencing after the effective date of the registration
statement, which statements shall cover such twelve-month periods.
(c) After the date hereof, the Company shall not grant to any holder
of securities of the Company any registration rights which have a priority
greater than or equal to those granted to Holders pursuant to this Warrant
without the prior written consent of the Holder(s).
(d) The Company's obligations under Section 10(a) above with respect
to each holder of Shares are expressly conditioned upon such holder's
furnishing to the Company in writing such information concerning such
holder and the terms of such holder's proposed offering as the Company
shall reasonably request for inclusion in the registration statement. If
any registration statement including any of the Shares is filed, then the
Company shall indemnify each holder thereof (and each underwriter for such
holder and each person, if any, who controls such underwriter within the
meaning of the Securities Act) from any loss, claim, damage or liability
arising out of, based upon or in any way relating to any untrue statement
of a material fact contained in such registration statement or any omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, except for any such
statement or omission based on information furnished in writing by such
holder of the Shares expressly for use in connection with such registration
statement; and such holder shall indemnify the Company (and each of its
officers and directors who has signed such registration statement, each
director, each person, if any, who controls the Company within the meaning
of the Securities Act, each underwriter for the Company and each person, if
any, who controls such underwriter within the meaning of the Securities
Act) and each other such holder against any loss, claim, damage or
liability arising from any such statement or omission which was made in
reliance upon information furnished in writing to the Company by such
holder of the Shares expressly for use in connection with such registration
statement.
(e) For purposes of this Section 10, all of the Shares shall be
deemed to be issued and outstanding.
14
<PAGE>
11. Certain Notices. In case at any time the Company shall propose to:
(a) declare any cash dividend upon its Common Stock;
(b) declare any dividend upon its Common Stock payable in stock or
make any special dividend or other distribution to the holders of its
Common Stock;
(c) offer for subscription to the holders of any of its Common Stock
any additional shares of stock in any class or other rights;
(d) reorganize, or reclassify the capital stock of the Company, or
consolidate, merge or otherwise combine with, or sell all or substantially
all of its assets to, another corporation; or
(e) voluntarily or involuntarily dissolve, liquidate or wind up the
affairs of the Company;
then, in any one or more of said cases, the Company shall give to the
Holder of the Warrant, by certified or registered mail, (i) at least twenty
(20) days' prior written notice of the date on which the books of the
Company shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in
respect of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, and (ii) in the case
of such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, at least twenty (20) days' prior
written notice of the date when the same shall take place. Any notice
required by clause (i) shall also specify, in the case of any such
dividend, distribution or subscription rights, the date on which the
holders of Common Stock shall be entitled thereto, and any notice required
by clause (ii) shall specify the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, as the
case may be.
12. Rights of Co-Sale.
(a) Co-Sale Right. Neither Intelligent Systems Corporation, Grubb &
Williams Ltd., nor GW Investments, Ltd. (individually a "Selling
Shareholder" and collectively the "Selling Shareholders") shall enter into
any transaction
15
<PAGE>
that would result in the sale by it of any Common Stock now or hereafter
owned by it, unless prior to such sale the Selling Shareholder shall give
notice to Holder of its intention to effect such sale in order that Holder
may exercise its rights under this Section 12 as hereinafter described.
Such notice shall set forth (i) the number of shares to be sold by the
Selling Shareholder, (ii) the principal terms of the sale, including the
price at which the shares are intended to be sold, and (iii) an offer by
the Selling Shareholder to use its best efforts to cause to be included
with the shares to be sold by it in the sale, on a share-by-share basis and
on the same terms and conditions, the Shares issuable or issued to Holder
pursuant this Warrant. The co-sale rights hereunder shall terminate if the
Company successfully completes the IPO and repays the Note in full and
shall not be effective with respect to the sale by any Selling Shareholder
in the IPO.
(b) Rejection of Co-Sale Offer. If Holder has not accepted such
offer in writing within a period of ten (10) days from the date of receipt
of the notice, then the Selling Shareholder shall thereafter be free for a
period of ninety (90) days to sell the number of shares specified in such
notice, at a price no greater than the price set forth in such notice and
on otherwise no more favorable terms to the Selling Shareholder than as set
forth in such notice, without any further obligation to Holder in
connection with such sale. In the event that the Selling Shareholder fails
to consummate such sale within such ninety-day period, the shares specified
in such notice shall continue to be subject to this Section.
(c) Acceptance of Co-Sale Offer. If Holder accepts such offer in
writing within ten (10) day period, such acceptance shall be irrevocable
unless the Selling Shareholder shall be unable to cause to be included in
his sale the number of Shares of stock held by Holder and set forth in the
written acceptance. In that event, the Selling Shareholder and Holder
shall participate in the sale pro rata, with the Selling Shareholder and
Holder each selling half the total number of such shares to be sold in the
sale.
13. Stock Option Plan. Notwithstanding anything contained herein to the
contrary, the Company may grant options to purchase up to sixteen percent
of the Company's Common Stock outstanding on the date hereof to employees
and directors of the Company pursuant to the Company's 1995 Stock Incentive
Plan (the "1995 Plan"), and the Company may issue shares of the Company's
Common Stock or grant options to purchase
16
<PAGE>
shares of the Company's Common Stock (up to a maximum of six percent of the
Common Stock outstanding on the date hereof) to key employees, officers and
directors of the Company pursuant to the 1997 Stock Incentive Plan (the
"1997 Plan") (the 1995 Plan and the 1997 Plan are sometimes collectively
referred to as the "Plans"); provided, however, that the exercise price per
share under each option granted under the Plans shall in no event be less
than 100% of the fair market value of the Common Stock on the date such
option is granted.
14. Equity Participation. This Warrant is issued in connection with the
Loan Agreement. It is intended that this Warrant constitute an equity
participation under and pursuant to T.C.A. Section 47-24-101, et seq. and
that such equity participation be permitted under said statutes and not
constitute interest on the Note. If under any circumstances whatsoever,
fulfillment of any obligation of this Warrant, the Loan Agreement, or any
other agreement or document executed in connection with the Loan Agreement,
shall violate the lawful limit of any applicable usury statute or any other
applicable law with regard to obligations of like character and amount,
then the obligation to be fulfilled shall be reduced to such lawful limit,
such that in no event shall there occur, under this Warrant, the Loan
Agreement, or any other document or instrument executed in connection with
the Loan Agreement, any violation of such lawful limit, but such obligation
shall be fulfilled to the lawful limit. If any sum is collected in excess
of the lawful limit, such excess shall be applied to reduce the principal
amount of the Note.
15. Governing Law. This warrant shall be governed by the laws of the
State of Tennessee applicable to agreements made entirely within the State.
16. Severability. If any provision(s) of this Warrant or the
application thereof to any person or circumstances shall
17
<PAGE>
be invalid or unenforceable to any extent, the remainder of this Warrant
and the application of such provisions to other persons or circumstances
shall not be affected thereby and shall be enforced to the greatest extent
permitted by law.
17. Counterparts. This Warrant may be executed in any number of
counterparts and be different parties to this Warrant in separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
Warrant.
18. Jurisdiction and Venue. The Company hereby consents to the
jurisdiction of the courts of the State of Tennessee and the United States
District Court for the Middle District of Tennessee, as well as to the
jurisdiction of all courts from which an appeal may be taken from such
courts, for the purpose of any suit, action or other proceeding arising out
of any of its obligations arising under this Agreement or with respect to
the transactions contemplated hereby, and expressly waives any and all
objections it may have as to venue in any such courts.
IN WITNESS WHEREOF, the parties hereto have set their hands as of the date
first above written.
PAYSYS INTERNATIONAL, INC., a
Florida corporation
By:____________________________
Title:_______________________
SIRROM CAPITAL CORPORATION, a
Tennessee corporation
By:____________________________
Title:_________________________
18
<PAGE>
The undersigned Shareholders join in the execution of this Warrant for the
purposes of acknowledging and agreeing to be bound by Section 12 hereof.
INTELLIGENT SYSTEMS CORPORATION
_______________________________
By:____________________________
Title:_________________________
GRUBB & WILLIAMS, LTD.
________________________________
By:_____________________________
Title:__________________________
GW INVESTMENTS, LTD.
________________________________
By:____________________________,
By:_____________________________
Title:__________________________
19
<PAGE>
- -----------------------------------------------------------------------------
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED
("FEDERAL ACT"), THE GEORGIA SECURITIES ACT OF 1973, AS AMENDED ("GEORGIA
ACT") OR ANY OTHER STATE SECURITIES LAWS. THIS NOTE MAY NOT BE SOLD OR
TRANSFERRED UNLESS A REGISTRATION STATEMENT WITH RESPECT TO THIS NOTE IS
EFFECTIVE UNDER THE FEDERAL ACT, THE GEORGIA ACT AND ANY OTHER APPLICABLE
STATE SECURITIES LAWS, OR THE HOLDER HAS DELIVERED TO PAYOR AN OPINION OF
COUNSEL TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.
- -----------------------------------------------------------------------------
TERM NOTE
$426,000.00 August 29, 1997
Norcross, Georgia
FOR VALUE RECEIVED, the undersigned, PaySys International, Inc., a
Florida corporation ("Payor") hereby promises to pay to the order of
INTELLIGENT SYSTEMS CORPORATION, a Georgia corporation ("Holder"), the
principal sum of Four Hundred and Twenty-Six Thousand dollars ($426,000.00)
on September 15, 1997 (the "Maturity Date"). Payor further promises to pay
to the order of Holder interest on the outstanding principal balance of this
Note at the simple interest rate per annum of fourteen percent. Interest and
principal shall be due on the Maturity Date. Principal and interest payments
due hereunder shall be paid at 4355 Shackleford Road, Norcross, Georgia
30093, or such other address as Holder may designate in writing to Payor.
Prepayment. This Note may be prepaid in whole or part at any time or
from time to time without fee, penalty or premium.
Application of Payments. Any payments made under this Note shall be
applied first to the reduction of reduction of interest and secondly to the
reduction of the principal.
Default and Acceleration. Each of the following shall constitute an
Event of Default:
(a) Any payment due hereunder has become due and has not been paid
in full on the date on which the payment became due.
(b) A receiver, liquidator, or trustee of Payor or of any property
of Payor shall be appointed by court order; or Payor shall be
adjudged bankrupt or insolvent; or any of the property of
Payor shall be sequestered by court order; or a petition shall
be filed against Payor under any bankruptcy, reorganization,
or insolvency law and shall not be dismissed within thirty
(30) days after such filing.
(c) Payor shall file a petition in voluntary bankruptcy or
requesting reorganization under any provision of any
bankruptcy, reorganization, or insolvency law or shall consent
to the filing of any petition against it under such law.
1
<PAGE>
(d) Payor shall make a formal or informal assignment for the
benefit of its creditors or admit in writing its inability to
pay its debts generally when they become due or shall consent
to the appointment of a receiver, trustee, or liquidator of
all or any part of the property of Payor.
Upon the occurrence of any such Event of Default, this Note shall, at
the option of Holder, become immediately due and payable without notice or
demand. Payor acknowledges that Holder may recover any amounts due and
unpaid under this note by means of the garnishment or attachment of property
of Payor.
Attorney's Fees. If this Note is collected by legal action or through
an attorney at law, Payor shall pay all costs of collection, including
reasonable attorney's fees equal to 15 percent (15%) of the principal owing.
Time. Time is of the essence of this Note.
Waiver. Demand, presentment, dishonor, protest, and notice of dishonor
or protect are hereby waived by Payor.
Forbearance. Holder shall not be deemed to waive any rights under this
Note unless such waiver is in writing and signed by Holder, and no delay or
omission by Holder in exercising any rights shall operate as a waiver of such
rights. A waiver of any right on one occasion shall not be construed as a
waiver of or an agreement to waive such right on subsequent occasions nor as
a waiver of any other right or remedy then or thereafter existing.
Applicable Law. This Note has been made and delivered in the State of
Georgia and shall be governed by and enforced in accordance with the laws of
this State, without giving effect to principles of conflict of laws.
IN WITNESS WHEREOF, Payor has caused this Note to be executed and
delivered on the date shown above.
PaySys International, Inc.
By:
-----------------------------------
William Pearson
Senior Vice President
and Chief Financial Officer
ATTEST:
- -----------------------------------
Secretary
2
<PAGE>
EXHIBIT 11.1
PAYSIS INTERNATIONAL, INC.
COMPUTATION OF EARNINGS PER SHARE (1)
<TABLE>
<CAPTION>
YEAR 11 MONTHS
ENDED ENDED SIX MONTH PERIOD
JANUARY 31, DECEMBER 31, YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------- ------------ ---------------------------------- ----------------------
1993 1993 1994 1995 1996 1996 1997
----------- ------------ -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Weighted average common and
common equivalent shares
outstanding during the
period ............................. 5,096 5,096 5,096 5,744 6,666 6,666 6,677
Net effect of dilutive stock
options and stock warrants
based on the treasury stock
method............................... -- -- -- -- 1,028 928 --
Effect of common stock issued
and stock options and warrants
granted subsequent to October 7,
1997 computed in accordance with
the treasury stock method as
required by the SEC (2).............. 876 876 876 876 876 876 876
------- ------- ------- ------- ------- ------- -------
Total common and common
equivalent shares................. 5,972 5,972 5,972 6,620 8,570 8,470 7,553
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
Income (loss) from continuing
operations........................... $ (745) $ (982) $ 149 $ (472) $ 139 $ 235 $(4,622)
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
Income (loss) per share from
continuing operations................ $ (0.12) $ (0.16) $ 0.02 $ (0.07) $ 0.02 $ 0.03 $ (0.61)
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
Net loss ............................. $(1,829) $(1,026) $ (23) $ (472) $ 139 $ 235 $(4,622)
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
Net loss per share.................... $ (0.31) $ (0.17) $ 0.00 $ (0.07) $ 0.02 $ 0.03 $ (0.61)
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
</TABLE>
- -----------------------------
(1) All share information has been adjusted to reflect a five-for-one
stock split.
(2) Pursuant to Securities and Exchange Commission Staff Accounting
Bulletin No. 83, Common and Preferred Stock issued and stock
options and warrants grants at prices below the assumed initial public
offering price of $12.00 per share during the 12-month period
immediately preceding the initial filing date of the Company's
Registration Statement for its initial public offering have been
included as outstanding for all periods presented using the treasury
stock method.
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and
to the use of our report dated February 7, 1997, except for Note 12, as to
which the date is October 7, 1997, in the Registration Statement on Form S-1
and related Prospectus of PaySys International, Inc. dated October 8, 1997,
for the registration of 3,333,333 shares of its common stock.
Ernst & Young LLP
Orlando, Florida
October 7, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<CASH> 1859
<SECURITIES> 0
<RECEIVABLES> 8612
<ALLOWANCES> 120
<INVENTORY> 0
<CURRENT-ASSETS> 10824
<PP&E> 6415
<DEPRECIATION> 4254
<TOTAL-ASSETS> 15402
<CURRENT-LIABILITIES> 18562
<BONDS> 310
0
0
<COMMON> 68
<OTHER-SE> (4519)
<TOTAL-LIABILITY-AND-EQUITY> 15402
<SALES> 13670
<TOTAL-REVENUES> 13670
<CGS> 0
<TOTAL-COSTS> 8491
<OTHER-EXPENSES> 9489
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35
<INCOME-PRETAX> (4345)
<INCOME-TAX> 277
<INCOME-CONTINUING> (4622)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4622)
<EPS-PRIMARY> (.60)
<EPS-DILUTED> (.60)
</TABLE>
