<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 2, 1998
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
THE INTERCEPT GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
GEORGIA 6099 58-2237359
STATE(OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
JOHN W. COLLINS
CHIEF EXECUTIVE OFFICER
THE INTERCEPT GROUP, INC.
3150 HOLCOMB BRIDGE ROAD, SUITE 200
NORCROSS, GEORGIA 30071
(770) 248-9600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES AND AGENT FOR SERVICE)
---------------
COPIES TO:
<TABLE>
<S> <C>
ROBERT D. PANNELL, ESQ. M. HILL JEFFRIES, ESQ.
SUSAN L. SPENCER, ESQ. R. BRANDON ASBILL, ESQ.
JONATHAN R. COE, ESQ. R. DAVID PATTON, ESQ.
NELSON MULLINS RILEY & SCARBOROUGH,
L.L.P. ALSTON & BIRD LLP
FIRST UNION PLAZA, SUITE 1400 ONE ATLANTIC CENTER
999 PEACHTREE STREET, N.E. 1201 WEST PEACHTREE STREET
ATLANTA, GEORGIA 30309 ATLANTA, GEORGIA 30309
(404) 817-6000 (404) 881-7000
(404) 817-6050 (FAX) (404) 881-4777 (FAX)
</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 being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for any 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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
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,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) FEE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par value........... 2,862,500 $12.00 34,350,000 $10,134
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Includes 337,500 shares which the Underwriters have an option to purchase
from the Company to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a).
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
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 OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID
SECTION 8(A) MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 2, 1998
PROSPECTUS
2,525,000 SHARES
THE INTERCEPT GROUP, INC.
[LOGO]
COMMON STOCK
Of the 2,525,000 shares of Common Stock offered hereby (the "Offering"),
2,250,000 shares are being offered by The InterCept Group, Inc. ("InterCept" or
the "Company") and 275,000 shares are being offered by certain shareholders of
the Company (the "Selling Shareholders"). See "Principal and Selling
Shareholders." The Company will not receive any of the proceeds from the sale
of shares by the Selling Shareholders. See "Use of Proceeds."
Prior to the Offering there has been no public market for the Common Stock.
It is currently anticipated that the initial public offering price for the
Common Stock will be between $10.00 and $12.00 per share. See "Underwriting"
for information relating to the determination of the initial public offering
price.
The Company has filed an application for listing of the Common Stock on The
Nasdaq Stock Market's National Market under the symbol "ICPT."
SEE "RISK FACTORS" BEGINNING ON PAGE 7 OF THIS PROSPECTUS 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>
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) SHAREHOLDERS
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share....................... $ $ $ $
- --------------------------------------------------------------------------------------------
Total(3)........................ $ $ $ $
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>
(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting estimated Offering expenses of $1,200,000, payable by the
Company.
(3) The Company has granted the Underwriters a 30-day over-allotment option to
purchase up to 337,500 additional shares of Common Stock on the same terms
and conditions as set forth above. If all such shares are purchased by the
Underwriters, the total Price to Public will be $ , the total
Underwriting Discount will be $ , the total Proceeds to Company will be
$ and the total Proceeds to Selling Shareholders will be $ . See
"Underwriting."
-----------
The shares of Common Stock are offered subject to receipt and acceptance by
the several Underwriters, to prior sale, and to the Underwriters' right to
reject orders in whole or in part and to withdraw, cancel or modify the offer
without notice. It is expected that certificates for the shares of Common Stock
will be available for delivery on or about , 1998.
-----------
J.C. Bradford & Co. Wheat First Union
, 1998
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN THE
COMMON STOCK, AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and Consolidated Financial Statements and the related Notes thereto
appearing elsewhere in this Prospectus. Unless otherwise indicated, the
information contained in this Prospectus assumes an initial public offering
price per share of $11.00 and no exercise of the Underwriters' over-allotment
option. All Common Stock share numbers in this Prospectus reflect a 2.1053-for-
1 stock split on February 28, 1998. The terms "InterCept" and "Company" as used
in this Prospectus mean The InterCept Group, Inc. and its subsidiaries on a
consolidated basis. Industry information presented in this Prospectus is based
upon sources which the Company believes to be reliable but has not
independently verified.
THE COMPANY
The InterCept Group, Inc. ("InterCept" or the "Company") designs, develops,
markets and implements a suite of fully integrated electronic commerce products
and services primarily for community financial institutions in the United
States. The Company's products and services include electronic funds transfer
("EFT"), data communications management, client/server enterprise software and
other processing solutions. InterCept currently serves over 550 financial
institutions and is the largest third-party processor of financial
institutions' automated teller machines ("ATMs") in the southeastern United
States. The Company has established marketing relationships with 9 of the 17
bankers' banks, which provide the Company access to over 4,500 of the
approximately 11,000 community financial institutions nationwide. On January
30, 1998, the Company merged with Intercept Communications Technologies,
L.L.C., a related party. The Company's pro forma revenues (giving effect to
such merger) increased from $16.4 million for the year ended December 31, 1996
to $23.3 million for the year ended December 31, 1997. Recurring revenues
accounted for approximately 66.2% and 76.3%, respectively, of the Company's pro
forma revenues for these two years.
InterCept is a single source provider of a broad range of flexible electronic
commerce solutions and supporting value-added products and services. The
Company provides numerous EFT products and services, including ATM, point-of-
sale ("POS") and scrip debit services, debit card processing, funds transfer
and remote banking services. The Company licenses PC BancPAC(TM), a
client/server enterprise software system that operates in a personal computing
environment and (since October 1997) in a Windows NT(R) environment. Community
financial institutions can implement PC BancPAC(TM) on both a service bureau
and in-house basis, providing them with two alternatives for utilizing the
Company's technologies and processing expertise to improve operating efficiency
for their institutions. The Company also provides maintenance and technical
support services, supplies banking related equipment and offers numerous
ancillary products and services to its financial institution customers.
As part of its integrated suite of electronic commerce products and services,
the Company provides end-to-end data communications management solutions to its
customers. The Company maintains nationwide data communications coverage and
has one of the largest private frame relay networks in the southeastern United
States (the "InterCept Frame Relay Network"). The InterCept Frame Relay Network
is the principal conduit through which the Company processes EFT transactions
and manages the data communications needs of its customers. The InterCept Frame
Relay Network contains approximately 1,300 drops which are located in 14
states, 40 local access transport areas ("LATAs") and all five markets of the
Regional Bell Operating Companies ("RBOCs"). The design of the InterCept Frame
Relay Network provides for efficient switching capabilities, which results in
rapid response time, as well as secure and reliable transmission and processing
of electronic commerce transactions conducted across the network. The Company
believes the InterCept Frame Relay Network enables it to provide its electronic
commerce products and services efficiently and on a more cost-effective basis
for its customers.
InterCept's top nine senior officers have an average of over 22 years of
industry experience and have expertise in multiple areas of electronic commerce
(including data communications management), enterprise
3
<PAGE>
software and transaction processing for financial institutions. The Company's
current market focus is on community financial institutions, which the Company
believes rely heavily on third-party providers for a majority of their EFT,
data communications management, enterprise software and transaction processing
solutions, including the products and services offered by the Company. As a
result of rapid technological, financial and other changes that have occurred
over the past several years, InterCept believes that the demand of community
financial institutions and their customers for technologically advanced
solutions has increased substantially and that such demand will continue to
grow in the future. The Company believes that its integrated suite of
electronic commerce solutions enables its community financial institution
customers to compete with larger financial institutions by allowing them to
offer similar products and services on a cost-competitive basis.
InterCept's goal is to become the largest provider of electronic commerce
products and services for community financial institutions in the United
States. The Company plans to implement the following key strategies to attain
its goal:
(i) Cross-Market to Existing Customer Base and Maximize Recurring
Revenues. InterCept plans to cross-market its EFT, data communications
management, client/server enterprise software and numerous ancillary
products and services to its existing customers, most of which already use
the Company's EFT services. The Company seeks to develop and maintain long-
term customer relationships by providing multiple electronic commerce
products and services to community financial institutions pursuant to
contracts with renewable terms. The Company intends to maximize its
recurring revenues through these relationships by enhancing and increasing
the use of its various products and services. The Company also plans to
create and acquire additional sources of recurring revenues to meet the
evolving needs of its customers.
(ii) Increase Data Communications Management and Optimize the InterCept
Frame Relay Network. InterCept intends to increase the use of its data
communications management services by offering customized, cost-competitive
telecommunications connectivity to its customers and by managing their data
traffic in a reliable and secure manner across the InterCept Frame Relay
Network. The Company intends to optimize the InterCept Frame Relay Network
by selling additional communications services to its customers, thereby
increasing network utilization with minimal additional cost to the Company.
InterCept plans to improve the speed and efficiency of transaction
processing across the network by selectively enhancing and upgrading its
processing and switching equipment and telecommunications lines. In
addition, the Company will attempt to expand the InterCept Frame Relay
Network into new geographic areas as business warrants. The Company
believes that the strategic development of the InterCept Frame Relay
Network will continue to provide for more efficient network utilization,
allow it to reduce transmission and other operating cost, and support its
current and future products and services.
(iii) Complete Strategic Acquisitions. InterCept intends to acquire other
companies with complementary technologies or services that will enhance and
expand the products and services offered to existing customers, increase
its market share, expand its geographic presence or optimize the InterCept
Frame Relay Network. Since the beginning of 1996, the Company has completed
several acquisitions of providers of complementary products and services.
(iv) Expand Sales Force and Strategic Marketing Relationships. The
Company plans to expand its customer base and penetrate new geographic
markets by hiring sales personnel with expertise in community financial
institutions' operations and/or the Company's electronic commerce products
and services. InterCept currently has established relationships with
several banking related business organizations, including strategic
marketing relationships with 9 of the 17 bankers' banks, which provide the
Company access to over 4,500 of the approximately 11,000 community
financial institutions nationwide. InterCept intends to use its expanded
sales force to market its products and services directly to these
institutions and to enhance its indirect marketing efforts by developing
additional strategic marketing relationships with bankers' banks and
various other business organizations.
4
<PAGE>
(v) Expand and Enhance its Products and Services. The Company has devoted
and will continue to devote resources to developing and enhancing its suite
of products and services. The Company plans to continue to combine its
enhanced and expanded electronic commerce solutions with sophisticated
technology to help its community financial institution customers remain
competitive with other financial service providers. The Company continually
strives to anticipate the most recent trends in the financial services
industry and to develop and provide leading edge products and services.
THE OFFERING
<TABLE>
<C> <S>
Common Stock offered by the Company........ 2,250,000 shares
Common Stock offered by the
Selling Shareholders...................... 275,000 shares(1)
Common Stock to be outstanding
after the Offering........................ 9,000,114 shares(2)
Use of proceeds by the Company............. To repay certain indebtedness and
an amount owed to an officer;
enhance marketing efforts;
upgrade, enhance and expand the
InterCept Frame Relay Network;
redeem outstanding preferred
stock; and for working capital
and general corporate purposes,
including acquisitions. See "Use
of Proceeds."
Proposed Nasdaq National Market symbol..... ICPT
</TABLE>
- --------
(1) See "Principal and Selling Shareholders."
(2) Excludes 595,853 shares issuable upon exercise of outstanding options
granted pursuant to the Company's stock option plans. See "Management--
Stock Option Plans."
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
PRO FORMA
AS ADJUSTED
1995(1) 1996(2) 1997 1997(3)
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues........................ $ 12,291 $ 14,299 $ 20,027 $ 23,260
Costs of services............... 6,163 6,792 7,682 10,241
Selling, general and
administrative expenses........ 4,488 7,631 9,900 10,087
Depreciation and amortization... 258 252 1,148 1,188
Loss on impairment of
intangibles.................... 0 0 728 728
Writeoff of purchased research
and development costs.......... 0 810 0 0
---------- ---------- ---------- ----------
Total operating expenses........ 10,909 15,485 19,458 22,244
---------- ---------- ---------- ----------
Operating income (loss)......... 1,382 (1,186) 569 1,016
Income (loss) before minority
interest and pro forma
provision for income taxes..... 1,324 (1,463) (88) 1,104
Net income (loss) attributable
to common shareholders......... $ 1,252 $ (1,294) $ (550) $ 207
========== ========== ========== ==========
Net income (loss) per common
share(4)....................... $ 0.34 $ (0.38) $ (0.14) $ 0.02
========== ========== ========== ==========
Weighted average common shares
outstanding.................... 3,736,908 3,367,913 4,009,085 9,000,114
</TABLE>
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1997
-----------------------------------
PRO FORMA
ACTUAL PRO FORMA(3) AS ADJUSTED(5)
------ ------------ --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................... $1,872 $ 2,010 $16,695
Working capital............................. 737 804 15,982
Total assets................................ 9,439 11,201 25,885
Long-term debt.............................. 4,717 4,717 316
Shareholders' (deficit) equity.............. (1,470) 86 21,864
</TABLE>
- --------
(1) On June 4, 1996, the Company, Intercept Systems, Inc. ("Systems") and Data
Services Corp. ("Data Services") combined in a share exchange combination
the majority of which has been accounted for as a common control merger in
a manner similar to a pooling of interests with the minority interest in
Data Services accounted for as a purchase. The results of operations of
Systems and Data Services have been included for the periods shown,
excluding precombination earnings related to the minority interest. See
Note 3 of Notes to Consolidated Financial Statements. The statements of
operations data for the year ended December 31, 1995 include $1,470 in
revenues and associated costs of $1,637 related to data communications
management. These operations were transferred to InterCept Communications
Technologies, L.L.C. ("Technologies") a related party company, as of
January 1, 1996. There are no data communications management revenues in
the Company's historical financial statements in either of the years ended
December 31, 1996 or 1997.
(2) On November 27, 1996, the Company acquired ProVesa, Inc. ("ProVesa") in a
merger transaction accounted for as a purchase, and the results of
operations of ProVesa have been included beginning December 1, 1996. On
December 17, 1996, InterCept acquired FiNet, Inc. ("FiNet") in a merger
transaction accounted for as a purchase, and the results of operations of
FiNet have been included since the date of acquisition. On December 31,
1996, InterCept acquired Bank Services Corporation ("Bank Services") in a
merger transaction accounted for as a purchase, and the results of
operations of Bank Services have been included since the date of
acquisition. See Note 3 of Notes to Consolidated Financial Statements.
(3) On January 30, 1998, the Company acquired Technologies in a merger
transaction the majority of which has been accounted for as a common
control merger in a manner similar to a pooling of interests with the
minority interest in Technologies accounted for as a purchase. The pro
forma statement of operations data reflect the Company's results of
operations as if the merger with Technologies had occurred on January 1,
1997. In addition, the pro forma statement of operations data reflect (i)
the sale of 2,250,000 shares of Common Stock offered by the Company, (ii)
the elimination of interest expense related to the Company's credit
facilities, (iii) the elimination of interest expense related to a deferred
compensation agreement with an officer and (iv) the elimination of
preferred stock dividends related to preferred stock to be repurchased with
proceeds of the Offering. See "Use of Proceeds."
(4) See Notes 2 and 10 of Notes to the Consolidated Financial Statements for a
discussion of the historical computations of net income (loss) per common
share. Pursuant to Staff Accounting Bulletin No. 98, the impact of any
options are excluded as the issuances are not considered nominal.
Accordingly, basic and fully diluted net income (loss) per common share are
the same. Pro forma net income per common share has been adjusted to
reflect the merger of Technologies with the Company and the sale of
2,250,000 shares of Common Stock offered by the Company (assuming the
shares were outstanding for the entire period).
(5) Adjusted to reflect the sale of 2,250,000 shares of Common Stock offered by
the Company and the application of the estimated net proceeds therefrom.
See "Use of Proceeds" and "Capitalization."
6
<PAGE>
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. In addition to the other information in this Prospectus, the
following factors should be considered carefully in evaluating an investment
in the Common Stock offered hereby. This Prospectus contains "forward-looking
statements" relating to, without limitation, future economic performance,
plans and objectives of management for future operations and other financial
items that are based on the beliefs of, as well as assumptions made by and
information currently known to, the Company's management. The words "may,"
"would," "could," "will," "expect," "estimate," "anticipate," "believe,"
"intends," "plans" and similar expressions and variations thereof are intended
to identify forward-looking statements. The cautionary statements set forth in
this "Risk Factors" section and elsewhere in this Prospectus identify
important factors with respect to such forward-looking statements, including
certain risks and uncertainties, that could cause actual results to differ
materially from those in such forward-looking statements.
ABILITY TO CONTINUE AND MANAGE GROWTH; ACQUISITION RISKS
The Company's failure or inability to continue and manage its growth
successfully may have a material adverse effect on the Company's business,
financial condition and results of operations. The expansion of the Company's
operations has placed and will continue to place significant demands on its
administrative, operational and financial personnel and systems. The Company
intends to continue to grow through strategic business combinations and
through internal growth, including expanding its sales and marketing forces,
cross-marketing its suite of products and services to existing customers,
opening new data communications and item processing centers and expanding the
InterCept Frame Relay Network. The Company's ability to grow also will depend
on a number of factors beyond the Company's control, including general
economic and industry conditions, existing and emerging competition and the
strength of demand for the products and services provided by the Company.
There can be no assurance that the Company will be able to generate or obtain
capital sufficient to fund mergers and acquisitions and the enhancement and
expansion of its products and services, manage costs, adapt its infrastructure
and modify its operating systems to accommodate growth and attract and train
additional qualified sales and marketing personnel. Implementing the Company's
business strategies, including integrating other companies, introducing new
products and services and opening new data communications and item processing
centers, may divert management's attention from normal operating activities,
which, in addition to the costs associated with such activities, may
materially and adversely affect the Company's business, financial condition
and results of operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
An element of the Company's strategy is the pursuit of business combinations
that either increase or enhance the products and services currently offered by
the Company. The inability to identify, acquire and integrate additional
businesses, products and services may have a material adverse effect on the
Company's business, financial condition and results of operations. There can
be no assurance that the Company will be able to identify suitable acquisition
candidates, establish favorable consideration and other terms, arrange
adequate financing on acceptable terms, consummate any transaction, or
successfully integrate the operations, products, personnel and culture of any
acquired business into those of the Company, nor can there be any assurance
that the Company will be able to expand its market share. Future acquisitions
may also result in potentially dilutive issuances of equity securities, the
incurrence of additional debt, the loss of key employees, the writeoff of in-
process product development and capitalized product costs, integration costs,
the amortization of expenses related to goodwill and other intangible assets,
and the incurrence of unforeseen liabilities, all of which could have a
material adverse effect on the Company. In addition, the Company competes with
other electronic commerce providers for acquisition candidates, and
consolidation in the financial services industry in the United States has
resulted in fewer opportunities for acquisitions.
ABILITY TO EXPAND SALES AND MARKETING FORCES AND STRATEGIC MARKETING
RELATIONSHIPS
An integral part of the Company's strategy is to expand its sales and
marketing forces and its strategic marketing relationships. If InterCept is
unable to locate and hire experienced personnel or establish and maintain
7
<PAGE>
key marketing relationships on a timely basis, the Company's business,
financial condition and results of operations would likely be materially
adversely affected. Competition for experienced sales and marketing personnel
is intense, and there can be no assurance that the Company will be able to
retain existing personnel or to attract, integrate or keep additional
qualified personnel in the future. In addition, the Company has relationships
with various banking related organizations for the marketing and endorsement
of the Company's products and services that management believes are important
to its sales and marketing efforts and geographic expansion of the Company's
business. The loss of any of these marketing relationships or the failure to
enter into additional strategic marketing alliances could impact the Company's
ability to implement its business strategies and could have a material adverse
effect on its business, financial condition and results of operations. See
"Business--Business Strategy" and "--Sales and Marketing."
TECHNOLOGICAL CHANGE; DEPENDENCE ON NEW PRODUCTS
There can be no assurance that the Company will be successful in developing,
acquiring or marketing new or enhanced products or services that respond to
technological change or evolving customer needs, that the Company will not
experience difficulties that could delay or prevent the successful
introduction of such products or services, that its new or enhanced products
and services will satisfy the requirements of the marketplace and be accepted
by its customers or that incorporating new developments in data communications
or information processing technology or employing new technologies will not
involve substantial cost. Electronic commerce, including EFT, data
communications and enterprise software, has been characterized by rapid
technological change, and the introduction of new communications technologies
and new financial products and services can render existing technologies,
products and services obsolete in a short period of time. The Company believes
that its future success will depend in large part upon its ability to maintain
and enhance its current product and service offerings and to continually
develop and introduce new products and services that will keep pace with
technological advances and satisfy evolving customer requirements.
In addition, telephone companies and media companies are likely to increase
communications services through the Internet, and if the Internet becomes an
accepted method of electronic commerce, the Company could lose customers,
which would reduce revenues from EFT and data communications management
services. Use of the Internet for electronic commerce services raises numerous
issues, including reliability, data security and data integrity, timely
transmission, and pricing of products and services. It is impossible to
predict whether the Internet will prove to be a viable commercial marketplace
or whether the Company will continue to design, develop and offer Internet
products and services which will be accepted in the marketplace.
Delays or failures in the development and provision of new or enhanced
products or services, or the failure of such products or services to achieve
market acceptance, could have a material adverse effect on the business,
financial condition and results of operations of the Company. The Company
expects other vendors to continually introduce new products and services, as
well as enhancements to their existing products and services, which will
compete with the products and services offered by the Company. The Company's
success will depend significantly on its ability to anticipate evolving
industry trends, continue to apply advances in electronic commerce, enhance
existing products and services, and develop, acquire and introduce new
products and services on a timely basis to address technological developments
and meet increasing demands of its customers.
DEPENDENCE ON MANAGEMENT
The loss of the services of one or more of the Company's senior officers or
key management personnel would likely have a material adverse effect on the
Company's business, financial condition and results of operations. The
Company's success depends on the abilities of John W. Collins, its Chief
Executive Officer, Donny R. Jackson, its President and Chief Operating
Officer, and a number of other senior officers and key management personnel
who have substantial experience with the Company's operations, the rapidly
changing electronic commerce industry and the particular community financial
institutions on which the Company focuses. The relationships established
between the Company and its customers and marketing partners would be impaired
8
<PAGE>
if the Company lost the services of one or more of its senior officers, which
would likely have a material adverse effect on the Company's business,
financial condition and results of operations. As the Company implements its
business strategies, its success will depend on its ability to continue to
attract, manage and retain other qualified management and technical personnel,
and there can be no assurance that the Company will be able to attract or
retain such personnel. The Company is the beneficiary of key man life
insurance policies on Mr. Collins and Mr. Jackson. See "Management."
COMPETITION
The EFT, data communications management, enterprise software and transaction
processing industries are intensely competitive and highly fragmented, and the
Company expects increased competition from both existing competitors and
entrants into the Company's existing or future markets. Such competition could
materially and adversely affect the Company's business, financial condition
and results of operations. The Company believes that its ability to compete
depends in part on a number of factors, including the development by others of
competing products and services, the price at which others offer competitive
products and services, the extent of competing competitors' responsiveness to
customer needs and the ability of the Company's competitors to hire, retain
and motivate key personnel. Numerous companies supply competing products and
services, and many of these companies specialize in one or more of the
services that the Company offers or intends to offer to its customers. The
Company believes that existing competitors are likely to expand their product
and service offerings and that new competitors are likely to enter the market
and attempt to integrate various electronic commerce products and services,
resulting in greater competition for the Company which could materially and
adversely affect its business, financial condition and results of operations.
Current and potential competitors have established, and may establish in the
future, cooperative relationships among themselves or with third parties to
increase their ability to address the needs of the Company's prospective
customers. Accordingly, new competitors or alliances among competitors may
emerge and rapidly acquire significant market share. Many of the Company's
current and potential competitors have longer operating histories, greater
name recognition, larger customer bases and substantially greater financial,
personnel, marketing, engineering, technical and other resources than the
Company. As a result of these and other factors, the Company's competitors may
be able to adapt more quickly than the Company to new or emerging technologies
and changes in customer requirements, or to devote greater resources to the
promotion and sale of their products. There can be no assurance that the
Company will be able to compete successfully with existing or new competitors.
Failure by the Company to adapt to emerging market demands and to compete
successfully with existing and new competitors would have a material adverse
effect on the Company's business, financial condition and results of
operations.
The Company's principal EFT competitors include regional ATM networks,
regional and local processing banks, non-bank processors and other independent
electronic commerce and data communications organizations. There can be no
assurance that the Company will be able to compete effectively with such
competitors. The Company's EFT services and its customers' outsourced core
processing data are transmitted to its customers over telephone lines, and the
Telecommunications Act of 1996 (the "Act") lifted certain restrictions on
regional telephone companies and others competing with the Company, which will
likely lead to these companies competing with the Company by packaging
information service offerings with other services and providing them on a
wider geographic scale. The competitive pricing pressures that would result
from any such increase in competition could have a material adverse effect on
the Company's business, financial condition and results of operations. See "--
Government and Network Regulation," "Business--Competition" and "Business--
Government Regulation."
DEPENDENCE ON PROCESSING CENTERS AND COMMUNICATIONS
Damage or destruction that interrupts the Company's processing services
could cause the Company to lose customers and may cause the Company to incur
substantial additional expense to repair or replace damaged
9
<PAGE>
equipment or to avoid interruption of communications services, any of which
would likely have a material adverse effect on the Company's business,
financial condition and results of operations. The processing centers and
communications network operations of the Company depend upon its ability to
protect computer equipment and the information stored in the Company's data
centers against damage or destruction that may be caused by natural disasters,
human causes, fire, power loss, telecommunication failures, unauthorized
intrusion, computer viruses and disabling devices and other similar causes and
events. The Company's electronic commerce products and services depend upon
long-distance and local telecommunications carriers and access to
telecommunications facilities on a 24-hour basis. The Company maintains a
single EFT processing and communications switching facility and has
established a limited disaster recovery plan with certain telecommunications
providers to provide alternative communications capabilities in the event the
Company experiences a natural disaster or other interruption at such facility,
rather than maintaining a "hot site" backup location for its EFT processing
and InterCept Frame Relay Network switching hardware. There can be no
assurance that a natural disaster, telecommunications failure or other event,
including national, regional or local telecommunications outages, would not
result in a prolonged interruption of the Company's transaction processing
services. In the event of a disaster, and depending on the nature of any such
disaster, several hours to several days may pass before the Company's systems
can become operational for all of its customers. In the event that an
interruption of the Company's network extends for more than several hours, the
Company may experience data loss or a reduction in revenues by reason of such
interruption. See "Business--The InterCept Solution--Data Communications
Management and The InterCept Frame Relay Network."
RISKS ASSOCIATED WITH NEW PRODUCTS AND SERVICES
There can be no assurance that any new products and services offered by the
Company will not have undetected errors or failures that could have a material
adverse effect upon the Company's business, financial condition and results of
operations. Electronic commerce products and services as complex as those
offered by the Company may contain undetected errors or failures when first
introduced or when new versions are released. If errors are discovered after
introduction to the marketplace, the Company could experience delayed or lost
revenues during the period required to correct these errors. There can be no
assurance that, despite testing by the Company and by current and potential
customers, errors will not be found in new products or releases after
introduction to the market, resulting in loss of or delay in market
acceptance, additional and unexpected expenses to fund further product
development or to add programming personnel to complete a development project,
and loss of revenue because of the inability to sell the new product on a
timely basis, any one or more of which could have a material adverse effect on
the Company's business, financial condition and results of operations. The
Company's 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 limitations on liability for special,
consequential and incidental damages. It is possible, however, that the
limitation of liability provisions contained in such agreements may not be
effective as a result of existing or future federal, state or local laws or
ordinances or unfavorable judicial decisions. The sale and support of products
by the Company may result in the Company's being subject to product liability
claims, and a successful product liability claim brought against the Company
could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company's ability to successfully
develop new products and services depends on a number of factors, including
its ability to identify and effectively integrate new services into the
Company's suite of integrated electronic commerce solutions. The
identification and offering of new services in which the Company has little or
no experience or expertise could divert management's attention and place
significant demands on the Company's operational, administrative and financial
resources. See "Business--Business Strategy."
FACTORS AFFECTING OPERATING RESULTS; POTENTIAL FLUCTUATIONS IN QUARTERLY
RESULTS
The market for EFT, data communications management, client/server software
and other processing products and services is rapidly evolving and the
Company's revenues in any period may be affected by many factors, including
the introduction of new products and services by the Company's competitors as
well as alternative data communications technologies. The Company's expense
levels are based, in part, on its
10
<PAGE>
expectations as to future revenues. If revenue levels are below expectations,
the Company may be unable or unwilling to reduce expenses proportionately and
the Company's business, financial condition and results of operations are
likely to be adversely affected. Customers may be lost at the expiration of a
contract due to conversion to a competing processor or to an in-house system.
Prior to contract expiration, customers may be lost due to business failure or
acquisition by financial institutions using other third party service
providers. The Company's quarterly operating results have varied in the past
and will likely vary or decrease significantly in the future. Factors that may
cause the Company's future operating results to vary include, without
limitation, the timing of new product and service announcements, changes in
pricing policies by the Company and its competitors, market acceptance of new
and enhanced versions of the Company's products and services, the lengthening
of sales cycles for new or existing customers, customer attrition, changes in
operating expenses, changes in Company strategy, personnel changes, the
introduction of alternative technologies, the Company's products becoming
obsolete, the failure, delay and expense in making software, systems and
networks utilized in the Company's business Year 2000 compliant, the effect of
acquisitions and general economic factors. The Company has limited or no
control over many of these factors. As a result, the Company believes that
period-to-period comparisons of its results of operations are not necessarily
meaningful and should not be relied upon as indicative of future performance.
Due to all of the foregoing factors, it is likely that in some future quarter
or quarters the Company's operating results will be below the expectations of
public market analysts and investors. In such event, the price of the
Company's Common Stock will likely be adversely affected.
BRIEF COMBINED OPERATING HISTORY
The Company was incorporated in May 1996 and has acquired six companies in
transactions that occurred from June 1996 through January 1998. The members of
the Company's senior management have worked together to manage the Company as
a combined business for only a short time. There can be no assurance that
management will be able to effectively manage the combined enterprise or
implement the Company's growth strategies or that the Company will be able to
achieve any cost savings. The Company's historical financial results cover
periods when the Company was not operating as a combined entity and,
therefore, may not be indicative of the Company's future operating results or
financial condition. See "The Company," "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Certain Transactions."
GOVERNMENT AND NETWORK REGULATION
As a provider of services to financial institutions, the Company's data
processing operations are examined from time to time by various state and
federal regulatory agencies. These agencies can make findings or
recommendations regarding various aspects of operations, and the Company
generally must follow such recommendations to continue its data processing
operations. As part of its compliance efforts, the Company arranges for an
annual independent examination of certain of its data processing facilities.
The Company's ATM network operations are subject to federal regulations
governing consumers' rights with respect to ATM transactions. Certain fees
charged by ATM owners are currently regulated in several states, and
legislation regulating ATM fees has been proposed in several other states. It
is impossible to predict whether such legislation will continue to be proposed
and enacted in the future or whether existing consumer protection laws will be
expanded to apply to fees charged in connection with ATM transactions. If the
number of ATMs deployed decreases, then revenues for the Company's EFT
business may decline. Furthermore, the Company is subject to the regulations
and policies of various ATM and debit card associations and networks. If the
Company lost its privileges to provide transaction processing services across
these networks, the Company's revenues from ATM and POS transaction processing
might decrease significantly. The Clinton administration has announced an
initiative to establish a framework for global electronic commerce. Also,
there are a number of bills currently being considered in the United States at
the federal and state levels involving encryption and digital signatures, all
of which may impact the Company. No assurance can be given that such laws,
regulations and policies will not be amended or interpreted differently by
regulatory authorities, associations and networks, or that new laws,
regulations and policies will not be adopted, the effect of which could
materially and adversely affect the Company's business, financial condition
and results of operations. See "Business--Government Regulation."
11
<PAGE>
RISKS ASSOCIATED WITH YEAR 2000
The Company's business and relationships with its customers depend
significantly on a number of computer software programs, internal operating
systems and connections to other networks, and the failure of any of these
programs, systems or networks to successfully address the Year 2000 data
rollover problem could have a material adverse effect on the Company's
business, financial condition and results of operations. Many installed
computer software and network processing systems currently accept only two-
digit entries in the date code field and may need to be upgraded or replaced
in order to accurately record and process information and transactions on and
after January 1, 2000. The Company believes that its internal systems and
software and the network connections it maintains are adequately programmed to
address the Year 2000 issue. The Company currently provides service bureau
processing services to certain customers using a processing system that is not
Year 2000 compliant, and the Company is in the process of converting those
customers to its PC BancPAC(TM) software, which the Company believes is Year
2000 compliant, before the end of 1999. It is difficult to predict with any
certainty the costs the Company will incur to implement this conversion and
there can be no assurance that the costs necessary to convert its customers to
PC BancPAC(TM) will not have a material adverse effect on the Company's
business, financial condition and results of operations. Further, any failure
by the Company to complete the conversion of any of its service bureau
customers in a timely manner could significantly interrupt the business
operations of such customers, which could have material adverse effect on the
business, financial condition and results of operations of both the affected
customers and the Company.
Other companies interact electronically with the Company and its customers,
and the Company must coordinate its EFT, data communications and enterprise
software processing with such companies, including interfacing and exchanging
information with customers, financial institutions' network processors and
other participants in the electronic commerce process. If such other companies
do not successfully address Year 2000 issues in their operations, the
Company's processing operations may be impeded, hindered or delayed, which
could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company believes that many financial
institutions and third party vendors and network processors are still in the
preliminary stages of analyzing their software and network applications for
Year 2000 compliance and that it is impossible to estimate the potential
expenses involved or delays that may result as these institutions transition
their operations to resolve the Year 2000 issue. There can be no assurance
that the failure or delay of third parties in addressing the Year 2000 issue
or the costs involved in such process will not have a material adverse effect
on the Company's business, financial condition and results of operations.
STATE TAXATION
Transaction processing companies such as the Company may be subject to state
taxation of certain portions of the fees charged for their services.
Application of this tax is an emerging issue in the industry, and the states
have not yet adopted uniform guidelines implementing these regulations. In the
event the Company is required to bear all or a portion of these costs, and is
unable to pass such costs through to its customers, the financial condition
and results of operations of the Company could be adversely affected.
VOTING CONTROL BY MANAGEMENT
After the Offering, the executive officers and directors of the Company will
own approximately 59.2% of the outstanding Common Stock (approximately 57.1%
if the Underwriters' over-allotment option is exercised in full). As a result,
the officers and directors of the Company, voting together, will be able to
control or, at a minimum, significantly impact the outcome of matters
requiring a shareholder vote, including the election of directors, adopting or
amending provisions of the Company's Articles of Incorporation and Bylaws, and
approving certain mergers or other similar transactions, such as sales of
substantially all the Company's assets. Purchasers in this Offering will
become minority shareholders of the Company and will be unable to control the
management or business policies of the Company. Moreover, the Company is not
prohibited from engaging in transactions with its management and principal
shareholders, or with entities in which such persons are interested, as long
as such transactions are on terms that are no less favorable to the Company
than could be obtained from an unaffiliated third party in an arm's length
transaction. See "Management," "Principal and Selling Shareholders" and
"Certain Transactions."
12
<PAGE>
DISCRETION OF MANAGEMENT CONCERNING USE OF PROCEEDS
The Company expects to use approximately $9.3 million of the net proceeds of
the Offering for specific, identified purposes, with the remaining net
proceeds to be used for working capital and general corporate purposes
including possible acquisitions. Accordingly, management will have substantial
discretion in spending a large part of the net proceeds to be received by the
Company. See "Use of Proceeds."
LIMITED PROTECTION OF PROPRIETARY TECHNOLOGY; RISKS OF INFRINGEMENT
The Company attempts to protect its software, documentation and other
written materials principally under trade secret and copyright laws,
confidentiality procedures and contractual provisions, 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. 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. The Company does not believe
that any of its products infringe the proprietary rights of third parties.
There can be no assurance, however, that third parties will not claim
infringement by the Company with respect to current or future products, and
the Company has agreed to indemnify many of its customers against such claims.
The Company anticipates that the number of infringement claims will increase
as the number of electronic commerce products and services increase 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, and may not be resolved on terms acceptable to the Company, or at
all, which could have a material adverse effect on the Company's business,
financial condition or results of operations.
NO PRIOR PUBLIC MARKET; VOLATILITY OF STOCK PRICE
Before this 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
continue following 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 for the Common Stock was determined by negotiation between the
Company and the Underwriters based on several factors and may not be
indicative of the market price for the Common Stock after this Offering. The
Company believes that various factors such as general economic conditions and
changes or volatility in the financial markets, changing conditions in the
Company's market and quarterly or annual variations in the Company's financial
results, some of which are unrelated to the Company's performance, could cause
the market price of the Common Stock to fluctuate substantially. See
"Underwriting."
IMMEDIATE AND SUBSTANTIAL DILUTION
Purchasers of Common Stock offered hereby will experience immediate dilution
in the pro forma net tangible book value per share of Common Stock of $8.87
per share. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE; POSSIBLE ADVERSE EFFECT ON MARKET PRICE
A substantial number of outstanding shares of Common Stock, as well as
shares of Common Stock issuable on exercise of stock options granted or to be
granted under the Company's stock option plans, are or will be eligible for
future sale in the public market at prescribed times pursuant to Rule 144 or
Rule 701 under the Securities Act of 1933, as amended (the "Securities Act").
Sales of such shares in the public market, or the perception that such sales
may occur, could adversely affect the market price of the Common Stock or
impair the Company's ability to raise additional capital in the future through
the sale of equity securities. Upon completion of the Offering, there will be
9,000,114 outstanding shares of Common Stock (9,337,614 shares if the
Underwriters' over-allotment option is exercised in full). Of these shares,
the 2,525,000 shares of Common Stock sold in the Offering (2,862,500 shares if
the Underwriters' over-allotment option is exercised in full) will be freely
tradable by persons other than "affiliates" of the Company without restriction
under the Securities Act.
13
<PAGE>
The remaining 6,475,114 outstanding shares of Common Stock will be
"restricted" securities within the meaning of Rule 144 under the Securities
Act and may not be sold in the absence of registration under the Securities
Act unless an exemption from registration is available, including the
exemptions contained in Rule 144. In addition, prior to the Offering, the
Company had outstanding options to purchase 595,853 shares of Common Stock.
All executive officers, directors and current shareholders of the Company have
agreed to enter into contractual agreements with the Underwriters (the "Lock-
up Agreements"), pursuant to which they will agree not to sell, contract to
sell, or otherwise dispose of any shares of the Common Stock currently owned
by them for a period of 180 days after the date of this Prospectus without the
prior written consent of J.C. Bradford & Co. As soon as practical after the
closing of this Offering, the Company intends to register up to 2,000,000
shares of its Common Stock under the Securities Act for use by the Company in
connection with future acquisitions, and it will be a condition to the
issuance of any of these shares that the holders agree similarly not to sell,
contract to sell or otherwise dispose of such shares for the remaining
portion, if any, of such 180 day period. Thereafter, these shares will
generally be freely tradable after their issuance, unless the sale thereof is
contractually restricted. See "Management--Stock Option Plans," "Shares
Eligible for Future Sales" and "Underwriting."
Upon expiration of the Lock-up Agreements, if their employment is terminated
for any reason or if they are no longer directors of the Company, Mr. Collins
and Mr. Jackson, who will beneficially hold approximately 2,472,112 and
605,625 shares of Common Stock, respectively, after the Offering, will be
entitled to certain demand registration rights with respect to such shares. If
the exercise of their demand registration rights causes a large number of
shares to be registered and sold in the public market, such sales could have a
material adverse effect on the market price for the Common Stock. See "Shares
Eligible for Future Sale--Registration Rights."
POTENTIAL ANTI-TAKEOVER EFFECTS OF ARTICLES AND BYLAWS PROVISIONS AND
EMPLOYMENT AGREEMENTS
The Company's Articles of Incorporation and Bylaws, as well as employment
agreements between the Company and certain of its executive officers, contain
provisions that could have the effect of delaying, deferring or preventing an
unsolicited change in the control of the Company, which may adversely affect
the market price of the Common Stock or the ability of shareholders to
participate in a transaction in which they might otherwise receive a premium
for their shares over the then-current market price. The Company's Articles of
Incorporation authorize the Board of Directors to issue preferred stock
("Preferred Stock") without shareholder approval and on such terms as the
Board of Directors may determine. Following closing of this Offering and the
application of a portion of the net proceeds therefrom to redeem the Company's
Series A Preferred Stock, the Company will have no shares of Preferred Stock
outstanding. Although the Company has no present plans to issue any shares of
Preferred Stock, the rights of the holders of Common Stock will be subject to,
and may be adversely affected by, the rights of holders of any shares of
Preferred Stock that may be issued in the future. See "Description of Capital
Stock--Preferred Stock." The Bylaws provide that special meetings of
shareholders may be called by shareholders only upon a written request made by
the holders of a majority of the votes entitled to be cast on an issue and
require compliance with certain advance notice procedures to bring business
before an annual meeting of shareholders and to nominate directors.
Certain of the Company's executive officers have entered into employment
agreements with the Company that contain change in control provisions. The
change in control provisions may hinder, delay, deter or prevent a tender
offer, proxy contest or other attempted takeover because the covered employees
can terminate their employment and receive one-twelfth of their annual base
salary and bonus for a varying number of consecutive 30-day periods following
the termination and, in some cases, the employees' options would vest and
become immediately exercisable. See "Management--Employment Agreements."
DIVIDEND POLICY; RESTRICTIONS ON PAYMENT
The Company currently anticipates that after completion of this Offering all
of its earnings will be retained for development and expansion of its
business. The Company does not anticipate paying any cash dividends in the
foreseeable future. In addition, the Company's current loan facilities
prohibit the payment of cash dividends without the lenders' consent, and the
Company may in the future obtain loan or credit facilities containing similar
restrictions. See "Dividend Policy."
14
<PAGE>
THE COMPANY
InterCept designs, develops, markets and implements a suite of fully
integrated electronic commerce products and services for community financial
institutions in the United States, including EFT, data communications
management, client/server enterprise software solutions maintenance and
technical support services and banking related equipment. John W. Collins, the
Company's Chairman and Chief Executive Officer, co-founded InterCept Systems,
Inc. ("Systems") in 1986 to provide EFT transaction services to financial
institutions. Mr. Collins, together with one or more of the Company's other
senior officers, formed Data Services Corp. ("Data Services") in 1989 to
supply maintenance and technical support services and certain banking related
equipment required by financial institutions, and also formed ProVesa, Inc.
("ProVesa") in 1994 to provide core bank processing services, item processing,
check imaging and related products and services to financial institutions.
The Company was incorporated in May 1996 to be a holding company for
Systems, Data Services and ProVesa. The Company acquired FiNet, Inc.
("FiNet"), a provider of merchant credit card portfolio management services,
and Bank Services Corporation ("Bank Services"), a provider of client/server
enterprise software and data processing solutions, in December 1996 to create
a single-source provider of electronic commerce solutions for community
financial institutions.
In 1996, Mr. Collins and certain other members of the Company's management
also formed Intercept Communications Technologies, L.L.C. ("Technologies") to
develop the InterCept Frame Relay Network and to offer data communications
management services to financial institutions on a more cost-effective basis
than previously available for its customers. On January 30, 1998, the Company
merged with certain of its wholly-owned subsidiaries, Systems, Data Services,
Bank Services and FiNet, to consolidate its corporate structure, and merged
with Technologies. For a description of the transactions pursuant to which
these businesses were acquired, see "Certain Transactions--Acquisitions."
Prior to the merger of Bank Services with the Company on January 30, 1998,
Bank Services transferred all of its service bureau operations and related
assets to ProVesa, which the Company will continue to operate as a wholly-
owned subsidiary. ProVesa includes, on a consolidated basis, its wholly-owned
subsidiary, ProVesa Services, Inc., and ProImage, Inc. ("Pro Image"), 33.3% of
which is owned by ProVesa. The Company's other remaining subsidiary is
InterCept Switch, Inc. ("InterCept Switch"), which maintains the Company's
surcharge-free ATM network.
The Company is a Georgia corporation whose principal offices are located at
3150 Holcomb Bridge Road, Suite 200, Norcross, Georgia and its telephone
number is (770) 248-9600. InterCept maintains a site on the Internet's World
Wide Web. Information contained in the Company's web site shall not be deemed
to be a part of this Prospectus.
15
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,250,000 shares of
Common Stock offered by the Company in this Offering are estimated to be
approximately $21.8 million (approximately $25.3 million if the Underwriters'
over-allotment is exercised in full), after deducting underwriting discounts
and other offering expenses payable by the Company. The Company will not
receive any proceeds from the sale of the shares offered by the Selling
Shareholders. See "Principal and Selling Shareholders."
The Company intends to use a total of approximately $9.3 million of the net
proceeds of this Offering as follows: (i) approximately $2.7 million to repay
the indebtedness outstanding under the Company's loan facility with Georgia
State Bank (the "GSB Loan Facility"); (ii) approximately $1.4 million to repay
the indebtedness outstanding under the Company's loan facility with First
National Bank of Commerce (the "FNBC Loan Facility"); (iii) approximately
$400,000 to repay the indebtedness outstanding under the Company's loan
facility with Allied Bank of Georgia (the "Allied Loan Facility");
(iv) approximately $1.8 million to pay an amount owed to an officer for
services previously rendered to the Company; (v) approximately $1.5 million to
upgrade, enhance and expand the InterCept Frame Relay Network, including to
purchase currently leased network equipment; (vi) approximately $1.0 million
to enhance its marketing efforts; and (vii) approximately $450,000 to redeem
the outstanding shares of the Company's Series A Preferred Stock. The GSB Loan
Facility matures on July 20, 2006 and bears interest at the lender's prime
rate plus 2.5%. The FNBC Loan Facility matures on June 1, 2003 and bears
interest at the lender's prime rate plus 2.0%. The Allied Loan Facility
matures on December 31, 1999 and bears interest at the lender's prime rate.
The deferred compensation amount owed to an officer is due on or before June
4, 2001 and bears interest at an annual rate of approximately 10.0%. The
Company's Series A Preferred Stock accrues dividends, which are payable
quarterly, at an annual rate of 8.0% and is redeemable at any time by the
Company upon 10 days' notice. See "Certain Transactions--Acquisitions" and
"Description of Capital Stock."
The Company intends to use the balance of the net proceeds, expected to be
approximately $12.5 million, for working capital and general corporate
purposes, including possible acquisitions. The Company continues to evaluate
potential strategic acquisitions of providers of complementary technologies
and services and to carry on discussions with several potential acquisition
candidates. The Company is not currently a party to any binding agreements or
commitments with respect to any such acquisitions. There can be no assurance
that any acquisitions will be consummated on terms favorable to the Company,
if at all. Pending application of the net proceeds as described above, the
Company intends to invest the net proceeds in short-term, interest-bearing,
investment grade securities. See "Risk Factors--Discretion of Management
Concerning Use of Proceeds" and "Business--Business Strategy."
DIVIDEND POLICY
The Company does not anticipate paying any cash dividends on its Common
Stock in the foreseeable future because it intends to retain its earnings, if
any, to finance the expansion of its business and for general corporate
purposes, including future acquisitions. Unless waived in writing by the
lender, the GSB Loan Facility and the FNBC Loan Facility restrict the
declaration and payment of dividends. Any payment of future dividends on the
Common Stock will be at the discretion of the Board of Directors and will
depend upon, among other things, the Company's earnings, financial condition,
capital requirements, level of indebtedness, contractual restrictions with
respect to the payment of dividends and other factors that the Company's Board
of Directors deems relevant. See "Description of Capital Stock."
16
<PAGE>
DILUTION
The pro forma net tangible book value of the Company at December 31, 1997
after giving effect to the merger with Technologies was $(2,645,540), or
$(0.39) per share. The pro forma net tangible book value per share represents
the amount by which the Company's net tangible assets exceed the Company's
total liabilities divided by the number of shares of Common Stock outstanding.
After giving effect to the sale of the 2,250,000 shares of Common Stock
offered by the Company in this Offering and the application of the net
proceeds as set forth under "Use of Proceeds," the Company's pro forma net
tangible book value as of December 31, 1997 would have been $19.1 million, or
$2.13 per share, representing an immediate increase of $2.52 in pro forma net
tangible book value per share to existing shareholders and an immediate
dilution of $8.87 in pro forma net tangible book value per share to persons
purchasing shares in the Offering. The following table illustrates this per
share dilution:
<TABLE>
<S> <C> <C>
Initial public offering price............................... $11.00
Pro forma net tangible book value at December 31, 1997.... $(0.39)
Increase attributable to the sale of shares offered
hereby................................................... 2.52
------
Pro forma net tangible book value after the Offering........ 2.13
------
Dilution per share to new investors(1)...................... $ 8.87
======
</TABLE>
- --------
(1) If the underwriters' over-allotment option is exercised in full, pro forma
net tangible book value of the Company would be $2.42 per share,
representing an increase in pro forma net tangible book value of $2.81 per
share and dilution to new investors of $8.58 per share.
The following table sets forth the number of shares of Common Stock
purchased from the Company, the total consideration paid and the average price
per share paid by existing shareholders and to be paid by the new investors
purchasing shares of Common Stock offered hereby.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------- ------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders........... 6,750,114 75.0% $ 2,519,775 9.2% $ 0.37
New investors................... 2,250,000 25.0 24,750,000 90.8 11.00
--------- ----- ----------- -----
Total......................... 9,000,114 100.0% $27,269,775 100.0%
========= ===== =========== =====
</TABLE>
Sales by Selling Shareholders in the Offering will reduce the number of
shares of Common Stock held by existing shareholders to 6,475,114, or 71.9%,
and will increase the number of shares to be held by new investors to
2,525,000, or 28.1%, of the total number of shares of Common Stock to be
outstanding after this Offering (2,862,500 shares, or 30.7%, if the
Underwriters' over-allotment option is exercised in full). See "Principal and
Selling Shareholders."
The foregoing table assumes no exercise of outstanding stock options. At
December 31, 1997 there were outstanding options to purchase 792,121 shares of
Common Stock at a weighted average exercise price of $2.17 per share. See Note
10 of Notes to Consolidated Financial Statements. Options to purchase 513,956
shares of Common Stock at an exercise price of $2.16 per share were canceled
as of January 30, 1998. On February 1, 1998, the Company granted options to
purchase an additional 317,687 shares of Common Stock at an exercise price of
$7.70 per share to certain employees, non-employee directors and advisory
directors. See "Management."
17
<PAGE>
CAPITALIZATION
The following table sets forth the Company's capitalization at December 31,
1997 (i) on a historical basis, (ii) pro forma to give effect to Technologies
as if the merger had occurred on December 31, 1997 and (iii) pro forma as
adjusted to give effect to the sale by the Company of 2,250,000 shares of
Common Stock offered hereby and the application of the net proceeds therefrom.
See "Selected Consolidated Financial Data" and "Use of Proceeds." This table
should be read in conjunction with the Company's Consolidated Financial
Statements and the related Notes thereto, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the other
financial information appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED(1)
---------- ---------- --------------
<S> <C> <C> <C>
Long-term debt, including current
maturities............................. $5,297,201 $5,297,201 $ 404,116
---------- ---------- -----------
Series A Preferred Stock, 30,000 shares
authorized, 4,000 shares issued and
outstanding (actual and pro forma), and
none outstanding (pro forma as
adjusted).............................. 400,000 400,000 0
---------- ---------- -----------
Shareholders' equity(2):
Preferred Stock, 1,000,000 shares
(including Series A) authorized, none
outstanding.......................... 0 0 0
Common Stock, 50,000,000 shares
authorized, 4,009,085 shares issued
and outstanding (actual), 6,750,114
issued and outstanding (pro forma)
and 9,000,114 shares (pro forma as
adjusted)............................ 2,519,775 2,525,475 24,302,975
Accumulated deficit................... (3,989,861) (2,438,886) (2,438,886)
---------- ---------- -----------
Total shareholders' (deficit)
equity.............................. (1,470,086) 86,589 21,864,089
---------- ---------- -----------
Total capitalization................ $4,227,115 $5,783,790 $22,268,205
========== ========== ===========
</TABLE>
- --------
(1) Excludes an aggregate of 1,263,180 shares reserved for issuance pursuant
to the Company's stock option plans. Options to purchase 792,121 shares of
Common Stock had been granted at December 31, 1997 with a weighted average
exercise price of $2.17 per share. Of these options, 513,956 were canceled
as of January 30, 1998. On February 1, 1998, the Company granted options
to purchase an additional 317,687 shares of Common Stock at an exercise
price of $7.70 per share to certain employees, non-employee directors and
advisory directors. See "Management."
(2) Prior to completion of the Offering, the Company intends to file Amended
and Restated Articles of Incorporation to reflect 1,000,000 shares of
authorized Preferred Stock and 50,000,000 shares of authorized Common
Stock. See "Description of Capital Stock."
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data are qualified by
reference to, and should be read in conjunction with, the Consolidated
Financial Statements and the related Notes thereto and other financial
information included elsewhere in this Prospectus, as well as "Management's
Discussion and Analysis of Financial Condition and Results of Operations." The
consolidated selected financial data of the Company for the years ended
December 31, 1995, 1996 and 1997 were derived from the Company's Consolidated
Financial Statements, which have been audited by Arthur Andersen, LLP,
independent public accountants. The selected consolidated financial data for
the years ended December 31, 1993 and 1994 were derived from unaudited
consolidated financial statements which, in the opinion of management, include
all adjustments, consisting only of normal recurring accruals, necessary for a
fair presentation of financial condition and results of operations. These
results may not be indicative of future results.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
PRO FORMA
AS ADJUSTED
1993(1) 1994 1995 1996(2) 1997 1997(3)
----------- ----------- --------- --------- --------- -----------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Revenues................ $ 7,386 $ 8,697 $ 12,291 $ 14,299 $ 20,027 $ 23,260
Costs of services....... 1,174 1,487 6,163 6,792 7,682 10,241
Selling, general and
administrative
expenses............... 5,622 7,036 4,488 7,631 9,900 10,087
Depreciation and
amortization........... 182 179 258 252 1,148 1,188
Loss on impairment of
intangibles............ 0 0 0 0 728 728
Writeoff of purchased
research and
development costs...... 0 0 0 810 0 0
--------- --------- --------- --------- --------- ---------
Total operating
expenses............... 6,978 8,702 10,909 15,485 19,458 22,244
--------- --------- --------- --------- --------- ---------
Operating income
(loss)................. 408 (5) 1,382 (1,186) 569 1,016
Other income (expense),
net.................... (86) (86) (58) (277) (657) 88
--------- --------- --------- --------- --------- ---------
Income (loss) before
minority interest
income (loss) and pro
forma provision for
income taxes........... 322 (91) 1,324 (1,463) (88) 1,104
Minority interest
(income) loss.......... 2 2 (72) (79) 38 38
Provision (benefit) for
income taxes........... 0 0 0 (258) 468 935
--------- --------- --------- --------- --------- ---------
Net income (loss)....... 324 (89) 1,252 (1,286) (518) 207
Preferred stock
dividends.............. 0 0 0 8 32 0
--------- --------- --------- --------- --------- ---------
Net income (loss)
attributable to common
shareholders........... $ 324 $ (89) $ 1,252 $(1,294) $ (550) $ 207
========= ========= ========= ========= ========= =========
Basic and diluted net
income (loss) per
common share(4)........ $ 0.09 $ (0.02) $ 0.34 $ (0.38) $ (0.14) $ 0.02
========= ========= ========= ========= ========= =========
Weighted average common
shares outstanding..... 3,736,908 3,736,908 3,736,908 3,367,913 4,009,085 9,000,114
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF DECEMBER 31, 1997
------------------------------------- -------------------------------
PRO PRO FORMA
1993 1994 1995 1996 ACTUAL FORMA(3) AS ADJUSTED(5)
----------- ----------- ------ ------ ------ -------- --------------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents............ $ 311 $ 161 $ 624 $ 990 $1,872 $ 2,010 $16,695
Working capital......... 565 (191) 502 1,082 737 804 15,982
Total assets............ 1,932 1,690 2,971 9,815 9,439 11,201 25,885
Long-term debt.......... 903 746 589 5,212 4,717 4,717 316
Shareholders' equity
(deficit).............. (212) (339) 493 (920) (1,470) 86 21,864
</TABLE>
19
<PAGE>
- --------
(1) On June 4, 1996, the Company, Systems and Data Services combined in a
share exchange combination the majority of which has been accounted for as
a common control merger in a manner similar to a pooling of interests with
the minority interest in Data Services accounted for as a purchase. The
results of operations of Systems and Data Services have been included for
the periods shown excluding precombination earnings related to the
minority interest. See Note 3 of Notes to Consolidated Financial
Statements. The statements of operations data include $1,024, $1,050, and
$1,470 in revenues and associated costs of $1,152, $1,565, and $1,637
related to data communications management for the years ended December 31,
1993, 1994 and 1995, respectively. These operations were transferred to
Technologies, a related party company, as of January 1, 1996. There are no
data communications management revenues in the Company's historical
financial statements in either of the years ended December 31, 1996 or
1997.
(2) On November 27, 1996, the Company acquired ProVesa in a merger transaction
accounted for as a purchase and the results of operations of ProVesa have
been included beginning December 1, 1996. On December 17, 1996, InterCept
acquired FiNet in a merger transaction accounted for as a purchase and the
results of operations of FiNet have been included since the date of
acquisition. On December 31, 1996, InterCept acquired Bank Services in a
merger transaction accounted for as a purchase and the results of
operations of Bank Services have been included since the date of
acquisition. See Note 3 of Notes to Consolidated Financial Statements.
(3) On January 30, 1998, the Company acquired Technologies in a merger
transaction the majority of which has been accounted for as a common
control merger in a manner similar to a pooling of interests with the
minority interest in Technologies accounted for as a purchase. The pro
forma results of operations data reflect the Company's operations as if
the merger with Technologies had occurred on January 1, 1997. In addition,
the pro forma results of operations data reflect (i) the sale of 2,250,000
shares of Common Stock offered by the Company, (ii) the elimination of
interest expense related to the Company's credit facilities (iii) the
elimination of interest expense related to a deferred compensation
agreement with an officer and (iv) preferred stock to be repurchased with
proceeds of the Offering. See "Use of Proceeds."
(4) See Notes 2 and 10 of Notes to the Consolidated Financial Statements for a
discussion of the historical computations of net income (loss) per common
share. Pursuant to Staff Accounting Bulletin No. 98, the impact of any
options are excluded as the issuances are not considered nominal.
Accordingly, basic and fully diluted net income (loss) per common share
are the same. Pro forma net income per common share has been adjusted to
reflect the merger of Technologies with the Company and the sale of
2,250,000 shares of Common Stock offered by the Company (assuming the
shares were outstanding for the entire period).
(5) Adjusted to reflect the sale of 2,250,000 shares of Common Stock offered
by the Company hereby and the application of the estimated net proceeds
therefrom. See "Use of Proceeds" and "Capitalization."
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Prospectus contains "forward-looking statements" relating to, without
limitation, the Company's future economic performance, plans and objectives of
management for future operations, projections of revenue mix and other
financial items that are based on the beliefs of, as well as assumptions made
by and information currently known to, the Company's management. The words
"may," "could," "would," "will," "expect," "estimate," "anticipate,"
"believe," "intends," "plans" and similar expressions and variations thereof
are intended to identify forward-looking statements. The cautionary statements
set forth in this section, in "Risk Factors" and elsewhere in this Prospectus
identify important factors with respect to such forward-looking statements,
including certain risks and uncertainties, that could cause actual results to
differ materially from those in such forward-looking statements. The following
discussion should be read in conjunction with the Company's Consolidated
Financial Statements and the related Notes thereto and other financial
information appearing elsewhere in this Prospectus. The dollar amounts and
percentages provided below have been rounded to simplify presentations.
OVERVIEW
The Company designs, develops, markets and implements a suite of fully
integrated electronic commerce products and services, including EFT, data
communications management, enterprise software solutions, maintenance and
technical support services and banking related equipment for community
financial institutions in the United States. John W. Collins, the Company's
Chairman and Chief Executive Officer, co-founded Systems in 1986, Data
Services in 1989 and ProVesa in 1994. The Company was incorporated in May 1996
to become a holding company for these three related entities and acquired
FiNet and Bank Services in December 1996 to create a single-source provider of
electronic commerce solutions for community financial institutions. In 1996,
certain members of the Company's management formed Technologies, and on
January 30, 1998, the Company merged with its subsidiaries Systems, Data
Services, Bank Services and FiNet, and merged with Technologies. See "The
Company."
The transactions with Systems and Data Services have been accounted for as
common control mergers in a manner similar to a pooling of interests with the
minority interest accounted for as a purchase, and the results of operations
of Systems and Data Services have been included since January 1, 1993,
excluding precombination earnings related to the minority interest. The
acquisitions of ProVesa, FiNet and Bank Services have been accounted for as
purchases, and the results of operations of each entity have been included
since December 1, December 17 and December 31, 1996, respectively. The
transaction with Technologies will be accounted for as a common control merger
in a manner similar to a pooling of interests with the minority interest
accounted for as a purchase. As a result, historical combined results may not
be comparable to or indicative of future performance. The Company's revenues
and expenses may be significantly affected by the number and timing of future
acquisitions or the introduction of new products and services. The timing of
such expansion activities may also affect period-to-period comparisons.
Excluding revenues related to data communications management operations in
1995 which were transferred to Technologies, a related party, on January 1,
1996, approximately 10.9% and 93.6% of the increase in total revenues for the
years ended December 31, 1996 and 1997, respectively, over the prior year were
attributable to ProVesa, FiNet and Bank Services.
A substantial portion of the Company's revenues is derived from recurring
monthly charges to its customers under service agreements that generally have
terms of from one to five years. Recurring revenues are defined by the Company
as revenues derived from services that are used by the Company's customers
each year in connection with their ongoing businesses, and accordingly exclude
such items as conversion and deconversion fees, initial software license fees,
data communications line installation fees and hardware sales. For the years
ended December 31, 1996 and 1997, approximately 63.0% and 74.1%, respectively,
of the Company's consolidated revenues were recurring revenues. For the year
ended December 31, 1996 and 1997, approximately 87.3% and 89.9% of the
revenues of Technologies, which was merged with the Company on January 30,
1998, were recurring in nature.
21
<PAGE>
The Company derives revenues primarily from the following sources: (i) EFT
processing services; (ii) data communications management; (iii) client/server
enterprise software support, maintenance and related services; and (iv)
maintenance and technical support services, sales of banking related equipment
and complementary products and customer services. For the year ended December
31, 1997, the Company generated total pro forma revenues (including revenues
from Technologies) of $23.3 million, of which $9.3 million, or 40.0%, was
derived from EFT processing services; $3.3 million, or 14.0%, was derived from
data communications management; $5.6 million, or 24.1%, was derived from
client/server enterprise software support and maintenance and related
services; and $5.1 million, or 21.9%, was derived from maintenance and
technical support services, sales of banking related equipment and
complementary products and customer services.
The Company derives EFT revenues principally from processing ATM, POS and
debit card transactions. The Company receives a base fee for providing its ATM
processing services and an additional fee for each ATM serviced. Once the
number of transactions exceeds established levels (typically between 2,000 and
3,000 transactions), the Company charges additional fees for the extra
transactions processed. The Company also receives fees for installation,
maintenance and support of the ATMs it supplies to its customers. For its POS
services, the Company generally receives a portion of the interchange fees
charged by its community financial institution customers that issue debit
cards and charges a monthly fee if its customers do not meet a certain minimum
dollar amount of transactions for a particular month. Most charges due under
the Company's EFT service agreements are paid monthly. The Company generally
is permitted to raise prices on an annual basis subject to certain maximum
limits. Generally, the Company's EFT contracts automatically renew for varying
periods at the end of the initial or any renewal term unless either party
elects to cancel the agreement 180 days prior to its expiration.
The Company's data communications management service revenues are
principally derived from network management services, data packet
transportation services across the InterCept Frame Relay Network, consulting,
and equipment configuration, installation and sales. The Company charges a
flat monthly fee for providing telecommunications connectivity and network
management as well as an initial installation charge.
The Company licenses PC BancPAC(TM), the Company's proprietary Windows NT(R)
based client/server software system, on both a service bureau and in-house
basis. On a service bureau basis, the Company derives revenue from license
fees and service and item processing fees based on the volume of transactions
processed. If a customer chooses to implement the software on an in-house
basis, the Company derives revenues from software licensing, maintenance
contracts and certain consulting services. The Company recognizes service
revenue as the services are provided. It is the Company's policy to recognize
revenues for licensing of PC BancPAC(TM) in accordance with Statement of
Position 97-2 on "Software Revenue Recognition" issued by the American
Institute of Certified Public Accountants. Software license fees are
recognized when a non-cancelable license agreement has been signed, the
product has been shipped and all significant obligations to the customer have
been satisfied. Revenues for implementation, conversion, installation,
training, interface and consulting services are recognized when the services
are performed. Service revenues for ongoing customer and software support,
product updates and disaster recovery services provide recurring revenues as
they are recognized ratably over each year of the license agreement, the term
of which is typically five years.
The Company's maintenance, support and equipment revenues consist primarily
of revenues from the Company's maintenance and technical support services,
which generate recurring revenues, as well as sales of specialized equipment
including ATMs, proof machines, teller equipment, personal computers, vaults
and other security equipment. Equipment revenue is recognized at the time of
shipment while maintenance and technical support service revenue is recognized
as the service period elapses.
Costs of services consists primarily of network lines and leased router
equipment related to telecommunication transmission, the direct cost of the
Company's service bureau operations and the direct cost of equipment sales.
Historically, the Company's EFT customers directly bore the data
communications costs. Currently, many of the Company's EFT customers contract
with Technologies for data communications management services and pay
Technologies for their telecommunications connections.
22
<PAGE>
Selling, general and administrative expenses consist of commissions to the
Company's strategic marketing partners, direct sales force salaries,
commissions and benefits, a deferred compensation agreement with an officer in
1996 and other corporate administration expenses. Historically, the Company
has marketed its products and services primarily through a direct sales force.
Although the Company intends to increase both its direct sales forces and
indirect marketing relationships, it believes that future revenues from
products and services sold through indirect marketing channels may become an
increasingly significant source of the Company's total revenues. Composition
of revenues and expenses will vary depending on whether a sale is made
directly by the Company or through an indirect marketing relationship.
However, the Company believes that the difference in the net revenues obtained
from direct and indirect sales should not have a material adverse effect on
the Company's business, financial condition and results of operations. The
Company has entered into employment agreements with certain officers of the
Company providing for the payment of bonuses. See "Management--Employment
Agreements" and Note 12 of Notes to Consolidated Financial Statements.
Depreciation and amortization includes depreciation of computer and network
operations equipment, furniture and office equipment, buildings and leasehold
improvements and amortization of intangible assets. The Company provides for
depreciation using the straight-line method of depreciation over the estimated
useful lives of the assets, which range from 3 to 31 years. The Company's
amortization expense relates primarily to intangible assets allocated to
contracts, software purchased and goodwill associated with the Company's
acquisitions. The contracts, purchased software and goodwill are amortized
over a period of 18 months, 3 to 5 years, and 15 to 40 years, respectively.
In accordance with generally accepted accounting policies, the Company
capitalizes both costs to develop software for internal use as well as costs
to develop software for sale to third parties upon reaching technological
feasibility and expenses all such costs prior to reaching this point. Costs
incurred to develop computer software are charged to product development
expense when incurred until technological feasibility has been established for
the product. Thereafter, all software production costs are capitalized and
recorded at the lower of unamortized cost or net realizable value.
Capitalization ceases upon internal software use or general release of the
software to customers. After general release, capitalized costs are amortized
using the straight-line method over the estimated useful life of three to five
years.
In the quarter ended December 31, 1996, the Company purchased FiNet, a
merchant portfolio management company, for consideration of approximately
$570,000 of the Company's Common Stock. The purchase price of FiNet was
allocated to goodwill as of the acquisition date and written off as a
nonrecurring charge in the fourth quarter of 1997 due to uncertainties
regarding its recoverability. Additionally, during the quarter ended December
31, 1997, the Company wrote off approximately $190,000 related to purchased
software which was deemed to be impaired upon review under SFAS No. 121.
ProImage, a corporation in which ProVesa has a 33.3% ownership interest, has
been consolidated in the accompanying consolidated financial statements since
its inception, due to ProVesa's control of ProImage and limitations on the
ability of the other investors to have losses allocated to their capital
accounts. All significant intercompany accounts and transactions have been
eliminated in consolidation. Minority interest represents the minority
shareholders' proportionate share of the equity and earnings of ProImage in
all periods and of Data Services for the year ended December 31, 1995 and the
period from January 1, 1996 to June 4, 1996.
Provision for income taxes is a function of pretax earnings and the combined
effective rate of federal and state income taxes. Prior to June 4, 1996,
Systems and Data Services had elected to be taxed as S corporations and,
accordingly, no income tax provision (benefit) has been recorded.
The Company's business and relationships with its customers depend
significantly on a number of computer software programs, internal operating
systems and connections to other networks, and the failure of any of these
programs, systems or networks to successfully address the Year 2000 data
rollover problem could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company believes
that its internal systems and software and the network connections it
maintains are adequately programmed to
23
<PAGE>
address the Year 2000 issue. The Company believes that its internal systems
and software and the network connections it maintains are adequately
programmed to address the Year 2000 issue. The Company currently provides
service bureau processing services to certain customers using a processing
system that is not Year 2000 compliant, and the Company is in the process of
converting those customers to its PC BancPAC(TM) software, which the Company
believes is Year 2000 compliant, before the end of 1999. The Company currently
estimates that the cost of such conversion will total approximately $200,000;
however, it is difficult to predict such costs with any certainty, and there
can be no assurance that the costs necessary to convert its customers to PC
BancPAC(TM) will not have a material adverse effect on the Company's business,
financial condition and results of operations. Further, any failure by the
Company to complete the conversion of any of its service bureau customers in a
timely manner could significantly interrupt the business operations of such
customers, which could have material adverse effect on the business, financial
condition and results of operations of both the affected customers and the
Company.
The Company's quarterly operating results have varied in the past and will
likely vary significantly in the future. Factors that may cause the Company's
future operating results to vary include, without limitation, the timing of
new product and service announcements, changes in pricing policies by the
Company and its competitors, market acceptance of new and enhanced versions of
the Company's products and services, the lengthening of sales cycles for new
or existing customers, customer attrition, changes in operating expenses,
changes in Company strategy, personnel changes, the introduction of
alternative technologies, the Company's products becoming obsolete, failure,
delay and expense in making software, systems and networks utilized in the
Company's business Year 2000 compliant, the effect of acquisitions and general
economic factors. Product and service revenues are difficult to forecast
because the market for electronic commerce products and services is rapidly
evolving, and the Company's sales cycle generally covers an extended period
but varies substantially from customer to customer. InterCept believes that
quarter to quarter comparisons of its results of operations should not be
relied upon as indications of future performance. See "Risk Factors--Factors
Affecting Operating Results; Potential Fluctuations in Quarterly Results."
RESULTS OF OPERATIONS
The following table sets forth the percentage of revenues represented by
certain items in the Company's consolidated statements of operations for the
indicated periods.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Revenues............................................... 100.0% 100.0% 100.0%
Costs of services...................................... 50.2 47.5 38.4
Selling, general and administrative expenses........... 36.5 53.4 49.4
Depreciation and amortization.......................... 2.1 1.7 5.7
Loss on impairment of intangibles...................... 0 0 3.7
Writeoff of purchased research and development costs... 0 5.7 0
----- ----- -----
Total operating expenses............................... 88.8 108.3 97.2
----- ----- -----
Operating income (loss)................................ 11.2 (8.3) 2.8
Other income (expense), net............................ (0.5) (1.9) (3.2)
----- ----- -----
Income (loss) before minority interest and pro forma
provision for income taxes............................ 10.7 (10.2) (0.4)
Minority interest income (loss)........................ (0.6) (0.6) 0.2
Provision for income taxes............................. 0 1.8 (2.4)
----- ----- -----
Net income (loss)...................................... 10.1% (9.0)% (2.6)%
===== ===== =====
</TABLE>
YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER 31, 1996
Revenues. Revenues increased 40.0%, or $5.7 million, to $20.0 million for
the year ended December 31, 1997 from $14.3 million for the year ended
December 31, 1996. The $5.7 million increase was primarily
24
<PAGE>
attributable to (i) $4.0 million generated by ProVesa as it was included for
the full year in 1997 as compared to one month in 1996, (ii) $1.4 million
generated by an increase in EFT processing services, and (iii) $1.3 million
generated by Bank Services since its acquisition on December 31, 1996,
partially offset by a reduction of $1.0 million in revenues due to a decrease
in equipment sales. The decrease in equipment sales was primarily due to the
Company's decision to terminate its relationships with two independent service
organizations.
Costs of Services. Costs of services increased 13.1%, or $890,000, to $7.7
million for the year ended December 31, 1997 from $6.8 million for the year
ended December 31, 1996. The $890,000 increase was primarily due to (i) an
increase of $1.1 million related to the service bureau operations at ProVesa
as the operations were included for the full year in 1997 as compared to one
month in 1996 and (ii) an increase of $630,000 related to service bureau
operations at Bank Services which were included for the full year in 1997,
partially offset by a decrease of $870,000 associated with reduced equipment
sales. Costs of services as a percentage of sales decreased from 47.5% to
38.4% from 1996 to 1997, primarily due to additional higher margin EFT
revenues and reduced lower margin equipment sales.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 29.7%, or $2.3 million, to $9.9 million for
the year ended December 31, 1997 from $7.6 million for the year ended December
31, 1996. The $2.3 million increase was primarily attributable to (i) $1.3
million related to ProVesa as a full year of operations was included in 1997
as compared to one month in 1996 (ii) $980,000 related to Bank Services since
its acquisition on December 31, 1996 (iii) $520,000 related to FiNet as a full
year of operations was included in 1997 as compared to one month in 1996, and
(iv) $1.3 million related to additional personnel and facilities to support
the Company's growth, partially offset by a $1.8 million nonrecurring charge
in 1996 related to a deferred compensation agreement with an officer of the
Company. Excluding this charge, selling, general and administrative expenses
as a percentage of sales increased from 40.8% to 49.3% primarily due to the
commencement of operations of FiNet and additional personnel and facilities to
support the Company's growth.
Depreciation and Amortization. Depreciation and amortization increased
$900,000 to $1.1 million for the year ended December 31, 1997 from $250,000
for the year ended December 31, 1996. This increase was primarily due to
(i) the amortization of $620,000 of goodwill and contracts related to the
Company's purchase of ProVesa which was included for a full year in 1997 as
opposed to one month in 1996, (ii) an increase in depreciation expense of
$160,000 and (iii) other increases of $120,000.
Loss on Impairment of Intangibles. Loss on impairment of intangibles totaled
$730,000 for the year ended December 31, 1997. This was due to (i) the
writeoff of $540,000 of goodwill assumed in the Company's acquisition of FiNet
and (ii) the writeoff of $190,000 in purchased software assumed in the
Company's acquisition of ProVesa. These writeoffs were due to permanent
impairment in the related long term assets.
Writeoff of Purchased Research and Development Costs. The $810,000 in
writeoff of purchased research and development costs in 1996 was due to
allocation of a component of the purchase price of Bank Services to incomplete
research and development costs at the time of purchase as the development of
certain projects had not yet reached technological feasibility and the
technology had no alternative use and required substantial additional
development.
Operating Income (Loss). For the foregoing reasons, operating income
increased $1.8 million to $570,000 for the year ended December 31, 1997 from
an operating loss of $1.2 million for the year ended December 31, 1996.
Exclusive of the nonrecurring loss on impairment of intangibles, operating
income would have been $1.3 million in 1997.
Other Income (Expense). Other expense increased $380,000 to $660,000 for the
year ended December 31, 1997 from $280,000 for the year ended December 31,
1996. This increase was primarily due to interest on new debt to fund the
Company's acquisition during 1996 which was recorded for a full year in 1997.
Minority Interest Income (Loss). Minority interest income increased $120,000
to $40,000 for the year ended December 31, 1997 from a loss of $80,000 for the
year ended December 31, 1996. The increase was primarily due to losses in
ProImage's operations.
25
<PAGE>
Provision (Benefit) For Income Taxes. Provision for income taxes increased
$725,000 to $465,000 for the year ended December 31, 1997 from a benefit of
$260,000 for the year ended December 31, 1996. The increase was primarily due
to (i) the nondeductibility of the loss on impairment of intangibles recorded
in 1997, and (ii) nondeductible goodwill, purchased software, and contract
amortization that was not deductible, partially offset by deductible losses in
1996 primarily related to a deferred compensation agreement with an officer of
the Company.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE YEAR ENDED DECEMBER 31, 1995
Revenues. Revenues increased 16.3%, or $2.0 million, to $14.3 million for
the year ended December 31, 1996 from $12.3 million for the year ended
December 31, 1995. The $2.0 million increase was primarily related to (i) $1.7
million related to additional equipment sales, (ii) $1.1 million generated by
an increase in EFT processing services, (iii) an increase of $300,000 related
to additional maintenance contracts and (iv) $360,000 generated by ProVesa for
the one month of activity since the acquisition date, partially offset by the
reduction of $1.5 million in data communications management revenues since
January 1, 1996 as a result of the transfer of data communications management
operations to Technologies. Excluding the reduction in data communications
management revenues, revenues increased 32.3% from the year ended December 31,
1995 to December 31, 1996.
Costs of Services. Costs of services increased 10.2%, or $630,000, to $6.8
million for the year ended December 31, 1996 from $6.2 million for the year
ended December 31, 1995. The $630,000 increase was primarily attributable to
(i) $1.3 million related to additional equipment sales (ii) $360,000 related
to an increase in network operating expenses and salaries related to EFT
services and (iii) other increases of $170,000, partially offset by the
reduction of $1.2 million in data communications management costs as a result
of the transfer of data communications operations to Technologies on January
1, 1996. Exclusive of the reduction in data line costs, costs of services as a
percentage of sales increased from 40.6% to 47.5% due primarily to an increase
in sales of equipment which generated lower margins than the Company's other
products and services.
Selling, General and Administrative Expenses. Selling general and
administrative expenses increased 70.0%, or $3.1 million, to $7.6 million for
the year ended December 31, 1996 from $4.5 million for the year ended December
31, 1995. The $3.1 million increase was primarily due to (i) a $1.8 million
nonrecurring charge related to a deferred compensation agreement with an
officer of the Company, (ii) $1.3 million related to additional personnel to
support Company growth, (iii) $230,000 related to ProVesa for the one month of
activity since the acquisition date and (iv) $200,000 related to additional
selling and promotional expenses, partially offset by a reduction of $400,000
of data communications management costs. Exclusive of the $1.8 million
nonrecurring charge, selling, general and administrative expenses as a
percentage of sales increased from 36.5% to 40.4%. This increase was primarily
due to an increase in personnel to support the Company's growth.
Depreciation and Amortization. Depreciation and amortization decreased
$6,000 to $250,000 for the year ended December 31, 1996 from $260,000 for the
year ended December 31, 1995. The decrease was primarily due to a decrease in
amortization of capitalized software.
Writeoff of Purchased Research and Development Costs. The $810,000 in
writeoff of purchased research and development costs in 1996 was due to
allocation of a component of the purchase price of Bank Services to incomplete
research and development costs at the time of purchase as the development of
certain projects had not yet reached technological feasibility and the
technology had no alternative use and required substantial additional
developments.
Operating Income (Loss). For the foregoing reasons, operating income
decreased $2.6 million to an operating loss of $1.2 million for the year ended
December 31, 1996 from an operating income of $1.4 million for the year ended
December 31, 1995. Exclusive of the writeoff of purchased research and
development and the deferred compensation charge related to an agreement with
an officer of the Company, operating income would have been $1.4 million for
the year ended December 31, 1996.
Other Income (Expense). Other expense increased $220,000 to $280,000 for the
year ended December 31, 1996 from $60,000 for the year ended December 31,
1995. The increase was due to interest on new debt to fund the Company's
acquisitions as well as interest expense related to the repurchase of stock
from a shareholder.
26
<PAGE>
Minority Interest Income (Loss). Minority interest income decreased $8,000
to a loss of $80,000 for the year ended December 31, 1996 from a loss of
$72,000 for the year ended December 31, 1995. The decrease was primarily due
to preacquisition earnings of Data Services.
Provision (Benefit) For Income Taxes. Benefit for income taxes totaled
$260,000 for the year ended December 31, 1996 primarily due to pretax net
losses which were partially offset by the nondeductibility of the writeoff of
purchased research and development costs.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically generated positive cash flow from operations,
but has historically relied upon the proceeds of several loan facilities (the
"Loan Facilities") to refinance debt assumed in connection with its
acquisitions. Borrowings under the Loan Facilities were available for use in
connection with certain acquisitions and other general corporate purposes. The
$3.0 million GSB Loan Facility matures on July 20, 2006 and bears interest at
the lender's prime rate plus 2.5%. The $1.7 million FNBC Loan Facility matures
on June 1, 2003 and bears interest at the lender's prime rate plus 2.0%. The
$598,995 Allied Loan Facility matures on December 31, 1999 and bears interest
at the lender's prime rate. At February 28, 1998, the Company owed an
aggregate of approximately $4.5 million in principal on the outstanding Loan
Facilities. See "Use of Proceeds." The Loan Facilities contain covenants with
respect to the maintenance of certain financial ratios and specified net worth
and limit the incurrence of additional indebtedness, the sale of substantial
assets, the sale of Common Stock by the Company (including through this
Offering), consolidations or mergers by the Company and the declaration and
payment of dividends. Any past or potential defaults or breaches of the
provisions of the Loan Facilities as a result of the Offering and the
Company's business combination transactions have been waived in writing by the
lenders (such waivers being conditioned upon the Offering), but there can be
no assurance that similar waivers can be obtained, if needed, in the future.
The Loan Facilities are secured by all assets of the Company and a pledge of
100% of the stock of certain subsidiaries, which have guaranteed the repayment
of indebtedness under the Loan Facilities. The Company currently is
negotiating with certain other financial institutions to establish a credit
facility for future working capital and acquisition financing, but there can
be no assurance that such negotiations will be successful.
Net cash provided by operating activities was $1.7 million, $1.2 million,
and $1.4 million in 1997, 1996 and 1995, respectively. The increase in net
cash provided by operating activities in 1997 as compared to 1996 was due
primarily to a decrease in accounts receivable. The reduction in net cash
provided by operating activities in 1996 as compared to 1995 was primarily due
to an increase in deferred tax assets related to the payment of a deferred
compensation agreement with an officer of the Company that is not currently
deductible.
Net cash used in investing activities was $600,000, $360,000 and $230,000 in
1997, 1996 and 1995, respectively. The increase in net cash used in investing
activities in 1997 as compared to 1996 was primarily due to increased fixed
asset purchases, partially offset by the collection of a related party
receivable. The increase in net cash used in investing activities in 1996 as
compared to 1995 was primarily related to an increase in a related party note
receivable.
Net cash used in financing activities was $230,000, $510,000 and $670,000 in
1997, 1996 and 1995. In 1997, this amount was related primarily to net
payments on long term debt while the amounts in 1996 and 1995 were related
primarily to S corporation distributions to certain shareholders of Systems
and Data Services.
The net proceeds from the Offering remaining after deducting (i)
underwriting discounts, (ii) Offering expenses, (iii) the repayment of the
indebtedness outstanding under the Company's Loan Facilities, (iv) the payment
of deferred compensation amounts owed to an officer of the Company and (v) the
redemption of the outstanding shares of the Company's Series A Preferred Stock
are expected to total approximately $15.1 million. The Company plans to use
these remaining net proceeds to expand and enhance the Company's marketing
efforts and the InterCept Frame Relay Network, and for working capital and
general corporate purposes, including possible acquisitions. Pending such
uses, the Company plans to invest the net proceeds in short-term, interest
bearing, investment grade securities. The Company also plans to register up to
an additional 2,000,000 shares of its Common Stock as soon as practicable
after completion of this Offering for use by the Company as consideration in
connection with future acquisitions. See "Shares Eligible for Future Sale."
27
<PAGE>
While there can be no assurance, management believes that the proceeds of
this Offering, funds currently on hand, funds to be provided by operations,
and funds available through the Company's anticipated credit facility,
together with the issuance of Common Stock or other securities, will be
sufficient to meet the Company's anticipated needs for working capital,
capital expenditures and future acquisitions through 1998.
EFFECTS OF ACCOUNTING STANDARDS
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
issued by the Financial Accounting Standards Board requires the Company to
review for impairment, and potentially write down, the carrying values of
long-lived assets and certain identifiable intangibles (including goodwill) to
be held and used by the Company. The Company adopted SFAS No. 121, effective
January 1, 1996, with no material impact on the consolidated financial
statements. The Company periodically reviews the values assigned to long-lived
assets to determine if any impairments are other than temporary. Management
believes that the long-lived assets in the accompanying balance sheets are
appropriately valued.
SFAS No. 123, "Accounting for Stock Based Compensation" establishes a fair
value based method for financial accounting and reporting stock-based employee
compensation plans. Companies may elect to adopt the measurement criteria of
SFAS No. 123 for accounting purposes, thereby recognizing compensation expense
in results of operations on a prospective basis, or to disclose the pro forma
effects of the new measurement criteria. The Company has elected to disclose
the pro forma effects of the new measurement criteria. See Note 10 of Notes to
the Consolidated Financial Statements.
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share." SFAS No. 128 establishes standards for computing
and presenting earnings per share ("EPS"). It replaces the presentation of
basic and diluted EPS on the face of the statement of operations for all
entities with complex capital structures and requires a reconciliation of a
numerator and denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation. Basic EPS excludes dilution and is
computed by dividing income available to common stockholders by the weighted-
average number of shares of common stock outstanding for the period. Diluted
EPS reflects the potential dilution that could occur if convertible securities
or other contracts to issue common stock were exercised or converted into
common stock, resulting in the issuance of common stock that would then share
in the earnings of the entity. Diluted EPS is computed similarly to fully
diluted EPS pursuant to APB Opinion No. 15. The statement is effective for
financial statements issued for periods ending after December 15, 1997,
including interim periods; earlier application is not permitted. This
statement requires restatement of all prior-period EPS data presented.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" ("SFAS 130"), which establishes
standards for reporting and presentation of comprehensive income and its
components in a full set of general purpose financial statements. This
statement is effective for periods beginning after December 15, 1997. The
adoption of SFAS 130 is not expected to have an impact on the Company's
financial statements.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131"), which establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information
about operating segments in interim financial reports issued to stockholders.
It also establishes standards for related disclosures about products and
services, geographic areas and major customers. This Statement is effective
for financial statements for periods beginning after December 15, 1997. The
adoption of SFAS 131 is not expected to have a material impact on the
Company's financial statements.
28
<PAGE>
INDUSTRY
OVERVIEW
The financial services industry has changed dramatically over the past
several years, causing the Company's community financial institution customers
to compete directly with diversified financial service providers offering a
wide array of sophisticated financial products and services, including
electronic commerce services. Electronic commerce involves the transaction of
business through the use of telecommunications networks and computer systems
that transmit and process commercial information and business documents
electronically. Electronic commerce for the financial services industry
includes value-added EFT services such as ATM, POS, funds transfer, scrip
debit services, remote banking and universal access to funds.
The Company believes that the demand of community financial institutions and
their customers for third-party electronic commerce solutions has increased
substantially in recent years and will continue to grow in the future as a
result of numerous financial, strategic and technological factors. These
factors include: (i) the desire by these financial institutions to remain
competitive with larger institutions by using sophisticated technologies in
their operations without the expense and resource commitment required to
maintain an in-house system; (ii) the need for rapid and secure processing and
transmission of large amounts of data to multiple locations; (iii) the need to
accommodate the Year 2000 data rollover problem; (iv) the efforts of financial
institutions to control costs and improve operating efficiencies through the
use of service bureau outsourcing alternatives; and (v) the desire of
financial service providers to focus on their primary product and service
offerings. InterCept believes that, in order to stay competitive in the
changing marketplace, community financial institutions will continue to
require electronic commerce products and services, including the EFT, data
communications management, enterprise software and transaction processing
alternatives offered by the Company
EFT PROCESSING SERVICES
EFT transaction processing enables financial institutions and their
customers to conduct numerous business transactions conveniently and quickly,
reduces operating costs and facilitates more accurate settlement of payments.
Although larger financial institutions typically process their EFT
transactions in-house, many community financial institutions have outsourced
EFT transaction processing to third-party processors. By aggregating the EFT
transaction processing of numerous community financial institutions, third
party processors create economies of scale, which allow them to price their
services competitively. According to an industry report, transaction volume
for general purpose electronic commerce cards totaled $1.8 trillion worldwide
in 1996 (which translates approximately into a $27 billion market for
processing services) and is projected to grow to $6.5 trillion by the year
2005.
EFT transaction processing involves the on-line processing of transactions
initiated by a consumer at a terminal using a debit or credit card issued by
the consumer's financial institution. Various transactions, including cash
withdrawals, transfers and balance inquiries, are initialized, authorized,
completed and recorded against the consumer's accounts. According to industry
reports, there were over 175,000 ATMs and 1.3 million POS terminals in the
United States in 1997. Transaction volume has grown in recent years due to an
increase in the number of ATMs and POS terminals deployed, the number of
cardholders and the frequency of use by cardholders. Rapid technological
advances in data communications and transaction processing, particularly the
transition from paper-based to electronic processing, have contributed greatly
to wider acceptance and increased consumer use of EFT services. The number of
debit card transactions increased approximately 50.0% in 1996 and is projected
to increase 32.0% annually through the year 2005. The Company believes that
increased card acceptance and usage, coupled with technological advances in
electronic transaction processing, have created a need for financial service
providers to offer a variety of EFT solutions and value-added services to
their customers.
29
<PAGE>
DATA COMMUNICATIONS MANAGEMENT
EFT transaction processing mandates dependable and automated data
communications connectivity in a secure environment. Financial institutions
therefore require sophisticated technologies and value-added services to
perform critical functions and to facilitate rapid and accurate transaction
communications by and between different institutions. Electronic data
communications systems have dramatically changed in recent years from low
speed, inflexible analog circuits supporting legacy communications protocols
to high speed dynamic and flexible communications topologies based upon frame
relay, asynchronous transfer mode and other advanced technologies. These
technologies are now deployed widely in publicly available communications
platforms, including online services, the Internet (including the World Wide
Web) and interactive telephone information systems (such as those provided by
many banks). These communications resources enable individuals to locate and
retrieve large amounts of information from a remote location using standard
devices such as telephones and personal computers. Personal computers are now
commonly employed in businesses and homes, and many have various
communications devices (e.g., modems, ISDN terminal adaptors and network
interface cards) that allow remote communication with other computers. These
changes in the telecommunications marketplace are evidenced by the multitude
of communications devices and information services available today. The growth
in the number and types of communications devices has created a large market
in data communications and information exchange.
Many large transaction processors provide data communications using
mainframe-based legacy systems that are difficult and expensive to maintain
and modify. Transaction processors that maintain these systems for their data
communications and transaction processing needs often find it difficult to
meet the increasing demands of financial institutions for reliable high speed
networking capabilities tailored to their specific and changing needs. Recent
advances in less costly, flexible and integrated computer software systems,
including client/server systems, afford transaction processors improved
capabilities and responsiveness in providing data and transaction processing
services. In addition, the use of fiber optic cables and advanced switching
technology in telecommunications networks, as well as competition among
telecommunications providers, enables third-party processors to provide faster
and more reliable service at lower per-transaction costs than previously
available. As a result of continued technological changes, the Company
anticipates increased demand for third-party data communications management
and transaction processing services.
ENTERPRISE SOFTWARE
Changing technologies, business practices and financial products have
resulted in software-related issues of compatibility, scalability and
increased complexity for many financial institutions. The shift toward the
client/server processing environment has created the need for more user-
friendly applications and on-line support mechanisms and the integration of
highly complex systems and software with various telephony applications. The
technology surrounding the transmission, storage and retrieval of massive
amounts of data has further increased the complexity of data processing for
financial institutions. In addition, many existing software systems have a
Year 2000 data rollover problem because they do not store dates and process
data using codes which are written for four-digit years. These older systems
may produce inaccurate information or may even become inoperable at the turn
of the century, and may not otherwise offer the advanced technological
capabilities provided by newer systems. As a result, financial institutions
are demanding more complete and flexible data communications, information
technology, enterprise software and processing solutions, as well as
complementary products and services. According to a published market research
report, the size of the U.S. financial institutions information technology
outsourcing market was estimated to be approximately $2.8 billion in 1997 and
is projected to increase to $3.7 billion by the year 2000.
30
<PAGE>
BUSINESS
GENERAL
The Company designs, develops, markets and implements a suite of fully
integrated electronic commerce products and services primarily for community
financial institutions in the United States. The Company's products and
services include EFT, data communications management, client/server enterprise
software and other processing solutions. InterCept currently serves over 550
financial institutions and is the largest third-party processor of financial
institutions' ATMs in the southeastern United States. The Company has
established marketing relationships with 9 of the 17 bankers' banks, which
provide the Company access to over 4,500 of the approximately 11,000 financial
institutions nationwide. On January 30, 1998, the Company merged with
Technologies, a related party. The Company's pro forma revenues increased from
$16.4 million in the year ended December 31, 1996 to $23.3 million in the year
ended December 31, 1997. Recurring revenues accounted for approximately 66.7%
and 76.3%, respectively, of the Company's pro forma revenues for these two
years.
InterCept is a single source provider of a broad range of flexible
electronic commerce solutions and supporting value-added products and
services. The Company provides numerous EFT products and services, including
ATM, POS and scrip debit services, debit card transactions including both
MasterMoney(TM) and Visa(R) Check cards, funds transfer and remote banking
services. The Company licenses its PC-based client/server enterprise software,
PC BancPAC(TM), which operates in a personal computing environment and (since
October 1997) in a Windows NT(R) environment. Community financial institutions
can implement PC BancPAC(TM) on both an in-house and service bureau basis,
providing them with two alternatives for utilizing the Company's technologies
and processing expertise to improve operating efficiency for their
institutions. The Company offers its financial institution customers numerous
value-added products and services, including branch automation, optical disk
record storage and retrieval, check imaging and on-line signature
verification. The Company also provides maintenance and technical support
services, supplies ATMs, proof machines and other banking related equipment,
and offers numerous ancillary products and services to community financial
institutions.
As part of its integrated suite of electronic commerce products and
services, the Company provides end-to-end data communications management
solutions for its customers. The Company maintains nationwide data
communications coverage and has the InterCept Frame Relay Network, one of the
largest private frame relay networks in the southeastern United States. The
InterCept Frame Relay Network is the principal conduit through which the
Company processes EFT transactions and manages the data communications needs
of its customers. Through the InterCept Frame Relay Network and its
telecommunications connectivity to various other networks, the Company manages
data communications and, in some instances, voice-over-frame communications,
which eliminates certain long distance charges for its customers. The Company
also designs and manages various local and wide area data communications
networks for its customers. The Company offers internet services, including
managed firewall and email services, to the desktop of its customers'
personnel across the InterCept Frame Relay Network.
The InterCept Frame Relay Network contains approximately 1,300 drops which
are located in 14 states, 40 LATAs and all five of the RBOCs' markets. The
design of the InterCept Frame Relay Network provides for efficient switching
capabilities, which results in rapid response time, and secure and reliable
transmission and processing of electronic commerce transactions conducted
across the network. The Company believes the InterCept Frame Relay Network
enables it to provide its electronic commerce products and services more
efficiently and on a more cost-effective basis for its customers. The
attributes of the InterCept Frame Relay Network result in rapid response time,
and its considerable bandwidth facilitates the delivery of the Company's
numerous EFT, processing and ancillary services.
InterCept's top nine senior officers have an average of over 22 years of
industry experience and have expertise in multiple areas of electronic
commerce (including data communications management), enterprise software and
transaction processing for financial institutions. The Company's current
market focus is on
31
<PAGE>
community financial institutions, which the Company believes rely heavily on
third-party providers for a majority of their EFT, data communications
management, enterprise software and transaction processing solutions,
including the products and services offered by the Company. InterCept believes
that as a result of rapid technological, financial and other changes that have
occurred over the past several years that the demand of community financial
institutions and their customers for technologically advanced solutions has
increased substantially and that such demand will continue to grow in the
future. The Company believes that its integrated suite of electronic commerce
solutions enables its community financial institution customers to compete
with larger financial institutions by allowing them to offer their customers
similar products and services on a cost-competitive basis.
BUSINESS STRATEGY
InterCept's goal is to become the largest provider of electronic commerce
products and services for community financial institutions in the United
States. The Company plans to implement the following key strategies to attain
its goal:
(i) Cross-Market to Existing Customer Base and Maximize Recurring
Revenues. InterCept plans to cross-market its EFT, data communications
management, client/server enterprise software and numerous ancillary
products and services to its existing customers, most of which already use
the Company's EFT services. The Company seeks to develop and maintain long-
term customer relationships by providing multiple electronic commerce
products and services to community financial institutions pursuant to
contracts with renewable terms. Many of the Company's products and services
generate recurring revenues, which the Company defines as revenues from
services used by customers each month and year in connection with their
ongoing business. The Company intends to maximize its recurring revenues
through these relationships by enhancing and increasing the use of its
various products and services. The Company also plans to create and acquire
additional sources of recurring revenues to meet the evolving needs of its
customers.
(ii) Increase Data Communications Management and Optimize the InterCept
Frame Relay Network. InterCept intends to increase its data communications
management services by offering customized, cost-competitive
telecommunications connectivity to its customers and managing their data
traffic in a reliable and secure manner across the InterCept Frame Relay
Network. The Company intends to optimize the InterCept Frame Relay Network
by selling additional communications services to its customers, thereby
increasing network utilization with minimal additional cost to the Company.
In addition, the Company will attempt to expand the InterCept Frame Relay
Network into new geographic areas as business warrants. InterCept plans to
improve the speed and efficiency of transaction processing across the
network by enhancing and selectively upgrading its processing and switching
equipment and telecommunications lines. In addition, the Company will
attempt to expand the InterCept Frame Relay Network into new geographic
areas as business warrants. The Company believes that the strategic
development of the InterCept Frame Relay Network will continue to provide
for more efficient network utilization, allow it to reduce transmission and
other operating cost and support its current and future products and
services.
(iii) Complete Strategic Acquisitions. InterCept intends to acquire other
companies with complementary technologies or services that will enhance and
expand the products and services offered to existing customers, increase
its market share, expand its geographic presence or optimize the InterCept
Frame Relay Network. Since the beginning of 1996, the Company has completed
several acquisitions of providers of complementary products and services.
See "The Company." The Company believes that its previous acquisitions of
providers of complementary technologies and services has strengthened its
suite of products and services and expanded its geographic presence into
new markets. The Company plans to continue to integrate and enhance the
products and services it has acquired, pursue strategic acquisitions of
additional products and services and cross-market its expanded suite of
solutions to existing and future customers.
(iv) Expand Sales Force and Strategic Marketing Relationships. The
Company plans to expand its customer base and penetrate new geographic
markets by hiring sales personnel with expertise in community
32
<PAGE>
financial institutions' operations and/or the Company's electronic commerce
products and services. InterCept currently has established relationships
with several banking related business organizations, including strategic
marketing relationships with 9 of the 17 bankers' banks, which provide the
Company access to over 4,500 of the approximately 11,000 community
financial institutions nationwide. Bankers' banks are local or regional
business organizations that provide correspondent banking products and
services to financial institutions that could not provide them in an
efficient manner themselves due to cost, location, lack of resources or
other circumstances. In addition, bankers' banks provide financial support
and business advice to financial institutions with respect to various
critical areas such as operations, profitability and federal and state
regulation. The Company believes that the essential nature of the
relationship between bankers' banks and community financial institutions
makes the Company's alliances with bankers' banks an important part of its
marketing strategy. InterCept intends to use its expanded sales force to
market its products and services directly to community financial
institutions and to enhance its indirect marketing efforts by developing
additional strategic marketing relationships with bankers' banks and
various other business organizations.
(v) Expand and Enhance its Products and Services. The Company has devoted
and will continue to devote resources to developing and enhancing its suite
of products and services. The Company plans to continue to combine its
enhanced and expanded electronic commerce solutions with sophisticated
technology to help its community financial institution customers remain
competitive with other financial service providers. The Company continually
strives to anticipate the most recent trends in the financial services
industry and to develop and provide leading edge products and services.
THE INTERCEPT SOLUTION
The InterCept solution to addressing the complex and evolving needs of
community financial institutions is to continue to develop, enhance and
provide a comprehensive and flexible suite of fully integrated electronic
commerce products and services. These products and services include: (i) EFT
transaction services, including ATM, POS, scrip services, debit card
transactions, funds transfer, remote banking and universal access to funds;
(ii) data communications management services across the InterCept Frame Relay
Network; (iii) client/server enterprise software solutions to handle the core
processing needs of community financial institutions; (iv) other value-added
products and services, including item processing, branch automation and
optical disk storage products; and (v) equipment, maintenance and technical
support and merchant credit card portfolio management services.
The Company maintains nationwide data communications coverage and uses the
InterCept Frame Relay Network to support the complex electronic commerce
transaction requirements of its community financial institution customers. The
Company seeks to maximize the benefits of available technologies to enable it
to deliver highly reliable data communications, client/server enterprise
software and transaction processing solutions and related products and
services on a cost-effective basis. The Company attempts to establish long-
term business relationships with its customers to maximize the Company's
recurring revenues and optimize the InterCept Frame Relay Network. The Company
believes that each of its products and services efficiently and effectively
supports the various needs of community financial institutions and that, when
combined, its integrated electronic commerce products and services offer
community financial institutions a single source for comprehensive electronic
commerce solutions and allow its community financial institution customers to
remain competitive with larger financial service providers.
EFT Processing Services
InterCept offers a wide range of EFT transaction services, including ATM,
POS, scrip services, debit card transactions including MasterMoney(TM) and
VISA(R) Check cards, funds transfer, remote banking and universal access to
funds. The Company's EFT transaction processing business is conducted
primarily through its network connections to most regional and all national
ATM and POS switch networks, including HONOR(TM), PULSE(TM), Cirrus(R),
PLUS(R), Maestro(R) and INTERLINK(R). Based on the number of financial
institutions that use third parties
33
<PAGE>
to process their ATM transactions, the Company is the largest third-party
processor of financial institutions' ATM transactions in the southeastern
United States. As of December 31, 1997, the Company provided EFT services to
approximately 390 customers. Revenues from these activities were $9.3 million,
or 40.0%, of the Company's pro forma revenues, for the year ended December 31,
1997.
Historically, the national ATM switching networks prohibited member
institutions from charging fees for ATM usage on their networks. In April
1996, national switching networks Cirrus(R) and PLUS(R) voted to lift the ban
on these ATM surcharges. After the ban lifted, several financial institutions
began charging fees to non-customers for using their ATMs to conduct
transactions across their switching networks. The Company's community
financial institution customers became concerned that their customers would
migrate to institutions with a larger number of ATMs for the availability of a
larger number of surcharge-free ATMs. In response to this concern, the Company
formed a wholly-owned subsidiary, InterCept Switch, Inc., and introduced
InterCept Switch, a surcharge-free ATM network designed to keep its community
financial institution customers competitive with larger banks by allowing them
to waive ATM surcharges for customers of InterCept Switch members, while
retaining the ability to surcharge non-member customers that use their ATMs.
The InterCept Switch ATM network is run by PULSE(TM) for a fee based on the
number of ATM transactions conducted through the InterCept Switch network.
InterCept gives its financial institution customers the flexibility to
design the exact ATM program they wish to offer by providing full functional
support of all major ATM hardware. The Company provides necessary ATM support
services and products, including terminal processing, network support, POS and
ATM equipment, and maintenance services. The Company's customers may elect to
forego the purchase of ATM hardware by choosing the Company's card issue only
service option, which permits institutions to offer ATM services to their
customers without the expense of purchasing and maintaining ATM hardware.
The ATM transactions processed by the Company begin when a cardholder
inserts a card issued by a financial institution (a "Card Issuer") into an ATM
to withdraw funds, obtain a balance, make other account inquiries or transfer
funds. The transaction is routed from the ATM across the InterCept Frame Relay
Network to the Company's data communications and processing center. The
Company's computer identifies the Card Issuer by the financial institution
identification number contained within the card's magnetic strip. The Company
then either (i) authorizes or denies the requested transaction or (ii)
switches the transaction to the Card Issuer or its designated processor for
authorization. Once authorization is received, the authorization message is
routed back to the ATM almost immediately and the transaction is completed.
For its customers' clients, the Company updates the cardholder's account
information on a daily basis.
Throughout these steps, the Company charges various fees to the financial
institutions that are in addition to any fees that the Card Issuer might
charge the ATM user. The Company receives a base fee for providing its ATM
processing services and an additional fee for each ATM serviced. Once the
number of transactions exceeds established maximums (typically between 2,000
and 3,000 transactions), the Company charges additional fees for the extra
transactions processed. The Company also receives fees for installation,
maintenance and support of the ATMs it supplies to its customers.
The Company processes debit card transactions for banks issuing such cards,
including MasterMoney(TM) and Visa(R) Check cards, which permit direct payment
debit from POS terminals at over 13 million locations worldwide against the
cardholder's deposit account. InterCept's POS and scrip services provide
instant access to funds without the expense of installing a traditional ATM.
With a small initial investment in a POS or scrip terminal, the Company's
financial institution customers can support EFT transactions from virtually
any merchant location.
The electronic debit card transaction process begins when a consumer
presents a debit card to the merchant who then "swipes" the card at a POS
terminal and enters the transaction amount. The transaction data is
transmitted from the POS terminal through the applicable credit and debit
processing networks to the InterCept Frame Relay Network. The Company then
compares the purchase transaction against the authorization data
34
<PAGE>
accessed through the Company's system, places a hold for the transaction
amount, authorizes the transaction and transmits the authorization response
almost immediately back through the network to the POS terminal. The
appropriate processing network settles the payment and credits the merchant
with the transaction amount less any discounts. The merchant delivers final
transaction information to the credit processing network and the network
submits the transaction to the Company, which facilitates posting and
reporting of the transaction with the issuing bank. To complete the
transaction, the issuing bank debits its customer's account for the
transaction amount. For its POS services, the Company generally receives a
portion of the interchange fees charged by its community financial institution
customers that issue debit cards and charges a monthly fee if its customers do
not meet a certain minimum dollar amount of transactions for a particular
month.
A scrip transaction requires a customer to obtain a cash voucher, using an
ATM card, at a self-service terminal located within the store but not at the
check-out. The customer purchases goods with the voucher and receives any
overage from the transaction in cash (if permitted by the merchant) or in the
form of a voucher from the cashier. InterCept's scrip and POS services include
access to multiple networks, settlement reports, card management support and
administrative terminal support.
The Company markets its EFT services primarily to community financial
institutions in the southeastern and central United States. The Company's EFT
service contracts generally provide for an initial term of three to five years
and automatically renew for similar terms unless notice of non-renewal is
given prior to expiration. Most charges due under these agreements are paid
monthly. The Company generally is permitted to raise prices on an annual basis
subject to certain maximum limits. The Company provides ATM and various other
banking equipment and maintenance services to approximately 250 customers in
Georgia, Alabama, Florida, Tennessee and South Carolina. Where applicable, the
Company enters into standard ATM and other equipment maintenance contracts
with its customers that generally provide for a term of between one and three
years. Generally, these contracts automatically renew for varying periods at
the end of the initial or any renewal term unless either party elects to
cancel the agreement 180 days prior to its expiration.
Data Communications Management and The InterCept Frame Relay Network
In response to the relatively high cost and low efficiency of the data
communications operations of many of its community financial institution
customers, the Company developed the InterCept Frame Relay Network and began
to offer end-to-end data communications management services to financial
institutions on a more cost-effective basis than previously available. Through
the InterCept Frame Relay Network and its telecommunications connectivity to
various other networks, the Company manages data communications and, in some
instances, voice-over-frame communications, which eliminates certain long
distance charges for its customers. The Company also designs and manages
various local and wide area data communications networks for its customers.
The Company offers internet services, including managed firewall and email
services, to the desktop of its customers' personnel across the InterCept
Frame Relay Network. By providing end-to-end data communications management
services across the InterCept Frame Relay Network, the Company believes it
will have greater success in cross-marketing its fully integrated suite of
electronic commerce products and services and that it is able to better
monitor and maintain the quality of these products and services to help ensure
continued customer satisfaction. As of December 31, 1997, the Company provided
data communications management services to 63 customers. Pro forma revenues
from these activities were $3.3 million, or 14.0%, of the Company's pro forma
revenues for the year ended December 31, 1997.
The Company maintains nationwide data communications coverage and uses the
InterCept Frame Relay Network, the Company's private frame relay
telecommunications network with approximately 1,300 drops which are located in
14 states, 40 LATAs and all five RBOCs' markets. According to industry data,
based upon the number of drops, the InterCept Frame Relay Network is one of
the largest private frame relay networks in the southeastern United States.
The InterCept Frame Relay Network is the principal conduit through which the
Company provides its end-to-end data communications management services. The
key advantages of frame relay versus legacy protocols include: (i) the ability
to accommodate data packets of various sizes; and (ii) protocol independence--
not only can any set of data be accepted, switched and transported across a
network, but the
35
<PAGE>
specific data is undisturbed in the process of encapsulation. The design of
the InterCept Frame Relay Network provides efficient switching capabilities,
which results in rapid response time, as well as secure and reliable
transmission and processing for electronic commerce transactions conducted
across the network.
The InterCept Frame Relay Network uses the fiber optic networks of WorldCom,
Inc. and BellSouth Telecommunications, Inc. to provide the substantial
bandwidth capable of supporting the transaction-intensive services offered by
the Company. The InterCept Frame Relay Network is linked to the Company's
customer operations by T-1 and fractional T-1 communication lines to ensure
adequate bandwidth for rapid processing of electronically transmitted data. As
customer needs change and as technology improves, management believes that it
will be able to adapt and customize the InterCept Frame Relay Network as
necessary to achieve the processing speeds and functionality it desires.
The InterCept Frame Relay Network implements advanced satellite technology
provided by GE Capital SpaceNet Services, Inc. ("GE SpaceNet") and
sophisticated telecommunications equipment supplied by Motorola, Inc.
("Motorola"). Further, the InterCept Frame Relay Network topology gives the
Company the ability to acquire telecommunications access from providers other
than WorldCom. Management believes that, if necessary or desirable, the
Company could utilize the networks of any major telecommunications access
provider to operate the InterCept Frame Relay Network. Management believes
that transferring the InterCept Frame Relay Network to another
telecommunications access provider could be accomplished without significant
service interruption or delay, although such a transfer may increase the
Company's expenses for its telecommunications services.
The Company's relationship with GE SpaceNet augments the InterCept Frame
Relay Network in areas where frame relay connectivity is either unavailable or
not economically feasible. Because GE SpaceNet builds, launches and maintains
its own private satellites rather than leasing such services from third
parties, the Company is able to provide a high level of reliability in its
network services and provide better customer service. The Company maintains an
automated backup system for the most critical data circuits in the InterCept
Frame Relay Network in the event of a network outage or other similar
occurrence. The Company also provides shared hub satellite transmission
services as well as multi-drop and point-to-point hard line telecommunication
networks. The Company uses Motorola telecommunications equipment and
processing hardware to enable the InterCept Frame Relay Network to support the
various data communications protocols most commonly used by its customers.
The Company monitors and maintains the InterCept Frame Relay Network's
lines, circuits and equipment functions on a seven-day, 24-hour basis from a
central computer location in Norcross, Georgia. The Company maintains this EFT
processing and data communications switching facility and has established a
limited disaster recovery plan with certain telecommunications providers to
provide alternative communications capabilities in the event the Company
experiences a natural disaster or other interruption at its Norcross facility,
rather than maintaining a "hot site" backup location for its EFT processing
and InterCept Frame Relay Network switching hardware.
Client/Server Enterprise Software and Services
The Company offers client/server enterprise software processing and related
products and services on both an in-house and service bureau basis primarily
to community financial institutions. The Company satisfies its service bureau
customers' core processing requirements, including general ledger and
financial management, customer information file maintenance, loan and deposit
processing, financial accounting and reporting and ATM and automated clearing
house ("ACH") interfaces, through on-line data communications utilizing the
InterCept Frame Relay Network. Historically, InterCept delivered its core data
processing solutions on a service bureau basis using legacy computer system
technology. However, in December 1996 the Company acquired PC BancPAC(TM) and
has since licensed this client/server accounting software system on an in-
house basis and implemented this software in its service bureau operations.
Revenues from the Company's enterprise software and related services were $5.6
million, or 24.1%, of the Company's pro forma revenues, for the year ended
December 31, 1997.
36
<PAGE>
PC BancPAC(TM) consists of a series of integrated software modules which,
together, accommodate the core data processing needs of the Company's
financial institution customers, including general ledger and financial
management, customer information file maintenance, loan and deposit
processing, financial accounting and reporting and ATM and ACH interfaces. PC
BancPAC(TM) and related products operate in a Windows NT(R) environment and
the Company believes they are well-suited for both in-house and service bureau
core processing for financial institutions. The Company believes PC
BancPAC(TM) is Year 2000 compliant and permits the Company to offer flexible
alternatives to its existing customers and to pursue other segments of the
financial institution processing market. Processing in a client/server
environment provides superior flexibility in tailoring procedures and improves
customer service throughout the institution. Using personal computers as
workstations (the "client") and connecting them via a network to another
personal computer containing the database (the "server"), client/server
computing offers fast and easy processing on economical computer hardware. The
Company believes PC BancPAC(TM) is a user-friendly product with easy-to-learn
"point and click" and "drag and drop" features.
As part of its software processing services, the Company also provides item
processing and back office services including proofing and encoding, bulk
filing, statement preparation and check imaging to accommodate the additional
needs of its financial institution customers. The Company's data processing
and item processing services are typically priced on the basis of account or
item volume. The Company delivers its check imaging and item processing
services from five service centers located in Georgia and Colorado. Fees for
check imaging services are generally based upon the volume of information and
images (document pages) processed, stored or retrieved. The Company also
offers a variety of owned and licensed complementary value-added services and
products to its customers to enable them to compete with larger financial
institutions that offer a broad array of services and products to their
customers. These services and products include an integrated voice response
banking system, safe deposit box accounting, cash management services, check
imaging services and optical disk storage.
The Company's data communications, EFT and outsourced client/server
enterprise processing services utilize the InterCept Frame Relay Network and
are coordinated through the Company's two host data centers located in Georgia
and Colorado and five check imaging and item processing facilities located in
those states. The Company's data centers have a combined processing capacity
of over 820 RPMs (relative performance measure units). The Company continually
plans for testing and implementation of new technology and emphasizes
flexibility in structuring the services it offers using new technology. The
Company's data centers, together with its remote check imaging and item
processing centers, provide the comprehensive and customized data processing
services required by InterCept's service bureau customers. The Company's data
processing centers in Macon, Georgia and Colorado Springs and Denver, Colorado
each act as a back-up facility for the others in the event another site
experiences a natural disaster, destruction or other similar event which
eliminates or diminishes its processing capabilities.
As of December 31, 1997, the Company provided data processing and/or item
processing services to over 50 financial institutions pursuant to contracts
which generally provide for three year renewable terms. The Company also
provides account processing software support and maintenance to nine financial
institution customers that implement its products in-house.
Complementary Products and Customer Services
To complement its integrated suite of electronic commerce solutions, the
Company provides maintenance and technical support services, which generate
recurring revenues, and supplies specialized equipment including ATMs, proof
machines, teller equipment, personal computers, vaults and other security
equipment. Revenues from these activities were $5.1 million, or 21.9%, of the
Company's pro forma revenues, for the year ended December 31, 1997. The
Company anticipates that, as revenues from its other operations increase,
revenues from supplying equipment and maintenance and technical support
services will decrease as a percentage of total revenues.
37
<PAGE>
In December 1996, InterCept expanded its product offerings to include
merchant portfolio management services. The Company's merchant credit card
portfolio management services are tailored to help its customers meet day-to-
day challenges and satisfy their needs for portfolio growth and increased
revenue in today's competitive marketplace. By partnering with InterCept, the
Company's financial institution customers retain ownership and control of
their merchant credit card portfolio accounts while benefiting from economies
of scale and the ability to select flexible processes for product delivery.
The Company offers extensive customer services and technical support for its
electronic commerce products and services. InterCept believes that well-
trained support personnel are essential to attract and retain financial
institution customers. InterCept's trained customer service and technical
support personnel employ methodologies to enhance the Company's ability to
offer reliable, secure and automated solutions. The Company's customer service
departments are responsible for educating and assisting its customers in the
use of the Company's integrated services, for resolving billing related issues
and, in consultation with InterCept's technical support personnel, for solving
any technical problems customers may experience. As of December 31, 1997, the
Company employed 14 people in its customer service departments, which are
available 24 hours per day, seven days per week. Customer service
representatives who support vital processing functions are also accessible by
a toll-free telephone number.
The Company employs separate personnel who are responsible for technical
support functions. These employees are generally responsible for consulting
with InterCept's financial institution customers regarding technical issues,
and for solving any technical issues brought to their attention by the
customer service department. The Company's technical support department is
also responsible for maintaining the Company's backup systems and for
coordinating the disaster recovery services maintained by certain of the
Company's information processing customers. As of December 31, 1997, the
Company employed 25 technical support representatives who are available 24
hours a day, seven days per week. Technical support representatives who
support vital processing functions are also accessible by a toll-free
telephone number.
CUSTOMER BASE AND RECURRING REVENUES
The Company achieves growth in its recurring revenues and customer base
primarily through cross-marketing its integrated products and services. The
Company's customer base consists of more than 550 financial institutions in 20
states which primarily are community financial institutions located in the
southeastern United States and Colorado. As of December 31, 1997, the Company
provided EFT products and services to more than 390 customers, 290 of which
are full-service EFT customers. The Company also had 249 maintenance
customers, some of which also use the Company's EFT services. In addition, the
Company had 62 customers using its enterprise software, processing solutions
and ancillary products and services, including 53 service bureau customers and
nine customers processing on an in-house basis. Of these customers, 24 use
check imaging and item processing services. The Company also has approximately
10 merchant portfolio management customers as of December 31, 1997.
Approximately 63.0% and 74.1% of the Company's revenues for the years ended
December 31, 1996 and December 31, 1997, respectively, were recurring.
Recurring revenues are defined by the Company as revenues derived from
services that are used by the Company's customers each year in connection with
their ongoing businesses, and accordingly exclude such items as conversion and
deconversion fees, initial software license fees, data communications line
installation fees and hardware sales revenues.
SALES AND MARKETING
The Company's sales force is made up of six sales representatives for EFT
transaction processing products and services, one sales representative for
data communications management services and two sales representatives for
client/server enterprise software and related services as of December 31,
1997. Maintaining separate sales forces for its various service lines allows
the Company's sales representatives to concentrate on particular services,
product technology and customer markets, thereby keeping them informed of
developments in these areas. Sales representatives in the various groups are,
however, informed as to the full suite of the
38
<PAGE>
Company's products and services and are encouraged to market the full suite of
products and services to customers and to refer prospects to the appropriate
professionals. The Company offers its products and services on a stand-alone
basis and combined with one or more other products and services to create
customized solutions for each community financial institution.
The Company markets its EFT and processing services by designing custom-
tailored solutions that it believes are attractive to its community financial
institution customers in terms of features, quality of service and price. The
Company markets its services and products through direct sales forces located
in the southeastern United States, Colorado and Texas. InterCept intends to
expand its existing customer base and penetrate new geographic markets by
hiring sales personnel with expertise in community financial institutions'
operations and/or the Company's electronic commerce products and services. The
Company cross-markets its data communications management, client/server
enterprise processing and other value-added products and services to its
existing customers, most of which already use the Company's EFT services.
The Company's indirect marketing efforts include obtaining referrals and
endorsements from its financial institution customers and various banking
related organizations. InterCept currently has written marketing agreements
with 6 of the 17 bankers' banks and has other relationships with three
additional bankers' banks. Bankers' banks are local or regional business
organizations that provide correspondent banking products and services to
financial institutions that could not provide them in an efficient manner
themselves due to cost, location, lack of resources or other similar
circumstances. In addition, bankers' banks provide financial support and
business advice to financial institutions with respect to various critical
areas such as operations, profitability and federal and state regulation. The
Company believes that the essential nature of the relationship between
bankers' banks and community financial institutions makes the Company's
alliances with bankers' banks an important part of its marketing strategy.
Through its relationship with these bankers' banks, the Company has a referral
source to over 4,500 financial institutions nationwide. The Company seeks to
enter into additional strategic marketing arrangements to augment its indirect
marketing efforts and increase the number of its referral sources.
COMPETITION
The data communications, enterprise software and transaction processing
industries are intensely competitive and highly fragmented, and the Company
expects increased competition from both existing competitors and companies
that enter the Company's existing or future markets. Many of the Company's
current and potential competitors have longer operating histories, greater
name recognition, larger customer bases and substantially greater financial,
personnel, marketing, engineering, technical and other resources than the
Company. Numerous companies supply competing products and services, and many
of these companies specialize in one or more of the services which the Company
offers or intends to offer to its customers. The Company's market share
represents a small percentage of the total information processing market. The
Company believes that existing competitors are likely to expand their product
and service offerings and that new competitors are likely to enter the market
and attempt to integrate electronic commerce, information processing and other
services, resulting in greater competition for the Company. Such competition
could materially adversely affect the Company's business, financial condition
and results of operations.
Although the Company is not aware of any major competitor that is marketing
an integrated suite of solutions identical to that marketed by the Company,
many of the Company's competitors have substantial resources and technical
expertise, and could likely develop such comprehensive solutions if they chose
to expend sufficient resources. The Company believes that the principal
competitive factors affecting the market for its services generally are price,
quality and reliability of service, degree of service integration, ease of use
and service features. Generally, the Company believes that it competes
effectively in these areas.
The Company's principal EFT competitors include major regional ATM networks,
regional and local processing banks, non-bank processors and other independent
electronic commerce and data communications organizations, many of which have
substantially greater capital, management, marketing and technological
39
<PAGE>
resources than those of the Company. There can be no assurance that the
Company will continue to be able to compete effectively with such competitors.
The Company's EFT and outsourced core bank processing services are transmitted
to its customers over telephone lines and the Telecommunications Act of 1996
(the "Act") lifted certain restrictions on regional telephone companies and
others competing with the Company, which will likely lead to these companies
competing with the Company by packaging information service offerings with
other services and providing them on a wider geographic scale. The competitive
pricing pressures that would result from any increase in competition could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "--Government Regulation".
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
The Company relies on a combination of copyright, trademark and trade secret
laws, confidentiality procedures and contractual provisions to protect its
proprietary rights. 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. 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. The Company does not believe
that any of its products infringe the proprietary rights of third parties.
There can be no assurance, however, that third parties will not claim
infringement by the Company with respect to current or future products, and
the Company has agreed to indemnify many of its customers against such claims.
The Company anticipates that the number of infringement claims will increase
as the number of electronic commerce and information technology products and
services increase 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, and may not be resolved on terms
acceptable to the Company, or at all, which could have a material adverse
effect on the Company's business, financial condition and results of
operations.
EMPLOYEES
At January 31, 1998, the Company had 161 full-time employees, of which 20
were in sales and marketing, 100 were in operations and 41 were corporate and
general administrative employees. Of these employees, 105 were based in
Norcross, Georgia, 23 were based in Thomson, Georgia at the Company's
operations center, nine were based in Macon, Georgia, 17 were based in
Colorado Springs and Denver, Colorado, and seven were based in Nashville,
Tennessee. None of the Company's employees is represented by a collective
bargaining agreement nor has the Company ever experienced any work stoppage.
Management believes that the Company's relationship with its employees is
satisfactory.
GOVERNMENT REGULATION
The Company's network services are transmitted to its customers over
dedicated and public telephone lines. These lines are governed by federal and
state regulations establishing the rates, terms and conditions for their use.
Changes in the legislative and regulatory environment relating to online
services, electronic commerce or the Internet access industry, including
regulatory or legislative changes which directly or indirectly affect
telecommunication costs, restrict content or increase the likelihood of
competition from regional telephone companies or others, could have an adverse
effect on the Company's business. The Act amended the federal
telecommunications laws by lifting restrictions on regional telephone
companies and others competing with the Company. The Act set in motion certain
events that will lead to the elimination of restrictions on regional telephone
companies providing transport between defined geographic boundaries associated
with the provision of their own information services. This will enable
regional telephone companies to compete more readily with the Company by
packaging information service offerings with other services and providing them
on a wider geographic scale. The Clinton administration has announced an
initiative to establish a framework for global electronic commerce. Also,
there are a number of bills currently being considered in the United States at
the federal and state levels involving encryption and digital signatures, all
of which may impact the Company. The
40
<PAGE>
Company cannot predict the impact, if any, that the Act and future court
opinions, legislation, regulations or regulatory changes in the United States
may have on its business.
The Company is not directly subject to federal or state regulations
specifically applicable to financial institutions. As a provider of services
to banking institutions, however, the Company's service bureau processing
operations are examined from time to time by various state and federal
regulatory agencies. These agencies make recommendations to the Company
regarding various aspects of outsourcing operations and the Company generally
implements such recommendations. The Company also arranges for an annual
independent examination of its service bureau processing facilities.
The Company's ATM network operations are subject to federal regulations
governing consumers' rights with respect to ATM transactions. Fees charged by
ATM owners are currently regulated in several states and legislation has been
proposed in several other states, and there can be no assurance that such
regulations or legislation will not continue to be enacted in the future or
that existing consumer protection laws will not be expanded to apply to fees
charged in connection with ATM transactions.
PROPERTY AND FACILITIES
The Company's principal office consists of 14,641 square feet of leased
space located in Norcross, Georgia. The Company leases two additional offices
in Norcross that are used for item processing and operations. The Company owns
a facility in Thomson, Georgia that is used as a data and item processing
center for the Company's service bureau operations. A leased facility in
Macon, Georgia serves as an item and image processing center. The Company also
leases two locations in Colorado related to its service bureau operations,
including one in Colorado Springs which serves as a data and item processing
center, and another in Denver used for item processing. The Colorado leases
are due to expire in the next several months, and the Company is negotiating
new leases for these locations. The Company believes these facilities are
adequate for its needs and does not anticipate any material difficulty in
replacing such facilities or securing facilities for new offices.
LEGAL PROCEEDINGS
The Company is not a party to any pending material legal proceedings.
41
<PAGE>
MANAGEMENT
The executive and certain other key officers and directors of the Company
and their ages and positions as of February 1, 1998, are as follows.
<TABLE>
<CAPTION>
NAME AGE CLASS(1) POSITION
---- --- -------- --------
<C> <C> <C> <S>
Chief Executive Officer and Chairman of
John W. Collins......... 50 III the Board
President, Chief Operating Officer and
Donny R. Jackson........ 48 III Director
Scott R. Meyerhoff...... 29 -- Chief Financial Officer and Secretary
Executive Vice President of Sales and
Michael R. Boian........ 58 -- Marketing
Executive Vice President of Network
Michael D. Sulpy........ 37 -- Communications
Senior Vice President of Merchant
Paul D. England......... 47 -- Portfolio Management
Farrell S. Mashburn..... 51 -- Senior Vice President of Data Services
Senior Vice President of Service Bureau
Philip R. Meinert....... 56 -- Operations
Vir A. Nanda............ 55 -- Senior Vice President of Technology
Jon R. Burke............ 50 I Director
Boone A. Knox........... 61 II Director
Bruce P. Leonard........ 44 II Director
Glenn W. Sturm.......... 44 I Director
</TABLE>
- --------
(1) Class I term expires in 1999; Class II term expires in 2000; and Class III
term expires in 2001.
BIOGRAPHICAL INFORMATION FOR EXECUTIVE AND CERTAIN OTHER KEY OFFICERS AND
DIRECTORS
John W. Collins, a co-founder of the Company, has served as its Chief
Executive Officer and Chairman of the Board of Directors since its formation.
Mr. Collins also has served as the Chairman and Chief Executive Officer of
InterCept Switch since its formation in 1996. Mr. Collins co-founded Systems
in 1986, Data Services in 1989, ProVesa in 1994 and Technologies in 1996. He
served as the Chief Executive Officer of Systems prior to its merger with
InterCept in January 1998. Mr. Collins also served as Chairman of the boards
of Systems, Data Services, Bank Services, FiNet and Technologies prior to
their merger with the Company in January 1998. Mr. Collins has over 25 years
of experience in multiple areas of electronic commerce for community financial
institutions.
Donny R. Jackson, a co-founder of the Company, has served as President,
Chief Operating Officer and director of the Company since its formation. Mr.
Jackson also has served as the President and Chief Operating Officer of
InterCept Switch since its formation in 1996. Mr. Jackson was President and
Chief Operating Officer and director of Systems from July 1996 until its
merger with the Company. He has also served as the President and Chief
Executive Officer and director of ProVesa since July 1994 and the President of
ProImage, Inc. since July 1996. Mr. Jackson also served as President and a
member of the board of managers of Technologies from March 1996 until its
merger with the Company. From January 1993 to June 1994, Mr. Jackson was the
Chief Financial Officer of Systems. Prior to joining the Company, Mr. Jackson
was the President of Bank Atlanta from 1991 to 1992. Mr. Jackson has over 23
years of experience working with community financial institutions, including
in service bureau, enterprise software and other processing and accounting
operations.
Scott R. Meyerhoff has served as Chief Financial Officer and Secretary of
the Company since January 1998. For the seven years prior to joining the
Company, Mr. Meyerhoff was employed by Arthur Andersen LLP, most recently as
an audit manager. Mr. Meyerhoff received his B.S. degree, with honors, in
Accounting from The Pennsylvania State University, where he was a member of
The University's Scholars Program, and is a Certified Public Accountant.
Michael R. Boian has been Executive Vice President of Sales and Marketing
for the Company since January 1998. From February 1997 to January 1998, Mr.
Boian served as Vice President of Sales and Marketing of the Company. Prior to
joining the Company, he was Regional Vice President of Debit Services for
MasterCard
42
<PAGE>
International from May 1992 to November 1996. Mr. Boian has over 32 years of
financial technology experience, primarily in electronic funds transfer and
authorization systems, including debit and credit authorization systems.
Michael D. Sulpy has served as Executive Vice President of Network
Communications for the Company since January 1998. Mr. Sulpy co-founded
Technologies in March 1996 and served as its Vice President of Communications
until its merger with the Company in January 1998. He joined Systems in 1987,
and from January 1993 to January 1996, he served as its network manager,
responsible for data network design and maintenance and personnel training.
Mr. Sulpy has over 15 years of data communications management and
telecommunications network experience.
Paul D. England has served as Senior Vice President of Merchant Banking for
the Company since January 1998. He co-founded FiNet in June 1996 and served as
its President and Chief Executive Officer until its merger with the Company.
He also served as a director of the Company from December 1996 to January
1998. Prior to co-founding FiNet, Mr. England was Senior Vice President of
First American National Bank, where he had worked since 1989. Mr. England has
over 23 years of experience working with financial institutions, including
merchant credit card portfolio management.
Farrell S. Mashburn has served as Senior Vice President of Data Services for
the Company since January 1998 and Secretary of the Company since June 1996.
He served as the President of Data Services from May 1990 until its merger
with the Company in January 1998. Mr. Mashburn also served as a director of
the Company from May 1996 to January 1998. Mr. Mashburn has over 31 years of
experience in providing banking related equipment, maintenance and technical
support services, primarily to community financial institutions.
Philip R. Meinert has served as Senior Vice President of Service Bureau
Operations for the Company since January 1998. From December 1996 to January
1998, Mr. Meinert was President of Bank Services. Mr. Meinert also served as a
director of the Company from December 1996 to January 1998. Mr. Meinert was
the President of Bank Services until its acquisition by the Company in
December 1996. He had been with Bank Services since 1977, managing its service
bureau and software operations and monitoring the development of PC
BancPAC(TM). Mr. Meinert has over 28 years of financial institution core data
processing experience, including client/server enterprise software development
and service bureau processing.
Vir A. Nanda has served as Senior Vice President of Technology for the
Company since January 1998. From June 1996 to January 1998, Mr. Nanda was the
Director of Technology for the Company. Mr. Nanda served as a director of the
Company from May 1996 to January 1998. He co-founded Systems in 1986 and prior
to its merger with the Company, served Systems in several capacities, most
recently as the Executive Vice President of Technology. Mr. Nanda has over 23
years of experience in EFT transaction processing and technology, primarily
for community financial institutions.
Jon R. Burke has served as a director of the Company since February 1998. He
is presently the managing member of Capital Appreciation Management Company,
L.L.C., which is the managing general partner of an Atlanta-based merchant
banking fund specializing in acquiring controlling interests in companies
located in the southeastern United States. Mr. Burke is also a principal with
Brown, Burke Capital Partners, Inc., which provides financial advisory
services to middle market corporations in connection with mergers and
acquisitions and financing. He also is a director of United Companies
Financial Corporation, a financial services holding company engaged in
consumer lending. From 1973 to 1996, Mr. Burke was employed by The Robinson-
Humphrey Company, Inc., most recently serving as a Senior Vice President and
the head of its financial institutions/banking research.
Boone A. Knox has served as a director of the Company since February 1998.
He is Chairman of the board of Merry Land & Investment Co., Inc., a publicly
held real estate investment trust, and is also a director of Cousins
Properties, Inc., a publicly-held Atlanta-based real estate development
company. He serves as chairman of the board of directors of Allied Bank of
Georgia, Inc. ("Allied"), a subsidiary of Regions Financial Corp., and served
as Allied's President and Chief Executive Officer from 1975 through 1986. He
was Chairman of the board of directors and Chief Executive Officer of Allied
Bankshares, Inc., the holding company of Allied, from its formation in 1984
until January 1997.
43
<PAGE>
Bruce P. Leonard has served as a director of the Company since May 1997. Mr.
Leonard has been the President and Chief Executive Officer of The Bankers Bank
in Atlanta, Georgia, and its holding company, Community Financial Services,
Inc., since 1990.
Glenn W. Sturm has served as a director of the Company since May 1997. Mr.
Sturm is a partner in the law firm of Nelson Mullins Riley & Scarborough,
L.L.P, where he serves as Corporate Chairman and as a member of the executive
committee. Since 1996, Mr. Sturm has been a director of Phoenix International
Ltd., Inc., a publicly-held provider of client/server application software for
the financial services industry. Mr. Sturm is also a principal in the Javelin
Management Company, a recently established investor in and advisor to
electronic commerce and computer telephony companies.
DIRECTOR COMPENSATION
Upon initial election to the Board of Directors, certain non-employee
directors receive options to acquire 35,000 shares of Common Stock each,
11,667 of which vest immediately and the remainder of which vest ratably over
the remainder of their three year term. In addition, on each anniversary date
of a director's initial election to the Board of Directors, each will receive
an automatic grant of options to acquire 5,000 shares of Common Stock at an
exercise price equal to the fair market value on the date of such grant. Such
annual options vest on the date of grant. See "--Stock Option Plans."
Directors of the Company may be reimbursed for out-of-pocket expenses incurred
in attending meetings of the Board of Directors or its committees and for
other expenses incurred in their capacity as Directors. Directors do not
receive cash fees for their services as directors of the Company.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid or accrued by the
Company for services rendered during the years indicated to the Company's
Chief Executive Officer and the four most highly compensated other executive
officers whose total salary and bonus exceeded $100,000 (collectively, the
"Named Executive Officers") during the year ended December 31, 1997. The
Company did not grant any stock appreciation rights or make any long-term
incentive plan payouts during the periods shown.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
------------------ ---------------
SECURITIES
UNDERLYING ALL OTHER
YEAR SALARY($) BONUS($) OPTIONS/SARS(#) COMPENSATION($)
---- --------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
John W. Collins......... 1997 240,000 10,000 -- 7,059(1)
Chief Executive Officer
Donny R. Jackson........ 1997 172,500 7,500 75,000 7,059(1)
President and Chief
Operating Officer
Michael R. Boian........ 1997 106,570 5,000 10,000 1,094(2)
Executive Vice
President of Sales and
Marketing
Vir A. Nanda............ 1997 204,167 -- -- 7,059(1)
Senior Vice President
of Technology
Farrell S. Mashburn..... 1997 125,000 7,500 -- 2,965(3)
Senior Vice President
of Data Services
</TABLE>
- --------
(1)Includes for each executive (i) $6,109 for health insurance premiums paid
by the Company and (ii) $950 for contributions made by the Company on
behalf of the executive to the Company's 401(k) plan.
(2)Represents health insurance premiums paid by the Company.
(3)Includes (i) $2,015 for health insurance premiums paid by the Company and
(ii) $950 for contributions made by the Company on behalf of the executive
to the Company's 401(k) plan.
44
<PAGE>
EMPLOYMENT AGREEMENTS
Collins and Jackson Agreements. Mr. Collins and the Company entered into an
employment agreement effective as of January 30, 1998 (the "Collins
Agreement") pursuant to which he will serve as the Chief Executive Officer of
the Company. The Collins Agreement provides that Mr. Collins will receive a
base salary of not less than $265,000 per year. Mr. Jackson and the Company
entered into an employment agreement effective as of January 30, 1998 (the
"Jackson Agreement") pursuant to which he will serve as the President and
Chief Operating Officer of the Company. The Jackson Agreement provides that
Mr. Jackson will receive a base salary of not less than $190,000 per year. Mr.
Collins' and Mr. Jackson's base salaries may be increased upon a periodic
review by the Board of Directors or a committee thereof. In addition, each of
Mr. Collins and Mr. Jackson are entitled to incentive compensation as
determined by the Board of Directors or a committee thereof based upon
achievement of targeted levels of performance and such other criteria as the
Board of Directors or a committee thereof shall establish from time to time,
and an additional annual bonus as determined by the Board of Directors or a
committee thereof. Each of Mr. Collins and Mr. Jackson may participate in the
Company's Amended and Restated 1996 Stock Option Plan (the "1996 Stock Option
Plan") and will receive health insurance for himself and his dependents, long-
term disability insurance, civic and social club dues, use of an automobile
owned or leased by the Company and other benefits.
The Collins Agreement and the Jackson Agreement each have terms of three
years and renew daily until either party fixes the remaining term at three
years by giving written notice. The Company can terminate the Collins
Agreement and the Jackson Agreement upon the executive's death or disability
or for cause, and the executive can terminate his employment for any reason
within a 90-day period beginning on the 30th day after any occurrence of a
change in control or within a 90-day period beginning on the one-year
anniversary of the occurrence of any change in control. If Mr. Collins' or Mr.
Jackson's employment is terminated after a change in control of (i) by the
Company without cause or otherwise in breach of the Collins Agreement or the
Jackson Agreement, as applicable, or (ii) by Mr. Collins or Mr. Jackson for
any reason, the Company must pay the executive all accrued compensation and
bonus amounts and one-twelfth of his annual base salary and bonus for each of
36 consecutive 30-day periods following the termination. In addition, the
Company must continue life and health insurance for the executive until he
reaches age 65, and the executive's outstanding options to purchase Common
Stock would vest and become immediately exercisable.
In the event Mr. Collins ceases to be Chief Executive Officer of the Company
for any reason other than by voluntary resignation, the Company must offer to
repurchase all of the Common Stock owned by Mr. Collins at a purchase price
equal to Fair Market Value (as defined in the Collins Agreement). Also, in the
Collins Agreement and the Jackson Agreement, the Company granted, with respect
to their shares of Common Stock, piggyback and, after any termination of
employment, demand registration rights to each of Mr. Collins and Mr. Jackson.
See "Shares Eligible for Future Sale." Under the Collins Agreement and the
Jackson Agreement, Mr. Collins and Mr. Jackson agree to maintain the
confidentiality of the Company's trade secrets and that for a period of one
year, if terminated for cause, not to solicit employees or customers of the
Company.
Other Employment Agreements. The Company and Mr. Nanda entered into an
employment agreement dated June 4, 1996 pursuant to which Mr. Nanda receives
an annual salary of not less than $200,000. Mr. Nanda's employment agreement
permits the Company to terminate the agreement upon the completion of an
initial public offering. The Company and Mr. Nanda have agreed to negotiate a
new employment arrangement upon the closing of the Offering. On February 1,
1998, Mr. Meyerhoff and the Company entered into an employment agreement (the
"Meyerhoff Agreement") pursuant to which he will serve as the Chief Financial
Officer of the Company. The Meyerhoff Agreement has a term of one year which
renews automatically at the end of each term unless earlier terminated by the
Company or Mr. Meyerhoff. The Company can terminate the Meyerhoff Agreement
upon his death or disability or for cause, and Mr. Meyerhoff can terminate his
employment for any reason within a 90-day period beginning on the 30th day
after any occurrence of a change in control or within a 90-day period
beginning on the one-year anniversary of the occurrence of any change in
control. If Mr. Meyerhoff's employment is terminated for any reason after a
change in control, the Company must pay Mr. Meyerhoff a lump sum cash payment
equal to three-fourths of his annual base salary and bonus.
45
<PAGE>
OPTION GRANTS
The following table sets forth information concerning each grant of stock
options to the Named Executive Officers during the year ended December 31,
1997:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(1)
---------------------------------------------------- ----------------------------
PERCENT OF
NUMBER OF TOTAL OPTIONS
SECURITIES GRANTED TO EXERCISE
UNDERLYING EMPLOYEES IN OR BASE EXPIRATION
NAME OPTIONS GRANTED FISCAL YEAR PRICE($/SH) DATE 5%($) 10%($)
- ---- --------------- ------------- ----------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Donny R. Jackson........ 157,898 88.2% $2.16(2) 1/14/07 2,488,132 4,163,955
Michael R. Boian........ 21,053 11.8% $2.16(3) 2/24/07 331,750 552,192
</TABLE>
- --------
(1) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission. There can
be no assurance provided to any executive officer or any other holder of
the Company's securities that the actual stock price appreciation over the
term will be at the assumed 5% and 10% levels or at any other defined
level. Unless the market price of the Common Stock appreciates over the
option term, no value will be realized from the option grants made to the
Named Executive Officers.
(2) Options were granted at the fair market value of the Common Stock on the
date of grant as determined by the Board of Directors, and vest ratably
over five years beginning with the date of the grant.
(3) Options were granted at the fair market value of the Common Stock on the
date of grant as determined by the Board of Directors, and vest ratably
over five years beginning with the date of the grant.
The following table sets forth certain information regarding the exercise of
options and the number of options held by the Named Executive Officers who
have been granted stock options, as of December 31, 1997:
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED
SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-
OPTIONS AT DATE OF THE-MONEY OPTIONS AT DATE
OFFERING(#) OF OFFERING($)(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
John W. Collins............. 16,842 -- 145,355 --
Donny R. Jackson............ 40,001 126,318 351,840 1,116,651
Michael R. Boian............ 8,421 12,632 37,225 148,883
Farrell S. Mashburn......... 8,421 -- 72,673 --
</TABLE>
- --------
(1)Based upon the price of the Common Stock to be sold in this Offering, which
is assumed to be $11.00 per share.
STOCK OPTION PLANS
1996 Stock Option Plan
The Board of Directors and the Company's shareholders have approved the
Company's 1996 Stock Option Plan, effective as of November 12, 1996. The
purpose of the 1996 Stock Option Plan is to advance the interests of the
Company, its subsidiaries and its shareholders by affording certain employees
and directors of the Company, as well as key consultants and advisors to the
Company or any subsidiary, an opportunity to acquire or increase their
proprietary interests in the Company. The objective of the issuance of stock
options and grants of restricted stock under the Plan is to promote the growth
and profitability of the Company and its subsidiaries because the optionees
and grantees will be provided with an additional incentive to achieve the
Company's objectives through participation in its success and growth and by
encouraging their continued association with or service to the Company.
Awards under the 1996 Stock Option Plan are currently granted by the Board
of Directors but will be granted by a committee composed of at least two
independent directors (the "Committee") of the Board of Directors when it is
established. Awards issued under the 1996 Stock Option Plan may include
incentive stock
46
<PAGE>
options ("ISOs") and/or non-qualified stock options ("NQSOs") and/or grants of
restricted stock. The Committee will administer the 1996 Stock Option Plan and
generally has discretion to determine the terms of an option grant, including
the number of option shares, option price, term, vesting schedule, the post-
termination exercise period and whether the grant will be an ISO or NQSO.
Notwithstanding this discretion: (i) the number of shares subject to options
granted to any individual in any fiscal year may not exceed 315,795 shares
(subject to certain adjustments); (ii) if an option is intended to be an ISO
and is granted to a shareholder holding more than 10% of the combined voting
power of all classes of the Company's stock or the stock of its parent or
subsidiary on the date of the grant of the option, the option price per share
of Common Stock may not be less than 110% of the fair market value of such
share at the time of grant; and (iii) the term of an ISO may not exceed 10
years, or 5 years if granted to a shareholder owning more than 10% of the
total combined voting power of all classes of stock on the date of the grant
of the option.
The Stock Option Plan provides for the granting of non-qualified stock
options to the directors of the Company ("Director Grants"). The Board of
Directors has authorized the issuance of up to 175,000 shares of Common Stock
under the Stock Option Plan pursuant to options having an exercise price equal
to the fair market value of the Common Stock on the date the options are
granted. The Board of Directors has approved Director Grants of (i) options to
purchase 35,000 shares to each non-employee director of the Company who
beneficially owns less than 4% of the Company's outstanding Common Stock on
the date of such director's election to the Board of Directors, and (ii)
options to purchase 5,000 shares to each director on each anniversary date of
such director's election to the board at an exercise price equal to the fair
market value of the Common Stock on the date the options are granted. Each
initial Director Grant option vests ratably over the three year term of
service and each annual grant vests on the date of grant. Each Director Grant
shall expire five years after the date of grant, unless canceled sooner as a
result of termination of service or death, or unless such option is fully
exercised prior to the end of the option period.
The maximum number of shares of Common Stock that currently may be subject
to outstanding options, determined immediately after the grant of any option,
is 1,263,180 shares (subject to certain adjustments). The 1996 Stock Option
Plan provides that the number of shares of Common Stock available for issuance
thereunder shall be automatically increased on the first trading day of each
calendar year beginning January 1, 1999 by the lesser of (i) three percent of
the number of shares outstanding on the preceding trading day or (ii) 315,795
shares (subject to certain adjustments). Shares of Common Stock that are
attributable to awards which have expired, terminated or been canceled or
forfeited during any calendar year are available for issuance or use in
connection with future awards during such calendar year.
The 1996 Stock Option Plan will remain in effect until terminated by the
Board of Directors. The 1996 Stock Option Plan may be amended by the Board of
Directors without the consent of the shareholders of the Company, except that
any amendment, although effective when made, will be subject to shareholder
approval within one year after approval by the Board of Directors if the
amendment increases the total number of shares issuable pursuant to ISOs
(other than the permitted annual increase), changes the class of employees
eligible to receive ISOs that may participate in the 1996 Stock Option Plan,
or otherwise materially increases the benefits accruing to recipients of ISOs.
The Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to the
Internal Revenue Code of 1986, as amended. Section 162(m) generally disallows
a public company's tax deduction for compensation to the chief executive
officer and four other most highly compensated executive officers in excess of
$1,000,000 in any tax year beginning on or after January 1, 1994. Compensation
that qualifies as "performance-based compensation" is excluded from the
$1,000,000 deductibility cap, and therefore remains fully deductible by the
company that pays it. The Company intends that options granted with an
exercise price at least equal to 100% of fair market value of the underlying
stock at the date of grant will qualify as such "performance-based
compensation," although other awards under the 1996 Stock Option Plan may not
so qualify.
ProVesa, Inc. 1994 Stock Option Plan
In November 1996, as part of the ProVesa Merger, the Company executed a
Stock Option Plan Assumption Agreement, pursuant to which 20,000 options
outstanding under the ProVesa, Inc. 1994 Stock Option Plan (the
47
<PAGE>
"ProVesa Plan") were converted into options to acquire 42,106 shares of Common
Stock. The Company assumed the rights and obligations of ProVesa under the
ProVesa Plan.
The purpose of the ProVesa Plan is to advance the interests of the Company,
its subsidiaries, and its shareholders by affording certain employees and
directors of the Company and its subsidiaries, as well as key consultants and
employees of the Company's suppliers and contractors, an opportunity to
acquire or increase their proprietary interests in the Company. The objective
of the issuance of stock options and grants of restricted stock under the
ProVesa Plan is to promote the growth and profitability of the Company and its
subsidiaries because the optionees and grantees will be provided with an
additional incentive to achieve the Company's objectives through participation
in its success and growth and by encouraging their continued association with
or service to the Company.
Awards under the ProVesa Plan are granted by the Board of Directors but may
be granted by a committee of at least two directors appointed by the Board of
Directors. Awards under the ProVesa Plan may include ISOs, NQSOs or restricted
stock. The committee that administers the ProVesa Plan generally has
discretion to determine the terms of an option grant, including the number of
option shares, option price, term, vesting schedule, the post-termination
exercise period and whether the grant will be an ISO or NQSO. Notwithstanding
this discretion, if an option is intended to be an ISO and is granted to a
shareholder holding more than 10% of the combined voting power of all classes
of the Company's stock or of its parent or subsidiary on the date of the grant
of the option, the option price per share of Common Stock may not be less than
110% of the fair market value of such shares and the term of any option may
not exceed 10 years, or 5 years if the option is intended to be an ISO and is
granted to a shareholder owning more than 10% of total combined voting power
of all classes of stock on the date of the grant of the option.
The ProVesa Plan may be amended by the Board of Directors without the
consent of the shareholders of the Company, except that any amendment,
although effective when made, will be subject to shareholder approval within
one year after approval by the Board of Directors if the amendment increases
the total number of shares issuable pursuant to ISOs or changes the class of
employees eligible to receive ISOs that may participate in the ProVesa Plan or
otherwise materially increases the benefits accruing to recipients of ISOs.
Effective February 24, 1998, the Board of Directors determined that the
Company will not issue any additional options under the ProVesa Plan.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors intends to establish an Audit Committee, a
Compensation Committee and an Executive Committee. The members of each
committee are expected to be determined at the first meeting of the Board of
Directors following the closing of the Offering. The members of the Audit and
Compensation Committees will consist of a majority of outside directors.
48
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of February 28, 1998 and as
adjusted to reflect the sale of the Common Stock offered hereby with respect
to: (i) each of the Company's directors and executive officers; (ii) each
person known by the Company to own beneficially more than 5% of the Common
Stock; (iii) each Selling Shareholder; and (iv) all directors and executive
officers of the Company as a group. Unless otherwise indicated, each of the
holders listed below has sole voting power and investment power over the
shares beneficially owned and each person known by the Company to beneficially
own more than 5% of the Common Stock has an address in care of the Company's
principal office.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO THIS OWNED AFTER THIS
STOCK OFFERING(1) NUMBER OF STOCK OFFERING(1)
-------------------- SHARES --------------------
NAME NUMBER PERCENTAGE OFFERED NUMBER PERCENTAGE
- ---- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
John W. Collins(2)......... 2,472,112 36.5% 2,472,112 27.4%
Donny R. Jackson(3)........ 605,625 8.9 605,625 6.7
Michael R. Boian(4)........ 8,421 * 8,421 *
Michael D. Sulpy........... 497,202 7.4 497,202 5.5
Farrell S. Mashburn(5)..... 212,635 3.1 212,635 2.4
Vir A. Nanda(6)............ 1,038,544 15.4 137,500 901,044 10.0
Jon R. Burke(7)............ 11,667 * 11,667 *
Boone A. Knox(8)........... 11,667 * 11,667 *
Bruce P. Leonard(9)........ 11,667 * 11,667 *
Glenn W. Sturm(10)......... 373,865 5.5 373,865 4.2
James R. Henderson(11)..... 385,270 5.7 137,500 247,770 2.8
All directors and executive
officers as
a group (13 persons)...... 5,468,466 80.7% 5,353,003 59.2%
</TABLE>
- --------
(1) Shares Beneficially Owned is calculated assuming 6,750,114 shares of
Common Stock were outstanding on February 28, 1998 and 9,000,114 shares
will be outstanding immediately after the Offering. This percentage also
includes Common Stock of which such individual or group has the right to
acquire beneficial ownership within 60 days of February 28, 1998,
including but not limited to the exercise of an option; however, such
Common Stock shall not be deemed outstanding for the purpose of computing
the percentage owned by any other individual or group. See
"Underwriting."
(2) Includes 2,455,270 shares of Common Stock owned by Mr. Collins and
currently exercisable options held by Mr. Collins to purchase a total of
16,842 shares of Common Stock, but excludes 594,131 outstanding shares of
Common Stock and 57,108 shares of Common Stock issuable upon the exercise
of currently outstanding options which are subject to a voting trust for
which Mr. Collins is the trustee with the sole power to vote. The voting
trust automatically expires upon completion of the Offering. See "Certain
Transactions."
(3) Includes currently exercisable options held by Mr. Jackson to purchase a
total of 71,580 shares of Common Stock.
(4) Includes currently exercisable options held by Mr. Boian to purchase a
total of 8,421 shares of Common Stock.
(5) Includes currently exercisable options held by Mr. Mashburn to purchase a
total of 8,421 shares of Common Stock.
(6) The 1,038,544 shares owned by Mr. Nanda are subject to a voting agreement
which provides that such shares will be voted as Mr. Collins votes
through May 1998.
(7) Includes options held by Mr. Burke to purchase a total of 11,667 shares
of Common Stock which are vested but not currently exercisable.
(8) Includes options held by Mr. Knox to purchase a total of 11,667 shares of
Common Stock which are vested but not currently exercisable.
(9) Includes options held by Mr. Leonard to purchase a total of 11,667 shares
of Common Stock which are vested but not currently exercisable.
(10) Mr. Sturm's address is Nelson Mullins Riley & Scarborough, L.L.P., 999
Peachtree Street, N.E., Suite 1400, Atlanta, Georgia 30309. The 373,865
shares owned by Mr. Sturm are subject to a voting trust agreement
pursuant to which Mr. Collins has the right to vote such shares. Such
voting trust expires, by its terms, upon completion of the Offering.
(11) Includes currently exercisable options held by Mr. Henderson to purchase
a total of 8,421 shares of Common Stock.
49
<PAGE>
CERTAIN TRANSACTIONS
ACQUISITIONS
The Company was incorporated in 1996 to be a holding company for Systems,
Data Services and ProVesa and has since acquired three other companies to
create a single-source provider of electronic commerce solutions for community
financial institutions. Historically, the Company operated these companies as
wholly-owned subsidiaries. On January 30, 1998, the Company consolidated its
corporate structure and now operates two wholly-owned subsidiaries, ProVesa
and InterCept Switch. See "The Company." In certain of these transactions,
persons who were previously officers, directors and/or shareholders of the
acquired companies became executive officers, directors or holders of at least
5% of the outstanding Common Stock ("Interested Persons") and may have
received other consideration from the Company. The following table summarizes
the total number of shares of Common Stock issued by the Company to Interested
Persons in those acquisitions:
<TABLE>
<CAPTION>
SHARES OF
ACQUIRED COMPANY COMMON STOCK
---------------- ------------
<S> <C>
Systems..................................................... 2,431,622
Data Services............................................... 610,537
ProVesa..................................................... 221,056
Bank Services............................................... 501,129
FiNet....................................................... 244,741
Technologies................................................ 2,741,029
---------
Total................................................... 6,750,114
=========
</TABLE>
Intercept Systems, Inc. and Data Services Corp.
On June 4, 1996, pursuant to an Agreement of Share Exchange by and between
the Company, Systems, Data Services, John W. Collins, Vir A. Nanda, James R.
Henderson, and Farrell S. Mashburn, the Company acquired all of the
outstanding capital stock of Systems and Data Services. In exchange for
substantially all of the capital stock of Systems, the Company issued the
following shares of Common Stock: John W. Collins--1,042,124 shares; Vir A.
Nanda--1,042,124 shares and J. Ronney Henderson--347,375 shares. The Company
and The Ronney Henderson Charitable Remainder Trust, for which J. Ronney
Henderson is the trustee, entered into a Share Purchase Agreement dated June
4, 1996, pursuant to which the Company purchased 206 shares of the common
stock of Systems for the purchase price of $1.0 million. In exchange for all
of the capital stock of Data Services, the Company issued 427,376 shares of
Common Stock to Mr. Collins and 183,161 shares of Common Stock to Mr.
Mashburn. Pursuant to a voting agreement, Mr. Nanda has agreed to vote his
1,038,544 shares as Mr. Collins votes through May 1998.
The Company entered into an employment agreement with Mr. Henderson dated
June 4, 1996, pursuant to which Mr. Henderson receives an annual salary of not
less than $60,000. In addition, pursuant to his employment agreement, the
Company is required to pay Mr. Henderson (x) $15,000 per month until the
earlier of (i) the completion of 60 consecutive months, or (ii) the payment of
$1.8 million on or, at the Company's discretion, at any time prior to June 4,
2001. The Company also entered into an employment agreement with Mr. Nanda
dated June 4, 1996, pursuant to which Mr. Nanda receives an annual salary of
not less than $200,000.
Also in connection with the acquisition of Systems and Data Services, the
Company entered into the GSB Loan Facility on June 17, 1996, pursuant to which
it borrowed $3.0 million from the Georgia State Bank. The proceeds of the loan
were used to acquire the stock of Data Services and Systems and to satisfy
existing indebtedness in the amount of $686,421 owed to The Bankers Bank,
Atlanta, Georgia ("The Bankers Bank"). Data Services, Systems and Mr. Collins
guaranteed the GSB Loan Facility. The stock of Data Services and Systems was
pledged to secure the GSB Loan Facility, and, as additional security, Mr.
Collins assigned to the lender a life insurance policy on his life in the
amount of $1.0 million. In connection with the
50
<PAGE>
GSB Loan Facility, Mr. Henderson agreed to subordinate his rights to payments
from the Company pursuant to his employment agreement dated June 4, 1996 to
the rights of the lender.
On June 17, 1996, The Bankers Bank purchased an 83.0% interest in the GSB
Loan Facility. Bruce P. Leonard, a director of the Company, is the President
and Chief Executive Officer of The Bankers Bank. As of January 31, 1998, the
outstanding balance owed under the GSB Loan Facility was $2,717,182. See "Use
of Proceeds."
ProVesa Inc.
Pursuant to an Agreement and Plan of Merger effective November 27, 1996,
among the Company, PV Acquisition Corp., a wholly-owned subsidiary of the
Company ("PVAC"), and ProVesa, Inc., ProVesa, Inc. merged with and into PVAC,
which then changed its name to ProVesa Inc. In connection with the merger, all
outstanding shares of capital stock of ProVesa, Inc. were converted into an
equal number of shares of the capital stock of the Company. As a result of
such conversion, the Company issued a total of 221,057 shares of Common Stock
and 4,000 shares of Series A Preferred Stock. Interested Persons receiving
shares of Common Stock in connection with this transaction included: John W.
Collins--58,948 shares; Donny R. Jackson--36,843 shares; Farrell S. Mashburn--
21,053 shares; J. Ronney Henderson--29,474 shares; Michael D. Sulpy--4,211
shares; Vir A. Nanda--4,211 shares; and Glenn W. Sturm--4,211 shares.
FiNet, Inc.
On December 17, 1996, pursuant to an Acquisition and Merger Agreement dated
as of November 30, 1996, Intercept Acquisitions II, Inc., a wholly-owned
subsidiary of the Company, acquired by merger all of the capital stock of
FiNet in exchange for 244,741 shares of Common Stock and changed its name to
FiNet, Inc. Paul D. England, an officer and shareholder of the acquired
company, received 73,422 shares of Common Stock and options to acquire 171,319
shares of Common Stock (which options have been canceled). Following the
acquisition, Mr. England remained the President of FiNet and entered into an
employment agreement with the Company which provides for a current annual
salary of $120,000. Glenn W. Sturm, a director of the Company, exchanged
options to acquire 333 shares of common stock of FiNet for 12,236 shares of
Common Stock of the Company in connection with this transaction.
The Company, John W. Collins, Glenn W. Sturm, Salem Capital Corporation,
Paul D. England, Jack L. Lance and Jerry McKamey entered into a Voting Trust
Agreement dated as of December 31, 1996 (the "Voting Trust"), Pursuant to the
Voting Trust, Messrs. England, Lance, Sturm and McKamey and Salem Capital
Corporation agreed to place into a voting trust all shares of Common Stock
received upon exercise of options granted to them by the Company and all other
securities of the Company acquired or held by them at any future time in
connection with the performance of employment and consulting services to
FiNet. The options to acquire 513,956 shares of Common Stock held by Messrs.
England, Lance and McKamey were terminated in January 1998. However, in
connection with their continued employment by the Company following the merger
of the Company and FiNet in January 1998, Messrs. England, Lance and McKamey
agreed to subject the shares of Common Stock owned by them to the Voting
Trust. John W. Collins is the trustee of the trust and has the right to vote
shares subject to the Voting Trust. The Voting Trust terminates automatically
upon completion of this Offering. The options owned by Mr. Sturm and Salem
Capital Corporation are not currently exercisable.
Bank Services Corporation
On December 31, 1996, pursuant to an Acquisition and Merger Agreement dated
as of November 26, 1996, Intercept Acquisitions, Inc., a wholly-owned
subsidiary of the Company, acquired by merger all of the capital stock of Bank
Services in exchange for 501,129 shares of Common Stock. Philip R. Meinert, a
director of the Company, received 129,602 shares of Common Stock in exchange
for his shares of Bank Services owned prior to the merger.
51
<PAGE>
In connection with the acquisition, Bank Services entered into a Loan
Agreement dated December 27, 1996 with Community Bank of Georgia, pursuant to
which it borrowed $450,000. The Company pledged all of the stock of Bank
Services it received in the transaction as security for the loan. Messrs.
Collins and Jackson and Data Services were guarantors of the loan. In
addition, life insurance policies on the lives of Messrs. Collins and Jackson
with a face value of $200,000 were pledged as additional collateral. On
January 26, 1998, Bank Services paid $406,336 to Community Bank of Georgia in
full satisfaction of the loan. As a result of such repayment, the Bank
Services stock was released from the pledge, Messrs. Collins and Jackson were
released from their guaranties and the life insurance policies previously
pledged as collateral for the loan were also released.
Intercept Communications Technologies, Inc.
Pursuant to an Agreement and Plan of Merger dated as of January 30, 1998,
the Company merged with Technologies. In exchange for the membership units of
Technologies, the Company issued a total of 2,741,029 shares of Common Stock
to 17 individuals, including the following Interested Persons: John W.
Collins--926,823 shares; Donny R. Jackson--492,990 shares; Glenn W. Sturm--
357,419 shares; Michael D. Sulpy--492,992 shares and a total of 470,804 shares
to certain family members of John W. Collins, some of whom work for the
Company. Pursuant to agreements dated July and August of 1997, Messrs.
Jackson, Sturm and Sulpy granted Mr. Collins the right to vote their interests
in Technologies.
OTHER TRANSACTIONS AND RELATIONSHIPS
In connection with a $3.5 million loan from Sirrom Investments, Inc. to Dyad
Corporation ("Dyad"), Mr. Collins guaranteed the loan and pledged 1,222,758
shares of Common Stock to secure his guaranty. The shares of Common Stock
pledged by Mr. Collins will be released upon completion of the Offering.
Messrs. Collins, Jackson and Sturm are directors and shareholders of Dyad. On
December 31, 1996, Mr. Sturm was granted options to acquire 28,554 shares of
Common Stock at an exercise price of $2.16 per share.
On December 31, 1997, the Company received $1,254,121 from Dyad for
repayment of a loan to Dyad from the Company. The shareholders of Dyad
include: the Company; John W. Collins; Donny R. Jackson; Glenn W. Sturm;
Michael D. Sulpy; JCB Venture Partnership III, an affiliate of J.C. Bradford &
Co.; and Phoenix International Ltd. ("Phoenix"), of which Mr. Sturm is a
director.
Prior to their acquisition by the Company, Data Services and Systems were S
corporations. As a result, Messrs. Collins and Mashburn received distributions
in amounts (totaling $40,000) necessary to pay their personal taxes
attributable to the income of Data Services and Messrs. Collins, Henderson and
Nanda received distributions of $532,479, $526,122 and $520,446, respectively,
necessary to pay their personal taxes attributable to the income of Systems.
From its inception in March 1996 until October 1997, Technologies was taxed as
a partnership. Upon its election in October 1997 to be taxed as a C
corporation, Technologies made distributions of $385,811, of which $12,773
remains unpaid after the January 15, 1998 distribution to its members,
including Messrs. Collins, Jackson, Sulpy and Sturm.
During 1995, the Company incurred costs of $102,821 for transportation
services provided by Javiar, Inc. ("Javiar" ), a corporation owned by Messrs.
Collins, Henderson and Nanda, In May 1996, Javiar was merged into Systems, and
each of the shareholders of Javiar received nine shares of stock of Systems as
part of the merger. The Company had a note receivable from Javiar in the
amount of $182,179, which was extinguished upon the merger.
The Company incurred costs of $168,018 and $125,296 in 1995 and 1996,
respectively, for supplies and services from ATM Source, a corporation wholly-
owned by Mr. Collins. There were no transactions between these entities in
1997.
During the years ended December 31, 1996 and 1997, the Company incurred
costs of $495,908 and $668,810, respectively, under an arrangement whereby the
Company has agreed to subsidize certain contracts for data line services
provided at a loss by Technologies for the Company's customers and for data
line services, and other telecommunication services provided to the Company by
Technologies.
52
<PAGE>
The Company and Phoenix have entered into Software License and Development
Agreements dated December 31, 1997 (the "December Agreement"). Under the
December Agreement, the Company licensed ATM and voice response software from
Phoenix and obtained the rights to develop the software and integrate it with
the Company's existing software programs. On January 15, 1998, Phoenix and the
Company entered into an agreement (the "January Agreement") whereby Phoenix
licensed EFT software from the Company and obtained the rights to develop the
software and integrate it with Phoenix's existing programs. Glenn W. Sturm, a
director of the Company, is also a director of Phoenix. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
ProVesa paid Systems a total of $174,774 and $166,572 for the year ended
December 31, 1995 and the eleven month period ended November 30, 1996 for ATM
processing and card supplies.
COMPANY POLICY
Following the closing of this Offering, all transactions with the Company's
shareholders, officers and directors or their affiliates, if any, will be
subject to the approval of a majority of the independent and disinterested
outside directors and will be conducted on terms no less favorable than could
be obtained from unaffiliated third parties on an arm's length basis.
53
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of the Company is only a
summary and is subject to the provisions of the Articles of Incorporation and
Bylaws, which are included as exhibits to the Registration Statement of which
this Prospectus forms a part, and the provisions of applicable law.
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
The Company's capital stock currently consists of 10,000,000 shares of
Common Stock and 50,000 shares of preferred stock. On or before completion of
the Offering, officers of the Company will cause to be filed Amended and
Restated Articles of Incorporation (the "Articles of Incorporation"), which
will authorize the Board of Directors to issue 50,000,000 shares of Common
Stock without par value and 1,000,000 shares of Preferred Stock without par
value, in one or more classes or series and, within certain limitations, to
determine the voting rights (including the right to vote as a series on
particular matters), preferences as to dividends and in liquidation, and
conversion and other rights of such series. The rights of the holders of the
Common Stock are subject to the rights of the Company's Series A 8% Cumulative
Preferred Stock (the "Series A Preferred Stock") (discussed below) and such
other rights as the Board of Directors may hereafter confer on the holders of
preferred stock; accordingly, such rights conferred on holders of any
additional preferred stock that may be issued in the future under the Articles
of Incorporation may adversely affect the rights of holders of the Common
Stock. As of February 28, 1998, there were 6,750,114 shares of Common Stock
outstanding.
COMMON STOCK
Under the Articles of Incorporation, holders of Common Stock are entitled to
receive such dividends as may be legally declared by the Board of Directors.
Each shareholder is entitled to one vote per share on all matters to be voted
upon and will not be entitled to cumulate votes for the election of directors.
Holders of Common Stock will not have preemptive, redemption or conversion
rights and, upon liquidation, dissolution or winding up of the Company, will
be entitled to share ratably in the net assets of the Company available for
distribution to common shareholders. All outstanding shares prior to the
Offering are, and all shares to be issued in this Offering, will be validly
issued, fully paid and non-assessable. The rights, preferences and privileges
of holders of Common Stock are subject to the rights of the Series A Preferred
Stock, as well as any additional classes or series of preferred stock that the
Company may issue in the future.
PREFERRED STOCK
The Articles of Incorporation authorize the Board of Directors to issue,
without further action by the holders of the Common Stock, shares of Preferred
Stock in one or more series and to fix any preferences, conversion and other
rights, voting powers, restrictions, limitations, qualifications and terms and
conditions of redemption as shall be set forth in resolutions adopted by the
Board of Directors. Articles of amendment must be filed with the Georgia
Secretary of State prior to the issuance of any shares of Preferred Stock of
the applicable series. Any preferred stock so issued may rank senior to the
Common Stock with respect to the payment of dividends or amounts upon
liquidation, dissolution or winding-up, or both. In addition, any such shares
of preferred stock may have class or series voting rights. Issuances of
preferred stock, while providing the Company with flexibility in connection
with general corporate purposes, may, among other things, have an adverse
effect on the rights of holders of Common Stock and, in certain circumstances,
could have the effect of making it more difficult for a third party to acquire
a majority of the outstanding voting stock of the Company or the effect of
decreasing the market price of the Common Stock. The Company has no present
plan to issue any additional shares of preferred stock.
Series A Preferred Stock
On November 27, 1996, the Company filed Articles of Amendment to its
Articles of Incorporation for the designation of 30,000 shares of Series A
Preferred Stock. The stated value of the Series A is $100 per share. Holders
of Series A Preferred Stock are entitled to receive dividends at the annual
rate of 8% of the stated value per share, or $8.00 per share, payable
quarterly. Dividends are cumulative from the date of issue. The Company
54
<PAGE>
may not declare or pay cash dividends on any other series of Preferred Stock
that is junior to or on parity with the Series A Preferred Stock, or on Common
Stock, nor may it redeem, purchase or otherwise acquire any of such stock,
unless full cumulative dividends have been or are contemporaneously declared
and paid on the Series A Preferred Stock. In the event of any liquidation or
dissolution of the Company, the holders of shares of Series A Preferred Stock
are entitled to receive out of assets of the Company available for
distribution to shareholders, before any distributions are made to holders of
Common Stock or of any other shares of stock of the Company ranking junior to
the Series A Preferred Stock, liquidating distributions in the amount of $100
per share, plus accrued and unpaid dividends.
The Series A Preferred Stock is redeemable at the option of the Company for
cash at any time, in whole or in part, on at least 10 days' notice. The price
payable upon redemption is 110% of stated value per share, or $110 per share,
plus accrued but unpaid dividends. At any time after the third anniversary of
the initial issuance of shares of Series A Preferred Stock, any holder of
Series A Preferred Stock may tender all or part of such holder's Series A
Preferred Stock for redemption at a price equal to 100% of stated value, or
$100 per share, plus accrued and unpaid dividends. The holders of the Series A
Preferred Stock have no voting rights except as otherwise required by the
Georgia Business Corporation Code (the "Georgia Code") and applicable law. The
holders of shares of Series A Preferred Stock have no preemptive or other
rights to subscribe for any other shares or securities, nor do they have any
conversion rights. The Series A Preferred Stock ranks prior to the Common
Stock as to dividends and upon liquidation of the Company.
As of January 31, 1998, there were 4,000 shares of Series A Preferred Stock
outstanding. The Company will redeem all of the 4,000 shares of Series A
Preferred Stock using net proceeds of the Offering. See "Use of Proceeds."
CLASSIFIED BOARD OF DIRECTORS
The Articles of Incorporation provide that the Board of Directors shall
consist of not less than four nor more than 12 members. The Board of Directors
is divided into three classes of directors serving staggered three-year terms.
As a result, approximately one-third of the Board of Directors are elected at
each annual meeting of shareholders. The classification of directors, together
with other provisions in the Articles of Incorporation and Bylaws that limit
the removal of directors and permit the remaining directors to fill any
vacancies on the Board of Directors, has the effect of making it more
difficult for shareholders to change the composition of the Board of
Directors. As a result, at least two annual meetings of shareholders may be
required for the shareholders to change a majority of the directors, whether
or not such change in the Board of Directors would be beneficial to the
Company and its shareholders and whether or not a majority of the Company's
shareholders believes that such a change would be desirable. The Company
believes, however, that the longer time required to elect a majority of a
classified Board of Directors will help to ensure the continuity and stability
of the Company's management and policies. Currently, the terms of Class I
directors expire in 1999, the terms of Class II directors expire in 2000 and
the terms of Class III directors expire in 2001.
REMOVAL OF DIRECTORS AND FILLING VACANCIES
The Bylaws provide that, unless the Board of Directors otherwise determines,
any vacancies, including vacancies resulting from an increase in the number of
directors, will be filled by the affirmative vote of a majority of the
remaining directors, even if less than a quorum. A director may be removed
only with cause by the vote of the holders of 66 2/3% of the shares entitled
to vote for the election of directors at a meeting of shareholders called for
the purpose of removing such director.
ADVANCE NOTICE PROVISIONS FOR SHAREHOLDER NOMINATIONS AND SHAREHOLDER
PROPOSALS
The Bylaws provide that with respect to an annual meeting of shareholders,
the proposal of business to be considered by shareholders and nominations of
persons for election to the Board of Directors may be made only (i) by or at
the direction of the Board of Directors, the Chairman of the Board of
Directors or the President, or (ii) by a shareholder who has complied with the
advance notice procedures set forth in the Bylaws.
55
<PAGE>
The purpose of requiring shareholders to give the Company advance notice of
nominations and other business is to afford the Board of Directors a
meaningful opportunity to consider the qualifications of the proposed nominees
or the advisability of the other proposed business and, to the extent deemed
necessary or desirable by the Board of Directors, to inform shareholders and
make recommendations about such qualifications or business, as well as to
provide a more orderly procedure for conducting meetings of shareholders.
Although the Bylaws do not give the Board of Directors any power to disapprove
timely shareholder nominations for the election of directors or proposals for
action, they may have the effect of precluding a contest for the election of
directors or the consideration of shareholder proposals if the proper
procedures are not followed and of discouraging or deterring a third party
from conducting a solicitation of proxies to elect its own slate of directors
or to approve its own proposal.
SPECIAL MEETINGS
Under the Bylaws, provided that the Company has more than 100 beneficial
owners (as defined by the Georgia Code) of its shares, special meetings of the
shareholders may be called by shareholders only if such shareholders hold
outstanding shares representing a majority of all votes entitled to be cast on
any issue proposed to be considered at any such special meeting. If the
Company has less than 100 beneficial owners, the holders of shares
representing 25% or more of the votes entitled to be cast may call a special
meeting.
INDEMNIFICATION AND LIMITATION OF LIABILITY
The Articles of Incorporation eliminate, subject to certain exceptions, the
personal liability of a director to the Company or its shareholders for
monetary damage for breaches of such director's duty of care or other duties
as a director. The Articles do not provide for the elimination of or any
limitation on the personal liability of a director for (i) any appropriation,
in violation of the director's duties, of any business opportunity of the
Company, (ii) acts or omissions that involve intentional misconduct or a
knowing violation of law, (iii) unlawful corporate distributions, or (iv) any
transactions from which the director derived an improper personal benefit. The
Articles of Incorporation of the Company further provide that if the Georgia
Code is amended to authorize corporate action further eliminating or limiting
the personal liability of directors, then the liability of a director of the
Company shall be eliminated or limited to the fullest extent permitted by the
Georgia Code, as amended, without further action by the shareholders. These
provisions of the Articles of Incorporation will limit the remedies available
to a shareholder in the event of breaches of any director's duties to such
shareholder or the Company.
The Company's Bylaws require the Company to indemnify and hold harmless any
director who was or is a party or is threatened to be made a party, to any
threatened, pending or completed action, suit or proceeding whether civil,
criminal, administrative or investigative (including any action or suit by or
in the right of the Company) because he or she is or was a director of the
Company, against expenses (including, but not limited to, attorney's fees and
disbursements, court costs and expert witness fees), and against judgments,
fines, penalties, and amounts paid in settlement incurred by him or her in
connection with the action, suit or proceeding. Indemnification would be
disallowed under any circumstances where indemnification may not be authorized
by action of the Board of Directors, the shareholders or otherwise.
The Company has entered into separate indemnification agreements with each
of its directors and executive officers, whereby the Company agreed, among
other things, to provide for indemnification and advancement of expenses in a
manner and subject to terms and conditions similar to those set forth in the
Bylaws. These agreements also provide that the Company shall purchase and
maintain liability insurance for the benefit of its directors and executive
officers. These agreements may not be abrogated by action of the shareholders.
There is no pending litigation or proceeding involving a director, officer,
employee or other agent of the Company as to which indemnification is being
sought, nor is the Company aware of any pending or threatened litigation that
may result in claims for indemnification by any director, officer, employee or
other agent.
56
<PAGE>
REGISTRATION RIGHTS
Upon expiration of the Lock-up Agreements, if their employment is terminated
for any reason or if they are no longer directors of the Company, Mr. Collins
and Mr. Jackson, who will beneficially hold approximately 2,472,112 and
605,625 shares of Common Stock, respectively, after the Offering, will be
entitled to certain demand registration rights with respect to such shares. If
the exercise of their demand registration rights causes a large number of
shares to be registered and sold in the public market, such sales could have a
material adverse effect on the market price for the Common Stock. See "Shares
Eligible for Future Sale."
ANTI-TAKEOVER PROVISIONS AND GEORGIA LAW
Board and Shareholder Action Required for Certain Transactions. The Articles
of Incorporation require the affirmative vote of at least 66 2/3% of the
directors for the following actions by the Company to be submitted to a vote
of the shareholders: (i) a sale of all or substantially all of the assets of
the Company; (ii) a liquidation or dissolution of the Company; (iii) the
merger, consolidation or reorganization of the Company, unless the
shareholders of the Company immediately prior to such transaction own at least
a majority of the combined voting power of the Company resulting from such
merger, consolidation or reorganization; or (iv) any increase in the number of
directors above 12 directors. In addition, the affirmative vote of 66 2/3% of
the holders of the Common Stock is required for shareholder approval of any
such actions.
Issuance of Preferred Stock. The Board of Directors has the power to issue
1,000,000 shares of Preferred Stock, in one or more classes or series and with
such rights and preferences as determined by the Board of Directors, all
without shareholder approval. Because the Board of Directors has the power to
establish the preferences and rights of each class or series of Preferred
Stock, it may afford the holders in any series of Preferred Stock preferences,
powers and rights, voting or otherwise, senior to the rights of holders of
Common Stock. The Board of Directors has no present plans to issue any
additional shares of Preferred Stock.
Georgia Anti-Takeover Statutes. The Georgia Code generally restricts a
company from entering into certain business combinations with an interested
shareholder (which is defined as any person or entity that is the beneficial
owner of at least 10% of the company's voting stock) or its affiliates for a
period of five years after the date on which such shareholder became an
interested shareholder, unless (i) the transaction is approved by the Board of
Directors of the Company prior to the date such person became an interested
shareholder, (ii) the interested shareholder acquires 90% of the company's
voting stock in the same transaction in which it exceeds 10%, or (iii)
subsequent to becoming an interested shareholder, such shareholder acquires
90% of the company's voting stock and the business combination is approved by
the holders of a majority of the voting stock entitled to vote thereon (the
"Business Combination Statute"). The Georgia Code provides that the Business
Combination Statute will not apply unless the bylaws of the corporation
specifically provide that the Business Combination Statute is applicable to
the corporation. The Company has not elected to be covered by such statute,
but it could do so by action of the Board of Directors at any time.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is
.
57
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have 9,000,114 shares of
Common Stock outstanding. The 2,525,000 shares sold in this Offering
(2,862,500 shares if the Underwriters over-allotment option is exercised in
full) will be freely tradable by persons other than affiliates of the Company,
without restriction. The remaining 6,475,114 shares of Common Stock will be
"restricted" securities within the meaning of Rule 144 under the Securities
Act and may not be sold in the absence of registration under the Securities
Act unless an exemption from registration is available, including exemptions
contained in Rule 144. In addition, prior to the Offering, the Company had
outstanding options, to purchase 595,852 shares of Common Stock. Of the shares
of Common Stock outstanding after the Offering, 5,353,003 shares will be
beneficially owned by persons who are affiliates of the Company and,
commencing 90 days after the date of this Prospectus, would be eligible for
public sale pursuant to Rule 144 or Rule 701, subject to the volume
restrictions discussed below. The officers, directors and current shareholders
of the Company, however, have agreed not to sell or otherwise dispose of any
shares of Common Stock for a period of 180 days (the "Lock-up Period") after
the date of this Prospectus without the prior written consent of J.C. Bradford
& Co., Inc., except that the Company may issue shares of Common Stock in
connection with acquisitions or upon the exercise of options granted under the
Company's stock option plans. See "Underwriting."
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned his or her shares of
Common Stock for at least one year (including the prior holding period of any
prior owner other than an affiliate) is entitled to sell within any three-
month period that number of shares which does not exceed the greater of 1% of
the outstanding shares of Common Stock and the average weekly trading volume
during the four calendar weeks preceding each such sale. Sales under Rule 144
are also subject to certain manner of sale provisions, notice requirements and
the availability of current public information about the Company. A person (or
persons whose shares are aggregated) who is not deemed an "affiliate" of the
Company for at least three months and who has beneficially owned shares for at
least two years (including the holding period of any prior owner other than an
affiliate) would be entitled to sell such shares under Rule 144 without regard
to the limitations described above. Rule 144 defines "affiliate" of a company
as a person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such company.
Affiliates of a company generally include its directors, officers and
principal shareholders.
The Company intends to register on a registration statement on Form S-8 the
shares of Common Stock issuable upon exercise of options granted or to be
granted under the 1996 Stock Option Plan and the ProVesa Plan. Upon such
registration, such shares will be eligible for resale in the public market
without restrictions by persons who are not affiliates of the Company, and to
the extent they are held by affiliates, pursuant to Rule 144 without
observance of the holding period requirements.
As soon as practical after the closing of this Offering, the Company intends
to register up to 2,000,000 shares of its Common Stock under the Securities
Act for use in connection with future acquisitions, and it will be a condition
to the issuance of any of these shares that the holders agree similarly not to
sell, contract to sell or otherwise dispose of such shares for the remaining
portion, if any, of the Lock-up Period. Thereafter, these shares will
generally be freely tradable after their issuance, unless the sale thereof is
contractually restricted.
The Company has also granted Mr. Collins and Mr. Jackson, with respect to
their shares of Common Stock, piggyback and, after any termination of
employment or if no longer a director of the Company, demand registration
rights. The Company generally is required to bear the expense relating to the
sale of the shareholders' securities under these registration rights, except
for underwriting discounts and commissions, and in certain cases the fees and
expenses of the shareholders' counsel and filing fees related to the
registration statement. The Company also is obligated to indemnify the
shareholders whose shares are included in any of the Company's registrations
against certain losses and liabilities, including liabilities under the
Securities Act and state securities laws.
Prior to this Offering, there has been no public market for the Common
Stock, and no prediction can be made as to the effect, if any, that the sale
of shares or the availability of shares for sale will have on the market price
prevailing from time to time. Nevertheless, sales of substantial amounts of
Common Stock in the public market could adversely affect prevailing market
prices and the ability of the Company to raise equity capital in the future.
58
<PAGE>
UNDERWRITING
Pursuant to the Underwriting Agreement, and subject to the terms and
conditions thereof, the Underwriters listed below, who are represented by J.C.
Bradford & Co. and Wheat First Union, a division of Wheat First Securities,
Inc., have agreed, severally, to purchase from the Company and the Selling
Shareholders the number of shares of Common Stock set forth below opposite
their respective names:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
J.C. Bradford & Co.
Wheat First Securities, Inc. ..................................
---------
Total........................................................ 2,525,000
=========
</TABLE>
The Company and the Selling Shareholders have been advised by the
Representatives that the Underwriters propose initially 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 public offering, the public offering price
and such concessions may be changed. The Representatives have informed the
Company that the Underwriters do not intend to confirm sales to accounts over
which they exercise discretionary authority.
The offering of the shares of Common Stock is made for delivery when, as and
if accepted by the Underwriters and subject to prior sale and to withdrawal,
cancellation or modification of the offer without notice. The Underwriters
reserve the right to reject any offer for the purchase of shares.
The Company has granted the Underwriters an option, exercisable not later
than 30 days from the date of this Prospectus, to purchase up to 337,500
additional shares of Common Stock to cover over-allotments, if any, on the
same terms as those on which the 2,525,000 shares of Common Stock are being
offered. To the extent that the Underwriters exercise such option, each of
them will have a firm commitment to purchase approximately the same percentage
thereof which the number of shares of Common Stock to be purchased by it shown
in the table above bears to the total number of shares in such table, and the
Company will be obligated, pursuant to the option, to sell such shares to the
Underwriters. The Underwriters may exercise such option only to cover over-
allotments made in connection with the Offering.
The Representatives have informed the Company and the Selling Shareholders
that the Underwriters do not intend to make sales to any accounts over which
they exercise discretionary authority.
Prior to the Offering, there has been no public market for the Common Stock.
The initial public offering price has been determined by negotiation among the
Company, the Selling Shareholders and the Representatives. In determining such
price, consideration was given to, among other things, the financial and
operating history and trends of the Company, the experience of its management,
the position of the Company in its industry, the Company's prospects and the
Company's financial results. In addition, consideration was given to the
status of the securities markets, market conditions for new offerings of
securities and the prices of similar securities of comparable companies.
The Company's executive officers and directors and all of its current
shareholders, have agreed with the Representatives not to offer, sell or
otherwise dispose of any shares of Common Stock, any securities exercisable
for or convertible into Common Stock or any options to acquire Common Stock
owned by them prior to the expiration of the Lock-up Period, without the prior
written consent of the J.C. Bradford & Co. See "Shares Eligible for Future
Sale."
As soon as practical after the closing of this Offering, the Company intends
to register up to 2,000,000 shares of its Common Stock under the Securities
Act for use in connection with future acquisitions, and it will be a condition
to the issuance of any of these shares that the holders agree similarly not to
sell, contract to sell or otherwise dispose of such shares for the remaining
portion, if any, of the Lock-up Period. Thereafter, these shares will
generally be freely tradable after their issuance, unless the sale thereof is
contractually restricted.
59
<PAGE>
The Underwriting Agreement provides that the Company and Selling Shareholder
will indemnify the Underwriters and controlling persons, if any, against
certain civil liabilities, including liabilities under the Securities Act, or
will contribute to payments that the Underwriters or any such controlling
person may be required to make in respect thereof.
In connection with the offering, the Underwriters and other persons
participating in the Offering may engage in transactions that stabilize,
maintain or otherwise affect the price of Common Stock. Specifically, the
Underwriters may over-allot in connection with the Offering, creating a short
position in Common Stock for their own account. To cover over-allotments or to
stabilize the price of Common Stock, the Underwriters may bid for, and
purchase, shares of Common Stock in the open market. The Underwriters may also
impose a penalty bid whereby they may reclaim selling concessions allowed to
an underwriter or a dealer for distributing Common Stock in the Offering, if
the Underwriters repurchase previously distributed Common Stock in
transactions to cover their short position, in stabilization transactions or
otherwise. Finally, the Underwriters may bid for, and purchase, shares of
Common Stock in market making transactions. These activities may stabilize or
maintain the market price of Common Stock above market levels that may
otherwise prevail. The Underwriters are not required to engage in these
activities and may end any of these activities at any time.
LEGAL MATTERS
The validity of shares of Common Stock offered hereby is being passed upon
for the Company by Nelson Mullins Riley & Scarborough, L.L.P., Atlanta,
Georgia. Glenn W. Sturm, a partner in Nelson Mullins Riley & Scarborough,
L.L.P., is a director of the Company, and certain members of the firm,
including Mr. Sturm, own an aggregate of 380,181 shares of Common Stock and
options to acquire 28,554 shares of Common Stock. See "Management" and
"Principal and Selling Shareholders." Certain legal matters related to this
Offering will be passed upon for the Underwriters by Alston & Bird LLP,
Atlanta, Georgia.
EXPERTS
The Consolidated Financial Statements for the years ended December 31, 1995,
1996 and 1997, included elsewhere in this Prospectus, have been audited by
Arthur Andersen LLP ("Andersen"), independent public accountants, as indicated
in their reports with respect thereto, and are included herein in reliance
upon the authority of said firm as experts in giving such reports.
ADDITIONAL INFORMATION
On January 16, 1998, the Company's Board of Directors decided to retain
Arthur Andersen LLP as its independent public accountants and dismissed the
Company's former auditors. The former auditors' report on the Company's
financial statements for the two years ended December 31, 1996 does not cover
the consolidated financial statements of the Company included in this
Prospectus. Such report did not contain an adverse opinion or disclaimer of
opinion and was not modified as to uncertainty, audit scope or accounting
principles. There were no disagreements with the former auditors on any matter
of accounting principles or practices, financial statement disclosure or
auditing scope or procedure at the time of the change or with respect to the
Company's financial statements for fiscal years 1995 and 1996 which, if not
resolved to the former auditors' satisfaction, would have caused them to make
reference to the subject matter of the disagreement in connection with their
report. Prior to retaining Arthur Andersen LLP, the Company had consulted with
Arthur Andersen LLP regarding accounting principles in connection with the
acquisition of FiNet. Arthur Andersen LLP issued a report in connection with
this engagement regarding the poolability of FiNet. The engagement did not
include a review of the poolability of the Company. The Company ultimately
determined that the acquisition of FiNet should be accounted for as a purchase
due to treasury stock transactions of the Company.
60
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission through the Electronic Data
Gathering and Retrieval ("EDGAR") system a registration statement on Form S-1
(together with all amendments, exhibits and schedules thereto, the
"Registration Statement") under the Securities Act with respect to the
Securities offered by this Prospectus. This Prospectus does not contain all of
the information set forth in such Registration Statement, certain parts of
which have been omitted in accordance with the rules and regulations of the
Commission. Statements contained in this Prospectus as to the contents of any
contract or other document referred to are not necessarily complete and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement of which this Prospectus
forms a part. For further information, reference is made to such registration
statement, including the exhibits thereto, which may be inspected without
charge at the Commission's principal office at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549; and at the following Regional Offices of the
Commission, except that copies of the exhibits may not be available at certain
of the Regional Offices: Chicago Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661; and New York Regional Office, 7 World
Trade Center, Suite 1300, New York, New York 10048. Copies of all or any part
of such material may be obtained from the Commission at 450 Fifth Street, N.W.
Room 1024, Washington, D.C. 20549, upon payment of certain fees prescribed by
the Commission. The Commission maintains a World Wide Web site on the Internet
at http://www.sec.gov that contains reports, proxies, information statements,
and registration statements and other information filed with the Commission
through the EDGAR system.
The Company is not presently a reporting company and does not file reports
or other information with the Commission. On the effective date of the
Registration Statement, however, the Company will become a reporting company.
Further, the Company will register its securities under the Exchange Act.
Accordingly, the Company will become subject to the additional reporting
requirements of the Exchange Act and in accordance therewith will file
reports, proxy statements and other information with the Commission. In
addition, after the completion of this Offering, the Company intends to
furnish its shareholders with annual reports containing audited financial
statements and with quarterly reports containing unaudited summary financial
information for each of the first three quarters of each fiscal year.
61
<PAGE>
THE INTERCEPT GROUP, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
The InterCept Group, Inc. and Subsidiaries
Report of Independent Public Accountants.................................
Consolidated Balance Sheets--December 31, 1996 and 1997..................
Consolidated Statements of Operations for the years ended December 31,
1995, 1996 and 1997.....................................................
Consolidated Statements of Shareholders' Equity (Deficit) for the years
ended December 31, 1995, 1996 and 1997..................................
Consolidated Statements of Cash Flows for the years ended December 31,
1995, 1996 and 1997.....................................................
Notes to Consolidated Financial Statements...............................
ProVesa, Inc. and Subsidiaries
Report of Independent Public Accountants.................................
Consolidated Balance Sheets--June 30, 1995 and 1996 and November 27,
1996....................................................................
Consolidated Statements of Operations for the years ended June 30, 1995
and 1996 and the period from July 1, 1996 to November 27, 1996..........
Consolidated Statements of Shareholders' Equity for the years ended June
30, 1995 and 1996 and the period from July 1, 1996 to November 27,
1996....................................................................
Consolidated Statements of Cash Flows for the years ended June 30, 1995
and 1996 and the period from July 1, 1996 to November 27, 1996..........
Notes to Consolidated Financial Statements...............................
InterCept Communications Technologies, L.L.C.
Report of Independent Public Accountants.................................
Balance Sheets--December 31, 1996 and 1997...............................
Statements of Operations for the years ended December 31, 1996 and 1997..
Statements of Members' Equity for the years ended December 31, 1996 and
1997....................................................................
Statements of Cash Flow for the years ended December 31, 1996 and 1997...
Notes to Financial Statements............................................
FiNet, Inc.
Report of Independent Public Accountants.................................
Balance Sheet--December 17, 1996.........................................
Statement of Operations for the period from June 21, 1996 to December 17,
1996 ...................................................................
Statement of Shareholders' Equity for the period from June 21, 1996 to
December 17, 1996 ......................................................
Statement of Cash Flows for the period from June 21, 1996 to December 17,
1996 ...................................................................
Notes to Financial Statements............................................
Bank Services Corporation..................................................
Report of Independent Public Accountants.................................
Balance Sheets--December 31, 1995 and 1996...............................
Statements of Operations for the years ended December 31, 1995 and 1996..
Statements of Shareholders' Equity (Deficit) for the years ended December
31, 1995 and 1996.......................................................
Statements of Cash Flows for the years ended December 31, 1995 and 1996..
Notes to Financial Statements............................................
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The InterCept Group, Inc.:
We have audited the accompanying consolidated balance sheets of THE
INTERCEPT GROUP, INC. (a Georgia corporation) AND SUBSIDIARIES as of December
31, 1996 and 1997 and the related consolidated statements of operations,
changes in shareholders' deficit, and cash flows for each of the three years
in the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The
InterCept Group, Inc. and subsidiaries as of December 31, 1997 and 1996 and
the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles.
Atlanta, Georgia
February 27, 1998
F-2
<PAGE>
THE INTERCEPT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................. $ 989,735 $1,871,896
Accounts receivable, less allowance for doubtful
accounts of $157,772 and $156,616 in 1996 and 1997,
respectively......................................... 2,716,739 2,636,602
Related party note receivable......................... 466,941 0
Inventory, prepaid expenses and other................. 193,144 221,124
---------- ----------
Total current assets............................. 4,366,559 4,729,622
PROPERTY AND EQUIPMENT, net............................ 2,086,609 2,496,781
DEFERRED TAX ASSETS.................................... 653,236 668,275
NOTES RECEIVABLE....................................... 0 54,309
INTANGIBLE ASSETS, net of accumulated amortization of
$108,669 and $544,575 in 1996 and 1997, respectively.. 2,596,440 1,284,734
OTHER NONCURRENT ASSETS................................ 112,530 204,957
---------- ----------
$9,815,374 $9,438,678
========== ==========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Current maturities of notes payable................... $ 518,883 $ 580,590
Line of credit........................................ 0 200,000
Accounts payable and accrued liabilities.............. 1,400,459 1,650,712
Accrued income taxes.................................. 293,590 435,463
Deferred revenue...................................... 1,071,753 1,125,488
---------- ----------
Total current liabilities........................ 3,284,685 3,992,253
---------- ----------
NOTES PAYABLE, less current portion.................... 5,212,208 4,716,511
---------- ----------
DEFERRED COMPENSATION.................................. 1,800,000 1,800,000
---------- ----------
Total liabilities................................ 10,296,893 10,508,764
---------- ----------
MINORITY INTEREST...................................... 38,563 0
COMMITMENTS AND CONTINGENCIES..........................
SERIES A REDEEMABLE PREFERRED STOCK 8% CUMULATIVE, NO
PAR VALUE; 30,000 SHARES AUTHORIZED; 4,000 SHARES
ISSUED AND OUTSTANDING................................ 400,000 400,000
SHAREHOLDERS' DEFICIT:
Preferred stock, no par value; 50,000 shares
authorized; Series A reported above ................. 0 0
Common stock, no par value; 10,000,000 shares
authorized; 4,009,085 shares issued and outstanding.. 2,519,775 2,519,775
Accumulated deficit................................... (3,439,857) (3,989,861)
---------- ----------
Total shareholders' deficit...................... (920,082) (1,470,086)
---------- ----------
$9,815,374 $9,438,678
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE>
THE INTERCEPT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996, AND 1997
<TABLE>
<CAPTION>
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES:
Service fee income.................... $ 8,284,148 $10,109,290 $16,636,913
Equipment product sales, services and
other................................ 2,526,492 4,189,779 3,389,709
Data communications management
income............................... 1,479,908 0 0
----------- ----------- -----------
Total revenues....................... 12,290,548 14,299,069 20,026,622
----------- ----------- -----------
COSTS OF SERVICES:
Cost of service fee income............ 2,281,487 2,785,717 4,124,943
Cost of equipment and product sales... 2,724,306 4,006,668 3,556,769
Cost of data communications management
income............................... 1,156,972 0 0
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSE............................... 4,488,417 7,631,117 9,900,314
DEPRECIATION AND AMORTIZATION.......... 257,784 251,501 1,148,589
LOSS ON IMPAIRMENT OF INTANGIBLES...... 0 0 727,500
WRITEOFF OF PURCHASED RESEARCH AND
DEVELOPMENT COSTS..................... 0 810,000 0
----------- ----------- -----------
Total operating expenses ............ 10,908,966 15,485,003 19,458,115
----------- ----------- -----------
OPERATING INCOME (LOSS)................ 1,381,582 (1,185,934) 568,507
INTEREST EXPENSE....................... (86,516) (320,431) (770,175)
INTEREST AND OTHER INCOME, net......... 29,272 43,715 113,514
----------- ----------- -----------
INCOME (LOSS) BEFORE (BENEFIT)
PROVISION FOR INCOME TAXES AND
MINORITY INTEREST..................... 1,324,338 (1,462,650) (88,154)
(BENEFIT) PROVISION FOR INCOME TAXES... 0 (256,595) 468,412
MINORITY INTEREST IN (INCOME) LOSS OF
CONSOLIDATED SUBSIDIARY............... (72,474) (79,463) 38,562
----------- ----------- -----------
NET INCOME (LOSS) BEFORE PREFERRED
DIVIDENDS............................. 1,251,864 (1,285,518) (518,004)
PREFERRED DIVIDENDS.................... 0 8,000 32,000
----------- ----------- -----------
NET INCOME (LOSS) ATTRIBUTABLE TO
COMMON SHAREHOLDERS................... $ 1,251,864 $(1,293,518) $ (550,004)
=========== =========== ===========
NET INCOME (LOSS) PER COMMON SHARE:
Basic................................. $ 0.34 $ (0.38) $ (0.14)
=========== =========== ===========
Diluted............................... $ 0.34 $ (0.38) $ (0.14)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE>
THE INTERCEPT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
COMMON STOCK
---------------------
RETAINED
EARNINGS
(ACCUMULATED
SHARES AMOUNT DEFICIT) TOTAL
--------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1994.... 3,736,908 $ 106,528 $ (379,192) $ (272,664)
Distribution to S corporation
shareholders of InterCept
Systems..................... 0 0 (420,600) (420,600)
Net income attributable to
common shareholders......... 0 0 1,251,864 1,251,864
--------- ---------- ----------- -----------
BALANCE, December 31, 1995.... 3,736,908 106,528 452,072 558,600
Distribution to S corporation
shareholders of InterCept
Systems..................... 0 0 (1,579,047) (1,579,047)
Distribution to S corporation
shareholders of Data
Services Corporation........ 0 0 (28,280) (28,280)
Acquisition and retirement of
treasury stock.............. (694,750) (8,916) (991,084) (1,000,000)
Acquisition of minority
interest in Data Services
Corporation................. 0 257,584 0 257,584
Issuance of common stock in
connection with the
acquisition of ProVesa...... 221,057 505,303 0 505,303
Issuance of common stock in
connection with the
acquisition of FiNet........ 244,741 576,000 0 576,000
Issuance of common stock in
connection with the
acquisition of Bank Services
Corporation................. 501,129 1,083,276 0 1,083,276
Net loss attributable to
common shareholders......... 0 0 (1,293,518) (1,293,518)
--------- ---------- ----------- -----------
BALANCE, December 31, 1996.... 4,009,085 2,519,775 (3,439,857) (920,082)
Net loss attributable to
common shareholders......... 0 0 (550,004) (550,004)
--------- ---------- ----------- -----------
BALANCE, December 31, 1997.... 4,009,085 $2,519,775 $(3,989,861) $(1,470,086)
========= ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE>
THE INTERCEPT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996, AND 1997
<TABLE>
<CAPTION>
1995 1996 1997
---------- ----------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)....................... $1,251,864 $(1,285,518) $ (518,004)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization.......... 257,784 251,501 1,148,589
Writeoff of purchased research and
development........................... 0 810,000 0
Loss on impairment of intangibles...... 0 0 727,500
Minority interest in income (loss) of
consolidated subsidiary............... 72,474 79,464 (38,563)
Deferred income tax provision
(benefit)............................. 0 (696,369) (15,039)
Changes in operating assets and
liabilities, net of effects of
purchase acquisitions:
Accounts receivable................... (564,580) (549,888) 80,137
Prepaid expenses...................... (178,081) 156,917 (27,980)
Other assets.......................... (100,965) (29,600) (42,427)
Accounts payable and accrued
expenses............................. 557,445 502,611 392,126
Deferred revenue...................... 65,213 196,736 53,735
Deferred compensation................. 0 1,800,000 0
---------- ----------- ----------
Net cash provided by operating
activities........................ 1,361,154 1,235,854 1,760,074
---------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES, net
of effects of purchase acquisitions:
(Decrease) increase in note receivable.. (92,794) (556,326) 412,632
Purchases of property and equipment..... (139,082) (136,084) (974,555)
Purchase of businesses, net of cash
acquired............................... 0 335,324 0
Increase in investments................. 0 0 (50,000)
---------- ----------- ----------
Net cash used by investing
activities........................ (231,876) (357,086) (611,923)
---------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES, net
of effect of purchase acquisitions:
Proceeds from long-term debt............ 0 2,139,361 280,000
Payments on long-term debt.............. (246,033) 0 (513,990)
S corporation distributions paid to
shareholders........................... (420,600) (1,619,047) 0
Retirement of preferred stock........... 0 (25,000) 0
Payment of preferred dividends.......... 0 (8,000) (32,000)
Purchase and retirement of treasury
stock.................................. 0 (1,000,000) 0
---------- ----------- ----------
Net cash used by financing
activities........................ (666,633) (512,686) (265,990)
---------- ----------- ----------
NET INCREASE IN CASH..................... 462,645 366,086 882,161
CASH, AT BEGINNING OF YEAR............... 161,008 623,653 989,735
---------- ----------- ----------
CASH, AT END OF YEAR..................... $ 623,653 $ 989,735 $1,871,896
========== =========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest.................. $ 87,131 $ 382,240 $ 725,923
========== =========== ==========
Cash paid for income taxes.............. $ 0 $ 146,184 $ 341,604
========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
THE INTERCEPT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996, AND 1997
1. ORGANIZATION AND NATURE OF BUSINESS
The InterCept Group, Inc. ("Intercept" or the "Company") (a Georgia
corporation) designs, develops, markets, and implements a suite of fully
integrated electronic commerce products and services primarily for community
financial institutions in the United States. The Company's products and
services include electronic funds transfer ("EFT"), data communications
management, client/server enterprise software, and other processing solutions.
The Company is a single source provider of a broad range of flexible
electronic commerce solutions supporting value-added products and services.
The Company provides numerous EFT products and services, including automated
teller machine ("ATM"), point-of-sale ("POS") and script debit services, debit
card transactions, funds transfer services, and remote banking services. The
Company licenses client/server enterprise software, which operates in a
Windows NT(R) environment, to community financial institutions on both a
service bureau and in-house basis. The Company also supplies banking related
equipment, provides related maintenance and technical support and offers
numerous ancillary products and services to its financial institution
customers.
The Company was incorporated on April 30, 1996 as a shell entity, primarily
to facilitate the combination of two companies under common control. On June
4, 1996, InterCept Systems, Inc. ("Systems") and Data Services Corporation
("Data Services") were combined with the Company. Systems provides electronic
funds transfer services and Data Services provides maintenance and repairs on
computer-related equipment primarily through annual service contracts and
equipment sales.
On November 27, 1996, the Company acquired ProVesa, Inc. and its subsidiary,
ProVesa Services, Inc. (collectively, "ProVesa"), which provide information
technology and data processing services to financial institutions through the
operation of an on-line service bureau serving community banks.
On December 17, 1996, the Company acquired FiNet, Inc. ("FiNet"), a merchant
portfolio management company that provides a complete outsourcing solution for
banks and merchants.
On December 31, 1996, the Company acquired Bank Services Corporation ("Bank
Services"), which is engaged in providing data processing services and
developing core accounting software for internal use and sale.
See Note 3 where acquisitions are discussed.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries Systems, Data Services, ProVesa, FiNet, and
Bank Services for the year ended December 31, 1997. Additionally, ProImage,
Inc. ("ProImage"), a corporation in which ProVesa has a 33.3% ownership
interest, has been consolidated in the accompanying consolidated financial
statements since its inception, due to ProVesa's control of ProImage and
limitations on the ability of the other investors to have losses allocated to
their capital accounts. All significant intercompany accounts and transactions
have been eliminated in consolidation. Minority interest represents the
minority shareholders' proportionate share of the equity and earnings of
ProImage in all periods and Data Services for the year ended December 31, 1995
and the period from January 1, 1996 to June 4, 1996.
F-7
<PAGE>
THE INTERCEPT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all short-term highly liquid investments with an
original maturity of three months or less to be cash equivalents.
Property and Equipment
Property and equipment are recorded at cost and are depreciated using the
straight-line method over the estimated useful lives of the respective assets
for financial reporting purposes. Major additions and improvements are charged
to the property accounts while replacements, maintenance, and repairs which do
not improve or extend the lives of respective assets are expensed in the
current period. Estimated useful lives for the Company's assets are as
follows:
<TABLE>
<S> <C>
Computer equipment....................... 5 to 7 years
Furniture and office equipment........... 5 to 10 years
Software................................. 3 to 5 years
Building and improvements................ 31 years
Transportation equipment................. 3 to 5 years
</TABLE>
Software Development Costs
The Company capitalizes software development costs incurred from the time
that technological feasibility of the software is established until the
software is saleable. These costs are amortized on a straight-line basis over
three years, the estimated economic life of the software. Research and
development costs and maintenance costs related to software development are
expensed as incurred.
Intangible Assets
Intangible assets include goodwill, customer contracts, capitalized product
technology, and organizational costs. The Company evaluates the realizability
of intangible assets based on estimates of undiscounted future cash flows over
the remaining useful life of the related asset. If the amount of such
estimated undiscounted future cash flow is less than the net book value of the
asset, the asset is written down to the amount of the estimated undiscounted
cash flows.
Goodwill
Goodwill represents the excess of the purchase price over the net
tangible and identifiable intangible assets of acquired businesses.
Goodwill is amortized on a straight-line basis over periods of 15 to 40
years.
Customer Contracts
In connection with the Company's acquisitions of Data Services, ProVesa,
and Bank Services, the Company allocated a portion of the purchase price to
customer contracts acquired based upon a discounted cash flow analysis of
the applicable contracts. The estimated fair values attributed to the
contracts are being amortized over periods of 18 months, which represents
the estimated average remaining life of the contracts.
F-8
<PAGE>
THE INTERCEPT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Product Technology
Product technology represents internally developed software acquired as a
result of the ProVesa and Bank Services acquisitions for the processing of
data transactions. Product technology is amortized on a straight-line basis
over periods of three to five years.
Organizational Costs
Organizational costs are amortized on a straight-line basis over a period
of five years.
Revenue Recognition
Revenues include service fee income, data processing fees, equipment sales,
installation and maintenance, software license fees, and software maintenance.
Service fee income, data processing fees, and installation revenues are
recognized as services are performed. Revenue from software and equipment
sales are recognized upon shipment of the product to customers, provided that
there are no significant obligations remaining and collectibility of the
revenue is probable. Any postcontract support included in the contract is
separately priced and deferred and recognized over the period of the
postcontract support in accordance with AICPA Statement of Position No. 97-2.
The Company recognizes revenue from software license fees, services and
maintenance ratably over the period or as the applicable services or
maintenance are performed.
Deferred Revenue
Deferred revenues represent the liability for advanced billings to customers
primarily related to maintenance contracts. Such amounts are recognized as
revenue when the related services are performed.
Long-Lived Assets
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," on January 1, 1996. SFAS No. 121 established
accounting standards for the impairment of long-lived assets and goodwill
related to those assets to be held and used and for long-lived assets and
certain identifiable intangible assets to be disposed of. The effect of
adopting SFAS No. 121 was not material to the Company's consolidated financial
statements.
The Company reviews its long-lived assets for impairment at each balance
sheet date or whenever events or changes in circumstances indicate that the
carrying amount of an asset should be assessed. Management evaluates the
intangible assets related to each acquisition individually to determine
whether an impairment has occurred. An impairment is recognized when the
discounted future cash flows estimated to be generated by the acquired
business are not sufficient to recover the unamortized balance of the
intangible asset with the amount of any such deficiency charged to income in
the current year. Estimates of future cash flows are based on many factors,
including current operating results, expected market trends, and competitive
influences.
F-9
<PAGE>
THE INTERCEPT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
In the event the future tax consequences of differences between the
financial reporting bases and the tax bases of the Company's assets and
liabilities result in deferred tax assets, an evaluation of the probability of
being able to realize the future benefits indicated by such asset is required.
A valuation allowance is provided for
a portion of the deferred tax asset when it is more likely than not that some
portion or all of the deferred tax asset will not be realized. In assessing
the realizability of the deferred tax assets, management considers the
scheduled reversals of deferred tax liabilities, projected future taxable
income, and tax planning strategies.
Historically, Systems and Data Services had elected by consent of their
shareholders to be taxed under the provisions of Subchapter S of the Internal
Revenue Code. Under those provisions, the shareholders included their
respective shares of the companies' earnings or losses in their individual
income tax returns. This election was revoked prior to the merger of these
companies into the Company.
Fair Value of Financial Instruments
The fair value of financial instruments classified as current assets or
liabilities, including cash and cash equivalents, accounts receivable and
accounts payable, approximate carrying value due to the short-term maturity of
the instruments. The fair value of short-term and long-term debt, and deferred
compensation amounts approximate carrying value and are based on their
effective interest rates compared to current market rates.
Advertising Costs
The Company expenses all advertising costs as incurred.
Net Income (Loss) Per Common Share
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
128 effective December 31, 1997. Basic earnings per share is computed based on
the weighted average number of total common shares outstanding during the
respective years. Diluted earnings per share is computed based on the weighted
average number of total shares of common stock outstanding, adjusted for
common stock equivalents.
On February 4, 1998, the Securities and Exchange Commission released Staff
Accounting Bulletin ("SAB") No. 98 "Computation of Earnings Per Share." SAB
No. 98 requires the retroactive inclusion of nominal issuances of common stock
and common stock equivalents in earnings per share calculations for all
periods presented and precludes the use of the treasury stock method for these
issuances. Management believes that all issuances of common stock and stock
options have been made at the current market value at the time of issuance and
that there have been no nominal issuances.
3. ACQUISITIONS
On June 4, 1996, Systems and Data Services were merged into the Company in a
transaction accounted for as a merger of entities under common control and an
acquisition of the uncontrolled minority interest in Data Services due to the
majority voting control of one shareholder in both entities. The merger was
effected by the
F-10
<PAGE>
THE INTERCEPT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
exchange of 721 out of the 927 outstanding shares of common stock of Systems
for 2,431,622 shares of common stock of the Company. The remaining 206 common
shares of Systems (equivalent to 694,750 shares of the Company) were acquired
for $1,000,000 and retired. All outstanding common shares of Data Services
were exchanged for 610,537 shares of common stock of the Company. The fair
value of the minority interest in Data Services of $257,584 exceeded its share
of the net assets by approximately $246,900. Of this excess, $113,400 was
allocated to customer contracts based upon a discounted cash flow analysis and
amortized over a period of 18 months and the remaining $133,500 was allocated
to goodwill and amortized over a period of 20 years. Similar to a pooling of
interests, the historical financial statements have been restated to reflect
the combined results of Systems and Data Services. The uncontrolled minority
interest in Data Services has been reflected for periods prior to the merger.
On November 27, 1996, the Company acquired all of the outstanding shares of
common and Series A preferred stock of ProVesa in exchange for 221,057 shares
of common stock and 4,250 shares of Series A preferred stock of the Company
with a total fair value of approximately $904,850. The transaction was
accounted for as a purchase. The consideration exchanged exceeded the net
tangible asset value of ProVesa by approximately $1,304,700. Of this excess,
$441,600 was allocated to customer contracts based upon a discounted cash flow
analysis and amortized over a period of 18 months, $300,000 was allocated to
existing product technology and amortized over a period of 3 years, and the
remaining $563,100 was allocated to goodwill and amortized over a period of 40
years. The results of operations of the acquired business have been included
in the Company's consolidated financial statements from the date of
acquisition.
In December 1997, the Company made a decision to write off the costs
allocated to product technology as the software was not Year 2000 compliant,
and the Company made a decision not to further develop or support the
software. The Company took a charge of $191,000 in arriving at operating
income in its accompanying financial statements during the fourth quarter of
1997. Customers using the software are being migrated to other software
products of the Company which are year 2000 compliant.
On December 17, 1996, the Company acquired all of the outstanding shares of
FiNet in exchange for 244,741 shares of common stock of the Company with a
total fair value of approximately $576,000. The transaction was accounted for
as a purchase. The consideration exchanged exceeded the net tangible asset
value of FiNet by approximately $575,800. This amount was allocated to
goodwill and amortized over a period of 15 years. The results of operations of
the acquired business have been included in the Company's consolidated
financial statements from the date of acquisition.
During 1997, the operating losses of FiNet significantly exceeded budgeted
amounts. In addition, FiNet was not successful in implementing its sales plan
to targeted customers, and the Company anticipates that FiNet will continue to
incur operating losses for the foreseeable future. The Company is currently
evaluating its future plans with regard to FiNet. Based upon the current and
projected losses, the Company determined in December 1997 that the goodwill
recorded on the purchase of FiNet was impaired, and accordingly recorded a
$536,000 charge to operating income. In addition, in January 1998, the Company
canceled certain performance stock options which had been granted to the
officers of FiNet.
On December 31, 1996, the Company acquired all of the outstanding shares of
Bank Services in exchange for 501,129 shares of common stock of the Company
with a total fair value of approximately $1,083,300. The transaction was
accounted for as a purchase. The consideration exchanged exceeded the net
tangible asset value of Bank Services by approximately $1,310,000. Of this
excess, $810,000 was allocated to incomplete research and development projects
based upon a third party appraisal report, and expensed in the statement of
operations on the acquisition date. The incomplete research and development
projects had not reached technological feasibility, had no alternative use,
and required substantial additional development by the Company. Of the
remaining excess, $150,000 was allocated to product technology and amortized
over a period of 3 years and the remaining
F-11
<PAGE>
THE INTERCEPT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
$350,000 was allocated to goodwill and amortized over a period of 20 years.
The results of operations of the acquired business have been included in the
consolidated financial statements from the date of acquisition.
The following unaudited pro forma consolidated financial information for the
years ended December 31, 1995 and 1996 assume the acquisitions of ProVesa,
FiNet, and Bank Services had occurred as of January 1, 1995.
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Revenues...................... $15,131,938 $19,302,336
Net income (loss) before
income taxes and minority
interest..................... 936,009 (456,299)
Net income (loss) per common
share........................ $.23 $(.11)
</TABLE>
Pro forma net loss before income taxes and minority interest for the year
ended December 31, 1996 excludes the charge of $810,000 for incomplete
research and development projects acquired in the Bank Services acquisition.
The unaudited pro forma consolidated financial information is not
necessarily indicative of the actual results that would have occurred had the
acquisitions been consummated at the beginning of the periods presented or of
the future operations of the combined entities.
4. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 and 1997 consisted of the
following:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Land and building................................. $ 624,514 $ 629,404
Leasehold improvements............................ 82,255 87,182
Computer equipment................................ 1,616,565 1,757,821
Furniture and office equipment.................... 986,727 1,467,510
Software.......................................... 263,837 484,697
Transportation equipment.......................... 312,641 392,280
---------- ----------
3,886,539 4,818,894
Less accumulated depreciation..................... (1,799,930) (2,322,113)
---------- ----------
$2,086,609 $2,496,781
========== ==========
</TABLE>
5. INTANGIBLES
Intangibles at December 31, 1996 and 1997 are summarized as follows:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Goodwill.......................................... $1,680,109 $1,104,309
Product technology................................ 450,000 150,000
Customer contracts................................ 555,000 555,000
Organizational costs.............................. 20,000 20,000
---------- ----------
2,705,109 1,829,309
Less accumulated amortization..................... (108,669) (544,575)
---------- ----------
$2,596,440 $1,284,734
========== ==========
</TABLE>
F-12
<PAGE>
THE INTERCEPT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. LONG-TERM DEBT AND LINE OF CREDIT
Long-term debt at December 31, 1996 and 1997 consisted of the following:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Note payable to Georgia State Bank, interest
payable monthly at prime plus 2.5%; monthly
principal and interest payments (with
adjustments for changes in prime) beginning
July 20, 1996 through June 20, 2006; the note
is collateralized by common stock and assets of
the Company, and a life insurance policy and
personal guarantee of a major shareholder...... $2,917,601 $2,732,974
Note payable to FNB Commerce, interest payable
monthly at prime plus 2%; monthly principal and
interest payments (with adjustments for changes
of prime) beginning July 1, 1996 through June
1, 2003; the note is collateralized by common
stock and assets of the Company, and a life
insurance policy and personal guarantee of a
shareholder.................................... 1,553,907 1,377,522
Note payable to Community Bank of Georgia,
interest payable monthly at prime plus 1%,
monthly principal and interest installments
(with adjustments for changes in prime)
beginning January 25, 1997 through December 25,
1999, with remaining principal due at this
date; the note is collateralized by common
stock and assets of the Company, a $200,000
certificate of deposit, and a life insurance
policy and personal guarantee of two
shareholders................................... 450,000 402,963
Mortgage note payable to Allied Bank, interest
payable at prime, in monthly principal and
interest payments through December 1, 1999,
with remaining principal due December 31, 1999;
the note is collateralized by land and
building....................................... 426,437 389,493
Note payable to First Macon Bank & Trust
interest payable at prime; monthly principal
and interest payments, payable in full on
September 15, 2001; the note is collateralized
by assets of the Company, and a corporate
guarantee by ProVesa of one-third of the
balance of the debt............................ 383,146 316,123
Note payable to First Macon Bank & Trust,
interest payable at prime, monthly principal
and interest payments, the note is
collateralized by assets of the Company, and a
corporate guarantee by ProVesa of one-third of
the balance of the debt........................ 0 78,026
---------- ----------
5,731,091 5,297,101
Less current maturities........................ (518,883) (580,590)
---------- ----------
$5,212,208 $4,716,511
========== ==========
</TABLE>
F-13
<PAGE>
THE INTERCEPT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Future maturities of long-term debt at December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998........................................ $ 580,590
1999........................................ 1,245,348
2000........................................ 603,266
2001........................................ 648,837
2002........................................ 637,565
Thereafter.................................. 1,581,495
----------
$5,297,101
==========
</TABLE>
Certain loan agreements contain covenants with respect to the maintenance of
certain financial ratios and specified net worth and limit the incurrence of
additional indebtedness, the sale of substantial assets, the sale of common
stock by the Company, consolidations or mergers by the Company and the
declaration and payment of dividends. Any past or potential defaults or
breaches of the provisions of the above loan agreements as a result of the
Company's business combination transactions or potentially as a result of the
planned initial public offering of common stock (Note 13) have been waived in
writing by the lenders (such waivers being conditioned upon the initial public
offering), but there can be no assurance that similar waivers can be obtained,
if needed, in the future. The loans are secured by all assets of the Company
and a pledge of 100% of the stock of certain subsidiaries, which have
guaranteed the repayment of indebtedness under the loans.
Line of Credit
On February 5, 1997, the Company entered into a $200,000 line of credit
agreement with The Bank of Gwinnett County. Interest was payable monthly at
the bank's prime rate plus 1.5%. At December 31, 1997, $200,000 of this line
of credit was outstanding. The balance was repaid in full in 1998.
7. INCOME TAXES
The components of income tax (benefit) provision in the consolidated
statements of operations for the years ended December 31, 1996 and 1997 are as
follows:
<TABLE>
<CAPTION>
1996 1997
--------- --------
<S> <C> <C>
Current expense...................................... $ 439,774 $483,477
Deferred benefit..................................... (696,369) (15,065)
--------- --------
(Benefit) provision for income taxes............. $(256,595) $468,412
========= ========
</TABLE>
The income tax (benefit) provision, as reported in the statements of income,
differs from the amounts computed by applying federal statutory rates due to
the following for the years ended December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1996 1997
--------- --------
<S> <C> <C>
Federal income tax benefit at statutory rate....... $(497,301) $(29,972)
Nondeductible amortization of goodwill............. 25,620 425,744
Purchased research and development................. 275,400 0
Meals and entertainment............................ 5,613 16,562
State tax (benefit) provision, net of federal ef-
fect.............................................. (24,152) 51,729
Net effect of an S corporation conversion to a C
corporation....................................... (43,112) 0
Other.............................................. 1,337 4,349
--------- --------
$(256,595) $468,412
========= ========
</TABLE>
F-14
<PAGE>
THE INTERCEPT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In May 1996, Data Services and Systems (collectively the "S Corporations")
converted from S Corporation status to C Corporation status. Accordingly,
taxable income prior to such date was reflected on the tax returns of the
shareholders, and no tax expense was reflected by the Company. On the
conversion date, the Company recorded an expense through its tax provision to
record the effect of cumulative temporary differences through such date. The
net effect of the 1996 income not taxable to the S Corporations, and the
provision to record cumulative temporary differences was to increase the tax
benefit for the year by $43,112 due to the fact that the Company generated
taxable income prior to the conversion, and a loss after the conversion.
During the period the S Corporations were not taxable, the Company distributed
all of the taxable income of the S Corporations. Accordingly, no adjustment is
made to transfer retained deficits to paid in capital at the date of the
conversion.
Deferred income tax assets and liabilities for 1996 and 1997 reflect the
impact of temporary differences between the amounts of assets and liabilities
for financial reporting and income tax reporting purposes. Temporary
differences that give rise to deferred tax assets and liabilities at December
31, 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Deferred tax assets:
Deferred compensation................................ $683,281 $683,281
Accounts receivable reserves......................... 59,890 59,451
Other................................................ 14,561 40,313
-------- --------
Deferred tax assets............................... 757,732 783,045
-------- --------
Deferred tax liabilities:
Accelerated depreciation............................. (104,496) (114,770)
-------- --------
Deferred tax liabilities.......................... (104,496) (114,770)
-------- --------
Net deferred asset liability...................... $653,236 $668,275
======== ========
</TABLE>
8. PREFERRED STOCK
Shares of preferred stock may be issued from time to time in one or more
series as may be established by resolution of the board of directors of the
Company. Each resolution shall include the number of shares issued,
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption as determined by the board.
The Articles of Incorporation authorize the Board of Directors to issue,
without further action by the holders of the common stock, shares of preferred
stock in one or more series and to fix any preferences, conversion and other
rights, voting powers, restrictions, limitations, qualifications and terms and
conditions of redemption as shall be set forth in resolutions adopted by the
Board of Directors. Articles of amendment must be filed with the Georgia
Secretary of State prior to the issuance of any shares of preferred stock of
the applicable series. Any preferred stock so issued may rank senior to the
common stock with respect to the payment of dividends or amounts upon
liquidation, dissolution or winding-up, or both. In addition, any such shares
of preferred stock may have class or series voting rights.
Series A Preferred Stock
On November 27, 1996, the Company filed Articles of Amendment to its
Articles of Incorporation for the designation of 30,000 shares of Series A
preferred stock. The stated value of the Series A preferred stock is $100 per
share. Holders of Series A preferred stock are entitled to receive dividends
at the annual rate of 8% of the stated value per share, or $8.00 per share,
payable quarterly. Dividends are cumulative from the date of issue. The
Company may not declare or pay cash dividends on any other series of preferred
stock that is junior or on parity with the Series A preferred stock, or on
common stock, nor may it redeem, purchase, or otherwise acquire
F-15
<PAGE>
THE INTERCEPT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
any of such stock, unless full cumulative dividends have been or are
contemporaneously declared and paid on the Series A preferred stock. In the
event of any liquidation or dissolution of the Company, the holders of shares
of Series A preferred stock are entitled to receive out of assets of the
Company available for distribution to shareholders, before any distributions
are made to holders of common stock or of any other shares of stock of the
Company ranking junior to the Series A preferred stock, liquidating
distributions in the amount of $100 per share, plus accrued and unpaid
dividends.
The Series A preferred stock is redeemable at the option of the Company for
cash at any time, in whole or in part, on at least 10 days' notice. The price
payable upon redemption is 110% of stated value per share, or $110 per share,
plus accrued but unpaid dividends. At any time after the third anniversary of
the initial issuance of shares of Series A preferred stock, any holder of
Series A preferred stock may tender all or part of such holder's Series A
preferred stock for redemption at a price equal to 100% of stated value, or
$100 per share, plus accrued and unpaid dividends. The holders of the Series A
preferred stock have no voting rights except as otherwise required by the
Georgia Business Corporation Code and applicable law. The holders of shares of
Series A preferred stock have no preemptive or other rights to subscribe for
any other shares of securities, nor do they have any conversion rights. The
Series A preferred stock ranks prior to the common stock as to dividends and
upon liquidation of the Company.
9. SHAREHOLDERS' EQUITY
Under the Articles of Incorporation, the Board of Directors has the
authority to issue 10,000,000 shares of common stock without par value and
50,000 shares of preferred stock without par value in one or more classes or
series and, within certain limitations, to determine the voting rights,
preferences as to dividends and in liquidation, and conversion or other rights
of such series.
Pursuant to a voting agreement, the Chief Executive Officer of the Company
has voting control over approximately 64% of the common stock of the Company.
The voting agreement expires in May 1998.
10. STOCK OPTION PLANS
1996 Stock Option Plan
The Board of Directors and the Company's shareholders approved the Company's
1996 Stock Option Plan effective as of November 12, 1996. Awards under the
1996 Stock Option Plan are currently granted by the Board of Directors, but
will be granted by a committee composed of at least two independent directors
(the "Committee") of the Board of Directors when it is established. Awards
issued under the 1996 Stock Option Plan may include incentive stock options
("ISOs") and/or non-qualified stock options ("NQSOs") and/or grants of
restricted stock. The Committee will administer the 1996 Stock Option Plan and
generally has discretion to determine the terms of an option grant, including
the number of option shares, option price, term, vesting schedule, the post-
termination exercise period and whether the grant will be an ISO or NQSO.
Notwithstanding this discretion: (i) the number of shares subject to options
granted to any individual in any fiscal year may not exceed 315,795 shares
(subject to certain adjustments); (ii) if an option is intended to be an ISO
and is granted to a shareholder holding more than 10% of the combined voting
power of all classes of the Company's stock or the stock of its parent or
subsidiary on the date of the grant of the option, the option price per share
of common stock may not be less than 110% of the fair market value of such
share at the time of grant; and (iii) the term of an ISO may not exceed 10
years, or 5 years if granted to a shareholder owning more than 10% of the
total combined voting power of all classes of stock on the date of the grant
of the option.
The Stock Option Plan provides for the granting of non-qualified stock
options to the directors of the Company ("Director Grants"). The Board of
Directors has authorized the issuance of up to 175,000 shares of common stock
under the Stock Option Plan pursuant to options having an exercise price equal
to the fair market value of the common stock on the date the options are
granted. The Board of Directors has approved Director
F-16
<PAGE>
THE INTERCEPT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Grants of (i) options to purchase 35,000 shares to each non-employee director
of the Company who beneficially owns less than 4% of the Company's outstanding
common stock on the date of such directors' initial election to the Board of
Directors, and (ii) options to purchase 5,000 shares to each director on each
anniversary date of such director's election to the Board at an exercise price
equal to the fair market value of the common stock on the date the options are
granted. Each Director Grant option vests ratably over the remaining term of
service and shall expire five years after the date of grant, unless canceled
sooner as a result of termination of service or death, or unless such option
is fully exercised prior to the end of the option period.
The maximum number of shares of common stock that currently may be subject
to outstanding options, determined immediately after the grant of any option,
is 1,263,180 shares (subject to certain adjustments). The 1996 Stock Option
Plan provides that the number of shares of common stock available for issuance
thereunder shall be automatically increased on the first trading day of each
calendar year beginning January 1, 1999 by the lesser of (i) three percent of
the number of shares outstanding on the preceding trading day or (ii) 315,795
shares (subject to certain adjustments). Shares of common stock that are
attributable to awards which have expired, terminated or been canceled or
forfeited during any calendar year are available for issuance or use in
connection with future awards during such calendar year.
The 1996 Stock Option Plan will remain in effect until terminated by the
Board of Directors. The 1996 Stock Option Plan may be amended by the Board of
Directors without the consent of the shareholders of the Company, except that
any amendment, although effective when made, will be subject to shareholder
approval within one year after approval by the Board of Directors if the
amendment increases the total number of shares issuable pursuant to ISOs
(other than the permitted annual increase), changes the class of employees
eligible to receive ISOs that may participant in the 1996 Stock Option Plan,
or otherwise materially increases the benefits accruing to recipients of ISOs.
ProVesa, Inc. 1994 Stock Option Plan
In November 1996, as part of the ProVesa Acquisition, the Company executed a
Stock Option Plan Assumption Agreement, pursuant to which 20,000 options
outstanding under the ProVesa, Inc. 1994 Stock Option Plan (the "ProVesa
Plan") were converted into options to acquire 42,106 shares of common stock of
the Company. The Company assumed the rights and obligations of ProVesa under
the ProVesa Plan.
Awards under the ProVesa Plan are granted by the Board of Directors but may
be granted by a committee of at least two directors appointed by the Board of
Directors. Awards under the ProVesa Plan may include ISOs, NQSOs or restricted
stock. The committee that administers the ProVesa Plan generally has
discretion to determine the terms of an option grant, including the number of
option shares, option price, term, vesting schedule, the post-termination
exercise period and whether the grant will be an ISO or NQSO. Notwithstanding
this discretion, if an option is intended to be an ISO and is granted to a
shareholder holding more than 10% of the combined voting power of all classes
of the Company's stock or of its parent or subsidiary on the date of the grant
of the option, the option price per share of common stock may not be less than
110% of the fair market value of such shares and the term of any option may
not exceed 10 years, or 5 years if the option is intended to be an ISO and is
granted to a shareholder owning more than 10% of total combined voting power
of all classes of stock on the date of the grant of the option.
The ProVesa Plan may be amended by the Board of Directors without the
consent of the shareholders of the Company, except that any amendment,
although effective when made, will be subject to shareholder approval within
one year after approval by the Board of Directors if the amendment increases
the total number of shares issuable pursuant to ISOs or changes the class of
employees eligible to receive ISOs that may participate in the ProVesa plan or
otherwise materially increases the benefits accruing to recipients of IPOs.
Effective February 24, 1998, the Board of Directors determined that the
Company will not issue any additional options under the ProVesa Plan.
F-17
<PAGE>
THE INTERCEPT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A summary status of the Company's stock option plans as of December 31,
1995, 1996, 1997, and changes during the year, is presented below:
<TABLE>
<CAPTION>
PRICE
SHARES RANGE
------- ---------
<S> <C> <C>
Outstanding at December 31, 1995....................... 0 $ --
Granted............................................... 571,065 2.16
Assumed in ProVesa Acquisition........................ 42,106 2.37
-------
Outstanding at December 31, 1996....................... 613,171 2.16-2.37
Granted............................................... 178,951 2.16
-------
Outstanding at December 31, 1997....................... 792,121 2.16-2.37
=======
</TABLE>
Statement of Financial Accounting Standards No. 123
During 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation," which defines a fair value-based
method of accounting for an employee stock option or similar equity instrument
and encourages all entities to adopt that method of accounting for all of
their employee stock compensation plans. However, it also allows an entity to
continue to measure compensation cost for those plans using the method of
accounting prescribed by Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees." Entities electing to remain with
the accounting methodology required by APB Opinion No. 25 must make pro forma
disclosures of net income and, if presented, earnings per share as if the fair
value-based method of accounting defined in SFAS No. 123 had been applied.
The Company has elected to account for its stock based compensation plans
under APB Opinion No. 25, under which no compensation cost has been recognized
by the Company. However, the Company has computed, for pro forma disclosure
purposes, the value of all options for shares of its common stock granted
since January 1, 1995 to employees of the Company using the Black-Scholes
option pricing model prescribed by SFAS No. 123 and the following weighted
average assumptions:
<TABLE>
<CAPTION>
1996 1997
---------- -----------
<S> <C> <C>
Risk-free interest rate............................ 6.22% 6.15%-6.29%
Expected dividend yield............................ 0% 0%
Expected lives..................................... Five years Five years
Expected volatility................................ 0% 0%
</TABLE>
The weighted average fair value of options for the stock granted to
employees of the Company in 1996 and 1997 was $1.19 per share. The total value
of options granted to employees of the Company during 1996 and 1997 was
computed as approximately $321,432 and $101,447, respectively, which would be
amortized on a pro forma basis over the five-year vesting period of the
options. If the Company had accounted for these plans in accordance with SFAS
No. 123, the Company's net loss for the years ended December 31, 1996 and 1997
would have decreased as follows:
<TABLE>
<CAPTION>
AS REPORTED PRO FORMA
------------ ------------
<S> <C> <C>
Net loss attributable to common shareholders
for the year ended December 31, 1996........ $(1,293,518) $(1,293,518)
Net loss attributable to common shareholders
for the year ended December 31, 1997........ (550,004) (575,643)
</TABLE>
F-18
<PAGE>
THE INTERCEPT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table sets forth the number of shares, exercise price, and
weighted average contractual lives by groups of similar price and grant date:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER EXERCISE CONTRACTUAL
OF SHARES PRICE LIFE
--------- -------- -----------
(IN YEARS)
<S> <C> <C>
750,015 $2.16 5.2
42,106 2.37 7
</TABLE>
At December 31, 1997, 77,896 options for the Company's common stock with a
weighted average exercise price of $2.27 per share were exercisable by
employees of the Company. At December 31, 1996, 42,106 options for the
Company's common stock with a weighted average exercise price of $2.37 per
share were exercisable by employees of the Company.
Net Income (Loss) Per Common Share
Net income (loss) per common share at December 31, 1995, 1996 and 1997 were
as follows:
<TABLE>
<CAPTION>
1995
--------------------------------
PER SHARE
INCOME SHARES AMOUNT
----------- --------- ---------
<S> <C> <C> <C>
Net income............................. $ 1,251,864
Less preferred stock dividends........ 0
-----------
Net income available to common
shareholders.......................... $ 1,251,864
===========
Basic net income per common share...... 3,736,908 $ .34
========= =====
Diluted net income per common share.... 3,736,908 $ .34
========= =====
<CAPTION>
1996
--------------------------------
PER SHARE
LOSS SHARES AMOUNT
----------- --------- ---------
<S> <C> <C> <C>
Net loss............................... $(1,285,518)
Less preferred stock dividends........ 8,000
-----------
Net loss attributable to common
shareholders.......................... $(1,293,518)
===========
Basic net loss per common share........ 3,367,913 $(.38)
========= =====
Diluted net loss per common share...... 3,367,913 $(.38)
========= =====
<CAPTION>
1997
--------------------------------
PER SHARE
LOSS SHARES AMOUNT
----------- --------- ---------
<S> <C> <C> <C>
Net loss............................... $ (518,004)
Less preferred stock dividends........ 32,000
-----------
Net loss attributable to common
shareholders.......................... $ (550,004)
===========
Basic net loss per common share........ 4,009,085 $(.14)
========= =====
Diluted net loss per common share...... 4,009,085 $(.14)
========= =====
</TABLE>
Basic and diluted earnings per common share were computed by dividing net
income by the weighted average number of shares of common stock outstanding
during the year. Outstanding stock options were anti-dilutive in each of the
three years ended December 31, 1995, 1996 and 1997.
F-19
<PAGE>
THE INTERCEPT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. EMPLOYEE BENEFITS
The Company maintains a separate defined contribution 401(k) savings plan,
which covers substantially all employees subject to certain minimum age and
service requirements. Contributions to this plan by employees are voluntary;
however, the Company matches a percentage of the employees' contributions.
This percentage is determined annually by the Company. The Company's
contributions approximated $117,000, $13,000 and $35,000 in 1995, 1996 and
1997, respectively.
12. COMMITMENTS AND CONTINGENCIES
The Company leases various equipment and facilities under operating lease
agreements. Future minimum annual obligations under these leases as of
December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998........................................ $1,131,000
1999........................................ 854,000
2000........................................ 634,000
2001........................................ 480,000
2002........................................ 103,000
----------
$3,202,000
==========
</TABLE>
Included in the minimum annual obligation is an equipment lease that was
assumed by InterCept Communications Technologies L.L.C. ("Technologies"), a
related party. Reimbursements of this obligation of $465,000 and $596,000 were
received in 1996 and 1997, respectively.
Net rental expense was approximately $125,000, $194,000 and $413,000 during
1995, 1996 and 1997, respectively.
Employment Agreements
The Company entered into an employment agreement with the Chief Executive
Officer (the "CEO") effective as of January 30, 1998 (the "CEO Agreement").
The CEO Agreement provides that the CEO will receive a base salary of not less
than $265,000 per year. The Company entered into an employment agreement with
the President and Chief Operating Officer (the "President") effective as of
January 30, 1998 (the "President Agreement"). The President Agreement provides
that the President will receive a base salary of not less than $190,000 per
year. In addition, each of the President and the CEO are entitled to incentive
compensation as determined by the Board of Directors or a committee thereof
based upon achievement of targeted levels of performance and such other
criteria as the Board of Directors or a committee thereof shall establish from
time to time, and an additional annual bonus as determined by the Board of
Directors or a committee thereof. In addition, each of the President and the
CEO may participate in the Company's Amended and Restated 1996 Stock Option
Plan (the "1996 Stock Option Plan") and will receive health insurance for
himself and his dependents, long-term disability insurance, civic and social
club dues, use of an automobile owned or leased by the Company, and other
benefits. Base salaries may be increased upon a periodic review by the Board
of Directors or a committee thereof. The CEO Agreement and the President
Agreement have terms of three years and renew daily until either party fixes
the remaining term at three years by giving written notice. The Company can
terminate the CEO Agreement and the President Agreement upon the executive's
death or disability or for cause, and the executive can terminate his
employment for any reason within a 90-day period beginning on the 30th day
after any occurrence of a change in control or within a 90-day period
beginning on the one-year anniversary of the occurrence of any change in
control. If the President's or the CEO's employment is terminated after a
change in control (i) by the Company without cause or (ii) by the CEO or
President for any reason, the Company must pay the executive all accrued
compensation and bonus amounts and one-twelfth of his annual base salary and
bonus for each of 36 consecutive 30-day periods following the termination. In
addition, the Company must continue life and health
F-20
<PAGE>
THE INTERCEPT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
insurance for the executive until he reaches age 65, and the executive's
outstanding options to purchase common stock would vest and become immediately
exercisable.
The Company and another executive who is also a shareholder entered into an
employment agreement dated June 4, 1996 pursuant to which such person receives
an annual salary of not less than $200,000. On February 2, 1998, the Company
entered into an employment agreement with its Chief Financial Officer (the
"CFO") (the "CFO Agreement"). The CFO Agreement has a term of one year which
renews automatically at the end of each term unless earlier terminated by the
Company or the CFO. The Company can terminate the CFO Agreement upon his death
or disability or for cause, and the CFO can terminate his employment for any
reason within a 90-day period beginning on the 30th day after any occurrence
of a change in control or within a 90-day period beginning on the one-year
anniversary of the occurrence of any change in control. If the CFO's
employment is terminated by the Company in breach of the CFO Agreement or if
the CFO terminates the CFO Agreement for any reason after a change in control,
the Company must pay the CFO a lump sum cash payment equal to three-fourths of
his annual base salary and bonus.
In June 1996, the Company entered into an employment agreement with an
employee and stockholder in connection with a significant reduction in the
individual's employment responsibilities with the Company. Under the
agreement, the employee's salary was set at an amount of not less than $60,000
per year for the 60 month term of the agreement. In addition, the agreement
requires the Company to pay to the employee in consideration of past services
the sum of $1,800,000, and $15,000 per month until the principal amount of
$1,800,000 is paid for a maximum of 60 months, at which time the principal
amount is due if not paid earlier. The Company has recorded the $1,800,000 as
a non-current liability in the accompanying financial statements, with a
corresponding compensation expense charge as of the date of the agreement. The
$15,000 monthly payments are recorded as interest expense as due, resulting in
an effective interest rate on the obligation of approximately 10% per year,
which approximates the Company's incremental borrowing rate.
State Taxation
Transaction processing companies like the Company may be subject to state
taxation of certain portions of the fees charged for their services.
Application of this tax is an emerging issue in the industry, and the states
have not yet adopted uniform guidelines implementing these regulations. In the
event the Company is required to bear all or a portion of these costs, and is
unable to pass such costs through to its customers, the financial condition
and results of operations of the Company could be adversely affected.
Limitation of Liability Provisions
The Company's 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 limitations on liability for
special, consequential and incidental damages. It is possible, however, that
the limitation of liability provisions contained in such agreements may not be
effective as a result of existing or future federal, state or local laws or
ordinances or unfavorable judicial decisions. The sale and support of products
by the Company may result in the Company's being subject to product liability
claims, and a successful product liability claim brought against the Company
could have a material adverse effect on the Company's business, financial
condition and results of operations.
13. RELATED PARTY TRANSACTIONS
During 1995, the Company incurred costs of $102,800 for transportation
services provided by Javiar, Inc. ("Javiar"), a corporation owned by certain
of the Company's shareholders.
F-21
<PAGE>
THE INTERCEPT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
During the years ended December 31, 1995 and 1996, the Company incurred
costs for supplies and services in the amount of $168,018 and $125,296,
respectively, with ATM Source, a corporation owned 100% by a shareholder of
the Company.
During the years ended December 31, 1996 and 1997, the Company incurred fees
of $137,967 and $31,489 respectively, for legal services to a law firm in
which one of its partners is also a director of ProVesa and a director and
shareholder of the Company.
During the years ended December 31, 1996 and 1997, the Company incurred
costs of $495,908 and $668,810 respectively, from InterCept Communications
Technologies, L.L.C. ("Technologies"). These costs include $380,095 and
$414,000 in 1996 and 1997, respectively under an arrangement whereby the
Company has agreed to subsidize certain contracts for data line services
provided by Technologies at a loss for the Company's customers. The remaining
costs relate to data line services, and other telecommunication services
provided to the Company by Technologies.
The Company provided EFT services to ProVesa, a company partially owned by
certain shareholders of the Company prior to its acquisition on November 27,
1996, totaling $174,774 and $166,572 for the year ended December 31, 1995 and
the period from January 1, 1996 to November 27, 1996. Such amounts are
included in service fee income in the accompanying consolidated statements of
operations.
The Company and Phoenix International Ltd., Inc. ("Phoenix") have entered
into software license and development agreements dated December 31, 1997 (the
"December Agreement") and January 15, 1998 (the "January Agreement"). Under
the December Agreement, the Company licensed ATM and voice response software
from Phoenix and obtained the rights to develop the software and integrate it
with the Company's existing software programs. Under the January Agreement,
Phoenix licensed EFT software from the Company and obtained the rights to
develop the software and integrate it with Phoenix's existing programs. A
director and shareholder of the Company, is also a director of Phoenix.
The Company had a note receivable of $466,941 at December 31, 1996 from Dyad
Corporation, a company partially owned by certain shareholders of the Company.
During 1997, the loan increased to $1,254,122. This note was paid in full on
December 31, 1997. The Company also owns 2% of the outstanding common stock of
Dyad, which is reflected at its cost of $50,000 and included in other assets
in the accompanying consolidated balance sheets.
14. SUBSEQUENT EVENTS
Intercept Communications Technologies, L.L.C. Merger
On January 30, 1998, Technologies was merged into the Company in a
transaction accounted for as a merger of entities under common control and a
partial acquisition of the uncontrolled minority interest in Technologies due
to the majority voting control of one shareholder in both entities. The merger
was effected by the exchange of 2,741,029 common shares of the Company for
100% of the membership voting interest of Technologies.
Proposed Initial Public Offering of Common Stock
The Company plans to offer 2,250,000 shares of its common stock (2,587,500
shares if the underwriters' overallotment option is exercised in full) for
sale to the public at a proposed price range of $10 to $12 per share during
the second quarter of 1998 (the "Equity Offering"). There can be, however, no
assurance that the Equity
F-22
<PAGE>
INTERCEPT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Offering will be completed at a per share price within the estimated range, or
at all. There are significant potential risks associated with the Equity
Offering, as well as with the Companies' ability to compete profitably in this
industry.
Common Stock Split
On February 25, 1998, the Board of Directors declared a stock split on the
Company's common stock. The stock split will be effected in the form of a
stock dividend of 1.1053 shares of common stock issued for each share of
common stock held by shareholders of record on February 28, 1998.
The effect of the stock split has been retroactively reflected as of
December 31, 1994 in the statement of changes in shareholder equity and for
all periods presented. All references to the per share amounts and elsewhere
in consolidated financial statements and related footnotes have been restated
as appropriate to reflect the effect of the stock split.
F-23
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To ProVesa, Inc.:
We have audited the accompanying consolidated balance sheets of PROVESA,
INC. (a Georgia corporation) AND SUBSIDIARIES as of June 30, 1995 and 1996 and
November 27, 1996 and the related consolidated statements of operations,
shareholders' equity, and cash flows for the years ended June 30, 1995 and
1996 and the period from July 1, 1996 to November 27, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ProVesa,
Inc. and subsidiaries as of June 30, 1995 and 1996 and November 27, 1996 and
the results of their operations and their cash flows for the years ended June
30, 1995 and 1996 and the period from July 1, 1996 to November 27, 1996 then
ended in conformity with generally accepted accounting principles.
Atlanta, Georgia
February 27, 1998
F-24
<PAGE>
PROVESA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND 1996 AND NOVEMBER 27, 1996
ASSETS
<TABLE>
<CAPTION>
JUNE 30
----------------------- NOVEMBER 27,
1995 1996 1996
---------- ----------- ------------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............... $ 219,721 $ 180,031 $ 286,036
Accounts receivable..................... 81,653 492,365 471,817
Inventory, prepaid expenses and other... 113,685 97,979 92,683
---------- ----------- ----------
Total current assets............... 415,059 770,375 850,536
PROPERTY AND EQUIPMENT, net.............. 1,131,909 1,004,021 1,377,970
DEFERRED TAX ASSET....................... 0 63,298 0
OTHER ASSETS, net........................ 1,581,890 1,325,082 1,282,678
---------- ----------- ----------
$3,128,858 $ 3,162,776 $3,511,184
========== =========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
CURRENT LIABILITIES:
<S> <C> <C> <C>
Current maturities of notes payable and
capital lease obligations.............. $ 219,483 $ 207,936 $ 283,288
Accounts payable........................ 155,753 139,740 135,879
Accrued liabilities..................... 57,892 85,908 26,295
---------- ----------- ----------
Total current liabilities.......... 433,128 433,584 445,462
LONG-TERM LIABILITIES:
Long-term debt and capital lease
obligations, net of current
obligations............................ 2,097,673 1,873,643 2,102,692
Deferred income taxes................... 49,455 34,996 36,493
---------- ----------- ----------
Total liabilities.................. 2,580,256 2,342,223 2,584,647
---------- ----------- ----------
MINORITY INTEREST........................ 0 50,000 24,005
COMMITMENTS AND CONTINGENCIES
SERIES A PREFERRED STOCK 8% CUMULATIVE,
NO PAR VALUE; 30,000 SHARES AUTHORIZED;
4,250 SHARES ISSUED AND OUTSTANDING..... 425,000 425,000 425,000
SHAREHOLDERS' EQUITY:
Preferred stock, no par value; 1,000,000
shares authorized; Series A reported
above.................................. 0 0 0
Common stock, no par value, 9,000,000
shares authorized; 105,000 shares is-
sued and outstanding................... 390,895 390,895 390,895
Accumulated (deficit) earnings.......... (267,293) (45,342) 86,637
---------- ----------- ----------
Total shareholders' equity......... 123,602 345,553 477,532
---------- ----------- ----------
$3,128,858 $ 3,162,776 $3,511,184
========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-25
<PAGE>
PROVESA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1995 AND 1996
AND THE PERIOD FROM JULY 1, 1996 TO NOVEMBER 27, 1996
<TABLE>
<CAPTION>
PERIOD
YEARS ENDED JUNE 30 ENDED
---------------------- NOVEMBER 27,
1995 1996 1996
---------- ---------- ------------
<S> <C> <C> <C>
REVENUES................................. $3,423,037 $3,998,055 $1,833,924
---------- ---------- ----------
COSTS AND EXPENSES:
Cost of service fee income.............. 175,846 330,009 164,693
Cost of equipment and product sales..... 354,650 208,534 40,061
Cost of data communications income...... 177,398 282,403 129,767
Selling, general and administrative...... 1,949,830 2,101,041 1,074,670
Depreciation and amortization............ 741,238 674,474 141,340
---------- ---------- ----------
Total operating expense ............... 3,398,962 3,596,461 1,550,531
---------- ---------- ----------
OPERATING INCOME......................... 24,075 401,594 283,393
INTEREST EXPENSE......................... (292,738) (223,948) (90,564)
INTEREST INCOME.......................... 7,526 7,698 5,038
---------- ---------- ----------
(LOSS) INCOME BEFORE INCOME TAX (BENEFIT)
PROVISION............................... (261,137) 185,344 197,867
INCOME TAX (BENEFIT) PROVISION........... 0 (77,757) 83,383
MINORITY INTEREST IN NET LOSS OF SUBSIDI-
ARY..................................... 0 0 (25,995)
---------- ---------- ----------
NET (LOSS) INCOME BEFORE PREFERRED DIVI-
DENDS................................... $ (261,137) $ 263,101 $ 140,479
PREFERRED DIVIDENDS...................... 6,156 41,150 8,500
---------- ---------- ----------
NET (LOSS) INCOME ATTRIBUTABLE TO COMMON
SHAREHOLDERS............................ $ (267,293) $ 221,951 $ 131,979
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-26
<PAGE>
PROVESA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1995 AND 1996
AND THE PERIOD FROM JULY 1, 1996 TO NOVEMBER 27, 1996
<TABLE>
<CAPTION>
COMMON STOCK ACCUMULATED
---------------- (DEFICIT)
SHARES AMOUNT EARNINGS TOTAL
------- -------- ----------- ---------
<S> <C> <C> <C> <C>
BALANCE, June 30, 1994................. 22,000 $ 11,000 $ 0 $ 11,000
Proceeds from issuance of common
stock, net........................... 83,000 379,895 0 379,895
Net loss attributable to common
shareholders......................... 0 0 (267,293) (267,293)
------- -------- --------- ---------
BALANCE, June 30, 1995................. 105,000 390,895 (267,293) 123,602
Net income attributable to common
shareholders......................... 0 0 221,951 221,951
------- -------- --------- ---------
BALANCE, June 30, 1996................. 105,000 390,895 (45,342) 345,553
Net income attributable to common
shareholders......................... 0 0 131,979 131,979
------- -------- --------- ---------
BALANCE, November 27, 1996............. 105,000 $390,895 $ 86,637 $ 477,532
======= ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-27
<PAGE>
PROVESA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1995 AND 1996
AND THE PERIOD FROM JULY 1, 1996 TO NOVEMBER 27, 1996
<TABLE>
<CAPTION>
PERIOD
YEARS ENDED JUNE 30 ENDED
-------------------- NOVEMBER 27,
1995 1996 1996
---------- -------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).......................... $ (261,137) $263,101 $140,479
Adjustments to reconcile net income (loss)
to net cash provided by operating activi-
ties:
Minority interest in ProImage............. 0 0 (25,995)
Deferred income tax benefit............... 0 (77,757) 64,795
Depreciation and amortization............. 741,238 674,474 141,340
Change in operating assets and
liabilities, net of effects of
acquisition:
Accounts receivable...................... 36,967 (410,712) 20,548
Inventory and prepaids................... (85,044) 15,706 5,296
Other assets............................. 0 (3,217)
Accounts payable and accrued expenses.... 77,025 12,003 (63,474)
---------- -------- --------
Net cash provided by operating activi-
ties................................... 509,049 526,815 279,772
---------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment on notes receivable................ 100,000 0 0
Purchase of property and equipment, net.... (138,462) (239,778) (469,668)
Contributions from minority investors...... 0 (50,000) 0
Payments for business acquired............. (2,240,000) 0 0
Organizational costs....................... (47,979) 0 0
---------- -------- --------
Net cash provided by (used in) investing
activities............................. (2,326,441) (289,778) (469,668)
---------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (payments on) long-term debt,
net....................................... 1,153,473 (235,577) 304,401
Issuance of preferred stock................ 425,000 0 0
Issuance of common stock, net of issuance
costs..................................... 390,895 0 0
Payment of preferred dividends............. (6,156) (41,150) (8,500)
---------- -------- --------
Net cash provided by (used in) financing
activities............................. 1,963,212 (276,727) 295,901
---------- -------- --------
NET INCREASE (DECREASE) IN CASH............. 145,820 (39,690) 106,005
CASH, beginning of period................... 73,901 219,721 180,031
---------- -------- --------
CASH, end of period......................... $ 219,721 $180,031 $286,036
========== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest..................... $ 292,738 $223,948 $ 90,564
========== ======== ========
Cash paid for income tax................... 0 0 23,200
========== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-28
<PAGE>
PROVESA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1996 AND NOVEMBER 27, 1996
1. ORGANIZATION AND NATURE OF BUSINESS
ProVesa, Inc. (the "Company") (a Georgia corporation) was incorporated on
June 30, 1994 for the purpose of providing information technology and data
processing services to financial institutions, primarily community banks. On
July 8, 1994, the Company acquired all of the stock of Data Bank Solutions,
Inc. ("DBS") for $2,240,000 with the proceeds of a loan provided by a
commercial bank. The Company is continuing the business of DBS, which operates
a data processing service bureau serving community banks, primarily in
Georgia. The name of DBS was subsequently changed to ProVesa Services, Inc.
The acquisition was accounted for using the purchase method of accounting,
with the excess of the purchase price over the net assets acquired recorded as
goodwill, which is being amortized using the straight-line method over a 40-
year period.
In May 1996, the Company purchased a one-third ownership of ProImage, Inc.,
a check imaging corporation ("ProImage"). The remaining two-thirds of ProImage
are owned equally by two community banks. The Company is a one-third guarantor
of a $400,000 note obtained in September 1996, the proceeds of which were used
to start the corporation. Consideration for the Company's interest was
$25,000. As the Company maintains control over ProImage, ProImage is included
in the consolidated financial statements of the Company since beginning
operations. The remaining two-thirds interest is treated as minority
interests. As of June 30, 1996, ProImage had no operations or assets other
than receivables from its shareholders.
On November 27, 1996, the Company's Board of Directors approved a share for
share exchange with The InterCept Group, Inc. ("InterCept") making the Company
a wholly-owned subsidiary of InterCept. InterCept currently has operating
subsidiaries in equipment sales and maintenance services as well as electronic
funds transfer support services.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of the Company,
its wholly owned subsidiary, ProVesa Services, Inc. and its one third owned
subsidiary, ProImage, Inc. ("ProImage"). ProImage has been consolidated in the
accompanying consolidated financial statements since its inception, due to
ProVesa's control of ProImage and limitations on the ability of the other
investors to have losses allocated to their capital accounts. All significant
intercompany accounts and transactions have been eliminated in consolidation.
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 reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all short-term highly liquid investments with an
original maturity date of three months or less to be cash equivalents.
F-29
<PAGE>
PROVESA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Property and Equipment
Property and equipment are recorded at cost and are depreciated using the
straight-line method over the estimated useful lives of the assets. For
financial reporting purposes, major additions and improvements are charged to
property accounts while replacements, maintenance, and repairs which do not
improve or extend the lives of respective assets are expensed in the current
period. Estimated useful lives for the Company's assets are as follows:
<TABLE>
<S> <C>
Buildings and improvements................. 10-30 years
Computer equipment......................... 5 years
Furniture and fixtures..................... 7 years
Software................................... 3 years
Vehicles................................... 5 years
</TABLE>
Computer Software Licenses
Acquired software and licensing rights are capitalized and amortized using
the straight-line method over an estimated useful life of three to five years.
Software Development Costs
The Company capitalizes software development costs incurred from the time
technological feasibility of the software is established until the software is
sold. These costs are amortized on a straight-line basis over three years, the
estimated economic life of the software. Research and development costs and
maintenance costs related to software development are expensed as incurred.
Intangible Assets
Intangible assets include goodwill and organizational costs.
Goodwill
Goodwill represents the excess of the purchase price over the net
tangible and identifiable intangible assets of acquired businesses.
Goodwill is amortized on a straight-line basis over 40 years.
Organizational Costs
Organizational costs are amortized on a straight-line basis over a period
of five years.
Long-Lived Assets
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," on July 1, 1995. SFAS No. 121 established
accounting standards for the impairment of long-lived assets and goodwill
related to those assets to be held and used and for long-lived assets and
certain identifiable intangible assets to be disposed of. The effect of
adopting SFAS No. 121 was not material to the Company's consolidated financial
statements.
The Company reviews its long-lived assets for impairment at each balance
sheet date or whenever events or changes in circumstances indicate that the
carrying amount of an asset should be assessed. Management evaluates the
intangible assets related to each acquisition individually to determine
whether an impairment has
F-30
<PAGE>
PROVESA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
occurred. An impairment is recognized when the discounted future cash flows
estimated to be generated by the acquired business are not sufficient to
recover the unamortized balance of the intangible asset with the amount of any
such deficiency charged to income in the current year. Estimates of future
cash flows are based on many factors, including current operating results,
expected market trends, and competitive influences.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributed to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
In the event the future tax consequences of differences between the
financial reporting bases and the tax bases of the Company's assets and
liabilities results in deferred tax assets, an evaluation of the probability
of being able to realize the future benefits indicated by such asset is
required. A valuation allowance is provided for a portion of the deferred tax
asset when it is more likely than not that some portion or all of the deferred
tax asset will not be realized. In assessing the realizability of the deferred
tax assets, management considers the scheduled reversals of deferred tax
liabilities, projected future taxable income, and tax planning strategies.
Revenue Recognition
Revenues are recognized as services are provided.
Concentration of Credit Risk
During the years ended June 30, 1995 and 1996 and the period ended November
27, 1996, revenues from one customer constituted approximately 28%, 20% and
18% of total revenues, respectively.
3. PROPERTY AND EQUIPMENT
Property and equipment at June 30, 1995 and 1996, and November 27, 1996
consisted of the following:
<TABLE>
<CAPTION>
JUNE 30
---------------------- NOVEMBER 27,
1995 1996 1996
---------- ---------- ------------
<S> <C> <C> <C>
Land.................................... $ 67,157 $ 67,157 $ 67,157
Building and improvements............... 557,357 557,357 566,544
Computer equipment...................... 1,963,930 647,082 988,935
Furniture and fixtures.................. 111,630 118,331 118,331
Software................................ 123,643 131,083 249,711
Vehicles................................ 25,304 25,304 25,304
---------- ---------- ----------
2,849,021 1,546,314 2,015,982
Less accumulated depreciation........... (1,717,112) (542,293) (638,012)
---------- ---------- ----------
$1,131,909 $1,004,021 $1,377,970
========== ========== ==========
</TABLE>
F-31
<PAGE>
PROVESA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. OTHER ASSETS
Other assets at June 30, 1995 and 1996 and November 27, 1996 consisted of the
following:
<TABLE>
<CAPTION>
JUNE 30
---------------------- NOVEMBER 27,
1995 1996 1996
---------- ---------- ------------
<S> <C> <C> <C>
Goodwill................................ $1,494,533 $1,494,533 $1,494,533
Noncompete agreement.................... 400,000 0 0
Organizational costs.................... 47,979 47,979 51,196
Software licensing rights............... 123,002 0 0
---------- ---------- ----------
2,065,514 1,542,512 1,545,729
Less accumulated amortization........... (483,624) (217,430) (263,051)
---------- ---------- ----------
$1,581,890 $1,325,082 $1,282,678
========== ========== ==========
</TABLE>
5. LONG-TERM DEBT
Long-term debt at June 30, 1995 and 1996 and November 27, 1996 consisted of
the following:
<TABLE>
<CAPTION>
JUNE 30
---------------------- NOVEMBER 27,
1995 1996 1996
---------- ---------- ------------
<S> <C> <C> <C>
Note payable to Allied Bank, interest at
prime (8.25% at June 30, 1996), monthly
principal and interest installments of
$6,000 through December 1, 1999, with
remaining principal due December 31,
1999; the note is collateralized by land
and building............................ $ 475,973 $ 444,020 $ 429,372
Note payable to FNB Commerce, interest
at prime plus 2%; monthly principal and
interest payments of $28,434 (with
adjustments for changes of prime)
beginning July 1, 1996, payable in full
on June 1, 2003; the note is
collateralized by 674 shares of common
stock of ProVesa Services, Inc., a life
insurance policy and personal guarantee
of a major stockholder.................. 1,687,500 1,637,559 1,567,812
Note payable to First Macon Bank and
Trust, interest at prime (8.25% at
loan's inception at September 13, 1996),
monthly principal and interest payments
of $8,185.72 until the maturity date of
September 15, 2001; the note is
collateralized by all furnitures,
fixtures, equipment, inventory and
accounts receivables and guarantees from
all shareholders of ProImage, Inc. ..... 0 0 388,796
Capital Lease obligations, computer
equipment............................... 153,683 0 0
---------- ---------- ----------
2,317,156 2,081,579 2,385,980
Less current portion...................... (219,483) (207,936) (283,288)
---------- ---------- ----------
Long-term debt and capital lease
obligations net of current portion....... $2,097,673 $1,873,643 $2,102,692
========== ========== ==========
</TABLE>
Maturities of long-term debt at November 30, 1996 are as follows:
<TABLE>
<CAPTION>
1997........................................ $ 283,288
<S> <C>
1998........................................ 310,365
1999........................................ 341,500
2000........................................ 635,116
2001........................................ 348,040
Thereafter.................................. 467,671
----------
$2,385,980
==========
</TABLE>
F-32
<PAGE>
PROVESA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The loan agreement with FNB Commerce contains restrictions on the payment of
dividends on common stock and restrictions on capital expenditures.
6. INCOME TAXES
The components of income tax expense provision (benefit) for the years ended
June 30, 1995 and 1996 and the period ended November 27, 1996 are as follows:
<TABLE>
<CAPTION>
JUNE 30
-------------------- NOVEMBER 27,
1995 1996 1996
--------- --------- ------------
<S> <C> <C> <C>
Current...................................... $ 0 $ 0 $18,588
Deferred..................................... (107,411) 29,654 64,795
Change in valuation allowance................ 107,411 (107,411) 0
--------- --------- -------
Total.................................. $ 0 $ (77,757) $83,383
========= ========= =======
</TABLE>
The differences between the income tax benefit and the amount computed by
applying the statutory federal income tax rate to the net income (loss) for
the years ended June 30, 1995 and 1996 are due to unrecorded net operating
loss carryforwards.
The tax effects of temporary differences between the carrying amounts of
assets and liabilities in the financial statements and their respective tax
basis, which give rise to deferred tax assets and liabilities, as of June
30,1995 and 1996 and November 27, 1996 are as follows:
<TABLE>
<CAPTION>
JUNE 30
----------------- NOVEMBER 27,
1995 1996 1996
-------- ------- ------------
<S> <C> <C> <C>
Current deferred tax asset:
Deferred tax asset:
Accrued vacation pay...................... $ 1,509 $ 2,057 $ 0
Net operating loss carryforwards.......... 143,141 61,241 0
-------- ------- -------
Deferred tax assets..................... 144,650 63,298 0
-------- ------- -------
Less valuation allowance.................. (144,650) 0 0
-------- ------- -------
Net deferred tax assets................. $ 0 $63,298 $ 0
======== ======= =======
Noncurrent deferred tax liability,
consisting of accelerated depreciation..... $ 49,455 $34,996 $36,493
======== ======= =======
</TABLE>
7. PREFERRED STOCK
Shares of preferred stock may be issued from time to time in one or more
series as may be established by resolution of the board of directors of the
Company. Each resolution shall include the number of shares issued,
F-33
<PAGE>
PROVESA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption as determined by the board.
Series A Preferred Stock
On June 30, 1994, the Company filed Articles of Amendments to its Articles
of Incorporation for the designation of 30,000 shares of Series A preferred
stock. The stated value of the Series A is $100 per share. Holders of Series A
preferred stock are entitled to receive dividends at the annual rate of 8% of
the stated value per share, or $8.00 per share, payable quarterly. Dividends
are cumulative from the date of issue. The Company may not declare or pay cash
dividends on any other series of preferred stock that is junior or on parity
with the Series A preferred stock, or on common stock, nor may it redeem,
purchase, or otherwise acquire any of such stock, unless full cumulative
dividends have been or are contemporaneously declared and paid on the Series A
preferred stock. In the event of any liquidation or dissolution of the
Company, the holders of shares of Series A preferred stock are entitled to
receive out of assets of the Company available for distribution to
shareholders, before any distributions are made to holders of common stock or
of any other shares of stock of the Company ranking junior to the Series A
preferred stock, liquidating distributions in the amount of $100 per share,
plus accrued and unpaid dividends.
The Series A preferred stock is redeemable at the option of the Company for
cash at any time, in whole or in part, on at least 10 days' notice. The price
payable upon redemption is 110% of stated value per share, or $110 per share,
plus accrued but unpaid dividends. At any time after the fifth anniversary of
the initial issuance of shares of Series A preferred stock, any holder of
Series A preferred stock may tender all or part of such holder's Series A
preferred stock for redemption at a price equal to 100% of stated value, or
$100 per share, plus accrued and unpaid dividends. The holders of the Series A
preferred stock have no voting rights except as otherwise required by the
Georgia Business Corporation Code (the "Georgia Code") and applicable law. The
holders of shares of Series A preferred stock have no preemptive or other
rights to subscribe for any other shares of securities, nor do they have any
conversion rights. The Series A preferred stock ranks prior to the common
stock as to dividends and upon liquidation of the Company.
8.STOCK OPTION PLAN
The Company adopted a Stock Option Plan covering up to 25,000 shares of its
common stock. This plan is administered by a committee of the Board of
Directors and provides that restricted stock and stock options may be granted.
The Plan is intended as an incentive for and as a means of encouraging stock
ownership by persons who are employees or directors of the Company. Options
may be granted either as incentive stock options or as nonqualified stock
options. The exercise price of each option granted under the Plan will not be
less than the fair market value of the shares of common stock subject to the
option on the date of grant as determined by the Board of Directors. Options
will be exercisable in whole or in part upon such terms as may be determined
by the committee. During 1995, options for 20,000 shares were granted. The
options granted are nonqualified stock
options with an exercise price of $5.00 per share and exercise period up to 10
years. None of the options had been exercised as of November 27, 1996.
F-34
<PAGE>
PROVESA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In 1994, the board of directors adopted a stock option plan under which
25,000 shares of common stock were reserved for grant. During 1995, options to
purchase 20,000 shares of the Company's common stock were granted at an
exercise price of $5.00 per share. At November 27, 1996, 20,000 shares were
vested of which none had been exercised.
A summary status of the Company's stock option plan as of June 30, 1995 and
1996, and November 27, 1996 and changes during the year, is presented below:
<TABLE>
<CAPTION>
EXERCISE
SHARES PRICE
------ --------
<S> <C> <C>
Outstanding at June 30, 1995............................... 20,000 $5.00
Granted................................................... 0 --
------
Outstanding at June 30, 1996............................... 20,000 5.00
Granted................................................... 0 --
------
Outstanding at November 27, 1996........................... 20,000 5.00
======
</TABLE>
Statement of Financial Accounting Standards No. 123
During 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation," which defines a fair value-based
method of accounting for an employee stock option or similar equity instrument
and encourages all entities to adopt that method of accounting for all of
their employee stock compensation plans. However, it also allows an entity to
continue to measure compensation cost for those plans using the method of
accounting prescribed by Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees." Entities electing to remain with
the accounting methodology required by APB Opinion No. 25 must make pro forma
disclosures of net income and, if presented, earnings per share as if the fair
value-based method of accounting defined in SFAS No. 123 had been applied.
The Company has elected to account for its stock based compensation plans
under APB Opinion No. 25, under which no compensation cost has been recognized
by the Company. Under SFAS No. 123 the value of all options for shares of the
Company's common stock granted in fiscal years beginning after December 15,
1996 must be computed for pro forma disclosure purposes. The Company has
granted no options during this period, and no disclosures have been made.
The following table sets forth the number of shares, exercise price and
weighted average contractual lives by groups of similar price and grant date:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER EXERCISE CONTRACTUAL
OF SHARES PRICE LIFE
--------- -------- -----------
(IN YEARS)
<S> <C> <C>
20,000 $5.00 8.2
</TABLE>
At June 30, 1996, 20,000 options for the Company's stock with a weighted
average exercise price of $5.00 per share were exercisable by employees of the
Companies. At November 27, 1996, 20,000 options for the Company's stock with a
weighted average exercise price of $5.00 per share were exercisable by
employees. At November 27, 1996, all 20,000 options outstanding under the plan
were converted into options to acquire an equal number of shares of InterCept
common stock.
F-35
<PAGE>
PROVESA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. COMMITMENTS
The Company leases various equipment and facilities under operating lease
agreements. Future minimum payments on these leases at November 27, 1996 are
summarized as follows:
<TABLE>
<S> <C>
1997........................................... $31,200
1998........................................... 31,200
1999........................................... 26,000
-------
$88,400
=======
</TABLE>
Rent expense for all operating leases was $17,757, $55,506 and $27,151 for
the years ended June 30, 1995 and 1996 and the period from July 1, 1996 to
November 27, 1996, respectively.
10. RELATED-PARTY TRANSACTIONS
During the years ended June 30, 1995 and 1996, the Company incurred costs of
$4,888 and $5,953, respectively, for transportation services provided by
Javiar, Inc., a corporation owned by certain shareholders of the Company.
The Company purchased equipment and services during the years ended June 30,
1995, 1996 and the period from July 1, 1996 to November 27, 1996 in the
amounts of $261,231, $177,761, and $93,931 respectively, from Data Services
Corporation, a corporation owned by certain shareholders of the Company.
During the years ended June 30, 1995, 1996 and the period from July 1, 1996
to November 27, 1996 the Company incurred costs for supplies and services in
the amounts of $29,456, $19,383, and $1,769 respectively, with ATM Source, a
corporation owned by one of the shareholders of the Company.
The Company incurred costs of $195,070, $66,962, and $112,011 during the
years ended June 30, 1995, 1996 and the period from July 1, 1996 to November
27, 1996, respectively, for supplies and services provided by InterCept
Systems, Inc., a corporation owned by certain shareholders of the Company.
During the years ended June 30, 1995, 1996 and the period from July 1, 1996
to November 27, 1996, the Company paid $2,879, $58,164, and $120 respectively,
for legal services to Nelson, Mullins, Riley & Scarborough. One of the
partners in the law firm is also a director and shareholder of the Company.
The Company incurred costs of $52,268 and $41,737 during the year ended June
30, 1996 and for the period from July 1, 1996 to November 27, 1996
respectively for data line services provided by InterCept Communications
Technologies, L.L.C., a corporation owned by certain shareholders of the
Company.
F-36
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To InterCept Communications Technologies, L.L.C.:
We have audited the accompanying balance sheets of INTERCEPT COMMUNICATIONS
TECHNOLOGIES, L.L.C. (a Georgia corporation) as of December 31, 1996 and 1997
and the related statements of operations, members' equity, and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We 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 financial statements referred to above present fairly,
in all material respects, the financial position of InterCept Communications
Technologies, L.L.C. as of December 31, 1996 and 1997 and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
Atlanta, Georgia
February 27, 1998
F-37
<PAGE>
INTERCEPT COMMUNICATIONS TECHNOLOGIES, L.L.C.
BALANCE SHEETS
DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash........................................................ $408,383 $138,340
Accounts receivable, trade.................................. 154,070 298,469
Related party accounts receivable........................... 0 100,000
-------- --------
Total current assets................................... 562,453 536,809
PROPERTY AND EQUIPMENT, net.................................. 4,689 19,087
OTHER NONCURRENT ASSETS...................................... 22,988 22,988
-------- --------
$590,130 $578,884
======== ========
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................................ $404,131 $415,917
Accrued expenses............................................ 2,166 5,052
Accrued income taxes........................................ 0 34,509
Deferred revenue............................................ 0 14,126
-------- --------
Total current liabilities.............................. 406,297 469,604
-------- --------
COMMITMENTS AND CONTINGENCIES................................
MEMBERS' EQUITY:
Members' equity............................................. 100 5,700
Retained earnings........................................... 183,733 103,580
-------- --------
Total members' equity.................................... 183,833 109,280
-------- --------
Total liabilities and members' equity.................. $590,130 $578,884
======== ========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-38
<PAGE>
INTERCEPT COMMUNICATIONS TECHNOLOGIES, L.L.C.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
REVENUES:
Data communications management income.................... $2,083,456 $3,119,003
Related party data communications management fees........ 495,908 668,810
Equipment and product sales.............................. 59,751 114,457
---------- ----------
2,639,115 3,902,270
COST OF SERVICES:
Cost of data communications management income............ 2,292,954 2,902,831
Cost of equipment and product sales...................... 29,399 77,333
SELLING, GENERAL AND ADMINISTRATIVE....................... 135,976 434,589
DEPRECIATION AND AMORTIZATION............................. 162 3,378
---------- ----------
Total operating expenses................................ 2,458,491 3,418,131
---------- ----------
OPERATING INCOME.......................................... 180,624 484,139
OTHER INCOME.............................................. 3,109 8,020
---------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES.................. 183,733 492,159
PRO FORMA PROVISION FOR INCOME TAXES...................... 0 187,020
---------- ----------
NET INCOME................................................ $ 183,733 $ 305,139
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-39
<PAGE>
INTERCEPT COMMUNICATIONS TECHNOLOGIES, L.L.C.
STATEMENTS OF MEMBERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
MEMBERS' RETAINED
EQUITY EARNINGS TOTAL
-------- -------- --------
<S> <C> <C> <C>
JANUARY 1, 1996.................................... $ 0 $ 0 $ 0
Issuance of membership interest................... 100 0 100
Net income........................................ 0 183,733 183,773
------ -------- --------
BALANCE, DECEMBER 31, 1996......................... 100 183,733 183,833
Issuance of membership interest................... 5,600 0 5,600
Net income........................................ 0 305,139 305,139
Pro forma tax expense............................. 0 152,511 152,511
Distributions to members.......................... 0 (537,803) (537,803)
------ -------- --------
BALANCE, DECEMBER 31, 1997......................... $5,700 $103,580 $109,280
====== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-40
<PAGE>
INTERCEPT COMMUNICATIONS TECHNOLOGIES, L.L.C.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income................. $183,733 $457,650
Adjustments to reconcile
net income to net cash
provided by
operating activities:
Depreciation and amortiza-
tion..................... 162 3,378
Change in:
Accounts receivable...... (154,070) (244,399)
Other assets............. (22,988) 0
Accounts payable and ac-
crued liabilities....... 406,297 (272,323)
Deferred revenue......... 0 14,126
-------- --------
Net cash provided by
(used in) operating ac-
tivities............... 413,134 (41,568)
-------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of property and
equipment, net............ (4,851) (17,776)
-------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Member contributions....... 100 5,600
Distributions to members... 0 (216,299)
-------- --------
Net cash provided by
(used in) financing ac-
tivities............... 100 (210,699)
-------- --------
NET INCREASE (DECREASE) IN
CASH....................... 408,383 (270,043)
CASH, BEGINNING OF YEAR..... 0 408,383
-------- --------
CASH, END OF YEAR........... $408,383 $138,340
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-41
<PAGE>
INTERCEPT COMMUNICATIONS TECHNOLOGIES, L.L.C.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
1. ORGANIZATION AND NATURE OF BUSINESS
InterCept Communications Technologies, L.L.C. (the "Company") provides end-
to-end communications management solutions to its customers and maintains
nationwide data communications coverage. The Company has one of the largest
private frame relay networks in the Southeastern United States, with over
1,300 drops in 14 states, 40 local area transport areas, and a presence in all
five markets of the Regional Bell Operating Companies ("RBOCs").
The Company was formed in 1996 by certain of the shareholders and officers
of The InterCept Group, Inc. ("InterCept") to develop a frame relay network
and to offer data communications management services to financial
institutions.
Effective January 31, 1998 the Company was merged into InterCept in a
transaction accounted for as a merger of entities under common control and a
partial acquisition of the uncontrolled minority interest in the Company due
to the majority voting control of one shareholder in both entities. The merger
was affected by the exchange of 100% of the membership voting interest of the
Company for 2,741,029 common shares of InterCept.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all short-term highly liquid investments with an
original maturity date of three months or less to be cash equivalents.
Property and Equipment
Property and equipment are recorded at cost and are depreciated using the
straight-line method over the estimated useful lives of the assets for
financial reporting purposes. Major additions and improvements are charged to
the property accounts while replacements, maintenance, and repairs which do
not improve or extend the lives of respective assets are expensed in the
current period. The estimated useful life of the property and equipment is
five years.
Sources of Supplies
The Company voluntarily uses a single vendor for routing equipment used in
the Company's network. However, if this vendor were unable to meet the
Company's needs, management believes that other sources for this equipment
exist on commensurate terms and that operating results would not be affected.
Income Taxes
Effective October 31, 1997, the Company elected C corporation status for
federal and state income tax purposes. For the period from January 1, 1996
through October 31, 1997, no provision or benefit was recorded for state or
federal taxes as the results were recorded on the tax returns of the
shareholders.
F-42
<PAGE>
INTERCEPT COMMUNICATIONS TECHNOLOGIES, L.L.C.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Subsequent to October 31, 1997, the Company accounted for income taxes under
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes." SFAS No. 109 requires deferred tax assets and liabilities to be
determined based on the difference between the financial accounting and tax
bases of assets and liabilities. Deferred tax assets and liabilities at the
end of each year are determined using the enacted statutory tax rates expected
to apply to taxable income in the years in which the deferred tax assets or
liabilities are expected to be realized or settled.
Revenue Recognition
Revenues are recognized as the services or products are provided.
Revenue and Deferred Revenue
Deferred revenue represents the liability for advanced billings to customers
for use of the Company's frame relay network and for certain installation
services yet to be performed. Revenue is recognized as the service is
provided.
Fair Value of Financial Instruments
The fair value of financial instruments classified as current assets or
liabilities, including cash and cash equivalents, accounts receivable and
accounts payable, approximates carrying value due to the short-term maturity
of the instruments.
3. INCOME TAXES
The components of income tax expense for the year ended December 31, 1997 is
as follows:
<TABLE>
<CAPTION>
1997
-------
<S> <C>
Current.......................................... $34,509
Deferred......................................... 0
-------
Total........................................ $34,509
=======
</TABLE>
The income tax provision, as reported in the statements of operations,
differs from the amounts computed by applying federal statutory rates due to
the following for the year ended December 31, 1997:
<TABLE>
<S> <C>
Federal income taxes at statutory rates........ $167,334
Meals and entertainment........................ 30
State taxes, net of federal effect............. 5,455
Expense previously taken as an S Corporation... (138,310)
--------
$ 34,509
========
</TABLE>
F-43
<PAGE>
INTERCEPT COMMUNICATIONS TECHNOLOGIES, L.L.C.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. COMMITMENTS
The Company has assumed, by oral agreement, the obligation for an equipment
lease entered into by The InterCept Group, Inc. Future minimum payments
related to this obligation at December 31, 1997 are summarized as follows:
<TABLE>
<S> <C>
1998........................................ $ 646,000
1999........................................ 424,000
2000........................................ 257,000
2001........................................ 171,000
2002........................................ 57,000
----------
$1,555,000
==========
</TABLE>
Rent expense for all operating leases was $476,000 and $638,000 for the
years ended December 31, 1996 and 1997, respectively.
5. RELATED PARTY TRANSACTIONS
Certain entities with which the Company does business are under common
ownership.
During the years ended December 31, 1996 and 1997, the Company incurred
revenues of $495,908 and $668,810, respectively, from InterCept. These
revenues include $380,095 and $414,000, respectively, in 1995 and 1996 under
an arrangement whereby InterCept agreed to subsidize certain contracts for
data line services provided by the Company for InterCept's customers at a
loss. The remaining revenues relate to data line services and other
telecommunications services provided to InterCept by the Company.
F-44
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To FiNet, Inc.:
We have audited the accompanying balance sheet of FiNet, Inc. (a Tennessee
corporation) as of December 17, 1996 and the related statements of operations,
shareholders' equity, and cash flows for the period from Inception (June 21,
1996) to December 17, 1996. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
this financial statement based on our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of FiNet, Inc. as of December
17, 1996 and the results of its operations and its cash flows for the period
from Inception (June 21, 1996) through December 17, 1996 in conformity with
generally accepted accounting principles.
Atlanta, Georgia
February 27, 1998
F-45
<PAGE>
FINET, INC.
BALANCE SHEET
DECEMBER 17, 1996
<TABLE>
<S> <C>
ASSETS
Cash................................................................... $10,200
-------
Total Assets....................................................... $10,200
=======
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Note payable, current................................................. $10,000
Shareholders' Equity:
Common Stock.......................................................... 60
Paid in capital....................................................... 140
-------
Total shareholders' equity......................................... 200
-------
Total liabilities & shareholders' equity......................... $10,200
=======
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-46
<PAGE>
FINET INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (JUNE 21, 1996) TO DECEMBER 17, 1996
<TABLE>
<S> <C>
GENERAL AND ADMINISTRATIVE EXPENSES..................................... $44,795
-------
OPERATING LOSS.......................................................... 44,795
-------
LOSS BEFORE PROVISION FOR INCOME TAXES.................................. 44,795
PROVISION FOR INCOME TAXES.............................................. --
-------
NET LOSS................................................................ $44,795
=======
</TABLE>
The accompanying notes are an integral part of these statements.
F-47
<PAGE>
FINET, INC.
STATEMENT OF SHAREHOLDER'S DEFICIT
FOR THE PERIOD FROM INCEPTION (JUNE 21, 1996) TO DECEMBER 17, 1996
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------ PAID-IN RETAINED
STOCK AMOUNT CAPITAL DEFICIT TOTAL
----- ------ ---------- -------- --------
<S> <C> <C> <C> <C> <C>
INCEPTION, June 21, 1996............ 0 $ 0 $ 0 $ 0 $ 0
Issuance of common stock............ 6,000 60 140 0 200
Net loss............................ 0 0 0 (44,795) (44,795)
----- --- ---- -------- --------
Balance, December 17, 1996.......... 6,000 $60 $140 $(44,795) $(44,595)
----- --- ---- -------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
F-48
<PAGE>
FINET, INC
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION TO DECEMBER 17, 1996
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................................... $(44,795)
Adjustments to reconcile net loss to cash provided by operating
activities:
Change in:
Accrued liabilities............................................ 44,795
--------
Net cash provided by operating activities.................... 0
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related party note payable........................... 10,000
Issuance of common stock........................................... 200
--------
Net cash provided by financing activities........................ 10,200
--------
NET INCREASE IN CASH................................................. 10,200
CASH, AT INCEPTION................................................... 0
--------
CASH, AT END OF PERIOD............................................... $ 10,200
========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-49
<PAGE>
FINET, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF BUSINESS
FiNet, Inc. (a Tennessee corporation) (the "Company") was incorporated on
June 21, 1996 under the Tennessee Business Corporation Act. FiNet, Inc. is in
the business of providing merchant portfolio management services to community
banks.
Effective December 17, 1996, the Company was merged with and into InterCept
Acquisitions II, Inc., a wholly owned subsidiary of The InterCept Group Inc.
("InterCept"), whereby shareholders of the Company received 116,250 shares of
no par value InterCept common stock in exchange for all of the issued and
outstanding shares of common stock of the Company as of December 17, 1996 (the
"Merger"). The accompanying financial statements of the Company are exclusive
of the effects of the Merger.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of asset and liabilities and the disclosures
of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Note Payable
The note payable represents an advance made by InterCept to fund FiNet's
general working capital needs.
F-50
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Bank Services Corporation:
We have audited the accompanying balance sheets of BANK SERVICES CORPORATION
(a Colorado corporation) as of December 31, 1995 and 1996 and the related
statements of operations, shareholders' equity (deficit), and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We 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 financial statements referred to above present fairly,
in all material respects, the financial position of Bank Services Corporation
as of December 31, 1995 and 1996 and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
Atlanta, Georgia February 27, 1998
F-51
<PAGE>
BANK SERVICES CORPORATION
BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
ASSETS
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash....................................................... $144,453 $ 39,088
Accounts receivable........................................ 76,442 83,735
Prepaid expenses........................................... 14,429 25,493
-------- --------
Total current assets.................................. 235,324 148,316
-------- --------
PROPERTY AND EQUIPMENT:
Office equipment........................................... 31,177 23,674
Computer equipment and software............................ 853,329 641,331
Vehicles................................................... 13,500 13,500
-------- --------
898,006 678,505
Less accumulated depreciation.............................. (766,450) (562,189)
-------- --------
Net property and equipment............................ 131,556 116,316
-------- --------
SOFTWARE DEVELOPMENT, net................................... 30,000 45,600
-------- --------
$396,880 $310,232
======== ========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
<TABLE>
<S> <C> <C>
Accounts payable...................................................... $ 5,930 $ 23,814
Accrued expenses...................................................... 15,116 22,155
Accrued income tax.................................................... 6,000 0
Current portion of long-term debt..................................... 0 47,850
-------- --------
Total current liabilities........................................ 27,046 93,819
DEFERRED TAX LIABILITY................................................. 4,500 4,500
LONG-TERM DEBT, less current portion................................... 0 402,150
-------- --------
Total liabilities................................................ 31,546 500,469
-------- --------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT):
Preferred stock, no par value; 50,000 shares authorized at December
31, 1996; no shares issued or outstanding............................ 0 0
Common stock, no par value, 400,000 and 1,000,000 shares authorized
in 1995 and 1996, respectively; 162,857 and 177,857 shares issued
and 162,857 and 87,000 shares outstanding in 1995 and 1996,
respectively....................................................... 267,600 341,850
Treasury stock, 90,857 shares as of December 31, 1996, at cost........ 0 (450,000)
Additional paid-in capital............................................ 43,045 43,045
Deferred compensation................................................. 0 (56,875)
Retained earnings (accumulated deficit)............................... 54,689 (68,257)
-------- --------
Total shareholders' equity (deficit)........................ 365,334 (190,237)
-------- --------
$396,880 $310,232
======== ========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-52
<PAGE>
BANK SERVICES CORPORATION
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
-------- ---------
<S> <C> <C>
REVENUES:
Data processing fees..................................... $853,067 $ 825,055
Software sales and maintenance........................... 93,845 60,475
Consulting and other..................................... 33,012 60,821
-------- ---------
Total revenues...................................... 979,924 946,351
-------- ---------
COSTS OF SERVICES......................................... 281,150 284,274
SELLING, GENERAL AND ADMINISTRATIVE....................... 640,563 786,660
-------- ---------
Total operating expenses............................ 921,713 1,070,934
-------- ---------
OPERATING INCOME (LOSS)................................... 58,211 (124,583)
INTEREST INCOME........................................... 2,233 1,637
-------- ---------
INCOME (LOSS) BEFORE PROVISION FOR TAXES.................. 60,444 (122,946)
PROVISION FOR INCOME TAXES................................ (8,165) 0
-------- ---------
NET INCOME (LOSS)......................................... $ 52,279 $(122,946)
======== =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-53
<PAGE>
BANK SERVICES CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED
---------------- TREASURY PAID-IN DEFERRED EARNINGS
STOCK AMOUNT STOCK CAPITAL COMPENSATION (DEFICIT) TOTAL
------- -------- --------- ---------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31,
1994................... 162,857 $267,600 $ 0 $43,045 $ 0 $ 2,410 $ 313,055
Net income............. 0 0 0 0 0 52,279 52,279
------- -------- --------- ------- -------- -------- ---------
BALANCE, December 31,
1995................... 162,857 267,600 0 43,045 0 54,689 365,334
Issuance of common
stock.................. 15,000 74,250 0 0 (68,250) 0 6,000
Stock compensation ex-
pense.................. 0 0 0 0 11,375 0 11,375
Repurchase of common
stock.................. 0 0 (450,000) 0 0 0 (450,000)
Net loss............... 0 0 0 0 0 (122,946) (122,946)
------- -------- --------- ------- -------- -------- ---------
BALANCE, December 31,
1996................... 177,857 $341,850 $(450,000) $43,045 $(56,875) $(68,257) $(190,237)
======= ======== ========= ======= ======== ======== =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-54
<PAGE>
BANK SERVICES CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
-------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................ $ 52,279 $(122,946)
Adjustments to reconcile net income (loss) to net cash
provided by
(used in) operating activities:
Depreciation and amortization........................... 48,830 46,667
Stock compensation expense ............................. 0 11,375
Changes in operating assets and liabilities:
Accounts receivable.................................... 10,762 (7,293)
Prepaid expenses....................................... 3,976 (11,064)
Accounts payable....................................... 2,396 17,884
Accrued expenses....................................... 2,049 7,039
Accrued income taxes .................................. 6,000 (6,000)
Deferred income taxes.................................. 3,500 0
-------- ---------
Net cash provided by (used in) operating activities... 129,792 (64,338)
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Software development costs............................... (13,500) (15,600)
Purchase of equipment.................................... (96,766) (31,427)
Proceeds from sale of assets............................. 3,000 0
-------- ---------
Net cash used in investing activities................. (107,266) (47,027)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock................................. 0 6,000
Repurchase of common stock............................... 0 (450,000)
(Payments on) proceeds from long-term debt............... (40,332) 450,000
-------- ---------
Net cash (used in) provided by financing activities... (40,332) 6,000
-------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS................. (17,806) (105,365)
CASH AND CASH EQUIVALENTS, beginning of year.............. 162,259 144,453
-------- ---------
CASH AND CASH EQUIVALENTS, end of year.................... $144,453 $ 39,088
======== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes............................... $ 0 $ 6,000
======== =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-55
<PAGE>
BANK SERVICES CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996
1. ORGANIZATION AND NATURE OF BUSINESS
Bank Services Corporation (the "Company"), provides data processing,
software, and support services to independent community banks which utilize
the Company's software. The Company also licenses its software and offers
system maintenance contracts.
Effective December 31, 1996, the Company was merged with and into InterCept
Acquisitions, Inc., a wholly owned subsidiary of The InterCept Group Inc.
("InterCept"), whereby shareholders of the Company received 221,429 shares of
no par value InterCept common stock in exchange for the 87,000 shares of
outstanding common stock of the Company (the "Merger"). The accompanying
financial statements of the Company are exclusive of the effects of the
Merger.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of asset and liabilities and the disclosures
of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Property and Equipment
Property and equipment are recorded at cost and are depreciated using the
straight-line method over the estimated useful lives of the assets for
financial reporting purposes. Major additions and improvements are charged to
the property accounts while replacements, maintenance, and repairs which do
not improve or extend the lives of respective assets are expensed in the
current period. The estimated useful life of the property and equipment is
five to ten years.
Software Development Costs
The Company capitalizes software development costs incurred from the time
technological feasibility of the software is established until the software is
ready for use. These costs are amortized on the straight-line basis over three
years, the estimated economic life of the software. Research and development
costs and maintenance costs related to software development are expensed as
incurred.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributed to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred
In the event that the future tax consequences of differences between the
financial reporting bases and the tax bases of the Company's assets and
liabilities results in deferred tax assets, an evaluation of the probability
of being able to realize the future benefits indicated by such asset is
required. A valuation allowance is provided for a portion of the deferred tax
asset when it is more likely than not that some portion or all of the deferred
tax
F-56
<PAGE>
BANK SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
asset will not be realized. In assessing the realizability of the deferred tax
assets, management considers the scheduled reversals of deferred tax
liabilities, projected future taxable income, and tax planning strategies.
Fair Value of Financial Instruments
The fair value of financial instruments classified as current assets or
liabilities, including cash and cash equivalents, accounts receivable and
accounts payable, approximates carrying value due to the short-term maturity
of the instruments. The fair value of short-term and long-term debt amounts is
based on their effective interest rates compared to current market rates.
Revenue Recognition
Data processing fees are recognized as the services are provided. Software
sales are recognized as the systems are installed and training is complete.
Maintenance fees are recognized ratably over the contract term.
3. INCOME TAXES
The components of the provision for income taxes for the years ended
December 31, 1995 and 1996 are as follows:
<TABLE>
<CAPTION>
1995 1996
------- --------
<S> <C> <C>
Current............................ $ 4,665 $ 0
Deferred........................... 3,500 0
------- --------
Total.......................... $ 8,165 $ 0
======= ========
The differences between the provision for income taxes and the amounts
computed by applying the statutory federal income tax rate to the net earnings
(loss) for the years ended December 31, 1995 and 1996 consist of the
following:
<CAPTION>
1995 1996
------- --------
<S> <C> <C>
Federal income taxes (benefit) at
statutory rate.................... $ 9,067 $(41,800)
State taxes (benefit), net of
federal benefit................... 3,000 (4,900)
Change in valuation allowance...... 0 49,000
Other, net......................... (3,902) (2,300)
------- --------
$ 8,165 $ 0
======= ========
The following summarizes the sources and expected tax consequences of future
taxable deductions (income), which comprise the deferred tax accounts at
December 31, 1995 and 1996.
<CAPTION>
1995 1996
------- --------
<S> <C> <C>
Current deferred tax asset:
Deferred tax asset:
Accrued vacation pay............. $ 1,000 $ 1,000
Net operating loss
carryforwards................... 0 49,000
------- --------
Total deferred assets.......... 1,000 50,000
Less valuation allowance......... 0 (49,000)
------- --------
Net deferred tax asset......... $ 1,000 $ 1,000
======= ========
Noncurrent deferred tax liability,
consisting of accelerated
depreciation...................... $ 4,500 $ 4,500
======= ========
</TABLE>
F-57
<PAGE>
BANK SERVICES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. LONG-TERM DEBT
In anticipation of the merger with InterCept, the Company entered into a
$450,000 loan agreement with a bank in December 1996. The proceeds of the loan
were used to repurchase common stock of the Company (Note 6). This loan bears
interest at the prime rate (8.25% at December 31, 1996) plus 1% and is due in
full in December 1999. Future principal payments of debt as of December 31,
1996 are as follows:
<TABLE>
<S> <C>
1997.......................................... $ 47,850
1998.......................................... 52,409
1999.......................................... 349,741
--------
$450,000
========
</TABLE>
The debt is secured by substantially all assets of the Company, as well as
the Company's common stock and life insurance policies of board members. The
debt is guaranteed by a company related through common ownership with
InterCept (Note 1) and by certain members of the board of directors.
5. COMMITMENTS AND CONTINGENCIES
Leases
The Company leases two facilities under operating lease agreements. Future
minimum payments on these leases at December 31, 1996 are summarized as
follows:
<TABLE>
<S> <C>
1997........................................... $54,492
1998........................................... 18,680
-------
$73,172
=======
</TABLE>
Rental expense was $47,868 and $51,828 for the years ended December 31, 1995
and 1996, respectively.
Sales Agreement
Pursuant to various agreements between the Company and certain banks, the
Company is obligated to pay up to $40,000 in the aggregate for certain sales
of software made by the Company. The Company has accrued $6,154 and $9,231 at
December 31, 1995 and 1996, respectively, related to this obligation.
6. SHAREHOLDERS' EQUITY
In June 1996, the Company issued 15,000 shares of common stock to an
employee for $6,000 cash. These shares are subject to repurchase by the
Company for a period of three years at a price of $7,392 plus interest if the
employee leaves the Company or is terminated for just cause. The difference of
$68,250 between the amount paid and the estimated fair market value of the
stock at the date of issuance has been recorded as deferred compensation and
will be amortized over the restricted period. The Company recognized $11,375
in compensation expense during 1996.
In December 1996, the Company repurchased 90,857 shares of common stock from
a shareholder for $450,000. This amount has been recorded as treasury stock,
at cost.
Effective December 31, 1996, the Company amended the Articles of
Incorporation, authorizing 50,000 shares of preferred stock and 1,000,000
shares of voting common stock. As of December 31, 1996, there were no issued
or outstanding preferred shares and 87,000 outstanding common shares.
7. CONCENTRATION OF CREDIT RISK
The Company's three largest customers accounted for approximately 38% and
39% of total revenues for the years ended December 31, 1995 and 1996,
respectively.
F-58
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON
STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS
OR AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
UNTIL , 1998 ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON
STOCK, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS 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.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................................................... 3
Risk Factors............................................................... 7
The Company................................................................ 15
Use of Proceeds............................................................ 16
Dividend Policy............................................................ 16
Dilution................................................................... 17
Capitalization............................................................. 18
Selected Consolidated Financial Data....................................... 19
Management's Discussion and
Analysis of Financial Condition
and Results of Operations ................................................ 21
Industry................................................................... 29
Business................................................................... 31
Management................................................................. 42
Principal and Selling Shareholders......................................... 49
Certain Transactions....................................................... 50
Description of Capital Stock............................................... 54
Shares Eligible for Future Sale............................................ 58
Underwriting............................................................... 59
Legal Matters.............................................................. 60
Experts.................................................................... 60
Available Information...................................................... 61
Index to Consolidated Financial Statements................................. F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2,525,000 SHARES
THE INTERCEPT
GROUP, INC.
[LOGO]
COMMON STOCK
---------------
PROSPECTUS
---------------
J.C. Bradford & Co.
Wheat First Union
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses in connection with the
Offering described in the Registration Statement:
<TABLE>
<S> <C>
SEC Registration Fee............................................. $ 10,134
NASD Fees........................................................ $ 3,935
Nasdaq Fees...................................................... $ 40,001
Blue Sky Fees and Expenses....................................... $ 3,000
Printing and Engraving........................................... $ 150,000
Legal Fees and Expenses.......................................... $ 550,000
Accounting Fees and Expenses..................................... $ 400,000
Transfer Agent Fees.............................................. $ 15,000
Miscellaneous Expenses........................................... $ 27,930
----------
Total:........................................................... $1,200,000
==========
</TABLE>
- --------
* All amounts other than the SEC Registration Fee and NASD Fees reflect
Company estimates.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Articles of Incorporation eliminate, subject to certain
limited exceptions, the personal liability of a director to the Company or its
shareholders for monetary damage for any breach of duty as a director. There
is no elimination of liability for (i) a breach of duty involving
appropriation of a business opportunity of the Company; (ii) an act or
omission which involves intentional misconduct or a knowing violation of law;
(iii) any transaction from which the director derives an improper personal
benefit; or (iv) as to any payments of a dividend or any other type of
distribution that is illegal under Section 14-2-832 of the Georgia Business
Corporation Code (the "Code"). In addition, if at any time the Code is amended
to authorize further elimination or limitation of the personal liability of a
director, then the liability of each director of the Company shall be
eliminated or limited to the fullest extent permitted by such provisions, as
so amended, without further action by the shareholders, unless the provisions
of the Code require such action. The provision does not limit the right of the
Company or its shareholders to seek injunctive or other equitable relief not
involving payments in the nature of monetary damages.
The Company's bylaws contain certain provisions which provide
indemnification to directors of the Company that is broader than the
protection expressly mandated in Sections 14-2-852 and 14-2-857 of the Code.
To the extent that a director or officer of the Company has been successful,
on the merits or otherwise, in the defense of any action or proceeding brought
by reason of the fact that such person was a director or officer of the
Company, Sections 14-2-852 and 14-2-857 of the Code would require the Company
to indemnify such persons against expenses (including attorney's fees)
actually and reasonably incurred in connection therewith. The Code expressly
allows the Company to provide for greater indemnification rights to its
officers and directors, subject to shareholder approval.
The indemnification provisions in the Company's bylaws require the Company
to indemnify and hold harmless any director who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding whether civil, criminal, administrative or investigative
(including any action or suit by or in the right of the Company) because he or
she is or was a director of the Company, against expenses (including, but not
limited to, attorney's fees and disbursements, court costs and expert witness
fees), and against judgments, fines, penalties, and amounts paid in settlement
incurred by him or her in connection with the action, suit or proceeding.
Indemnification would be disallowed under any circumstances where
indemnification may not be authorized by action of the Board of Directors, the
shareholders or otherwise. The Board of Directors of the Company also has the
authority to extend to officers, employees and agents the same indemnification
rights
II-1
<PAGE>
held by directors, subject to all the accompanying conditions and obligations.
Indemnified persons would also be entitled to have the Company advance
expenses prior to the final disposition of the proceeding. If it is ultimately
determined that they are not entitled to indemnification, however, such
amounts would be repaid. Insofar as indemnification for liability arising
under the Securities Act may be permitted to officers and directors of the
Company pursuant to the foregoing provisions, the Company has been informed
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.
The Company has entered into separate indemnification agreements with each
of its directors and executive officers, whereby the Company agreed, among
other things, to provide for indemnification and advancement of expenses in a
manner and subject to terms and conditions similar to those set forth in the
Bylaws. These agreements also provide that the Company shall purchase and
maintain liability insurance for the benefit of its directors and executive
officers. These agreements may not be abrogated by action of the shareholders.
There is no pending litigation or proceeding involving a director, officer,
employee or other agent of the Company as to which indemnification is being
sought, nor is the Company aware of any pending or threatened litigation that
may result in claims for indemnification by any director, officer, employee or
other agent.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
No securities which were not registered under the Securities Act have been
sold by the Company within the past three years except for those indicated
below. Share numbers do not reflect the 2.1053-for-1 stock split with respect
to the Company's common stock effected on February 28, 1998.
(i) Pursuant to that certain Agreement of Share Exchange dated as of June 4,
1996 by and among the Company, Intercept Systems, Inc. ("ISI"), Data Services
Corp. ("Data"), John W. Collins ("Collins"), Vir A. Nanda ("Nanda"), James E.
Henderson ("Henderson") and Farrell S. Mashburn ("Mashburn"), the Company
acquired all of the outstanding capital stock of Data and ISI. In exchange for
all of the capital stock of Data and ISI, the Company issued 698,000 shares of
Common Stock to Collins, 87,000 shares of Common Stock to Mashburn, 495,000
shares to Nanda and 165,000 shares to Henderson.
(ii) Pursuant to that certain Agreement and Plan of Merger effective as of
November 27, 1996 by and among the Company, PV Acquisition Corp. ("PVAC") and
Provesa, Inc. ("ProVesa"), PVAC, a wholly-owned subsidiary of the Company,
merged with ProVesa. Upon the effectiveness of the merger, all of the issued
and outstanding shares of capital stock of ProVesa was converted into an equal
number of shares of the capital stock of the Company, and the Company issued
an aggregate of 105,000 shares of Common Stock and 4,250 shares of Series A
Preferred Stock to the shareholders of ProVesa. Also pursuant to such
agreement, the Company issued options to acquire an aggregate of 20,000 shares
of Common Stock to holders of options to acquire 20,000 shares of ProVesa
common stock.
(ii) Pursuant to that certain Acquisition and Merger Agreement dated as of
November 30, 1996 by and among the Company, Intercept Acquisition II, Inc.,
FiNet, Inc. ("FiNet") and the shareholders of FiNet, Intercept Acquisitions
II, a wholly-owned subsidiary of the Company, merged with FiNet. Upon the
effectiveness of the merger on December 17, 1996, all of the issued and
outstanding stock of FiNet was converted into stock of the Company, and the
Company issued an aggregate of 116,250 shares of Common Stock to the
shareholders of FiNet.
(iv) Pursuant to that certain Acquisition and Merger Agreement dated as of
November 26, 1996 by and among the Company, Intercept Acquisitions, Inc., Bank
Services Corporation ("Bank Services"), and the shareholders of Bank Services,
Intercept Acquisitions, a wholly-owned subsidiary of the Company, merged with
Bank Services. Upon the effectiveness of the merger on December 31, 1996, all
of the issued and outstanding stock of Bank Services was converted into stock
of the Company, and the Company issued an aggregate of 238,032 shares of
Common Stock to the shareholders of Bank Services.
II-2
<PAGE>
(v) On December 31, 1996, the Company issued options to acquire an aggregate
of 271,251 shares of Common Stock to certain officers of and consultants to
the Company and one of its subsidiaries at an exercise price of $4.55 per
share. In January 1997, the Company issued options to acquire 75,000 shares of
Common Stock at an exercise price of $4.55 per share to an executive officer
of the Company. In February 1997, the Company issued options to acquire 10,000
shares of Common Stock at an exercise price of $4.55 per share to another
executive officer of the Company.
(vi) Pursuant to that certain Agreement and Plan of Merger dated as of
January 30, 1998 by and between the Company and Intercept Communications
Technologies, L.L.C. ("ICT"), ICT merged with and into the Company. Upon the
effectiveness of the merger, all of the membership units of ICT were converted
into stock of the Company, and the Company issued an aggregate of 1,301,966
shares of Common Stock to the members of ICT.
(vii) On February 1, 1998, the Company granted options to acquire 294,846
shares of Common Stock at an exercise price of $7.70 per share to certain
employees, consultants and directors pursuant to one of the Company's stock
option plans.
The issuances of securities described above were made in reliance on one or
more of the exemptions from registration, including those provided for by
Section 4(2), Regulation D and Rule 701 of the Securities Act. The recipients
of the securities in the above transactions represented their intention to
acquire the securities for investment purposes only and not with a view to or
for the sale in connection with any distribution thereof, and appropriate
legends were affixed to the share certificates issued in such transactions.
The recipients of these securities had adequate access, through their
relationship with the Company, to information about the Company.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement*
2.1 Agreement of Share Exchange dated as of June 4, 1996 by and between
the Company, Intercept Systems, Inc., Data Services Corporation, John
Collins, Vir A. Nanda, J. Ronney Henderson and Farrell Mashburn
2.2 Acquisition and Merger Agreement dated as of November 30, 1996 by and
among the Company, Intercept Acquisitions II, Inc., FiNet, Inc., and
the shareholders named therein**
2.3 Acquisition and Merger Agreement dated as of November 26, 1996 by and
among the Company, Intercept Acquisitions, Inc., Bank Services
Corporation and the shareholders named therein**
2.4 Agreement and Plan of Merger dated as of November 25, 1996 by and
among the Company, PV Acquisition Corp. and ProVesa, Inc.
2.5 Agreement and Plan of Merger dated as of January 30, 1998 by and
between the Company and Intercept Communications Technologies, L.L.C.
2.6 Plan of Merger dated as of January 30, 1998 by and between the Company
and Bank Services Corporation
2.7 Plan of Merger dated as of January 30, 1998 by and among the Company,
Data Services Corp., FiNet, Inc. and Intercept Systems, Inc.
3.1 Amended and Restated Articles of Incorporation of the Company (to be
filed with the Secretary of State of Georgia on or before completion
of the Offering)
3.2 Bylaws (Amended and Restated) of the Company
4.1 See Exhibits 3.1 and 3.2 for provisions of the Articles of
Incorporation and Bylaws defining the rights of the holders of Common
Stock of the Registrant
4.2 Specimen Common Stock Certificate*
5.1 Opinion of Nelson Mullins Riley & Scarborough, L.L.P.*
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
9.1 Voting Trust Agreement dated as of December 31, 1996 by and between
the Company, John W. Collins, Glenn W. Sturm, Salem Capital
Corporation, Paul D. England, Jack K. Lance and Jerry McKamey
10.1 The InterCept Group, Inc. Amended and Restated 1996 Stock Option Plan
10.2 Form of Stock Option Agreement under The InterCept Group, Inc. Amended
and Restated 1996 Stock Option Plan
10.3 ProVesa, Inc. 1994 Stock Option Plan
10.4 Employment Agreement by and between the Company and John W. Collins
dated as of January 30, 1998
10.5 Employment Agreement by and between the Company and Donny R. Jackson
dated as of January 30, 1998
10.6 Employment Agreement by and between the Company and Scott R. Meyerhoff
dated as of February 1, 1998
10.7 Employment Agreement by and between the Company, Vir Nanda and
Intercept Systems, Inc. dated June 4, 1996
10.8 Stock Option Agreement by and between the Company and Donny R. Jackson
dated January 14, 1997*
10.9 Stock Option Agreement dated as of February 1, 1998 by and between the
Company and Scott R. Meyerhoff*
10.10 Stock Option Agreement dated as of February 24, 1997 by and between
the Company and Michael R. Boian*
10.11 Form of Indemnification Agreement entered into between the Company and
its directors and officers*
10.12 Form of General Marketing Agent Agreement
10.13 Form of Master Electronic Funds Transfer Services Agreement
10.14 Form of Data Processing Agreement
10.15 Form of Service Agreement for Data Communications
10.16 Form of Software License Agreement for PC BancPAC(TM)
10.17 Loan Agreement dated as of June 17, 1996 by and between the Company,
Georgia State Bank, John W. Collins, Data Services Corp. and Intercept
Systems, Inc.
10.18 Loan Agreement dated as of May 2, 1995 by and between ProVesa, Inc.
and First National Bank of Commerce
10.19 Channel Services Payment Plan Agreement dated December 22, 1993
between Intercept Systems, Inc. and BellSouth Communications, Inc.
10.20 Form of Special Service Arrangement Agreement with BellSouth
Telecommunications, Inc. for frame relay services
10.21 Form of SynchroNet Service Agreement with Southern Bell Telephone and
Telegraph Company
10.22 Service Agreement dated as of February 25, 1998 by and between GE
Capital Spacenet Services, Inc. and Intercept Communications
Technologies, L.L.C.
10.23 WorldCom Data Services Agreement dated as of February 27, 1998 by and
between WorldCom, Inc. and Intercept Communications Technologies,
L.L.C.*
21.1 Subsidiaries of the Company
23.1 Consent of Arthur Andersen LLP
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
23.3 Consent of Nelson Mullins Riley & Scarborough, L.L.P. (filed as part
of Exhibit 5.1)
24.1 Power of Attorney (contained on the signature page hereof)
27.1 Financial Data Schedule for period ending December 31, 1997 (for SEC
use only)
</TABLE>
- --------
* To be filed by amendment.
** The Registrant agrees to furnish supplementally a copy of any omitted
schedule or exhibit to the Securities and Exchange Commission upon request,
as provided in Item 601(b)(2) of Regulation S-K.
(b) Financial Statement Schedules
Schedule II: Valuation and Qualifying Accounts
ITEM 17. UNDERTAKINGS.
The Company hereby undertakes to provide to the underwriter at the closing
specified in the underwriting agreement, certificates in such denominations
and registered in such names as required by the underwriter to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 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 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
registrant 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 whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The Company hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, 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
of 1933, 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-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
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 March 2, 1998.
THE INTERCEPT GROUP, INC.
By: /s/ John W. Collins
___________________________________
JOHN W. COLLINS
CHIEF EXECUTIVE OFFICER
KNOW ALL MEN BY THESE PRESENTS that each of the undersigned officers and
directors of The InterCept Group, Inc. (the "Company"), a Georgia corporation,
for himself and not for one another, does hereby constitute and appoint John
W. Collins and Donny R. Jackson, and each of them, a true and lawful attorney
in his name, place and stead, in any and all capacities, to sign his name to
any and all amendments, including post-effective amendments, to this
Registration Statement, and to sign a Registration Statement pursuant to
Section 462(b) of the Securities Act of 1933, and to cause the same (together
with all Exhibits thereto) to be filed with the Securities and Exchange
Commission, granting unto said attorneys and each of them full power and
authority to do and perform any act and thing necessary and proper to be done
in the premises, as fully to all intents and purposes as the undersigned could
do if personally present, and each of the undersigned for himself hereby
ratifies and confirms all that said attorneys or any one of them shall
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 in the
capacities listed and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ John W. Collins Chairman of the Board of March 2, 1998
____________________________________ Directors and Chief
John W. Collins Executive Officer
(Principal Executive Officer)
/s/ Donny R. Jackson President, Chief Operating March 2, 1998
____________________________________ Officer and Director
Donny R. Jackson
/s/ Scott R. Meyerhoff Chief Financial Officer March 2, 1998
____________________________________ (Principal Financial and
Scott R. Meyerhoff Accounting Officer)
/s/ Jon R. Burke Director March 2, 1998
____________________________________
Jon R. Burke
/s/ Boone A. Knox Director March 2, 1998
____________________________________
Boone A. Knox
/s/ Bruce P. Leonard Director March 2, 1998
____________________________________
Bruce P. Leonard
/s/ Glenn W. Sturm Director March 2, 1998
____________________________________
Glenn W. Sturm
</TABLE>
II-6
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE II
To The InterCept Group, Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of The InterCept Group, Inc. and
Subsidiaries included in this Registration Statement and have issued our
report thereon dated February 27, 1998. Our audit was made for the purpose of
forming an opinion on the basic financial statements taken as a whole. The
schedule listed in Item 16(b) of the Registration Statement is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
February 27, 1998
Atlanta, GA
S-1
<PAGE>
THE INTERCEPT GROUP
SCHEDULE II: VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31,
1995, 1996, AND 1997
<TABLE>
<CAPTION>
CHARGED TO
BEGINNING COSTS ENDING
DESCRIPTION AND BALANCE EXPENSE WRITEOFFS BALANCE
----------- --------------- ------- --------- -------
<S> <C> <C> <C> <C>
1994 Allowance for doubtful ac-
counts............................. 43,645 8,579 -- 52,224
1995 Allowance for doubtful ac-
counts............................. 52,224 74,064 (14,000) 112,288
1996 Allowance for doubtful ac-
counts............................. 112,288 106,652 (61,168) 157,772
1997 Allowance for doubtful ac-
counts............................. 157,772 (1,156) -- 156,616
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement*
2.1 Agreement of Share Exchange dated as of June 4, 1996 by and between
the Company, Intercept Systems, Inc., Data Services Corporation, John
Collins, Vir A. Nanda, J. Ronney Henderson and Farrell Mashburn
2.2 Acquisition and Merger Agreement dated as of November 30, 1996 by and
among the Company, Intercept Acquisitions II, Inc., FiNet, Inc., and
the shareholders named therein**
2.3 Acquisition and Merger Agreement dated as of November 26, 1996 by and
among the Company, Intercept Acquisitions, Inc., Bank Services
Corporation and the shareholders named therein**
2.4 Agreement and Plan of Merger dated as of November 25, 1996 by and
among the Company, PV Acquisition Corp. and ProVesa, Inc.
2.5 Agreement and Plan of Merger dated as of January 30, 1998 by and
between the Company and Intercept Communications Technologies, L.L.C.
2.6 Plan of Merger dated as of January 30, 1998 by and between the Company
and Bank Services Corporation
2.7 Plan of Merger dated as of January 30, 1998 by and among the Company,
Data Services Corp., FiNet, Inc. and Intercept Systems, Inc.
3.1 Amended and Restated Articles of Incorporation of the Company (to be
filed with the Secretary of State of Georgia on or before completion
of the Offering)
3.2 Bylaws (Amended and Restated) of the Company
4.1 See Exhibits 3.1 and 3.2 for provisions of the Articles of
Incorporation and Bylaws defining the rights of the holders of Common
Stock of the Registrant
4.2 Specimen Common Stock Certificate*
5.1 Opinion of Nelson Mullins Riley & Scarborough, L.L.P.*
9.1 Voting Trust Agreement dated as of December 31, 1996 by and between
the Company, John W. Collins, Glenn W. Sturm, Salem Capital
Corporation, Paul D. England, Jack K. Lance and Jerry McKamey
10.1 The InterCept Group, Inc. Amended and Restated 1996 Stock Option Plan
10.2 Form of Stock Option Agreement under The InterCept Group, Inc. Amended
and Restated 1996 Stock Option Plan
10.3 ProVesa, Inc. 1994 Stock Option Plan
10.4 Employment Agreement by and between the Company and John W. Collins
dated as of January 30, 1998
10.5 Employment Agreement by and between the Company and Donny R. Jackson
dated as of January 30, 1998
10.6 Employment Agreement by and between the Company and Scott R. Meyerhoff
dated as of February 1, 1998
10.7 Employment Agreement by and between the Company, Vir Nanda and
Intercept Systems, Inc. dated June 4, 1996
10.8 Stock Option Agreement by and between the Company and Donny R. Jackson
dated January 14, 1997*
10.9 Stock Option Agreement dated as of February 1, 1998 by and between the
Company and Scott R. Meyerhoff*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.10 Stock Option Agreement dated as of February 24, 1997 by and between
the Company and Michael R. Boian*
10.11 Form of Indemnification Agreement entered into between the Company and
its directors and officers*
10.12 Form of General Marketing Agent Agreement
10.13 Form of Master Electronic Funds Transfer Services Agreement
10.14 Form of Data Processing Agreement
10.15 Form of Service Agreement for Data Communications
10.16 Form of Software License Agreement for PC BancPAC(TM)
10.17 Loan Agreement dated as of June 17, 1996 by and between the Company,
Georgia State Bank, John W. Collins, Data Services Corp. and Intercept
Systems, Inc.
10.18 Loan Agreement dated as of May 2, 1995 by and between ProVesa, Inc.
and First National Bank of Commerce
10.19 Channel Services Payment Plan Agreement dated December 22, 1993
between Intercept Systems, Inc. and BellSouth Communications, Inc.
10.20 Form of Special Service Arrangement Agreement with BellSouth
Telecommunications, Inc. for frame relay services
10.21 Form of SynchroNet Service Agreement with Southern Bell Telephone and
Telegraph Company
10.22 Service Agreement dated as of February 25, 1988 by and between GE
Capital Spacenet Services, Inc. and Intercept Communications
Technologies, L.L.C.
10.23 WorldCom Data Services Agreement dated as of February 27, 1998 by and
between WorldCom, Inc. and Intercept Communications Technologies,
L.L.C.*
21.1 Subsidiaries of the Company
23.1 Consent of Arthur Andersen LLP
23.3 Consent of Nelson Mullins Riley & Scarborough, L.L.P. (filed as part
of Exhibit 5.1)
24.1 Power of Attorney (contained on the signature page hereof)
27.1 Financial Data Schedule for period ending December 31, 1997 (for SEC
use only)
</TABLE>
- --------
* To be filed by amendment.
** The Registrant agrees to furnish supplementally a copy of any omitted
schedule or exhibit to the Securities and Exchange Commission upon request,
as provided in Item 601(b)(2) of Regulation S-K.
<PAGE>
EXHIBIT 2.1
AGREEMENT OF SHARE EXCHANGE
This Agreement of Share Exchange ("Agreement") is made and entered into as
of the 4th day of June, 1996, by and between Intercept Holdings Inc., a
corporation ("Holdings"); Intercept Systems, Inc., a corporation ("Intercept");
Data Services Corporation, a corporation ("Data"); John Collins, an individual
("Collins"); Vir A. Nanda, an individual ("Nanda"); J. Ronney Henderson, an
individual ("Henderson"); and Farrell Mashburn, an individual ("Mashburn").
W I T N E S S E T H:
WHEREAS, Holdings is a Georgia corporation with its principal office at
6611 Bay Circle, Suite 160, Norcross, Georgia 30071, in Gwinnett County;
WHEREAS, Holdings has authorized capital stock consisting of (i) 10,000,000
shares of common stock, of which no shares are issued and outstanding, (ii)
50,000 shares of preferred stock, of which no shares are issued and outstanding;
WHEREAS, Intercept is a Georgia corporation with its principal office at
6611 Bay Circle, Suite 160, Norcross, Georgia 30071, in Gwinnett County;
1
<PAGE>
WHEREAS, Intercept has authorized capital stock consisting of 5,000 shares
of common stock, par value $1.00 per share, of which 721 shares are issued and
outstanding;
WHEREAS, Data is a Georgia corporation with its principal office at 5730
Oakbrook Parkway, Suite 130, Norcross, Georgia 30093, in Gwinnett County;
WHEREAS, Data has authorized capital stock of 1,000,000 shares of common
stock of no par value, of which 500 shares are issued and outstanding;
WHEREAS, the Board of Directors of Holdings has determined that it is
advisable to acquire up to all of the shares of capital stock of Data and
Intercept which are issued and outstanding on the Closing Date defined below;
WHEREAS, such acquisition of the shares of Intercept and Data is to be made
solely in exchange for the issuance of shares of common stock of Holdings on the
terms and conditions hereinafter set forth;
NOW THEREFORE, for and in consideration of the premises and of the mutual
agreements, promises and covenants contained herein, it is agreed by and between
the parties hereto, subject to the conditions hereinafter set forth, that all of
the outstanding shares of capital stock of Data on the Closing Date
2
<PAGE>
shall be exchanged for an aggregate of 290,000 shares of common stock of
Holdings and that all of the outstanding shares of capital stock of Intercept on
the Closing Date shall be exchanged for an aggregate of 1,155,000 shares of
common stock of Holdings, and that the terms and conditions of the share
exchange hereby agreed upon, the mode of carrying the same into effect and the
manner of exchanging shares shall be as follows:
Section 1
Data Share Exchange
1.1 On the Closing Date, all of the then outstanding shares of capital
stock of Data shall be exchanged for an aggregate of 290,000 shares of common
stock of Holdings as follows:
Name of Exchanging Number of Shares Number of Shares of
Shareholder of Data Exchanged Holdings to be Issued
- ------------------ ----------------- ---------------------
John Collins 350 203,000
Farrell Mashburn 150 87,000
--- -------
Totals 500 290,000
1.2 Prior to and from and after the Closing Date, Holdings, Data, Collins
and Mashburn each shall take all such action as shall be necessary or
appropriate in order to effectuate the share exchange.
3
<PAGE>
Section 2
Intercept Share Exchange
2.1 On the Closing Date, all of the then outstanding shares of
capital stock of Intercept shall be exchanged for an aggregate of 1,155,000
shares of common stock of Holdings, as follows:
Name of Exchanging Number of Shares of Number of Shares of
Shareholder Intercept Exchanged Holdings to be Issued
- ------------------ ------------------- ---------------------
John Collins 309 495,000
Vir A. Nanda 309 495,000
J. Ronney Henderson 103 165,000
--- ---------
Total 721 1,155,000
2.2 Prior to and from and after the Closing Date, Intercept, Holdings,
Collins, Nanda and Henderson shall each take all such action as shall be
necessary or appropriate in order to effectuate the share exchange.
Section 3
Representations and Warranties of Data Shareholders
As an inducement to Holdings to enter into this Agreement and to
consummate the transactions contemplated hereby, each of Collins and Mashburn
(collectively, the "Data Shareholders") hereby represents and warrants to
Holdings as set forth below in Subsections 3.1 through 3.6. Each such
representation or warranty made by Collins relates only to Collins and Data,
while
4
<PAGE>
each such representation or warranty made by Mashburn relates only to Mashburn
and Data.
3.1 Authority. Such shareholder has full power and authority to
---------
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance by such shareholder of this
Agreement and all transactions contemplated hereby have been duly and validly
authorized by all necessary action of such shareholder, and this Agreement
constitutes the legal, valid and binding obligation of such shareholder and of
Data, enforceable in accordance with its terms, except as may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the rights and remedies of creditors generally and general equitable principles
and (ii) judicial discretion in the enforcement of legal and equitable remedies.
3.2 Title to Shares. All of the number of Data shares set opposite
---------------
such shareholder's name in Subsection 1.1 above are owned of record and
beneficially by such shareholder. Such shareholder has good and valid title to
such shares, free and clear of all pledges, security interests, liens, charges,
encumbrances, shareholder agreements, other contracts or agreements, equities,
claims and options of whatever nature, except the rights of Holdings under this
Agreement. Any agreement among the shareholders restricting transfer of any
shares or limiting the manner in which any shareholder may vote
5
<PAGE>
his shares on any matter has been terminated and is of no force and effect.
3.3 Additional Shares. Such shareholder has no option, warrant or
-----------------
other legal or equitable right to acquire any additional shares of the capital
stock of Data. Data has not granted to any person any right to require Data to
issue any securities that are not already outstanding.
3.4 Residence. Such shareholder is a bona fide resident of the State
---------
of Georgia, registered to vote in Georgia (and in no other state) and holds a
valid vehicle drivers license from the State of Georgia (and from no other
state).
3.5 Information. In his capacity as a shareholder and director of
-----------
Data and through his longstanding business dealings with Intercept and his
business and social relationships with the Intercept Shareholders (defined
below), such shareholder has obtained or has access to all information which he
deems important or otherwise desires with respect to (i) his investment decision
to exchange his Data shares for Holdings shares, (ii) the transactions
contemplated by this Agreement, (iii) the status and proposed operations of
Holdings, and (iv) the contemplated status of Data and Intercept as subsidiaries
of Holdings.
3.6 Purchase for Investment. Such shareholder is acquiring the
-----------------------
shares of common stock of Holdings for such shareholder's own
6
<PAGE>
account for investment purposes only and with no intent to engage in a
distribution of such shares.
Section 4
Representations and Warranties of Intercept Shareholders
As an inducement to Holdings to enter into this Agreement and to
consummate the transactions contemplated hereby, each of Collins, Nanda and
Henderson (collectively, the "Intercept Shareholders") represents and warrants
as set forth below in Subsections 4.1 through 4.6. Each such representation or
warranty made by Collins relates only to Collins and Intercept, and each such
representation or warranty made by Nanda or Henderson relates only to himself
and Intercept.
4.1 Authority. Such shareholder has full power and authority to enter
---------
into this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance by such shareholder of this Agreement and
all transactions contemplated hereby have been duly and validly authorized by
all necessary action of such shareholder, and this Agreement constitutes the
legal, valid and binding obligation of such shareholder and of Intercept,
enforceable in accordance with its terms, except as may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the rights and remedies of creditors generally and general
7
<PAGE>
equitable principles and (ii) judicial discretion in the enforcement of legal
and equitable remedies.
4.2 Title to Shares. All of the number of Intercept shares set
---------------
opposite such shareholder's name in Subsection 2.1 above are owned of record and
beneficially by such shareholder. Such shareholder has good and valid title to
such shares, free and clear of all pledges, security interests, liens, charges,
encumbrances, shareholder agreements, other contracts or agreements, equities,
claims and options of whatever nature, except the rights of Holdings under this
Agreement. Any agreements among the shareholders restricting transfer of any
shares or limiting the manner in which any shareholder may vote his shares on
any matter, including but not limited to that certain Agreement Among
Stockholders of Bank Service Corporation dated December 2, 1986, and Amendment
to Agreement Among Stockholders of Intercept Systems, Inc. f/k/a Bank Service
Corporation dated January 31, 1991, have been terminated on or before the date
hereof and are of no force and effect.
4.3 Additional Shares. Such shareholder has no option, warrant or
-----------------
other legal or equitable right to acquire any additional shares of the capital
stock of Intercept. Intercept has not granted to any person any right to
require Intercept to issue any securities that are not already outstanding.
8
<PAGE>
4.4 Residence. Such shareholder is a bona fide resident of the State
---------
of Georgia, is registered to vote in Georgia (and in no other state) and holds a
valid vehicle drivers license from the State of Georgia (and from no other
state).
4.5 Information. In his capacity as a shareholder and director of
-----------
Intercept, and through his longstanding business dealings with Data and the Data
Shareholders, such shareholder has obtained or has access to all information
which he deems important or otherwise desires with respect to (i) his investment
decision to exchange his Intercept shares for Holdings shares, (ii) the
transactions contemplated by this Agreement, (iii) the status and proposed
operations of Holdings, and (iv) the contemplated status of Intercept and Data
as subsidiaries of Holdings.
4.6 Purchase for Investment. Such shareholder is acquiring the shares
-----------------------
of Holdings for such shareholder's own account for investment purposes only and
with no intent to engage in a distribution of such shares.
9
<PAGE>
Section 5
Representation and Warranties of Intercept
As an inducement to Holdings to enter into this Agreement and to
consummate the transactions contemplated hereby, Intercept hereby represents and
warrants to Holdings as follows:
5.1 Authority. Intercept has full power and authority to enter into
---------
this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance by Intercept of this Agreement and all
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action by the Board of Directors and shareholders of
Intercept, and this Agreement constitutes the legal, valid and binding
obligation of Intercept, enforceable in accordance with its terms, except as may
be limited by (i) bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting the rights and remedies of creditors generally and general
equitable principles and (ii) judicial discretion in the enforcement of legal
and equitable remedies.
5.2 Capital Structure. Prior to the time that Holdings has acquired
-----------------
721 shares of common stock of Intercept, Intercept will not issue or agree to
issue any other securities and will not acquire or agree to acquire any
currently outstanding securities of Intercept, Data or Holdings without
Holdings' prior consent.
10
<PAGE>
Section 6
Representations and Warranties of Data
As an inducement to Holdings to enter into this Agreement and to
consummate the transactions contemplated hereby, Data hereby represents and
warrants to Holdings as follows:
6.1 Authority. Data has full power and authority to enter into this
---------
Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance by Data of this Agreement and all
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action by the Board of Directors and shareholders of Data,
and this Agreement constitutes the legal, valid and binding obligation of Data,
enforceable in accordance with its terms, except as same may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the rights and remedies of creditors generally and general equitable principles
and (ii) judicial discretion in the enforcement of legal and equitable remedies.
6.2 Capital Structure. Prior to the time Holdings has acquired 500
-----------------
shares of common stock of Data, Data will not issue or agree to issue any other
securities and will not acquire or agree to acquire any currently issued
securities of Data, Intercept or Holdings without Holdings' prior consent.
11
<PAGE>
Section 7
Representations and Warranties of Holdings
As an inducement to the shareholders to enter into this Agreement and
to consummate the transactions contemplated hereby, Holdings hereby represents
and warrants to the shareholders as follows:
7.1 Authority. Holdings has full power and authority to enter into
---------
this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance by Holdings of this Agreement and all
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action by the Board of Directors of Holdings, and this
Agreement constitutes the legal, valid and binding obligation of Holdings,
enforceable in accordance with its terms, except as may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the rights and remedies of creditors generally and general equitable principles
and (ii) judicial discretion in the enforcement of legal and equitable remedies.
7.2 Capital Structure. Prior to the time that Holdings has acquired
-----------------
at least a majority of the 721 shares of common stock of Intercept and at least
a majority of the 500 shares of common stock of Data currently outstanding,
Holdings will not issue or
12
<PAGE>
agree to issue any securities except by means of the exchanges contemplated
hereby. After Holdings has issued shares of its common stock in exchange for
shares of common stock of Data or Intercept or both, Holdings shall not be
subject to or bound by any shareholder agreement or similar agreement unless the
agreement has been approved by a vote of the holders of a majority of the
outstanding common stock of Holdings and approved by vote of its Board of
Directors.
Section 8
Conditions of Closing by Data Shareholders
The obligation of each Data shareholder to consummate the transactions
contemplated hereby is subject to the following conditions:
8.1 Other Data Shareholder. The other Data shareholder shall have
----------------------
executed and delivered this Agreement and shall be bound by this Agreement at
the time of Closing, and such other shareholder shall have tendered to Holdings
his share certificate evidencing all of his capital stock in Data and shall have
not withdrawn such tender.
8.2 No Material Change. There shall have occurred since the date of
------------------
this Agreement no material adverse change in the principal assets and ongoing
operations of Intercept which caused
13
<PAGE>
the value of Intercept relative to the value of Data to be materially
diminished.
8.3 Litigation. None of the parties to this Agreement shall be
----------
subject on the Closing Date to any order, decree or injunction of a court of
competent jurisdiction which enjoins or prohibits the consummation of this
Agreement.
8.4 Performance. Holdings shall have conformed and complied with, in
-----------
all material respects, Holdings' undertakings contained in this Agreement at or
prior to the Closing Date, and the representations and warranties of Holdings
set forth in this Agreement shall be true and correct in all material respects
as of such Closing Date as though made at and as of such Closing Date. If the
Closing Date is later than the date of this Agreement, such shareholder shall
have received a certificate as to the matters set forth in this Subsection
executed by Holdings as of the Closing Date.
Section 9
Conditions of Closing by Intercept Shareholders
The obligation of each Intercept Shareholders to consummate the
transactions contemplated hereby are subject to the following conditions:
14
<PAGE>
9.1 Other Intercept Shareholders. The other Intercept Shareholders
----------------------------
shall have executed and delivered this Agreement and shall be bound by this
Agreement at the time of Closing, and such other shareholders shall have
tendered to Holdings their share certificates evidencing all of their capital
stock in Intercept and shall have not withdrawn such tenders.
9.2 No Material Change. There shall have occurred since the date of
------------------
this Agreement no material adverse change in the principal assets and ongoing
operations of Data which caused the value of Data relative to the value of
Intercept to be materially diminished.
9.3 Litigation. None of the parties to this Agreement shall be
----------
subject on the Closing Date to any order, decree or injunction of the court or
competent jurisdiction which enjoins or prohibits the consummation of this
Agreement.
9.4 Performance. Holdings shall have conformed and complied with, in
-----------
all material respects, Holdings' undertakings contained in this Agreement at or
prior to the Closing Date, and the representations and warranties of Holdings
set forth in this Agreement shall be true and correct in all material respects
as of such Closing Date as though made at and as of such Closing Date. If the
Closing Date is later than the date of this Agreement, such shareholder shall
have received a certificate as to the matters set forth in this Subsection
executed by Holdings
15
<PAGE>
as of the Closing Date. In addition, each Data Shareholder shall have signed
and delivered this Agreement and shall be bound by this Agreement. Each such
Data Shareholder shall have tendered to Holdings his respective share
certificates evidencing all of his capital stock of Data, Holdings shall have
accepted such tenders, and, in exchange therefor, Holdings shall have issued all
of the shares of Holdings common stock to which the Data Shareholders are
entitled under this Agreement.
Section 10
Conditions to Closing By Holdings
10.1 Litigation. None of the parties to this Agreement shall be
----------
subject on the Closing Date to any threatened or existing order, decree or
injunction of a court which would enjoin or prohibit the consummation of this
Agreement.
10.2 Performance. All other parties to this Agreement shall have
-----------
conformed and complied with their respective undertakings contained in this
Agreement at or prior to the Closing Date, and the representations and
warranties of all such other parties to this Agreement shall be true and correct
as of such Closing Date as though made at and as of such Closing Date. If the
Closing Date is later than the date of this Agreement, Holdings shall have
received certificates as to the matters set forth herein executed by such other
parties as of the Closing Date.
16
<PAGE>
Section 11
Deliveries
At the Closing, each party to this Agreement who is a shareholder of Data
or Intercept or both shall deliver share certificates evidencing all of his
shares of stock in Data or Intercept or both, duly endorsed for transfer. Each
party hereto shall deliver certificates indicating his or its compliance with
their respective obligations under this Agreement. Each party to this Agreement
who is an officer or director of Intercept or Data or both shall, upon the
request of Holdings, deliver his resignation as an officer and/or as a member of
the Board of Directors of Intercept or Data or both.
Section 12
Termination
The holders of a majority of the shares of Intercept set forth in
Subsection 2.1 above, together with the holders of a majority of the shares of
Data set forth under Subsection 1.1 above, acting concurrently, may terminate
this Agreement if the Closing Date has not occurred on or before by the close of
business on June 28, 1996.
17
<PAGE>
Section 13
Miscellaneous
13.1 Assignment. This Agreement and all of the provisions hereof
----------
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. No part of this Agreement or any
of the rights, interest or obligations of any shareholder who is a party to this
Agreement may be assigned by such person without the prior written consent of
all other parties hereto.
13.2 Governing Law. This Agreement shall be governed by the laws of
-------------
the State of Georgia as to all matters, including but not limited to matters of
validity, construction, effect, enforcement, performance and remedies.
13.3 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.4 Recitals. Each of the recitals in the forepart of this
--------
Agreement are deemed to be incorporated into and made a part of the body of this
Agreement, and each such recital shall be regarded as a representation of fact
by each party who had knowledge, or under the circumstances should have had
knowledge,
18
<PAGE>
with respect to the substance of such recital at the time of the execution and
delivery of this Agreement.
13.5 Survival. All representations, warranties and agreements made
--------
by any party in this Agreement or pursuant hereto shall survive the Closing.
13.6 Entire Agreement. This Agreement, including the documents
----------------
delivered at Closing pursuant to this Agreement, embody the entire agreement and
understanding of the parties hereto in respect of the transactions contemplated
by this Agreement.
13.7 Headings. The Section and Subsection headings contained in this
--------
Agreement are solely for the purpose of reference, are not part of the Agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement.
13.8 Severability. If any of the provisions 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 unless Holdings, in its sole discretion, determines that this Agreement
in its entirety should be terminated due to such invalidity or unenforceability.
19
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the day and year first above written.
"Holdings"
INTERCEPT HOLDINGS INC.
By: /s/ Donny R. Jackson
Its: President
"Intercept"
INTERCEPT SYSTEMS, INC.
By: /s/ James R. Henderson
Its: President
"Data"
DATA SERVICES CORPORATION
By: /s/ Farrell Mashburn
Its: President
"Data Shareholders"
/s/ John W. Collins
--------------------------------
John Collins
/s/ Farrell Mashburn
--------------------------------
Farrell Mashburn
20
<PAGE>
"Intercept Shareholders"
/s/ John W. Collins
--------------------------------
John Collins
/s/ Vir A. Nanda
--------------------------------
Vir A. Nanda
/s/ J. Ronney Henderson
--------------------------------
J. Ronney Henderson
21
<PAGE>
EXHIBIT 2.2
ACQUISITION AND MERGER AGREEMENT
BY AND AMONG
INTERCEPT HOLDINGS INC.,
a Georgia corporation
INTERCEPT ACQUISITIONS II, INC.,
a Georgia corporation
And
FINET, INC.,
a Tennessee corporation
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 THE MERGER....................................................... 1
Section 1.1. Merger Transaction....................................... 1
Section 1.2. Effective Time of the Merger............................. 1
Section 1.3. Terms and Conditions; Conversion of Shares............... 1
ARTICLE 2 PURCHASE PRICE; EXCHANGE OF SHARES............................... 2
Section 2.1. Common Stock............................................. 2
Section 2.2. Exchange of Shares....................................... 2
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................... 2
Section 3.1. Authorization; Organization.............................. 2
Section 3.2. Capitalization; Structure................................ 3
Section 3.3. Financial Statements..................................... 4
Section 3.4. Undisclosed Liabilities.................................. 4
Section 3.5. Properties............................................... 5
Section 3.6. Litigation............................................... 6
Section 3.7. Intellectual Property.................................... 6
Section 3.8. Adequacy of Technical Documentation...................... 7
Section 3.9. Third-Party Components in Software....................... 7
Section 3.10. Third-Party Interests or Marketing Rights in Software.... 7
Section 3.11. Licenses................................................. 8
Section 3.12. Compliance with Laws..................................... 8
Section 3.13. Insurance................................................ 8
Section 3.14. Material Contracts....................................... 8
Section 3.15. Brokers, Finders, etc.................................... 9
Section 3.16. Taxes.................................................... 9
Section 3.17. Pension and Employee Benefit Plans....................... 10
Section 3.18. Labor and Employment Matters............................. 12
Section 3.19. Environmental Matters.................................... 13
Section 3.20. Agreements Affecting Competition......................... 13
Section 3.21. Transactions with Related Parties........................ 13
Section 3.22. Major Vendors and Customers.............................. 14
Section 3.23. Absence of Certain Commercial Practices.................. 14
Section 3.24. Accounts Receivable...................................... 14
Section 3.25. Disclosure............................................... 14
Section 3.26. Truth at Closing......................................... 15
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS................... 15
Section 4.1. Ownership of Shares............................................ 15
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
Section 4.2. Litigation..................................................... 15
Section 4.3. Brokers, Finders, etc................................... 15
Section 4.4. Taxes................................................... 15
Section 4.5. Securities Act Compliance............................... 15
Section 4.6. Sophistication of Shareholders.......................... 16
Section 4.7. Schedules............................................... 16
Section 4.8. Disclosure.............................................. 16
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER........................ 16
Section 5.1. Incorporation; Authorization............................ 16
Section 5.2. Litigation.............................................. 17
Section 5.3. Brokers, Finders, etc................................... 17
Section 5.4. Securities Act Compliance............................... 17
Section 5.5. Sophistication of Buyer................................. 17
Section 5.6. Disclosure.............................................. 18
ARTICLE 6 COVENANTS AND AGREEMENTS OF THE PARTIES........................ 18
Section 6.1. Access to Information................................... 18
Section 6.2. Conduct of Business..................................... 18
Section 6.3. Corporate Matters....................................... 18
Section 6.4. Employees............................................... 19
Section 6.5. New Business............................................ 19
Section 6.6. Agreements.............................................. 19
Section 6.7. Cooperation............................................. 19
Section 6.8. Customer Contacts....................................... 19
Section 6.9. No-Shop................................................. 19
Section 6.10. Tax Audits.............................................. 20
Section 6.11. Tax Returns............................................. 20
Section 6.12. Interim Financial Statements............................ 20
Section 6.13. Updating of Information................................. 20
Section 6.14. Pooling of Interests.................................... 20
ARTICLE 7 CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS.................... 20
Section 7.1. Accuracy of Representations............................. 21
Section 7.2. Performance of Company and Shareholders................. 21
Section 7.3. No Material Changes..................................... 21
Section 7.4. Certificates of the Company and Shareholders............ 21
Section 7.5. Absence of Litigation................................... 21
Section 7.6. Corporate Approval...................................... 21
Section 7.7. Approvals............................................... 21
Section 7.8. Customer Inquiries...................................... 21
Section 7.9. Third Party Consents.................................... 22
Section 7.10. Investigations.......................................... 22
Section 7.11. Affiliates.............................................. 22
Section 7.12. Pooling Letter.......................................... 22
Section 7.13. Employment Agreements................................... 22
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
Section 7.14. Salem Capital Documents................................. 22
Section 7.15. Opinion of Counsel...................................... 23
Section 7.16. Termination of Shareholders Agreement................... 23
ARTICLE 8 CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS............. 23
Section 8.1. Accuracy of Representations............................. 23
Section 8.2. Performance of Buyer.................................... 23
Section 8.3. Certificates of the Buyer and the Shareholders.......... 23
Section 8.4. Opinion of Counsel...................................... 23
Section 8.5. Absence of Litigation................................... 23
Section 8.6. Corporate Approval...................................... 24
Section 8.7. Third Party Approvals................................... 24
Section 8.8. Employment Agreements................................... 24
ARTICLE 9 CLOSING....................................................... 24
Section 9.1. Time and Place of Closing............................... 24
Section 9.2. Deliveries by the Company............................... 24
Section 9.3. Deliveries by Buyer and IAI............................. 25
Section 9.4. Post Closing Deliveries and Power of Attorney........... 25
ARTICLE 10 TERMINATION................................................... 26
Section 10.1. Termination.............................................. 26
Section 10.2. Effect of Termination................................... 26
ARTICLE 11 SURVIVAL; INDEMNIFICATION..................................... 26
Section 11.1. Survival................................................ 26
Section 11.2. Indemnification......................................... 26
Section 11.3. Procedure for Third-Party Claims........................ 27
ARTICLE 12 MISCELLANEOUS................................................. 28
Section 12.1. Counterparts............................................ 28
Section 12.2. Governing Law........................................... 28
Section 12.3. No Third-Party Beneficiaries............................ 28
Section 12.4. Joint and Several Liability............................. 29
Section 12.5. Entire Agreement........................................ 29
Section 12.6. Expenses................................................ 29
Section 12.7. Notices................................................. 29
Section 12.8. Public Announcements.................................... 30
Section 12.9. Successors and Assigns.................................. 30
Section 12.10. Headings................................................ 31
Section 12.11. Amendments and Waivers.................................. 31
Section 12.12. Invalidity of any Part.................................. 31
Section 12.13. Remedies................................................ 31
Section 12.14. Actions and Proceedings................................. 31
</TABLE>
iii
<PAGE>
ACQUISITION AND MERGER AGREEMENT
--------------------------------
THIS ACQUISITION AND MERGER AGREEMENT ("Agreement") is dated as of November
30, 1996, by and among Intercept Holdings Inc., a Georgia corporation ("Buyer"),
Intercept Acquisitions II, Inc., a Georgia corporation and a wholly owned
subsidiary of Buyer ("IAI"), FiNet, Inc., a Tennessee corporation (the
"Company"), Paul D. England, a resident of the State of Tennessee ("England"),
Jack K. Lance, a resident of the State of Tennessee ("Lance"), and Jerry
McKamey, a resident of the State of Tennessee ("McKamey") (England, Lance and
McKamey, each a "Shareholder" and, collectively, the "Shareholders").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, subject to the terms and conditions of this Agreement, the
Shareholders, the Company, Buyer and IAI desire and deem it in their respective
best interests that the Company be merged into IAI; and
WHEREAS, the Company's issued and outstanding capital stock currently
consists solely of 6,000 shares of Common Stock, $.01 par value per share (the
"Common Stock"); and
WHEREAS, the Shareholders own all of the outstanding shares of the Common
Stock, which constitute all of the outstanding shares of the Company's capital
stock; and
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto agree as follows:
ARTICLE 1
THE MERGER
----------
Section 1.1. Merger Transaction. Subject to the terms and conditions
------------------
hereof, the parties hereto agree that the Company shall be merged into IAI in
accordance with the applicable provisions of the Georgia Business Corporation
Act (the "GBCA"), and the separate existence of the Company shall thereupon
cease (such merger transaction is referred to hereinafter as the "Merger"). IAI
shall be the surviving corporation in the Merger. Subject to the terms and
conditions hereof, the parties hereto shall take all actions necessary in
accordance with applicable law and their respective Articles of Incorporation
and Bylaws to cause the Merger to be consummated.
Section 1.2. Effective Time of the Merger. The Merger shall become
----------------------------
effective at the time (the "Effective Time") when the Articles of Merger (the
"Articles of Merger") in the form attached hereto as Exhibit 1.2, together with
the Plan of Merger (the "Plan of Merger") attached thereto, are executed by the
Company and IAI in accordance with the applicable provisions of the GBCA and are
duly filed with the Secretary of State of Georgia and the Secretary of State of
Tennessee, which actions shall be taken on the Closing Date.
Section 1.3. Terms and Conditions; Conversion of Shares. The effect of
------------------------------------------
the Merger on the Articles of Incorporation, Bylaws, directors and officers of
the surviving corporation, and the manner and basis of converting the shares of
capital stock of IAI and the Company into stock or cash, shall be as set forth
in the Plan of Merger.
<PAGE>
ARTICLE 2
PURCHASE PRICE; EXCHANGE OF SHARES
----------------------------------
Section 2.1. Common Stock. All of the Shareholders' 6,000 shares of
------------
Common Stock, together with all outstanding options to acquire Common Stock, of
the Company, shall be converted into the right to receive a total of 116,250
shares of common stock, no par value per share ("Buyer Common Stock") of Buyer.
No fractional shares of Buyer Common Stock will be issued, and fractional shares
to which each Shareholder would otherwise be entitled will be disregarded.
Section 2.2. Exchange of Shares. At the Closing (as hereinafter defined),
------------------
the Buyer will deliver a certificate or certificates representing the shares of
Buyer Common Stock as computed pursuant to the Plan of Merger. The Shareholders
acknowledge and agree that the allocation of the Buyer Common Stock issued at
Closing shall be as set forth on Schedule 2.2 hereto.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company hereby represents and warrants to Buyer as follows:
Section 3.1. Authorization; Organization.
---------------------------
(a) This Agreement has been duly and voluntarily executed and
delivered by each of the Shareholders and the Company and constitutes, and, as
to the Company, will constitute at the Closing Date, the legal, valid and
binding obligations of each of them, enforceable in accordance with its terms.
(b) The Company has full corporate power and authority to execute and
deliver this Agreement and at the Closing Date will have full corporate power
and authority to perform its obligations hereunder and to consummate the Merger
and the other transactions provided for herein, in the Articles of Merger, the
Plan of Merger and all other documents and agreements executed in connection
herewith and therewith (collectively, the "Merger Documents"). The Board of
Directors of the Company and the Shareholders have unanimously approved the
execution, delivery and performance of this Agreement and the consummation of
the Merger and the other transactions provided for herein.
(c) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not conflict with or
result in a violation, breach, default, right to accelerate or increase in
obligations under the Company's Articles of Incorporation or Bylaws, any law or
statute or any order, judgment or decree by which the Company is bound by name
or any license, lease or other agreement to which the Company is a party or by
which its assets and business may be affected.
2
<PAGE>
(d) The Company is a corporation duly organized and validly existing
and in good standing under the laws of Tennessee and has all requisite corporate
power and authority to own, lease or operate its properties and assets and to
carry on its business as now being conducted. The Company is duly qualified to
transact business and is in good standing in each jurisdiction in which the
nature of property owned or leased by it or the conduct of its business requires
it to be so qualified, except where the failure to do so would not have a
material adverse effect on its business, operations, properties, assets or
condition, financial or otherwise (a "Material Adverse Effect").
(e) The Company's Articles of Incorporation, Bylaws and stock book
and, in all material respects, its minute books are complete and correct and
contain all amendments thereto to date, a record of all corporate proceedings of
the Company, and a record of all stock issuances and transfers of the Company.
(f) Except as set forth in Schedule 3.1(f), the Company has no
subsidiaries and never has had any subsidiaries, and the Company does not
conduct and never has conducted any business under any trade name or other
fictitious name.
(g) The Company is not a party to any joint venture or other similar
agreement or arrangement that involves any sharing of profits of the Company or
its assets or is similar to or competitive with the business.
(h) The Shareholders are the sole record and beneficial owners of the
shares of Common Stock, free and clear of any lien, claim, charge, mortgage,
pledge, security interest, option or other legal or equitable encumbrance of any
nature (hereinafter "Liens"). The Shareholders each have the full legal right,
power and authority to vote the shares of Common Stock.
Section 3.2. Capitalization; Structure.
-------------------------
(a) The authorized capital stock of the Company consists of 100,000
shares of Common Stock, of which 6,000 shares are outstanding and no shares are
held in treasury. All of the outstanding shares of Common Stock have been duly
and validly authorized and issued, and are all fully paid and nonassessable. No
shares of the Company's capital stock have been issued in violation of any
preemptive rights, any rights of first refusal or any similar restrictions.
Other than as shown on Schedule 2.2, there are no: (i) outstanding options
(including phantom options), warrants or other rights (including preemptive
rights) of any kind relating to the sale, issuance or voting of any shares of
capital stock of the Company; (ii) securities convertible into, exchangeable for
or evidencing the right to purchase any such shares; or (iii) contracts,
commitments, agreements, understandings or arrangements of any kind relating to
the issuance or voting of such shares, any such convertible or exchangeable
securities or any such options, warrants or rights.
(b) All transactions whereby the Company repurchased, redeemed,
canceled or reacquired shares of its capital stock and the solicitation of
shareholder consents in connection with the Merger have been effected in
compliance with all applicable corporate and securities
3
<PAGE>
laws, and documentation prepared by or on behalf of the Company in connection
therewith did not include any untrue statement of any material fact or omit to
state any material fact necessary to make the statements made therein correct
and complete.
Section 3.3. Financial Statements. Attached hereto as Exhibit 3.3(a) is a
--------------------
true and complete copy of the balance sheet of the Company at September 30, 1996
(collectively, the "Financial Statements").
The Financial Statements:
(a) have been prepared from, and are in accordance with, the books and
records of the Company;
(b) fairly present the financial position, results of operations and
cash flows of the Company as of and for the periods set forth therein; and
(c) have been prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied throughout the indicated
periods (except that, in the case of the Interim Financial Statements, there are
no footnotes).
Section 3.4. Undisclosed Liabilities.
-----------------------
(a) Except as disclosed in Schedule 3.4 or any other Schedule hereto,
and except as reflected, expressly reserved against or otherwise disclosed in
the Financial Statements, the Company has no material liabilities or obligations
of any nature, known or unknown (whether accrued, absolute, contingent or
otherwise).
(b) Except as set forth in Schedule 3.4, since September 30, 1996, the
Company has conducted its business only in the normal course and has not:
(i) suffered any physical damage, destruction or casualty loss
(whether or not such loss or damage shall have been covered by insurance)
which adversely affects the properties, business or prospects of the
Company, or suffered any deterioration in the operating condition of any
physical assets of the Company, normal wear and tear excepted;
(ii) incurred, created, assumed or guaranteed any liability or
obligation of any nature (whether absolute, accrued, contingent or
otherwise), except in the ordinary course of business;
(iii) increased, or made any change in any assumptions
underlying the method of calculating, any bad debt, contingency or other
reserves;
(iv) made any change in the method of valuing assets included
in the Financial Statements;
4
<PAGE>
(v) made any change in any method of accounting or keeping
its books of account or accounting practices or systems of internal
accounting controls;
(vi) paid, discharged or satisfied any liability or obligation
(whether absolute, accrued, contingent or otherwise), other than by
payment, discharge or satisfaction in the ordinary course of business;
(vii) permitted or allowed any of its assets (real, personal or
mixed, tangible or intangible) to be subjected to any Lien;
(viii) written down the value of any inventory or written off as
uncollectible any notes or accounts receivable, except for write-downs and
write-offs in the ordinary course of business;
(ix) canceled or waived any claims or rights, or sold,
transferred, distributed or otherwise disposed of any assets or properties,
except in the ordinary course of business;
(x) declared or paid any dividend or distribution on or in
respect of the Common Stock, or directly or indirectly redeemed, purchased,
or otherwise acquired any shares of its capital stock, any securities
convertible into or exchangeable for its capital stock, or any options,
warrants or other rights to purchase any of the foregoing, or authorized
the issuance of, or issued, sold or committed to sell (or granted any
options or rights to purchase) any additional shares of its capital stock,
or sold, issued or incurred any indebtedness;
(xi) experienced any strike, walkout, similar labor trouble or
other similar event; or
(xii) increased the salaries or other remuneration payable or
to become payable to, or made any advance (excluding advances for ordinary
business expenses) or loan to, any officer, director, employee or
shareholder (except normal merit increases made in the ordinary course of
business and consistent with past practice), or established, made any
increase in, or any addition to, other benefits (including, without
limitation, any Employee Plans, as hereinafter defined) to which any of
them may be entitled, or made any payments to any Employee Plan, except
payments in the ordinary course of business and consistent with past
practice, or entered into any agreement, arrangement or transaction with
any such person not in the ordinary course of business, or failed to make
any required payment under any Employee Plan.
Section 3.5. Properties. The Company has good and marketable title to, or
----------
holds by valid and existing lease or license, free and clear of all Liens, each
piece of real and personal property used in its business as now conducted,
except in any of the foregoing cases for such imperfections of title or Liens as
(a) are set forth in Schedule 3.5 hereof, (b) are reflected or reserved against
in the Financial Statements, (c) arise out of taxes or general or special
assessments not in default and payable without penalty or interest or (d) are of
a kind generally
5
<PAGE>
found in property of similar character and which do not have a Material Adverse
Effect. The real and personal property owned, leased or licensed by the Company
constitutes, and immediately after the Closing will constitute, all real or
personal property that is material to and necessary for the operation of its
business as currently conducted.
Section 3.6. Litigation. Except as set forth in Schedule 3.6, there are
----------
no suits, claims, investigations or proceedings pending or threatened against
the Company, its officers or directors in their capacities as officers or
directors, any Shareholder or any other person or entity for whom the Company
may be vicariously liable at law or in equity. The Company is not operating
under or subject to, any order, writ, injunction or decree of any court or
governmental authority in which the Company is named.
Section 3.7. Intellectual Property. The Company has developed and
---------------------
conducts an active program of licensing certain proprietary application software
products and systems to banks, credit unions and other financial institutions
for their use and provides data processing services utilizing such products and
systems (the "Software Programs"), and in connection therewith the Company has
developed certain related technical documentation and user reference manuals
(the "Documentation"). The Software Programs and the Documentation are
collectively referred to as the "Software." The Software Programs and
Documentation are listed in Schedule 3.7 hereto.
(a) Ownership. Except as set forth in Section 3.9, the Company owns
---------
all patents, trademarks, service marks, trade names and copyrights (including
registrations, licenses and applications pertaining thereto) and all other
proprietary information used by the Company in the conduct of its business,
including, without limitation, the Software. Schedule 3.7(a) sets forth all
patents, trademarks, service marks, trade names and copyrights owned or used by
the Company and all applications therefor and registrations thereof.
(b) Procedures for Copyright Protection. Schedule 3.7(b) sets forth
-----------------------------------
the form and placement of the proprietary legends and copyright notices
displayed in or on the Software, including screen displays. In no instance has
the eligibility of the Software for protection under copyright law been
forfeited to the public domain.
(c) Procedures for Trade Secret Protection. The Company has never
--------------------------------------
disclosed its source code to a third party other than the consultants identified
in Schedule 3.7(c), each of which has executed a nondisclosure agreement in
favor of the Company, and discloses its source code to employees only on a need-
to-know basis in connection with the performance of their duties to the Company.
Except as described in Schedule 3.7(c), each current employee of the Company and
each former employee of the Company employed after January 1, 1994 has executed
and delivered to the Company a Non-Disclosure & Assignment Agreement
substantially in the form attached to Schedule 3.7(c). The source code and
system documentation comprising the Software have at all times been maintained
by the Company in confidence, and the Company has not taken (nor has it failed
to take) any action which would result in such source code and system
documentation not being protectable as a trade secret under applicable law.
6
<PAGE>
(d) Ownership of Software. All persons who have contributed to or
---------------------
participated in the conception and development of the Software on behalf of the
Company have been full-time employees of the Company hired to prepare such works
within the scope of employment, except for the consultants identified in
Schedule 3.7(c). Each such consultant identified in Schedule 3.7(c) has executed
and delivered to the Company a valid assignment of such consultant's rights in
works prepared by the consultant on behalf of the Company and included in the
Software. As a consequence, the Company has all ownership interests in the
Software.
(e) Absence of Claims. Except as set forth in Schedule 3.7(e), no
-----------------
claims have been asserted by any person to rights in the Software, and no valid
basis for any such claim exists. The use of the Software by the Company and its
licensees does not infringe on the rights of any person (whether arising under
copyright, trade secret, patent, unfair competition or other state or federal
laws which protect intellectual property rights). The use by the Company of the
patents, trademarks, service marks, trade names and copyrights identified in
Schedule 3.7(a) does not infringe the rights of any person, and no claim has
been asserted that the use by the Company of any of the foregoing infringes the
rights of any person. No claim has been asserted by any person to the effect
that any current or former employee of the Company has violated the provisions
of any noncompete or nondisclosure agreement with such person, or has disclosed
any proprietary information of such person to the Company or any third party.
Section 3.8. Adequacy of Technical Documentation. The Software includes
-----------------------------------
the source code, system documentation, statements of principles of operation,
and schematics for all Software Programs, as well as any pertinent commentary or
explanation that may be reasonably necessary to render such materials
understandable and usable by a trained computer programmer. The Software also
includes any program (including compilers), workbenches, tools, and higher level
language used for the development, maintenance and implementation of a Software
Program.
Section 3.9. Third-Party Components in Software. The Company has validly
----------------------------------
obtained the right and license to use, copy, modify and distribute any third-
party programming and materials contained in the Software pursuant to the
contracts identified in Schedule 3.9, subject to no further license fee, royalty
or other payment obligations, other than software maintenance payments
customarily associated therewith. The Software contains no other programming or
materials in which any third party may claim superior, joint or common
ownership, including any right or license. The Software does not contain
derivative works of any programming or materials not owned in their entirety by
the Company.
Section 3.10. Third-Party Interests or Marketing Rights in Software. The
-----------------------------------------------------
Company has not granted, transferred, or assigned any right or interest in the
Software to any person, except pursuant to the contracts identified in Schedule
3.10. There are no contracts, agreements, licenses, commitments or arrangements
in effect with respect to the marketing, distribution, licensing or promotion of
the Software by any independent salesperson, distributor, sublicensor or other
remarketer or sales organization, except as set forth in Schedule 3.10.
7
<PAGE>
Section 3.11. Licenses. The Company has all government licenses,
--------
consents, permits, franchises, approvals and other governmental authorizations
("Licenses") required for its business as currently conducted except where the
failure to hold, maintain or obtain such Licenses would not have a Material
Adverse Effect. No proceeding is pending or threatened seeking the revocation or
suspension of any License.
Section 3.12. Compliance with Laws. The Company's business has been
--------------------
operated and maintained in all material respects in compliance with all
statutes, laws, regulations, ordinances, rules, judgments, orders or decrees
applicable thereto. There is no outstanding or threatened order, writ,
injunction, or decree of any court, governmental agency, or arbitration tribunal
against Company affecting, involving, or relating to its business or assets.
Company is not in violation of any applicable federal, state, or local law,
regulation, ordinance, zoning requirement, governmental restriction, order,
judgment, or decree affecting, involving, or relating to its business or assets
except where noncompliance has no material adverse effect upon the financial
condition, operation, or prospects of the business (including under ownership by
IAI) or the Company's assets, and the Company has not received any notices of
any allegation of any such violation. The foregoing shall be deemed to include
laws and regulations relating to the patent, copyright, and trademark laws,
state trade secret and unfair competition laws of the U.S. and foreign
jurisdictions, environmental laws and to all other applicable laws, including
equal opportunity, wage and hour, and other employment matters, and antitrust
and trade regulation laws.
Section 3.13. Insurance. Schedule 3.13 lists all policies of casualty,
---------
liability, workers' compensation, life and other forms of insurance by which the
Company is currently insured or has been insured during the previous three years
and includes for each policy in effect the period through which premiums have
been paid. All of the policies indicated as in force in Schedule 3.13 are in
full force and effect and no notice of cancellation has been received with
respect thereto and are sufficient for compliance in all material respects with
all requirements of law and all agreements to which the Company is a party.
Section 3.14. Material Contracts. Schedule 3.14 lists the following
------------------
agreements (including, without limitation, leases, purchase contracts and
commitments) to which the Company is a party or by which the Company or any of
its properties is bound:
(a) all contracts which involve future obligations on the part of the
Company in an aggregate amount exceeding $25,000 in the case of purchase orders
and commitments or $100,000 in the case of any other type of contract;
(b) all joint ventures, sales agency, sales representative or
distributorship, broker, franchise, license or similar contracts;
(c) all real estate leases;
(d) all notes, bonds, mortgages, security agreements, guarantees and
other agreements and instruments for or relating to any lending by the Company
in any amount
8
<PAGE>
(exclusive of advances to employees for expenses in the ordinary course of
business) or any borrowing of $100,000 or more;
(e) all powers of attorney, guarantees, suretyships or similar
agreements given by the Company; and
(f) all other written agreements to which any Shareholder is a
party.
Each contract set forth in Schedule 3.14 is valid, binding and
enforceable in accordance with its terms, and neither the Company nor any other
party to any such contract is in material breach or material default of the
express written terms of such contracts.
Section 3.15. Brokers, Finders, etc. Except as described in Schedule
---------------------
3.15, the Company has not employed any broker, finder, consultant or other
intermediary in connection with the transactions contemplated by this Agreement
and the other Merger Documents who might be entitled to a fee or commission in
connection with such transactions.
Section 3.16. Taxes.
-----
(a) Filing of Tax Returns. The Company has timely filed with the
---------------------
appropriate taxing authorities all returns (including, without limitation,
information returns and other material information) in respect of Taxes (as
hereinafter defined) required to be filed through the date hereof. All such
returns and other information filed are complete and accurate in all material
respects.
(b) Payment of Taxes. Except as set forth in Schedule 3.16(b),
----------------
all Taxes that are due and payable by the Company (whether or not shown on any
return) before the date hereof have been paid. To the extent required by GAAP,
an adequate reserve has been established on the Financial Statements for all
unpaid Taxes payable by the Company with respect to all periods through the date
of such Financial Statements, and the Company is not required under GAAP to
reserve for any liability for Taxes in excess of the reserves so established.
Except as described in Schedule 3.16(b), no portion of the reserve established
on the Financial Statements for Taxes reflects any contingent liability or other
potential liability for Taxes that are due and payable, or that may become due
and payable in the future, as a result of an audit, amended return or otherwise.
(c) Audit History. Except as set forth in Schedule 3.16(c):
-------------
(i) no deficiencies for Taxes have been claimed, proposed or
assessed by any taxing or other governmental authority against the Company
which have not been paid or otherwise finally settled and resolved;
(ii) the Company has not waived the statute of limitations in
respect of any Tax or agreed to any extension of time with respect to the
assessment of any Tax; and
9
<PAGE>
(iii) the Company is not currently under audit with respect
to Taxes by any governmental authority, and no such authority in a
jurisdiction where the Company does not file Tax returns or pay Taxes has
claimed that the Company is required to file Tax returns or otherwise is
subject to taxation.
(d) Withholding Taxes. The Company has withheld and paid all Taxes
-----------------
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, shareholder or other third
party.
(e) Tax Sharing or Allocation Agreements. The Company is not a party
------------------------------------
to or bound by any Tax indemnity, Tax sharing or Tax allocation agreement.
(f) Prior Affiliated Groups. The Company has never been a member of
-----------------------
an affiliated group of corporations, within the meaning of Section 1504 of the
Code (as hereinafter defined).
(g) Taxes. For purposes of this Agreement, "Taxes" shall mean all
-----
federal, state, local, foreign and other taxes, assessments, or other
governmental charges, including, without limitation, income, estimated income,
business, occupation, franchise, property, sales, gross receipts, excise,
employment, or withholding taxes, including interest, penalties and additions in
connection therewith.
Section 3.17. Pension and Employee Benefit Plans.
----------------------------------
(a) For purposes of this Agreement, the terms set forth below shall
have the following meanings:
(i) Code: The Internal Revenue Code of 1986, as amended,
----
together with the regulations promulgated thereunder;
(ii) Employee Plans: All plans, programs, arrangements,
--------------
practices or contracts pursuant to which the Company provides or is
obligated to provide or has within the last six years been obligated to
provide, directly or indirectly, benefits or compensation to or on behalf
of employees or former employees of the Company, whether formal or
informal, whether or not written, whether or not terminated, including but
not limited to the following:
(A) Executive Arrangements -- any bonus, incentive
compensation, stock option, deferred compensation, commission,
severance, golden parachute or other executive compensation plan,
employment contract, arrangement or practice;
(B) ERISA plans -- any Pension Plan or Welfare Plan, as
defined in Section 3 of ERISA, including but not limited to any multi-
employer plan, defined benefit pension plan, profit sharing plan,
savings or thrift plan, stock bonus plan, employee stock ownership
plan, or any plan, fund, program,
10
<PAGE>
arrangement or practice providing for medical hospitalization,
accident, sickness, disability, severance pay or life insurance
benefits; and
(C) Other Employee Fringe Benefits -- any stock purchase,
vacation, scholarship, day care, prepaid legal services, severance
pay, or fringe benefit plan, program, arrangement, contract, or
practice;
(iii) ERISA: The Employee Retirement Income Security Act of
-----
1974, as amended, and the rulings and regulations thereunder; and
(iv) ERISA Affiliate: A corporation that is or was a member of
---------------
a controlled group of corporations with the Company or a trade or business
that is under common control with the Company or which together with the
Company is treated as a single employer, in each case within the meaning of
Section 414 of the Code.
(b) Schedule 3.17 lists or describes all Employee Plans maintained or
contributed to by the Company pursuant to which the Company provides benefits or
compensation to or on behalf of employees or former employees of the Company.
The Company has no ERISA Affiliates.
(c) Each Employee Plan (and related trust or funding vehicle, if any)
has at all times been administered and maintained in accordance with its terms
and the applicable law including, without limitation, the filing of Forms 5500
and all other applicable reports.
(d) Except to the extent set forth in Schedule 3.17, to the extent any
Employee Plan is subject to approval by any governmental agency, such Employee
Plan has received such approval and such approval is current.
(e) The Company is not subject to, and no facts exist which could
subject the Company to, any liability whatsoever which is directly or indirectly
related to any Employee Plan, including, but not limited to, liability for
benefits payments or related claims (other than the ordinary claims by
participants or beneficiaries which have been made for benefits called for under
the terms of such Employee Plans), any liability for any Tax or related penalty
under the Code, or liability for any damages or penalties arising under Title I
or Title IV of ERISA.
(f) No Employee Plan has engaged in or been a party to any "prohibited
transaction" (as defined in ERISA or the Code), and the Company has not
incurred, and does not reasonably expect to incur, any liability under Chapter
43 of the Code or Section 502 of ERISA with respect to any Employee Plan.
(g) Except as set forth in Schedule 3.17, no ERISA Welfare Plan
provides benefits to former employees of the Company, other than continuation
coverage required by Section 4980B of the Code and Section 601 of ERISA.
(h) There are no pending or threatened claims, suits or other
proceedings with respect to any Employee Plan other than the ordinary claims by
participants or beneficiaries
11
<PAGE>
which have been made for benefits called for under the terms of such Employee
Plans and which will be paid under such Employee Plans in the ordinary course.
(i) There is no requirement that the Buyer or IAI make any further
contributions to any Employee Plan after the Closing Date, and each Employee
Plan which provides benefits to or on behalf of employees or former employees of
the Company may be terminated by IAI or Buyer in its sole discretion on or after
the Closing Date without liability of any kind or description whatsoever to IAI,
Buyer, or any other person, entity or governmental agency.
(j) The Company is not a party to or obligated under any agreement,
plan, contract or other arrangements that will result, separately or in the
aggregate, in the payment of any "excess parachute payment" within the meaning
of Section 28OG of the Code.
Section 3.18. Labor and Employment Matters. Except to the extent set
----------------------------
forth in Schedule 3.18:
(a) the Company is not a party to any collective bargaining
agreements;
(b) the Company is in compliance in all material respects with all
applicable laws respecting employment and employment practices, terms and
conditions of employment, wages and hours, occupational safety and health and is
not engaged in any unfair labor or unfair employment practices;
(c) there is no unfair labor practice, charge or complaint or any
other matter against or involving the Company pending or threatened before the
National Labor Relations Board or any court of law;
(d) there is no labor strike, dispute, slowdown or stoppage actually
pending or threatened against the Company, and the Company has not experienced
any organized work stoppage, organizational drive or other labor difficulty
since its inception;
(e) there are no charges, investigations, administrative proceedings
or formal complaints of discrimination (including discrimination based upon sex,
age, marital status, race, national origin, sexual preference, handicap or
veteran status) pending or threatened before the Equal Employment Opportunity
Commission or any federal, state or local agency or court against the Company,
and no basis for any such claim exists; and
(f) there are no citations, investigations, administrative proceedings
or formal complaints of violations of local, state or federal occupational
safety and health laws pending or threatened before the Occupational Safety and
Health Review Commission or any federal, state or local agency or court against
the Company.
(g) Schedule 3.18(g) lists all employment, consulting, loan-out,
retainer or other contracts or agreements involving any person employed by the
Company as an employee or independent contractor to which the Company is a party
or by which it is bound. The
12
<PAGE>
Company is not and no other party to any such agreement or contract is in
default with respect to any material term or condition thereof (including the
making of contributions and recording services therefor), nor has any event
occurred which through the passage of time or the giving of notice, or both,
would constitute a default thereunder or would cause the acceleration of any
obligation of any party thereto.
(h) Schedule 3.18(h) lists the names and current compensation levels
of all employees and consultants of the Company.
Section 3.19. Environmental Matters.
---------------------
(a) The operations of the Company comply, and have complied, in all
respects with all applicable environmental laws.
(b) The Company has obtained all environmental, health and safety
permits, approvals, licenses and other authorizations necessary for the
operation of the Company's business, all of which are valid and in good standing
and are not subject to any modification or revocation proceeding, and the
Company is in compliance in all respects with all terms and conditions thereof.
(c) The Company has not received any written notice of any pending or
threatened investigation, proceeding or claim to the effect that it is or may be
liable to any person, or responsible or potentially responsible for the costs of
any remedial or removal action or other cleanup costs, as a result of
noncompliance with any applicable environmental laws or arising out of the
presence, generation, storage or disposal of hazardous waste, including
liability under the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, or any state superfund law, and there is no past or
present action, activity, condition or circumstance that could be expected to
give rise to any such liability on the part of the Company to any person, or for
any such cleanup costs.
Section 3.20. Agreements Affecting Competition. Except as set forth in
--------------------------------
Schedule 3.20, the Company is neither a party to nor bound by any agreement
which presently restricts or precludes the Company or any present or future
affiliate of the Company from conducting any business anywhere in the world, or
upon the occurrence of any event, the giving of notice or the passage of time,
by its terms would have such an effect.
Section 3.21. Transactions with Related Parties. Except as set forth in
---------------------------------
Schedule 3.21 or in connection with customary transactions in the ordinary
course of business, no officer, director or shareholder of the Company:
(a) owes money to the Company;
(b) has any claim against the Company;
(c) has any interest in any property or assets used by the Company in
its business;
13
<PAGE>
(d) has any benefits which are contingent on the transactions
contemplated by this Agreement, other than as stated herein;
(e) has any agreement with the Company that is not terminable by the
Company without penalty or notice;
(f) has any agreement providing severance benefits or other benefits
(which are conditioned upon a change of control) after the termination of
employment of such employee regardless of the reason for such termination of
employment; or
(g) has any agreement or plan, any of the benefits of which will be
increased, vested or accelerated by the occurrence of any of the transactions
contemplated by this Agreement.
Section 3.22. Major Vendors and Customers. Schedule 3.22 sets forth a
---------------------------
list of each licensor, developer, remarketer, distributor and supplier of
property or services to, and each licensee, end-user or customer of, the
Company, to whom the Company paid or billed in the aggregate in excess of
$30,000 during calendar year 1995 or 1996.
Section 3.23. Absence of Certain Commercial Practices. Since January 1,
---------------------------------------
1993, neither the Company, any of its directors, officers, agents, affiliates or
employees, nor any other person acting on behalf of the Company has (a) given or
agreed to give any gift or similar benefit having a value of $1,000 or more to
any customer, supplier or governmental employee or official or any other person,
for the purpose of directly or indirectly furthering the business of the
Company, (b) used any corporate funds for contributions, payments, gifts or
entertainment, or made any expenditures relating to political activities to
government officials or others in violation of any applicable laws, or (c)
received any unlawful contributions, payments, gifts or expenditures in
connection with the business of the Company.
Section 3.24. Accounts Receivable. Schedule 3.24 is a complete and
-------------------
accurate schedule of the accounts receivable of the Company as of September 30,
1996, as reflected in the balance sheet as of that date, included in the
Financial Statements, together with an accurate aging of these accounts. These
accounts receivable, and all accounts receivable of the Company created after
that date, arose from valid transactions in the ordinary course of business and
will be good and collectible at the recorded amounts thereof. No portion of the
accounts receivable is subject to counterclaim or setoff.
Section 3.25. Disclosure. No representation, warranty, or statement made
----------
by the Company in this Agreement or in any document or certificate furnished or
to be furnished to Buyer or IAI pursuant to this Agreement contains or will
contain any untrue or incomplete statement or omits or will omit to state any
fact necessary to make the statements contained herein or therein not
misleading. All facts known or reasonably available to the Company that are
material to the financial condition, operation, or prospects of the Company's
business and assets have been disclosed to Buyer and IAI.
14
<PAGE>
Section 3.26. Truth at Closing. All of the representations, warranties,
----------------
and agreements of the Company contained in this Article 3 shall be true and
correct and in full force and effect on and as of the Closing Date.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
----------------------------------------------
The Shareholders hereby represent and warrant to Buyer as follows:
Section 4.1. Ownership of Shares. The Shareholders are the sole record
-------------------
and beneficial owners of all outstanding shares of Common Stock, free and clear
of any Liens. The Shareholders each have the full legal right, capacity, power
and authority to vote the shares of Common Stock.
Section 4.2. Litigation. Except as set forth in Schedule 3.6, there are
----------
no suits, claims, investigations or proceedings pending or, to the knowledge of
each Shareholder, threatened against the Company or any of the Shareholders and
no Shareholder is subject to any writ, order, judgment, injunction or decree of
any court or governmental authority that has or may have a Material Adverse
Effect on the Company or its successors.
Section 4.3. Brokers, Finders, etc. Except as described in Schedule 3.15,
---------------------
no Shareholder has employed any broker, finder, consultant or other intermediary
in connection with transactions contemplated by this Agreement and the other
Merger Documents who might be entitled to a fee or commission in connection with
such transactions.
Section 4.4. Taxes. Each Shareholder has timely filed with the
-----
appropriate taxing authorities all returns, information returns and other
material information required to be filed through the date hereof. All such
returns and other information filed are complete and accurate on all material
respects. All Taxes that are due and payable by the Shareholders before the
date hereof have been paid.
Section 4.5. Securities Act Compliance. The Shareholders each acknowledge
-------------------------
and agree that none of the shares of Buyer Common Stock to be delivered to the
Shareholders pursuant to this Agreement will, at the time of delivery, be
registered under the federal Securities Act of 1933 (the "Act") or any other
federal or state securities laws (together with the Act, collectively, the
"Securities Acts"). Each Shareholder hereby represents and warrants to the
Buyer that such Shareholder is acquiring the Buyer Common Stock for investment
and not with a view toward, or for resale in connection with, a distribution of
the Buyer Common Stock. The Shareholders acknowledge that the Buyer Common
Stock may be sold, pledged, hypothecated, disposed of, or otherwise transferred
or distributed only (i) pursuant to registration of the under the Securities
Acts, or (ii) pursuant to an exemption from the registration requirements of the
Securities Acts, and in the case of exemption, only if the Shareholder delivers
to Buyer a legal opinion, in form and substance satisfactory to Buyer and
Buyer's legal counsel, stating that an exemption from the registration
requirements of the Securities Acts is
15
<PAGE>
available. Certificates representing the Buyer Common Stock shall bear a legend
setting forth the restrictions on transfer set forth in this Section.
Section 4.6. Sophistication of Shareholders. At and as of the Closing,
------------------------------
each Shareholder will deliver to Buyer a Shareholder Investment Representation
Certificate in the form attached hereto as Schedule 4.6, if the statements
contained therein are true. If any Shareholder is not able to execute and
deliver such Certificate, Buyer shall not be obligated to consummate the
transactions contemplated herein.
Section 4.7. Schedules. Where the Schedules to this Agreement require
---------
information about the Shareholders, such information is true, accurate and
complete in all material respects.
Section 4.8. Disclosure. No representation, warranty, or statement made by
----------
the Shareholders in this Agreement, the other Merger Documents, or any document
or certificate furnished or to be furnished to Buyer or IAI pursuant hereto or
thereto contains or will contain any untrue or incomplete statement or omits or
will omit to state any fact necessary to make the statements contained herein or
therein not misleading. All facts known or reasonably available to the
Shareholders that are material to the financial condition, operation or
prospects of the Company's business and assets have been disclosed by the
Shareholders to Buyer and IAI. All representations, warranties and agreements
of the Shareholders contained in this Article 4 shall be true and correct and in
full force and effect on and as of the Closing Date.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer hereby represents and warrants to the Company as follows:
Section 5.1. Incorporation; Authorization.
----------------------------
(a) Buyer is a corporation duly incorporated, validly existing and in
good standing under the laws of Georgia. IAI is a corporation duly
incorporated, validly existing and in good standing under the laws of Georgia.
(b) Buyer and IAI each has full corporate power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby.
(c) The execution and delivery of this Agreement by Buyer and IAI, the
performance of their respective obligations hereunder and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate proceedings on the part of Buyer and IAI.
(d) This Agreement has been duly executed and delivered by Buyer and
IAI and constitutes the legal, valid and binding obligations of each of them,
enforceable in accordance with its terms.
16
<PAGE>
(e) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not conflict with or
result in a violation, breach, default, right to accelerate or increase in
obligations under the Articles of Incorporation or Bylaws of Buyer and IAI, any
law or statute or any order, judgment or decree by which either of them is bound
or any license, lease or other agreement to which either of them is a party or
by which its respective assets and business may be affected.
(f) Upon issuance thereof in accordance with the terms of this
Agreement and the other Merger Documents, the shares of Buyer Common Stock to be
delivered to the Shareholders at Closing and upon exercise of options granted
pursuant to the Merger Documents shall be duly and validly authorized, issued
and fully paid and nonassessable.
Section 5.2. Litigation. There is no claim, action, proceeding or
----------
investigation pending or, to the knowledge of Buyer, threatened, nor is there
any writ, order, decree or injunction that calls into question the Buyer's or
IAI's authority or right to enter into this Agreement and consummate the
transactions contemplated hereby, or would otherwise prevent or delay the
transactions contemplated by this Agreement. Neither the Buyer nor IAI has
received notice of any suit, claim or proceeding against the Buyer, IAI or their
officers or directors in their capacity as officers or directors or notice that
they are subject to any writ, order, injunction or decree of any court or
governmental authority with jurisdiction over the Buyer and IAI.
Section 5.3. Brokers, Finders, etc. Except as set forth on Schedule 3.15,
---------------------
neither Buyer nor IAI has employed any broker, finder, consultant or other
intermediary in connection with the transactions contemplated by this Agreement
who might be entitled to a fee or commission in connection with such
transactions.
Section 5.4. Securities Act Compliance. Buyer acknowledges that none of
-------------------------
the shares of the Company's Common Stock to be delivered to Buyer pursuant to
this Agreement will, at the time of delivery, be registered under the Securities
Acts. Buyer represents and warrants that Buyer is acquiring the Company's
Common Stock for investment, and not with a view toward, or for resale in
connection with, a distribution of the Common Stock. Buyer acknowledges that
the Company's Common Stock may be sold, pledged, hypothecated, disposed of, or
otherwise transferred or distributed only (i) pursuant to registration of the
Company Common Stock under the Securities Acts, or (ii) pursuant to an exemption
from the registration requirements of the Securities Acts.
Section 5.5. Sophistication of Buyer. As of the Closing, Buyer shall
-----------------------
deliver to the Company a Buyer's Investment Representation Certificate in the
form attached hereto as Schedule 5.5.
Section 5.6. Disclosure. No representation or warranty of Buyer in this
----------
Agreement, nor any financial statements or other written statements or
certificates furnished to the Company or the Shareholders in connection with the
transactions contemplated by this Agreement, contain or as of the Closing Date
will contain, any untrue statement of a material fact, or omit or as of the
Closing Date will omit to state a material fact necessary to make the statements
herein or therein not misleading.
17
<PAGE>
ARTICLE 6
COVENANTS AND AGREEMENTS OF THE PARTIES
---------------------------------------
Section 6.1. Access to Information. The Buyer and its counsel,
---------------------
accountants and other representatives shall have full access during normal
business hours to all properties, books, accounts, records, personnel contracts,
and documents of or relating to the Company, and the Company shall furnish or
cause to be furnished to the Buyer and its representatives all data and
information concerning the business, finances and properties of the Company.
Buyer shall make available its executive officers for interviews by the
Shareholders or their representatives.
Section 6.2. Conduct of Business. Between the date hereof and the Closing
-------------------
Date, the Company shall conduct its business diligently and in the ordinary
course, consistent with past practice. Without limiting the generality of the
foregoing, the Company will use commercially reasonable efforts to:
(a) maintain its status in good standing in all jurisdictions in which
it is required to be qualified or registered to conduct its business;
(b) maintain all of its tangible assets in good operating condition
and maintain the protection of all intellectual property in substantially the
same standing as exists on the date hereof;
(c) continue performance in the ordinary course of its obligations
under its contracts and agreements;
(d) preserve its business organization intact, keep available its
present officers and employees, and preserve its present relationships with
suppliers, customers and others having business relationships with it; and
(e) maintain its existing insurance, subject to variations in amount
required by the ordinary operations of its business.
Section 6.3. Corporate Matters. The Company will not (a) amend its
-----------------
Articles of Incorporation or Bylaws, (b) issue any shares of its capital stock,
or (c) issue or create any warrants, obligations, subscriptions, options,
convertible securities, or other commitments under which any additional shares
of its capital stock of any class might be directly or indirectly authorized or
issued.
Section 6.4. Employees. Except as consented to in writing by the Buyer,
---------
the Company will not grant any increase in salaries to any officer, employee,
sales agent or representative, or alter or increase benefits payable to any such
person under any Employee Plan or other contract or commitment, other than in
the ordinary course of business.
Section 6.5. New Business. The Company will not, without the Buyer's
------------
written consent:
18
<PAGE>
(a) incur or consent to the incurrence of any single obligation or
other liability in excess of $25,000 except for inventory and supplies purchased
in the ordinary course of business consistent with past practices;
(b) consent to any Lien on any of its assets, except as set forth in
Schedule 6.5; or
(c) sell or otherwise dispose of any of its assets, except in the
ordinary course of business.
Section 6.6. Agreements. The Company will not modify, amend, cancel or
----------
terminate any of its existing contracts or agreements with any party named in
Schedule 3.22, or agree to do any of those acts, except in the ordinary course
of business.
Section 6.7. Cooperation. The parties agree (i) to cooperate with each
-----------
other to determine whether any filings (including the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended) (the "HSR Act") are required to
be made or consents required to be obtained in any jurisdiction in connection
with the consummation of the transactions contemplated hereby and to make any
such filings promptly and to obtain in a timely manner any such consents; and
(ii) to use all commercially reasonable efforts to obtain promptly the
satisfaction of the conditions to the Closing of the transactions contemplated
herein. The parties shall furnish to each other and to their counsel all such
information as may be reasonably required in order to effectuate the foregoing.
Section 6.8. Customer Contacts. The Company shall permit the Buyer to
-----------------
conduct a survey or otherwise inquire of certain or all of the Company's key
customers, as selected by the Buyer, regarding the relationship between such
customer and the Company and the impact of a change in control on such
relationship. The Company shall assist the Buyer in making such survey or
inquiries and shall have the right to have a representative of its choice
participate therein. Buyer shall complete such survey within twenty (20) days
from the date this Agreement is executed by all parties hereto.
Section 6.9. No-Shop. From and after the date hereof, the Company and the
-------
Shareholders shall not, and shall use their best efforts to cause the Company's
officers, directors, employees, agents and representatives not to, directly or
indirectly, encourage, solicit, engage in discussions with, or provide any
information to any person or group (other than Buyer) concerning any sale or
other disposition of all or any substantial part of the Company. The Company
shall promptly communicate to Buyer any inquiries or communications concerning
any such transaction that it or any of its executive officers may receive or of
which it or any such person may become aware.
Section 6.10. Tax Audits. The Shareholders agree to obtain the consent of
----------
Buyer prior to settling any Tax audit or other examination which relates to
periods ending prior to the Closing Date, which consent will not be unreasonably
withheld.
19
<PAGE>
Section 6.11. Tax Returns. The Buyer will have the responsibility for the
-----------
preparation and filing of all Tax returns, and payment of all Taxes, for the
taxable period ending on the Closing Date. The Shareholders will have the
responsibility for the preparation and filing of all Tax returns and payment of
all Taxes for any taxable period ending prior to the Closing Date and the
payment of any associated interest and penalties for any amounts due for any
such period.
Section 6.12. Interim Financial Statements. As promptly as practicable
----------------------------
after each month-end or quarter-end, as the case may be, from the date of this
Agreement to the Closing Date, the Company shall deliver to Buyer and IAI all
monthly and quarterly financial reports in the form that it customarily prepares
for its internal purposes concerning itself or its business.
Section 6.13. Updating of Information. From the date of this Agreement to
-----------------------
the Closing Date, the Company shall deliver revised or supplementary schedules
to this Agreement, containing accurate information as of the Closing Date, in
order to enable Buyer and IAI to confirm the accuracy of the representations and
warranties set forth in Article 3 of this Agreement and otherwise to give full
effect to the provisions of this Agreement. Such revised or supplementary
schedules shall not modify or be deemed part of this Agreement unless agreed by
Buyer and IAI in writing with reference to the specific schedules to be so
treated. Provided that the Schedules prepared as of the date of this Agreement
are true and correct when submitted for inclusion herein, the foregoing
obligation to furnish updated information shall apply to such Schedules only
insofar as material events or changes occur such as to make the contents of such
schedules unreliable or misleading.
Section 6.14. Pooling of Interests. Each party shall use its respective
--------------------
best efforts to cause the Merger to qualify for pooling-of-interests accounting
treatment.
ARTICLE 7
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
-------------------------------------------
The obligations of Buyer to consummate the transactions contemplated by
this Agreement are subject to the satisfaction, at or before the Closing, of all
the conditions set forth below. The Buyer may waive any or all of these
conditions in whole or in part without prior notice; provided, however, that
-------- -------
except to the extent, if any, that such waiver constitutes an election of
remedies under Georgia law, no such waiver of a condition shall constitute a
waiver by the Buyer of any of its other rights or remedies, at law or in equity,
if the Company or the Shareholders shall be in default of any of their
representations, warranties or covenants under this Agreement.
Section 7.1. Accuracy of Representations. The representations and
---------------------------
warranties of the Company and the Shareholders in this Agreement or any Schedule
hereto or in any written statement delivered by them at or prior to the Closing
to the Buyer under this Agreement shall be true in all material respects as of
the date hereof and on and as of the Closing Date as though made at that time.
20
<PAGE>
Section 7.2. Performance of Company and Shareholders. The Company and the
---------------------------------------
Shareholders shall have performed, satisfied and complied with all covenants,
agreements and conditions required by this Agreement to be performed or complied
with by them on or before the Closing Date.
Section 7.3. No Material Changes. During the period from March 31, 1996
-------------------
to the Closing Date, there shall not have been any material adverse change in
the financial condition or the results of operations of the Company, and the
Company shall not have sustained any material loss or damage to its assets,
whether or not insured, that materially affects its ability to conduct a
material part of its business.
Section 7.4. Certificates of the Company and Shareholders. The Buyer
--------------------------------------------
shall have received certificates, dated the Closing Date, signed by the
Shareholders (and as to Section 7.3 only, the Company's principal financial
officer), certifying that the conditions specified in Sections 7.1, 7.2 and 7.3
have been fulfilled. The Buyer shall have received certificates, dated the
Closing Date, signed by each of the Shareholders, as required pursuant to
Section 4.6.
Section 7.5. Absence of Litigation. No action, suit or proceeding (other
---------------------
than consideration of any filing under the HSR Act) before any court,
governmental body or authority, other than routine regulatory and tax
inspections, audits and reviews, pertaining to the transactions contemplated by
this Agreement or its consummation, shall have been instituted or threatened.
Section 7.6. Corporate Approval. The execution and delivery of this
------------------
Agreement by the Company, and the performance of its covenants and obligations
hereunder, shall have been duly authorized by the Company's Board of Directors
and the Shareholders, and the Buyer shall have received copies of all
resolutions pertaining to those authorizations, certified by the Secretary of
the Company.
Section 7.7. Approvals. This Agreement and the transactions contemplated
---------
hereby shall have received all approvals, consents, authorizations and waivers
from governmental and regulatory agencies and other third parties (including
lenders and lessors) required to consummate the transactions contemplated hereby
(including the expiration of any applicable waiting period under the HSR Act),
which, either individually or in the aggregate, if not obtained would have a
Material Adverse Effect.
Section 7.8. Customer Inquiries. The Buyer shall be reasonably satisfied
------------------
with the results of its inquiries of the Company's customers with respect to the
impact of a change in control on their relationship with the Company.
Section 7.9. Third Party Consents. The Buyer shall have received
--------------------
consents, in form satisfactory to it, to the transactions contemplated by this
Agreement from the parties listed in Schedule 7.9 hereto.
Section 7.10. Investigations. Neither any investigation of the Company by
--------------
Buyer or IAI, nor the Schedules hereto, nor any other document delivered to
Buyer or IAI as
21
<PAGE>
contemplated by this Agreement, shall have revealed any facts or circumstances
that, in the judgment of Buyer or IAI, reflect in a material adverse way on the
Company's assets, business, operations, or prospects.
Section 7.11. Affiliates. Simultaneous with the execution and delivery
----------
of this Agreement, the Company and the Shareholder's shall deliver to Buyer
copies of letter agreements, each substantially in the form of Exhibit 7.11,
executed by the Shareholders and all other directors, executive officers and by
any other person who is an "affiliate" for purposes of the 1933 Act (for
purposes of qualifying for pooling-of-interests accounting treatment) of the
Company and any other person who is an "affiliate" (for purposes of the 1933 Act
and for purposes of qualifying for pooling-of-interests accounting treatment as
described below) providing that such person will not sell, pledge, transfer or
otherwise dispose of any shares of the Common Stock held by such "affiliate" and
the shares of Buyer Common Stock to be received by such "affiliate" in the
Merger: (a) in the case of shares of Buyer Common Stock only, except in
compliance with the applicable provisions of the 1933 Act and the rules and
regulations thereunder; and (b) during the periods during which any such sale,
pledge, transfer or other disposition would, under generally accepted accounting
principles or the rules, regulations or interpretations of the SEC, disqualify
the Merger for pooling-of-interest accounting treatment, except as permitted by
Staff Accounting Bulletin No. 76 issued by the SEC. The certificates of Buyer
Common Stock issued to "affiliates" of the Company will bear an appropriate
legend reflecting the foregoing. The parties understand that such periods in
general encompass the period commencing 30 days prior to the Merger and ending
at the time of the publication of financial results covering at least 30 days of
combined operations of Buyer and the Company within the meaning of Section
201.01 of the SEC's Codification of Financial Reporting Policies.
Section 7.12. Pooling Letter. Buyer shall have received a letter, in form
--------------
and substance satisfactory to Buyer, dated as of the date of the Effective Time
from Porter Keadle Moore, LLP, its independent certified public accountants, to
the effect that the Merger will qualify for pooling-of-interests accounting
treatment.
Section 7.13. Employment Agreements. At or prior to Closing, each of the
---------------------
Shareholders shall have entered into Employment Agreements substantially in the
form attached hereto as Exhibit 7.13, the effectiveness of which shall be
expressly contingent upon the occurrence of Closing.
Section 7.14. Salem Capital Documents. Salem Capital Corporation shall
-----------------------
execute and deliver to Buyer all such instruments, documents, certificates and
agreements as Buyer or its counsel may require in connection with this Agreement
and the other Merger Documents.
Section 7.15. Opinion of Counsel. The Buyer shall have received an
------------------
opinion, dated the Closing Date, from Baker, Donelson, Bearman & Caldwell,
counsel for the Company, substantially in the form attached hereto as Schedule
7.15.
Section 7.16. Termination of Shareholders Agreement. The Shareholders and
-------------------------------------
the Company shall waive all rights pursuant to and shall terminate the
Shareholders Agreement dated
22
<PAGE>
June 21, 1996 by and among the Shareholders of the Company in accordance with
Section 9.08 thereof, and such Shareholders Agreement shall be of no further
force or effect.
ARTICLE 8
CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS
-------------------------------------------------
The obligations of the Company and the Shareholders to consummate the
transactions contemplated by this Agreement are subject to the satisfaction, at
or before the Closing, of all the conditions set forth below. The Company and
the Shareholders may waive any or all of these conditions in whole or in part
without prior notice; provided, however, that no such waiver of a condition
-------- -------
shall constitute a waiver by the Company or the Shareholders of any of their
other rights or remedies, at law or at equity, if the Buyer shall be in default
of any of its representations, warranties or covenants under this Agreement.
Section 8.1. Accuracy of Representations. The representations and
---------------------------
warranties by the Buyer in this Agreement or in any written statement delivered
to the Company under this Agreement shall be true in all material respects as of
the date hereof and on and as of the Closing Date as though made at that time.
Section 8.2. Performance of Buyer. The Buyer shall have performed,
--------------------
satisfied and complied with all covenants, agreements and conditions required by
this Agreement to be performed or complied with by it on or before the Closing
Date.
Section 8.3. Certificates of the Buyer and the Shareholders. The Company
----------------------------------------------
shall have received a certificate, dated the Closing Date, signed by the Buyer's
president or vice president and its secretary or assistant secretary, certifying
that the conditions specified in Sections 8.1 and 8.2 have been fulfilled. The
Company shall have received a certificate, dated the Closing Date, signed by
Buyer, as required pursuant to Section 5.5.
Section 8.4. Opinion of Counsel. The Company shall have received an
------------------
opinion, dated the Closing Date, from Nelson Mullins Riley & Scarborough,
L.L.P., counsel for Buyer, substantially in the form attached as Schedule 8.4
hereto.
Section 8.5. Absence of Litigation. No action, suit or proceeding (other
---------------------
than consideration of any filing under the HSR Act) before any court,
governmental body or authority, other than routine regulatory and tax
inspections, audits and reviews, pertaining to the transactions contemplated by
this Agreement or its consummation, shall have been instituted or threatened.
Section 8.6. Corporate Approval. The execution and delivery of this
------------------
Agreement by the Buyer and IAI and the performance of their respective covenants
and obligations hereunder, shall have been duly authorized by the Board of
Directors of Buyer and IAI, and the Company shall have received copies of all
resolutions pertaining to these authorizations, certified by their respective
corporate secretaries.
23
<PAGE>
Section 8.7. Third Party Approvals. This Agreement and the transactions
---------------------
contemplated hereby shall have received all approvals, consents, authorizations
and waivers from governmental and regulatory agencies required to consummate the
transactions (including the expiration of any applicable waiting period under
the HSR Act), which, either individually or in the aggregate, if not obtained
would have a Material Adverse Effect on the financial condition, results of
operation or business of Buyer or the Company.
Section 8.8. Employment Agreements. At or prior to Closing, each of the
---------------------
Shareholders shall have entered into Employment Agreements substantially in the
form attached hereto as Exhibit 7.13, the effectiveness of which shall be
expressly contingent upon the occurrence of Closing.
ARTICLE 9
CLOSING
-------
Section 9.1. Time and Place of Closing. The closing ("Closing") of the
-------------------------
transactions contemplated hereunder shall take place as soon as practicable
after execution and delivery of this Agreement on such date as the parties shall
agree, but in no event later than December 17, 1996 ("Closing Date"), and
effective as of the Effective Time. The Closing shall take place at the offices
of Buyer, 3150 Holcomb Bridge Road, Suite 200, Norcross, Georgia 30071 at 10:00
a.m., Eastern Daylight Time, on the Closing Date.
Section 9.2. Deliveries by the Company. At the Closing, the Company shall
-------------------------
deliver to Buyer:
(a) stock certificates evidencing all of the shares of Common Stock,
canceled or duly endorsed in blank or with stock powers endorsed in blank;
(b) Articles of Incorporation of the Company, certified by the
Secretary of State of the State of Tennessee, and a true and correct copy of the
Bylaws of the Company, certified as of the Closing Date by the Secretary of the
Company;
(c) good standing certificates relating to the Company from the State
of Tennessee and each other jurisdiction in which the Company is qualified to
conduct business;
(d) the corporate seal and all stock ledgers and minute books of the
Company in existence as of the Closing, accompanied by a certificate of the
Secretary of the Company certifying that the stock ledgers and minutes books
are, to the best of his information and belief, true, correct and complete as of
the Closing Date;
(e) the Merger Documents, including the Articles of Merger and Plan of
Merger, duly executed by the Company;
24
<PAGE>
(f) a Secretary's Certificate attesting to the incumbency of the
officers of the Company executing this Agreement and the other certificates and
agreements delivered by the Company at the Closing; and
(g) the documents and instruments referred to in Article 7 and Article
8 hereof.
Section 9.3. Deliveries by Buyer and IAI. At the Closing, Buyer and IAI
---------------------------
shall deliver to the Company:
(a) a Secretary's Certificate attesting to the incumbency of the
officers of Buyer and IAI executing this Agreement and the other certificates
and agreements delivered by Buyer and IAI at the Closing;
(b) resolutions of the Board of Directors of Buyer (if applicable) and
IAI authorizing the execution and delivery of this Agreement and the performance
of the transactions contemplated hereby, certified by the Secretary of Buyer and
IAI, respectively;
(c) the Merger Documents, including the Articles of Merger and Plan of
Merger, duly executed by IAI;
(d) certificates representing the shares of Buyer Common Stock
issuable pursuant to Section 2.1, registered in the names of each of the
Shareholders; and
(e) the documents and instruments referred to in Article 7 and Article
8 hereof.
Section 9.4. Post Closing Deliveries and Power of Attorney. The
---------------------------------------------
Shareholders and Buyer agree that, from time to time after the Closing, each of
them will execute and deliver such further instruments of conveyance and
transfer and take such other action as may be necessary to carry out the
purposes and intent of this Agreement. Each Shareholder absolutely and
irrevocably appoints Buyer as his true and lawful agent and attorney-in-fact,
with full power of substitution, in the name of such Shareholder, to execute and
do all such assurances, acts and things which such Shareholder has covenanted
and agreed to do under this Agreement but which such Shareholder has failed to
execute or do within three (3) days of Buyer's request therefor, including but
not limited to executing, on behalf of such Shareholder, such transfer or
conveyance documents and other agreements that Buyer may deem proper in and for
the exercise of any such powers, authorities or discretion. This Power of
Attorney grants to Buyer, as agent for each Shareholder, all powers granted to
agents and attorneys-in-fact generally under applicable law. Each Shareholder
hereby ratifies and confirms and agrees to ratify and confirm whatever lawful
acts Buyer shall do in the exercise of the power of attorney granted to Buyer
hereby, which power of attorney shall be deemed to be coupled with an interest,
is irrevocable and shall survive the disability, incapacity or incompetency of
each Shareholder.
25
<PAGE>
ARTICLE 10
TERMINATION
-----------
Section 10.1. Termination. Notwithstanding anything herein to the
-----------
contrary, this Agreement may be terminated and the transactions contemplated
hereby abandoned at any time prior to the Closing:
(a) by mutual written consent of the Company and Buyer;
(b) by the party not in breach in the event of a material breach of
this Agreement by the Company or the Shareholders on the one hand or Buyer on
the other hand, which is not cured within ten days after written notice thereof;
or
(c) by either the Company or Buyer if the Closing has not occurred
prior to December 17, 1996.
Section 10.2. Effect of Termination. If this Agreement is terminated
---------------------
as provided above, this Agreement shall become void and be of no further force
or effect, and no party shall have any further liability to any other party
hereunder as a result of such termination.
ARTICLE 11
SURVIVAL; INDEMNIFICATION
-------------------------
Section 11.1. Survival. The parties' respective representations and
--------
warranties contained in this Agreement will survive execution and delivery of
this Agreement and Closing and shall remain in full force and effect until
December 31, 1998; provided, however, that the representations and warranties
-------- -------
set forth in Sections 3.1 and 3.2 shall survive the Closing for a period of five
years from the Closing Date; and provided, further, that the representations and
-------- -------
warranties set forth in Section 3.16 and Section 4.4 shall survive until
expiration of any applicable statute of limitations (including any extensions
thereof) which will preclude assertion of Tax claims against the Company and its
successors for matters existing on or prior to the Closing Date. Any claim made
or notice of a claim given as to any breach or alleged breach of a
representation or warranty shall extend the applicable survival period set forth
above until such claim has been resolved and satisfied by agreement of the
parties or by the entry of a final, non-appealable judgment of a court having
jurisdiction over such claim.
Section 11.2. Indemnification.
---------------
(a) Indemnification by Shareholders. Subject to the terms of this
-------------------------------
Article 11, Shareholders hereby, jointly and severally, covenant and agree to
indemnify, defend, save and hold harmless Buyer, IAI and the Company and their
respective officers, directors, employees, agents, affiliates or any of their
respective successors, assigns or personal representatives (collectively, the
"Buyer Indemnified Parties"), from and against any demands, claims, actions,
losses, damages, deficiencies, liabilities, costs and expenses (including,
without limitation, reasonable attorneys' and accountants' fees and expenses),
together with interest and penalties,
26
<PAGE>
if any, awarded by court order or otherwise agreed to (collectively,
"Indemnifiable Damages"), suffered by the Buyer Indemnified Parties which arise
out of or result from:
(i) any misrepresentation in or breach of any of the
representations, warranties or covenants made by Shareholders in this
Agreement;
(ii) any misrepresentation in a document, certificate or
affidavit delivered by the Shareholders at the Closing;
(iii) any guaranty or other material liability of the Company
not otherwise disclosed hereunder or in any Schedule hereto;
(iv) the assertion of any claim by any Shareholder or any other
person or entity arising out of consummation of the transactions
contemplated by this Agreement; or
(v) any claim alleging misconduct of, by or under the control
of the Company which is criminal or of a grossly negligent character that
is attributable to events occurring prior to the Closing.
(b) Indemnification by Buyer. Subject to the terms of this Article
------------------------
11, Buyer covenants and agrees to indemnify and hold harmless the Shareholders
from and against any Indemnifiable Damages suffered by them which arise out of
or result from:
(i) any misrepresentation in or breach of any of the
representations, warranties or covenants made by Buyer in this Agreement;
or
(ii) any misrepresentation in a document, certificate or
affidavit delivered by Buyer at the Closing.
Section 11.3. Procedure for Third-Party Claims.
--------------------------------
(a) Promptly after obtaining knowledge of any claim or demand which
has given rise to, or could reasonably give rise to, a claim for indemnification
hereunder, the party seeking indemnification shall give written notice of such
claim ("Notice of Claim") to the other party. The Notice of Claim shall set
forth a brief description of the facts giving rise to such claim and the amount
(or a reasonable estimate) of the liability, loss, damage or expense suffered,
or which may be suffered, by the party seeking indemnification, and shall be
accompanied by all documentation in the case of a third-party claim against the
indemnified party.
(b) Upon receiving the Notice of Claim, the indemnifying party shall
resist, settle or otherwise dispose of such claim in such manner as it shall
deem appropriate, including the employment of counsel, and shall be responsible
for the payment of all settlements, judgments, costs and expenses, including the
reasonable fees and expenses of any counsel retained. The indemnified party
shall have the right to employ separate counsel in any such
27
<PAGE>
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall be at the indemnified party's expense unless:
(i) the employment has been specifically authorized by the
indemnifying party in writing;
(ii) the indemnifying party has improperly failed to assume the
defense and employ counsel; or
(iii) the named parties to any action (including any impleaded
parties) include the Buyer and/or the Company and the Shareholders, and the
indemnified party has been advised by such counsel that representation of
Buyer and/or the Company and Shareholders by the same counsel would be
inappropriate under applicable standards of professional conduct due to
actual or potential differing interests between them (in which case, if the
indemnified party notifies the indemnifying party in writing that the
indemnified party elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall have neither the right nor
the obligation to assume the defense of such action on behalf of the
indemnified party).
(c) The party seeking indemnification shall comply with the foregoing
procedure for each claim arising hereunder, whether or not the amount of such
claims exceeds any minimum amount. The indemnified party shall cooperate with
the indemnifying party in defending any such claim and provide any books,
records, information or testimony requested, which is in the hands of or under
the control of the indemnified party or obtainable by the indemnified party
without unreasonable expense.
ARTICLE 12
MISCELLANEOUS
-------------
Section 12.1. Counterparts. This Agreement may be executed in two or more
------------
counterparts and may be delivered via facsimile, all of which shall be
considered one and the same agreement, and shall become effective when one or
more counterparts have been signed by each of the parties and delivered
(including via facsimile) to the other parties.
Section 12.2. Governing Law. This Agreement and the Merger Documents
-------------
shall be governed by and construed in accordance with the laws of the State of
Georgia without reference to the choice of law principles thereof.
Section 12.3. No Third-Party Beneficiaries. Nothing in this Agreement or
----------------------------
any other Merger Documents is intended, nor shall it be construed, to confer any
rights or benefits upon any person (including, but not limited to, any employee
or former employee of the Company) other than Shareholders, Buyer, IAI and Buyer
Indemnified Parties, and their successors and assigns, and no other person not a
party hereto shall have any rights or remedies hereunder.
Section 12.4. Joint and Several Liability. All obligations and
---------------------------
liabilities of the Shareholders hereunder shall be joint and several.
28
<PAGE>
Section 12.5. Entire Agreement. This Agreement and the Merger Documents
----------------
and the Schedules and Exhibits hereto and thereto, contain the entire agreement
between the parties with respect to the subject matter hereof, and there are no
agreements, understandings, representations or warranties between the parties
other than those set forth or referred to herein. The parties hereto
acknowledge that each party and its counsel have participated in the negotiation
and approval of this Agreement and the other Merger Documents. This Agreement
and the other Merger Documents shall be construed without regard to any
presumption or other rule requiring construction against the party causing the
Agreement and the other Merger Documents to be drafted. If any provision of
this Agreement and the other Merger Documents requires that action be taken on
or before a particular date that falls on a day that is not a business day, the
time for the taking of such action shall automatically be postponed until the
next following business day.
Section 12.6. Expenses. All legal, accounting and other costs and
--------
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses.
Section 12.7. Notices. All notices hereunder shall be sufficiently given
-------
for all purposes hereunder if in writing and delivered personally, sent by
documented overnight delivery service, or to the extent receipt is confirmed,
telecopy, telefax or other electronic transmission service to the appropriate
address or number as follows:
To the Shareholders:
Paul England
9431 Elmhurst Court
Brentwood, Tennessee 37027
and
Jack Lance
2353 North Berrys Chapel Road
Franklin, Tennessee 37069
and
Jerry McKamey
632 General George Patton Road
Nashville, Tennessee 37221
29
<PAGE>
To the Company:
FiNet, Inc.
632 General George Patton Road
Nashville, TN 37221
Facsimile: (615) 794-0008
With a copy to:
Steven J. Eisen
Baker, Donelson, Bearman & Caldwell
Suite 1700, Nashville City Center
511 Union Street
Nashville, Tennessee 37219
Facsimile: (615) 726-0464
To Buyer and IAI:
Intercept Holdings Inc.
3150 Holcomb Bridge Road, Suite 200
Norcross, GA 30071
Attn: John W. Collins
Facsimile: (770) 242-6803
With a copy to:
Glenn W. Sturm
Nelson Mullins Riley & Scarborough, L.L.P.
400 Colony Square, Suite 2200
1201 Peachtree Street, N.E.
Atlanta, Georgia 30361
Facsimile: (404) 817-6151
Section 12.8. Public Announcements. No party hereto shall make any public
--------------------
announcement or other public disclosure regarding this Agreement or its terms
without the consent of the other (which consent shall not be unreasonably
withheld) except to the extent that such disclosure is required by applicable
law. Notwithstanding the foregoing, the parties may communicate with their
respective employees, customers, suppliers, creditors, shareholders and relevant
governmental agencies as may be necessary and appropriate in connection with the
implementation and consummation of the terms of this Agreement. In addition,
the parties shall cooperate and coordinate with one another on the form and
substance of any press release announcing the execution and delivery of this
Agreement or relating to this Agreement prior to Closing.
30
<PAGE>
Section 12.9. Successors and Assigns. This Agreement shall be binding
----------------------
upon and inure to the benefit of the parties hereto and their respective
successors, personal representatives and permitted assigns; provided, however,
except as expressly contemplated hereunder, no party hereto will assign its
rights or delegate its obligations under this Agreement without the express
written consent of the other parties hereto; provided further, that Buyer may,
at its election, assign its rights under this Agreement in whole to any wholly
owned subsidiary of Buyer so long as the representations and warranties of Buyer
made herein are equally true of such assignee, and provided that such assignment
shall not relieve Buyer of liability hereunder. Any attempted assignment made
without the requisite approval shall be null and void.
Section 12.10. Headings. The section and article headings contained in
--------
this Agreement are inserted for convenience and reference only and will not
affect the meaning or interpretation of this Agreement.
Section 12.11. Amendments and Waivers. No amendment, modification, or
----------------------
alteration of the terms or provisions of this Agreement or any other Merger
Documents shall be binding unless the same shall be in writing and duly executed
by the parties hereto. Any of the terms or conditions of this Agreement may be
waived in writing at any time by the party that is entitled to the benefits
thereof. No waiver of any of the provisions of this Agreement shall be deemed
to or shall constitute a waiver of any other provision hereof (whether or not
similar).
Section 12.12. Invalidity of any Part. In any provision or part of this
----------------------
Agreement shall for any reason be held invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions of this Agreement and shall be construed as if such invalid,
illegal or unenforceable provision or part thereof had never been contained
herein, but only to the extent of its invalidity, illegality, or
unenforceability.
Section 12.13. Remedies. Each of the parties acknowledges that money
--------
damages would not be a sufficient remedy for any breach of this Agreement and
that irreparable harm would result if this Agreement were not specifically
enforced. Therefore, the rights and obligations of the parties under this
Agreement shall be enforceable by a decree of specific performance issued by any
court of competent jurisdiction, and appropriate injunctive relief may be
applied for and granted in connection therewith. A party's right to specific
performance shall be in addition to all other legal or equitable remedies
available to such party.
Section 12.14. Actions and Proceedings. The Company and each Shareholder
-----------------------
consent to the exclusive jurisdiction and venue of the courts of any county in
the State of Georgia and the United States District Court for any District of
Georgia in any action or judicial proceeding brought to enforce, construe or
interpret this Agreement or any other Merger Documents. The Company and each
Shareholder agree that any forum other than the State of Georgia is an
inconvenient forum and that a suit (or non-compulsory counterclaim) brought by
the Company and/or any Shareholder against Buyer, IAI or any Buyer Indemnified
Party in a court of any state other than the State of Georgia should be
forthwith dismissed or transferred to a court located in the State of Georgia.
31
<PAGE>
IN WITNESS WHEREOF, this Acquisition and Merger Agreement has been executed
by each of the parties as of the date first above written.
Witness: Intercept Holdings Inc.
/s/ April W. Barwick By: /s/ John W. Collins
- ----------------------- -----------------------------
John W. Collins, Chairman and
Chief Executive Officer
Witness: Intercept Acquisitions II, Inc.
/s/ April W. Barwick By: /s/ John W. Collins
- ----------------------- -----------------------------
John W. Collins, Chairman and
Chief Executive Officer
Witness: FiNet, Inc.
/s/ Steven J. Eisen By: /s/ Paul D. England
- ----------------------- -----------------------------
Paul D. England, President
32
<PAGE>
Shareholders
State of Tennessee /s/ Paul D. England
-------------------------------- -------------------------------
Paul D. England
County of Davidson
-------------------------------
The foregoing instrument was
acknowledged before me this 14th day of
December, 1996, by Paul D. England.
Witness my hand and official seal.
/s/ Steven J. Eisen
- -----------------------------------------
Title of Officer
My commission expires: May 23, 1998
-------------------
State of Tennessee /s/ Jack K. Lance
------------------------ -------------------------------
Jack K. Lance
County of Davidson
-----------------------
The foregoing instrument was
acknowledged before me this 14th day of
December, 1996, by Jack K. Lance.
Witness my hand and official seal.
/s/ Steven J. Eisen
- ----------------------------------------
Title of Officer
My commission expires: May 23, 1998
-----------------
33
<PAGE>
State of Tennessee /s/ Jerry McKamey
------------------------------ -------------------------------
Jerry McKamey
County of Davidson
-----------------------------
The foregoing instrument was
acknowledged before me this 14th day of
December, 1996, by Jerry McKamey.
Witness my hand and official seal.
/s/ Steven J. Reisen
- ------------------------------------------
Title of Officer
My commission expires: May 23, 1998
--------------------
34
<PAGE>
Index to Exhibits and Schedules
Exhibit 1.2 Form of Articles of Merger
Exhibit 3.3(a) Finet, Inc. Balance Sheet
Exhibit 7.11 Form of Finet, Inc. Affiliate Letter
Exhibit 7.13 Form of Employment Agreement
Schedule 2.2 Allocation of Buyer Common Stock
Schedule 3.1(f) Company Subsidiaries, Trade Name or Other Fictitious Names
Schedule 3.4 Liabilities
Schedule 3.5 Liens
Schedule 3.6 Litigation and Other Proceedings
Schedule 3.7 Software Programs and Documentation
Schedule 3.7(a) Patents, Trademarks, Service Marks, Tradenames and Copyrights
owned or used by the Company and all applications therefor
and registrations thereof
Schedule 3.7(b) Form and placement of the proprietary legends and copyright
notices displayed in or on the Software
Schedule 3.7(c) Form Non-Disclosure & Assignment Agreement; list of employees
and consultants
Schedule 3.7(e) Claims in Software
Schedule 3.9 Software Contracts
Schedule 3.10 Third Party Interests in Software
Schedule 3.13 Casualty, liability, workers' compensation, life and other
forms of insurance
Schedule 3.14 Material Contracts
Schedule 3.15 Brokers, Finders and Consultants
Schedule 3.16(b) Payment of Taxes
Schedule 3.16(c) Audit History
Schedule 3.17 Employee Plans
Schedule 3.18 Labor and Employment Matters
Schedule 3.18(g) Employment, consulting, loan-out, retainer or other contracts
or agreements
Schedule 3.18(h) Names and Compensation Levels of all Employees and
Consultants
Schedule 3.20 Competition Matters
Schedule 3.21 Transactions with Related Parties
Schedule 3.22 List of Distributors, Suppliers, Etc.
Schedule 3.24 Accounts Receivable
Schedule 4.6 Form of Shareholder Investment Representation Certificate
Schedule 5.5 Form of Buyer Investment Representation Certificate
Schedule 6.5 Consent Liens
Schedule 7.9 Third Party Consents
Schedule 7.15 Form of Opinion of Counsel to Finet, Inc. to be delivered to
Intercept at the effective time
Schedule 8.4 Form of Opinion of Counsel to Intercept to be delivered to
Finet at the effective time
<PAGE>
EXHIBIT 2.3
ACQUISITION AND MERGER AGREEMENT
BY AND AMONG
INTERCEPT HOLDINGS INC.,
a Georgia corporation
INTERCEPT ACQUISITIONS, INC.,
a Georgia corporation
And
BANK SERVICES CORPORATION,
a Colorado corporation
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 THE MERGER....................................................... 1
Section 1.1. Merger Transaction....................................... 1
Section 1.2. Effective Time of the Merger............................. 1
Section 1.3. Terms and Conditions; Conversion of Shares............... 2
ARTICLE 2 PURCHASE PRICE; EXCHANGE OF SHARES............................... 2
Section 2.1. Common Stock............................................. 2
Section 2.2. Exchange of Shares....................................... 2
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
SHAREHOLDERS..................................................... 2
Section 3.1. Authorization; Organization.............................. 2
Section 3.2. Capitalization; Structure................................ 3
Section 3.3. Financial Statements..................................... 4
Section 3.4. Undisclosed Liabilities.................................. 4
Section 3.5. Properties............................................... 6
Section 3.6. Litigation............................................... 6
Section 3.7. Intellectual Property.................................... 6
Section 3.8. Adequacy of Technical Documentation...................... 7
Section 3.9. Third-Party Components in Software....................... 8
Section 3.10. Third-Party Interests or Marketing Rights in Software.... 8
Section 3.11. Licenses................................................. 8
Section 3.12. Compliance with Laws..................................... 8
Section 3.13. Insurance................................................ 9
Section 3.14. Material Contracts....................................... 9
Section 3.15. Brokers, Finders, etc.................................... 9
Section 3.16. Taxes.................................................... 10
Section 3.17. Pension and Employee Benefit Plans....................... 11
Section 3.18. Labor and Employment Matters............................. 13
Section 3.19. Environmental Matters.................................... 14
Section 3.20. Agreements Affecting Competition......................... 14
Section 3.21. Transactions with Related Parties........................ 14
Section 3.22. Major Vendors and Customers.............................. 15
Section 3.23. Absence of Certain Commercial Practices.................. 15
Section 3.24. Accounts Receivable...................................... 15
Section 3.25. Securities Act Compliance................................ 15
Section 3.26. Sophistication of Shareholders........................... 16
Section 3.27. Disclosure............................................... 16
Section 3.28. Truth at Closing......................................... 16
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER.......................... 16
Section 4.1. Incorporation; Authorization............................. 16
Section 4.2. Litigation............................................... 17
Section 4.3. Brokers, Finders, etc. .................................. 17
Section 4.4. Securities Act Compliance................................ 17
Section 4.5. Sophistication of Buyer.................................. 17
Section 4.6. Disclosure............................................... 17
ARTICLE 5 COVENANTS AND AGREEMENTS OF THE PARTIES.......................... 18
Section 5.1. Access to Information.................................... 18
Section 5.2. Conduct of Business...................................... 18
Section 5.3. Corporate Matters........................................ 18
Section 5.4. Employees................................................ 18
Section 5.5. New Business............................................. 19
Section 5.6. Agreements............................................... 19
Section 5.7. Cooperation.............................................. 19
Section 5.8. Customer Contacts........................................ 19
Section 5.9. No-Shop.................................................. 19
Section 5.10. Tax Audits............................................... 20
Section 5.11. Tax Returns.............................................. 20
Section 5.12. Interim Financials....................................... 20
Section 5.13. Intent of the Parties.................................... 20
Section 5.14. Updating of Information.................................. 20
ARTICLE 6 CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS...................... 21
Section 6.1. Accuracy of Representations.............................. 21
Section 6.2. Performance of Seller.................................... 21
Section 6.3. No Material Changes...................................... 21
Section 6.4. Certificates of the Shareholders......................... 21
Section 6.5. Opinion of Counsel....................................... 21
Section 6.6. Absence of Litigation.................................... 21
Section 6.7. Corporate Approval....................................... 21
Section 6.8. Approvals................................................ 22
Section 6.9. Customer Inquiries....................................... 22
Section 6.10. Confidentiality and Work Product Agreements.............. 22
Section 6.11. Third Party Consents..................................... 22
Section 6.12. Investigations........................................... 22
Section 6.13. Closing of the Stock Purchase and Delivery of Shares..... 22
ARTICLE 7 CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS................ 22
Section 7.1. Accuracy of Representations.............................. 23
Section 7.2. Performance of Buyer..................................... 23
Section 7.3. Certificates of the Buyer................................ 23
Section 7.4. Opinion of Counsel....................................... 23
Section 7.5. Absence of Litigation.................................... 23
Section 7.6. Corporate Approval....................................... 23
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
Section 7.7. Third Party Approvals................................... 23
Section 7.8. No Material Changes..................................... 23
ARTICLE 8 CLOSING.......................................................... 24
Section 8.1. Time and Place of Closing............................... 24
Section 8.2. Deliveries by the Company............................... 24
Section 8.3. Deliveries by Buyer and IAI............................. 24
Section 8.4. Post Closing Deliveries and Power of Attorney........... 25
ARTICLE 9 TERMINATION...................................................... 25
Section 9.1. Termination............................................. 25
Section 9.2. Effect of Termination................................... 25
ARTICLE 10 SURVIVAL; INDEMNIFICATION........................................ 26
Section 10.1. Survival................................................ 26
Section 10.2. Indemnification......................................... 26
Section 10.3. Procedure for Third-Party Claims........................ 27
ARTICLE 11 MISCELLANEOUS.................................................... 28
Section 11.1. Counterparts............................................ 28
Section 11.2. Governing Law........................................... 28
Section 11.3. No Third-Party Beneficiaries............................ 28
Section 11.4. Joint and Several Liability............................. 28
Section 11.5. Entire Agreement........................................ 29
Section 11.6. Expenses................................................ 29
Section 11.7. Notices................................................. 29
Section 11.8. Public Announcements.................................... 30
Section 11.9. Successors and Assigns.................................. 31
Section 11.10. Headings................................................ 31
Section 11.11. Amendments and Waivers.................................. 31
Section 11.12. Invalidity of any Part.................................. 31
Section 11.13. Remedies................................................ 31
Section 11.14. Actions and Proceedings................................. 31
</TABLE>
iii
<PAGE>
ACQUISITION AND MERGER AGREEMENT
--------------------------------
THIS ACQUISITION AND MERGER AGREEMENT ("Agreement") is dated as of November
26, 1996, by and among Intercept Holdings Inc., a Georgia corporation ("Buyer"),
Intercept Acquisitions, Inc., a Georgia corporation and a wholly owned
subsidiary of Buyer ("IAI"), Bank Services Corporation, a Colorado corporation
(the "Company"), Charles W. Capel, a resident of the State of Texas ("Capel"),
Philip R. Meinert, a resident of the State of Colorado ("Meinert"), Gary L.
Nelson, a resident of the State of Colorado ("Nelson"), Brian W. Schmitt, a
resident of the State of Colorado ("Schmitt"), and Darcey E. Smith, a resident
of the State of Colorado ("Smith") (Capel, Meinert, Nelson, Schmitt and Smith,
each a "Shareholder" and, collectively, the "Shareholders").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, subject to the terms and conditions of this Agreement, the
Shareholders, the Company, Buyer and IAI desire and deem it in their respective
best interests that the Company be merged with IAI; and
WHEREAS, the Company's issued and outstanding capital stock currently
consists of 177,857 shares of common stock, no par value per share (the "Common
Stock"); and
WHEREAS, prior to the Closing Date (as hereinafter defined), the Company
will purchase all of the shares of Common Stock now or hereafter owned or
acquired by Roland Schmitt; and
WHEREAS, the Shareholders will own, after such purchase, 87,000 shares of
Common Stock which will be all of the outstanding shares of the Company's
capital stock; and
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto agree as follows:
ARTICLE 1
THE MERGER
----------
Section 1.1. Merger Transaction. Subject to the terms and conditions
------------------
hereof, the parties hereto agree that IAI shall be merged into the Company in
accordance with the applicable provisions of the Georgia Business Corporation
Act (the "GBCA") and the Colorado Business Corporation Act (the "CBCA"), and the
separate existence of IAI shall thereupon cease (such merger transaction is
referred to hereinafter as the "Merger"). The Company shall become a wholly-
owned subsidiary of Buyer and shall be the surviving corporation in the Merger.
Subject to the terms and conditions hereof, the parties hereto shall take all
actions necessary in accordance with applicable law and their respective
Articles of Incorporation and Bylaws to cause the Merger to be consummated.
Section 1.2. Effective Time of the Merger. The Merger shall become
----------------------------
effective at the time (the "Effective Time") when the Articles of Merger (the
"Articles of Merger") in the form attached hereto as Exhibit 1.2, together with
the Plan of Merger (the "Plan of Merger") attached thereto, are executed by the
Company and IAI in accordance with the applicable
<PAGE>
provisions of the GBCA and the CBCA and are duly filed with the Department of
State of Georgia and the Secretary of State of Colorado, which actions shall be
taken on the Closing Date.
Section 1.3. Terms and Conditions; Conversion of Shares. The effect of
------------------------------------------
the Merger on the Articles of Incorporation, Bylaws, directors and officers of
the surviving corporation, and the manner and basis of converting the shares of
capital stock of IAI and the Company into stock or cash, shall be as set forth
in the Plan of Merger.
ARTICLE 2
PURCHASE PRICE; EXCHANGE OF SHARES
----------------------------------
Section 2.1. Common Stock. All of the Shareholders' 87,000 shares of
------------
Common Stock shall be converted into the right to receive 221,429 shares of
common stock, no par value per share ("Buyer Common Stock"), of Buyer, or so
much as shall be necessary to equal 12.5% of the total number of issued and
outstanding shares of Buyer Common Stock as of the Closing (as hereinafter
defined), after giving effect to the Merger. No fractional shares of Buyer
Common Stock will be issued, and fractional shares to which each Shareholder
would otherwise be entitled will be disregarded.
Section 2.2. Exchange of Shares. At the Closing, the Buyer will deliver
------------------
to each of the Shareholders a certificate or certificates representing the
shares of Buyer Common Stock as computed pursuant to Section 2.1 and the
Shareholders shall deliver all certificates representing all outstanding shares
of the Common Stock.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
-------------------------------------------------
THE SHAREHOLDERS
----------------
The Company and the Shareholders, jointly and severally, hereby represent
and warrant to Buyer as follows:
Section 3.1. Authorization; Organization.
---------------------------
(a) This Agreement has been duly and voluntarily executed and
delivered by each of the Shareholders and the Company and constitutes, and, as
to the Company, will constitute at the Closing Date, the legal, valid and
binding obligations of each of them, enforceable in accordance with its terms.
(b) The Company has full corporate power and authority to execute
and deliver this Agreement and at the Closing Date will have full corporate
power and authority to perform its obligations hereunder and to consummate the
Merger and the other transactions provided for herein, in the Articles of
Merger, the Plan of Merger and all other documents and agreements executed in
connection herewith and therewith (collectively, the "Merger Documents"). The
Board of Directors of the Company and the Shareholders have unanimously
2
<PAGE>
approved the execution, delivery and performance of this Agreement and the
consummation of the Merger and the other transactions provided for herein.
(c) The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby will not conflict with
or result in a violation, breach, default, right to accelerate or increase in
obligations under the Company's Articles of Incorporation or Bylaws, any law or
statute or any order, judgment or decree by which the Company is bound by name
or any license, lease or other agreement to which the Company is a party or by
which its assets and business may be affected.
(d) The Company is a corporation duly organized and validly
existing and in good standing under the laws of Colorado and has all requisite
corporate power and authority to own, lease or operate its properties and assets
and to carry on its business as now being conducted. The Company is duly
qualified to transact business and is in good standing in each jurisdiction in
which the nature of property owned or leased by it or the conduct of its
business requires it to be so qualified, except where the failure to do so would
not have a material adverse effect on its business, operations, properties,
assets or condition, financial or otherwise (a "Material Adverse Effect").
(e) The Company's Articles of Incorporation, Bylaws and stock
book and, in all material respects, its minute books are complete and correct
and contain all amendments thereto to date, a record of all corporate
proceedings of the Company, and a record of all stock issuances and transfers of
the Company.
(f) Except as set forth in Schedule 3.1(f), the Company has no
subsidiaries and never has had any subsidiaries, and the Company does not
conduct any business under any trade name or other fictitious name.
(g) The Company is not a party to any joint venture or other
similar agreement or arrangement that involves any sharing of profits of the
Company or its assets or is similar to or competitive with the business.
(h) The Shareholders are the sole record and beneficial owners of
the shares of Common Stock, free and clear of any lien, claim, charge, mortgage,
pledge, security interest, option or other legal or equitable encumbrance of any
nature (hereinafter "Liens"). The Shareholders each have the full legal right,
power and authority to vote the shares of Common Stock.
Section 3.2. Capitalization; Structure.
-------------------------
(a) The authorized capital stock of the Company consists of
400,000 shares of Common Stock, of which 177,857 shares are outstanding. The
outstanding Common Stock is held, beneficially and of record, as indicated on
Schedule 3.2. After Roland Schmitt's shares are redeemed, 87,000 shares will be
outstanding and 90,857 shares will be held in treasury as authorized but
unissued stock. All of the outstanding shares of Common Stock have been duly and
validly authorized and issued, and are all fully paid and nonassessable. No
shares of the
3
<PAGE>
Company's capital stock have been issued in violation of any preemptive rights,
any rights of first refusal or any similar restrictions. The Shareholders
hereby permanently waive any and all preemptive rights, rights of first refusal
or other similar restrictions with respect to any of the Company's capital stock
in connection with the Merger and otherwise. There are no: (i) outstanding
options (including phantom options), warrants or other rights (including
preemptive rights) of any kind relating to the sale, issuance or voting of any
shares of capital stock of the Company; (ii) securities convertible into,
exchangeable for or evidencing the right to purchase any such shares; or (iii)
contracts, commitments, agreements, understandings or arrangements of any kind
relating to the issuance or voting of such shares, any such convertible or
exchangeable securities or any such options, warrants or rights.
(b) All transactions whereby the Company repurchased, redeemed,
canceled or reacquired shares of its capital stock and the solicitation of
shareholder consents in connection with the Merger have been effected in
compliance with all applicable corporate and securities laws, and documentation
prepared by or on behalf of the Company in connection therewith did not include
any untrue statement of any material fact or omit to state any material fact
necessary to make the statements made therein correct and complete.
Section 3.3. Financial Statements. Attached hereto as Exhibit 3.3(a) is a
--------------------
true and complete copy of the audited balance sheet of the Company at December
31, 1995 and 1994, and the related audited statements of operations, changes in
stockholders' equity and cash flows for the years then ended, including related
footnotes (collectively, the "Audited Financial Statements"), accompanied by the
report of McDonald, Holligan & McPherson, Inc., independent certified public
accountants. Attached hereto as Exhibit 3.3(b) is a true and complete copy of
the unaudited balance sheet of the Company at August 31, 1996 and the related
unaudited statements of operations for the period then ended (collectively, the
"Interim Financial Statements"). The Audited Financial Statements and the
Interim Financial Statements are hereinafter collectively referred to as the
"Financial Statements".
The Financial Statements:
(a) have been prepared from, and are in accordance with, the
books and records of the Company;
(b) fairly present the financial position, results of operations
and cash flows of the Company as of and for the periods set forth therein;
(c) have been prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied throughout the indicated
periods (except that, in the case of the Interim Financial Statements, there are
no footnotes); and
(d) with respect to the Interim Financial Statements, include all
adjustments (consisting only of normal recurring accruals) that are necessary
for a fair presentation of the financial position of the Company and the results
of its operations.
Section 3.4. Undisclosed Liabilities.
-----------------------
4
<PAGE>
(a) Except as disclosed in Schedule 3.4 or any other Schedule hereto,
and except as reflected, expressly reserved against or otherwise disclosed in
the Financial Statements, the Company has no material liabilities or obligations
of any nature, known or unknown (whether accrued, absolute, contingent or
otherwise).
(b) Except as set forth in Schedule 3.4 (which schedule shall detail
the terms of the loan to the Company, the proceeds of which will be used to
purchase Roland Schmitt's stock in the Company), since August 31, 1996, the
Company has conducted its business only in the normal course and has not:
(i) suffered any physical damage, destruction or casualty loss
(whether or not such loss or damage shall have been covered by insurance)
which adversely affects the properties, business or prospects of the
Company, or suffered any deterioration in the operating condition of any
physical assets of the Company, normal wear and tear excepted;
(ii) incurred, created, assumed or guaranteed any liability or
obligation of any nature (whether absolute, accrued, contingent or
otherwise), except in the ordinary course of business;
(iii) increased, or made any change in any assumptions
underlying the method of calculating, any bad debt, contingency or other
reserves;
(iv) made any change in the method of valuing assets included
in the Financial Statements;
(v) made any change in any method of accounting or keeping its
books of account or accounting practices or systems of internal accounting
controls;
(vi) paid, discharged or satisfied any liability or obligation
(whether absolute, accrued, contingent or otherwise), other than by
payment, discharge or satisfaction in the ordinary course of business;
(vii) permitted or allowed any of its assets (real, personal or
mixed, tangible or intangible) to be subjected to any Lien;
(viii) written down the value of any inventory or written off as
uncollectible any notes or accounts receivable, except for write-downs and
write-offs in the ordinary course of business;
(ix) canceled or waived any claims or rights, or sold,
transferred, distributed or otherwise disposed of any assets or properties,
except in the ordinary course of business;
(x) declared or paid any dividend or distribution on or in
respect of the Common Stock, or directly or indirectly redeemed, purchased,
or otherwise acquired any
5
<PAGE>
shares of its capital stock, any securities convertible into or
exchangeable for its capital stock, or any options, warrants or other
rights to purchase any of the foregoing, or authorized the issuance of, or
issued, sold or committed to sell (or granted any options or rights to
purchase) any additional shares of its capital stock, or sold, issued or
incurred any indebtedness;
(xi) experienced any strike, walkout, similar labor trouble
or other similar event; or
(xii) increased the salaries or other remuneration payable or
to become payable to, or made any advance (excluding advances for ordinary
business expenses) or loan to, any officer, director, employee or
shareholder (except normal merit increases made in the ordinary course of
business, consistent with past practice and previously disclosed to the
Buyer in the Company's budget), or established, made any increase in, or
any addition to, other benefits (including, without limitation, any
Employee Plans, as hereinafter defined) to which any of them may be
entitled, or made any payments to any Employee Plan, except payments in the
ordinary course of business and consistent with past practice, or entered
into any agreement, arrangement or transaction with any such person not in
the ordinary course of business, or failed to make any required payment
under any Employee Plan.
Section 3.5. Properties. The Company has good and marketable title to, or
----------
holds by valid and existing lease or license, free and clear of all Liens, each
piece of real and personal property used in its business as now conducted,
except in any of the foregoing cases for such imperfections of title or Liens as
(a) are set forth in Schedule 3.5 hereof, (b) are reflected or reserved against
in the Financial Statements, (c) arise out of taxes or general or special
assessments not in default and payable without penalty or interest or (d) are of
a kind generally found in property of similar character and which do not have a
Material Adverse Effect in which any of them is named.
The real and personal property owned, leased or licensed by the Company
constitutes, and immediately after the Closing will constitute, all real or
personal property that is material to and necessary for the operation of its
business as currently conducted.
Section 3.6. Litigation. Except as set forth in Schedule 3.6, there are
----------
no suits, claims, investigations or proceedings pending or, to the knowledge of
each Shareholder, threatened against the Company, its officers or directors in
their capacities as officers or directors, any Shareholder or any other person
or entity for whom the Shareholders or the Company may be vicariously liable at
law or in equity. The Shareholders are not subject to, and the Company is not
operating under or subject to, any order, writ, injunction or decree of any
court or governmental authority in which any of them is named.
Section 3.7. Intellectual Property. The Company has developed and
---------------------
conducts an active program of licensing certain proprietary application software
products and systems to banks, credit unions and other financial institutions
for their use and provides data processing services utilizing such products and
systems (the "Software Programs"), and in connection
6
<PAGE>
therewith the Company has developed certain related technical documentation and
user reference manuals (the "Documentation"). The Software Programs and the
Documentation are collectively referred to as the "Software." The Software
Programs and Documentation are listed in Schedule 3.7 hereto.
(a) Ownership. Except as set forth in Section 3.9, the Company owns
---------
all patents, trademarks, service marks, trade names and copyrights (including
registrations, licenses and applications pertaining thereto) and all other
proprietary information used by the Company in the conduct of its business,
including, without limitation, the Software. Schedule 3.7(a) sets forth all
patents, trademarks, service marks, trade names and copyrights owned or used by
the Company and all applications therefor and registrations thereof.
(b) Procedures for Copyright Protection. Schedule 3.7(b) sets forth
-----------------------------------
the form and placement of the proprietary legends and copyright notices
displayed in or on the Software, including screen displays. In no instance has
the eligibility of the Software for protection under copyright law been
forfeited to the public domain.
(c) Procedures for Trade Secret Protection. The Company has never
--------------------------------------
disclosed its source code to a third party other than the consultants identified
in Schedule 3.7(c), and discloses its source code to employees only on a need-
to-know basis in connection with the performance of their duties to the Company.
The source code and system documentation comprising the Software have at all
times been maintained by the Company in confidence, and the Company has not
taken (nor has it failed to take) any action which would result in such source
code and system documentation not being protectable as a trade secret under
applicable law.
(d) Ownership of Software. All persons who have contributed to or
---------------------
participated in the conception and development of the Software on behalf of the
Company have been full-time employees of the Company hired to prepare such works
within the scope of employment, except for the consultants identified in
Schedule 3.7(c). As a consequence, the Company has all ownership interests in
the Software.
(e) Absence of Claims. Except as set forth in Schedule 3.7(e), no
-----------------
claims have been asserted by any person to rights in the Software, and no valid
basis for any such claim exists. To the best of the Company's and the
Shareholders' knowledge and information, the use of the Software by the Company
and its licensees does not infringe on the rights of any person (whether arising
under copyright, trade secret, patent, unfair competition or other state or
federal laws which protect intellectual property rights) and the use by the
Company of the patents, trademarks, service marks, trade names and copyrights
identified in Schedule 3.7(a) does not infringe the rights of any person. No
claim, whether oral or written, has been asserted that the use by the Company of
any of the foregoing infringes the rights of any person. No claim has been
asserted by any person to the effect that any current or former employee of the
Company has violated the provisions of any noncompete or nondisclosure agreement
with such person, or has disclosed any proprietary information of such person to
the Company or any third party.
7
<PAGE>
Section 3.8. Adequacy of Technical Documentation. The Software includes
-----------------------------------
the source code, system documentation and statements of principles of operation
for all Software Programs, as well as any pertinent commentary or explanation
that may be reasonably necessary to render such materials understandable and
usable by a trained computer programmer. The Software also includes any program
(including compilers), workbenches, tools, and higher level language used for
the development, maintenance and implementation of a Software Program.
Section 3.9. Third-Party Components in Software. The Company has validly
----------------------------------
obtained the right and license to use, copy, modify and distribute any third-
party programming and materials contained in the Software pursuant to the
contracts identified in Schedule 3.9, subject to no further license fee, royalty
or other payment obligations, other than software maintenance payments
customarily associated therewith. The Software contains no other programming or
materials in which any third party may claim superior, joint or common
ownership, including any right or license. The Software does not contain
derivative works of any programming or materials not owned in their entirety by
the Company.
Section 3.10. Third-Party Interests or Marketing Rights in Software. The
-----------------------------------------------------
Company has not granted, transferred, or assigned any right or interest in the
Software to any person, except pursuant to the contracts identified in Schedule
3.10. There are no contracts, agreements, licenses, commitments or arrangements
in effect with respect to the marketing, distribution, licensing or promotion of
the Software by any independent salesperson, distributor, sublicensor or other
remarketer or sales organization, except as set forth in Schedule 3.10.
Section 3.11. Licenses. The Company has all government licenses,
--------
consents, permits, franchises, approvals and other governmental authorizations
("Licenses") required for its business as currently conducted except where the
failure to hold, maintain or obtain such Licenses would not have a Material
Adverse Effect. No proceeding is pending or threatened seeking the revocation
or suspension of any License.
Section 3.12. Compliance with Laws. The Company's business has been
--------------------
operated and maintained in all material respects in compliance with all
statutes, laws, regulations, ordinances, rules, judgments, orders or decrees
applicable thereto. There is no outstanding or, to the Shareholders' best
knowledge, threatened order, writ, injunction, or decree of any court,
governmental agency, or arbitration tribunal against Company affecting,
involving, or relating to its business or assets. To the best of the Company's
and the Shareholders' knowledge and information, the Company is not in violation
of any applicable federal, state, or local law, regulation, ordinance, zoning
requirement, governmental restriction, order, judgment, or decree affecting,
involving, or relating to its business or assets except where noncompliance has
no material adverse effect upon the financial condition, operation, or prospects
of the business (including under ownership by IAI) or the Company's assets.
Neither the Company nor any Shareholder has received any notices of any
allegation of any such violation and the Company is not currently subject to any
order, decree or other ruling imposed by any governmental agency or authority to
remedy any such violation. The foregoing shall be deemed to include laws and
regulations relating to the patent, copyright, and trademark laws, state trade
secret and unfair competition laws of the U.S. and foreign jurisdictions,
environmental laws and to all other
8
<PAGE>
applicable laws, including equal opportunity, wage and hour, and other
employment matters, and antitrust and trade regulation laws.
Section 3.13. Insurance. Schedule 3.13 lists all policies of casualty,
---------
liability, workers' compensation, life and other forms of insurance by which the
Company is currently insured or has been insured during the previous three years
and includes for each policy in effect the period through which premiums have
been paid. All of the policies indicated as in force in Schedule 3.13 are in
full force and effect and no notice of cancellation has been received with
respect thereto and are sufficient for compliance in all material respects with
all requirements of law and all agreements to which the Company is a party.
Section 3.14. Material Contracts. Schedule 3.14 lists the following
------------------
agreements (including, without limitation, leases, purchase contracts and
commitments) to which the Company is a party or by which the Company or any of
its properties is bound:
(a) all contracts which involve future obligations on the part
of the Company in an aggregate amount exceeding $25,000 in the case of purchase
orders and commitments or $100,000 in the case of any other type of contract;
(b) all joint ventures, sales agency, sales representative or
distributorship, broker, franchise, license or similar contracts;
(c) all real estate leases;
(d) all notes, bonds, mortgages, security agreements, guarantees
and other agreements and instruments for or relating to any lending by the
Company in any amount (exclusive of advances to employees for expenses in the
ordinary course of business) or any borrowing of $100,000 or more;
(e) all powers of attorney, guarantees, suretyships or similar
agreements given by the Company; and
(f) all other written agreements to which any Shareholder is a
party which in any way relate to the business, operations or assets of the
Company or which in any way affect any Shareholder's ability to execute and
deliver this Agreement, to perform his obligations hereunder and to consummate
the transactions contemplated hereby.
Each contract set forth in Schedule 3.14 is valid, binding and
enforceable in accordance with its terms, and neither the Company nor any other
party to any such contract is in material breach or material default of the
express written terms of such contracts.
Section 3.15. Brokers, Finders, etc. Except as described in Schedule
---------------------
3.15, neither the Shareholders nor the Company have employed any broker, finder,
consultant or other intermediary in connection with the transactions
contemplated by this Agreement who might be entitled to a fee or commission in
connection with such transactions.
9
<PAGE>
Section 3.16. Taxes.
-----
(a) Filing of Tax Returns. The Company has timely filed with
---------------------
the appropriate taxing authorities all returns (including, without limitation,
information returns and other material information) in respect of Taxes (as
hereinafter defined) required to be filed through the date hereof. All such
returns and other information filed are complete and accurate in all material
respects.
(b) Payment of Taxes. Except as set forth in Schedule 3.16(b),
----------------
all Taxes that are due and payable by the Company (whether or not shown on any
return) before the date hereof have been paid. To the extent required by GAAP,
an adequate reserve has been established on the Financial Statements for all
unpaid Taxes payable by the Company with respect to all periods through the date
of such Financial Statements, and the Company is not required under GAAP to
reserve for any liability for Taxes in excess of the reserves so established.
Except as described in Schedule 3.16(b), no portion of the reserve established
on the Financial Statements for Taxes reflects any contingent liability or other
potential liability for Taxes that are due and payable, or that may become due
and payable in the future, as a result of an audit, amended return or otherwise.
(c) Audit History. Except as set forth in Schedule 3.16(c):
-------------
(i) no deficiencies for Taxes have been claimed, proposed
or assessed by any taxing or other governmental authority against the
Company which have not been paid or otherwise finally settled and resolved;
(ii) the Company has not waived the statute of limitations
in respect of any Tax or agreed to any extension of time with respect to
the assessment of any Tax; and
(iii) the Company is not currently under audit with respect
to Taxes by any governmental authority, and no such authority in a
jurisdiction where the Company does not file Tax returns or pay Taxes has
claimed that the Company is required to file Tax returns or otherwise is
subject to taxation.
(d) Withholding Taxes. The Company has withheld and paid all
-----------------
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, shareholder or other
third party.
(e) Tax Sharing or Allocation Agreements. The Company is not
------------------------------------
a party to or bound by any Tax indemnity, Tax sharing or Tax allocation
agreement.
(f) Prior Affiliated Groups. The Company has never been a
-----------------------
member of an affiliated group of corporations, within the meaning of Section
1504 of the Code (as hereinafter defined).
10
<PAGE>
(g) Taxes. For purposes of this Agreement, "Taxes" shall mean
-----
all federal, state, local, foreign and other taxes, assessments, or other
governmental charges, including, without limitation, income, estimated income,
business, occupation, franchise, property, sales, gross receipts, excise,
employment, or withholding taxes, including interest, penalties and additions in
connection therewith.
Section 3.17. Pension and Employee Benefit Plans.
----------------------------------
(a) For purposes of this Agreement, the terms set forth below
shall have the following meanings:
(i) Code: The Internal Revenue Code of 1986, as amended,
----
together with the regulations promulgated thereunder;
(ii) Employee Plans: All plans, programs, arrangements,
--------------
practices or contracts pursuant to which the Company provides or is
obligated to provide or has within the last six years been obligated to
provide, directly or indirectly, benefits or compensation to or on behalf
of employees or former employees of the Company, whether formal or
informal, whether or not written, whether or not terminated, including but
not limited to the following:
(A) Executive Arrangements -- any bonus, incentive
compensation, stock option, deferred compensation, commission,
severance, golden parachute or other executive compensation plan,
employment contract, arrangement or practice;
(B) ERISA plans -- any Pension Plan or Welfare Plan,
as defined in Section 3 of ERISA, including but not limited to any
multi-employer plan, defined benefit pension plan, profit sharing
plan, savings or thrift plan, stock bonus plan, employee stock
ownership plan, or any plan, fund, program, arrangement or practice
providing for medical hospitalization, accident, sickness, disability,
severance pay or life insurance benefits; and
(C) Other Employee Fringe Benefits -- any stock
purchase, vacation, scholarship, day care, prepaid legal services,
severance pay, or fringe benefit plan, program, arrangement, contract,
or practice;
(iii) ERISA: The Employee Retirement Income Security Act
-----
of 1974, as amended, and the rulings and regulations thereunder; and
(iv) ERISA Affiliate: A corporation that is or was a
---------------
member of a controlled group of corporations with the Company or a trade or
business that is under common control with the Company or which together
with the Company is treated as a single employer, in each case within the
meaning of Section 414 of the Code.
11
<PAGE>
(b) Schedule 3.17 lists or describes all Employee Plans maintained or
contributed to by the Company pursuant to which the Company provides benefits or
compensation to or on behalf of employees or former employees of the Company.
The Company has no ERISA Affiliates.
(c) Each Employee Plan (and related trust or funding vehicle, if any)
has at all times been administered and maintained in accordance with its terms
and the applicable law including, without limitation, the filing of Forms 5500
and all other applicable reports.
(d) Except to the extent set forth in Schedule 3.17, to the extent any
Employee Plan is subject to approval by any governmental agency, such Employee
Plan has received such approval and such approval is current.
(e) The Company is not subject to, and neither the Company nor any
Shareholder knows or has notice of any facts or circumstances which could
subject the Company to any liability whatsoever which is directly or indirectly
related to any Employee Plan, including, but not limited to, liability for
benefits payments or related claims (other than the ordinary claims by
participants or beneficiaries which have been made for benefits called for under
the terms of such Employee Plans), any liability for any Tax or related penalty
under the Code, or liability for any damages or penalties arising under Title I
or Title IV of ERISA.
(f) No Employee Plan has engaged in or been a party to any "prohibited
transaction" (as defined in ERISA or the Code), and the Company has not
incurred, and does not reasonably expect to incur, any liability under Chapter
43 of the Code or Section 502 of ERISA with respect to any Employee Plan.
(g) Except as set forth in Schedule 3.17, no ERISA Welfare Plan
provides benefits to former employees of the Company, other than continuation
coverage required by Section 4980B of the Code and Section 601 of ERISA.
(h) There are no pending or threatened claims, suits or other
proceedings with respect to any Employee Plan other than the ordinary claims by
participants or beneficiaries which have been made for benefits called for under
the terms of such Employee Plans and which will be paid under such Employee
Plans in the ordinary course.
(i) There is no requirement that the Buyer or IAI make any further
contributions to any Employee Plan after the Closing Date, and each Employee
Plan which provides benefits to or on behalf of employees or former employees of
the Company may be terminated by IAI or Buyer in its sole discretion on or after
the Closing Date without liability of any kind or description whatsoever to IAI,
Buyer, or any other person, entity or governmental agency.
(j) The Company is not a party to or obligated under any agreement,
plan, contract or other arrangements that will result, separately or in the
aggregate, in the payment of any "excess parachute payment" within the meaning
of Section 28OG of the Code.
12
<PAGE>
Section 3.18. Labor and Employment Matters. Except to the extent set
----------------------------
forth in Schedule 3.18:
(a) the Company is not a party to any collective bargaining
agreements;
(b) the Company is in compliance in all material respects with
all applicable laws respecting employment and employment practices, terms and
conditions of employment, wages and hours, occupational safety and health and is
not engaged in any unfair labor or unfair employment practices;
(c) there is no unfair labor practice, charge or complaint or
any other matter against or involving the Company pending or, to the knowledge
of the Shareholders, threatened before the National Labor Relations Board or any
court of law;
(d) there is no labor strike, dispute, slowdown or stoppage
actually pending or, to the knowledge of the Shareholders, threatened against
the Company, and the Company has not experienced any organized work stoppage,
organizational drive or other labor difficulty since its inception;
(e) there are no charges, investigations, administrative
proceedings or formal complaints of discrimination (including discrimination
based upon sex, age, marital status, race, national origin, sexual preference,
handicap or veteran status) pending or, to the knowledge of the Shareholders,
threatened before the Equal Employment Opportunity Commission or any federal,
state or local agency or court against the Company, and to the knowledge of the
Shareholders, no basis for any such claim exists; and
(f) there are no citations, investigations, administrative
proceedings or formal complaints of violations of local, state or federal
occupational safety and health laws pending, or to the knowledge of the
Shareholders, threatened before the Occupational Safety and Health Review
Commission or any federal, state or local agency or court against the Company.
(g) Schedule 3.18(g) lists all employment, consulting, loan-out,
retainer or other contracts or agreements involving any person employed by the
Company as an employee or independent contractor to which the Company is a party
or by which it is bound. The Company is not and no other party to any such
agreement or contract is in default with respect to any material term or
condition thereof (including the making of contributions and recording services
therefor), nor has any event occurred which through the passage of time or the
giving of notice, or both, would constitute a default thereunder or would cause
the acceleration of any obligation of any party thereto.
(h) Schedule 3.18(h) lists the names and current compensation
levels of all employees and consultants of the Company.
13
<PAGE>
Section 3.19. Environmental Matters.
---------------------
(a) To the best knowledge and information of the Company and the
Shareholders, the operations of the Company comply, and have complied, in all
respects with all applicable environmental laws. Neither the Company nor any
Shareholder has received notice of any failure to comply with any such laws or
notice of any fact or circumstance which may give rise to any such failure to
comply with such laws.
(b) The Company has obtained all environmental, health and
safety permits, approvals, licenses and other authorizations necessary for the
operation of the Company's business, all of which are valid and in good standing
and are not subject to any modification or revocation proceeding, and the
Company is in compliance in all respects with all terms and conditions thereof.
(c) Neither the Company nor any Shareholder has received any
written notice of any pending or threatened investigation, proceeding or claim
to the effect that it is or may be liable to any person, or responsible or
potentially responsible for the costs of any remedial or removal action or other
cleanup costs, as a result of noncompliance with any applicable environmental
laws or arising out of the presence, generation, storage or disposal of
hazardous waste, including liability under the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, or any state superfund
law, and there is no past or present action, activity, condition or circumstance
that could be expected to give rise to any such liability on the part of the
Company to any person, or for any such cleanup costs.
Section 3.20. Agreements Affecting Competition. Except as set forth in
--------------------------------
Schedule 3.20, and except for general trade regulations and other laws and
regulations applicable to entities in the same or similar business as the
Company, the Company is neither a party to nor bound by any agreement which
presently restricts or precludes the Company or any present or future affiliate
of the Company from conducting any business anywhere in the world, or upon the
occurrence of any event, the giving of notice or the passage of time, by its
terms would have such an effect.
Section 3.21. Transactions with Related Parties. Except as set forth in
---------------------------------
Schedule 3.21 or in connection with customary transactions in the ordinary
course of business, no officer, director or shareholder of the Company:
(a) owes money to the Company;
(b) has any claim against the Company;
(c) has any interest in any property or assets used by the
Company in its business;
(d) has any benefits which are contingent on the transactions
contemplated by this Agreement, other than as stated herein;
14
<PAGE>
(e) has any agreement with the Company that is not terminable by the
Company without penalty or notice;
(f) has any agreement providing severance benefits or other benefits
(which are conditioned upon a change of control) after the termination of
employment of such employee regardless of the reason for such termination of
employment; or
(g) has any agreement or plan, any of the benefits of which will be
increased, vested or accelerated by the occurrence of any of the transactions
contemplated by this Agreement.
Section 3.22. Major Vendors and Customers. Schedule 3.22 sets forth a
---------------------------
list of each licensor, developer, remarketer, distributor and supplier of
property or services to, and each licensee, end-user or customer of, the
Company, to whom the Company paid or billed in the aggregate in excess of
$30,000 during calendar 1995 or 1996.
Section 3.23. Absence of Certain Commercial Practices. Since January 1,
---------------------------------------
1993, neither the Company, any of its directors, officers, agents, affiliates or
employees, nor any other person acting on behalf of the Company or any
Shareholder, has (a) given or agreed to give any gift or similar benefit having
a value of $1,000 or more to any customer, supplier or governmental employee or
official or any other person, for the purpose of directly or indirectly
furthering the business of the Company, (b) used any corporate funds for
contributions, payments, gifts or entertainment, or made any expenditures
relating to political activities to government officials or others in violation
of any applicable laws, or (c) received any unlawful contributions, payments,
gifts or expenditures in connection with the business of the Company.
Section 3.24. Accounts Receivable. Schedule 3.24 is a complete and
-------------------
accurate schedule of the accounts receivable of the Company as of August 31,
1996, as reflected in the balance sheet as of that date, included in the Interim
Financial Statements, together with an accurate aging of these accounts. These
accounts receivable, and all accounts receivable of the Company created after
that date, arose from valid transactions in the ordinary course of business and
will be good and collectible at the recorded amounts thereof. No portion of the
accounts receivable is subject to counterclaim or setoff.
Section 3.25. Securities Act Compliance. The Company and the
-------------------------
Shareholders each acknowledge and agree that none of the shares of Buyer Common
Stock to be delivered to the Shareholders pursuant to this Agreement will, at
the time of delivery, be registered under the federal Securities Act of 1933
(the "Act") or any other federal or state securities laws (together with the
Act, collectively, the "Securities Acts"). Each Shareholder hereby represents
and warrants to the Buyer that such Shareholder is acquiring the Buyer Common
Stock for investment and not with a view toward, or for resale in connection
with, a distribution of the Buyer Common Stock. The Shareholders acknowledge
that the Buyer Common Stock may be sold, pledged, hypothecated, disposed of, or
otherwise transferred or distributed only (i) pursuant to registration of the
Buyer Common Stock under the Securities Acts, or (ii) pursuant to an exemption
from the registration requirements of the Securities Acts, and in the case of
exemption, only if the Shareholder delivers to Buyer a legal opinion, in form
and substance
15
<PAGE>
satisfactory to Buyer and Buyer's legal counsel, stating that an exemption from
the registration requirements of the Securities Acts is available. Certificates
representing the Buyer Common Stock shall bear a legend setting forth the
restrictions on transfer set forth in this Section.
Section 3.26. Sophistication of Shareholders. At and as of the Closing,
------------------------------
each Shareholder will deliver to Buyer a Shareholder Investment Representation
Certificate in the form attached hereto as Schedule 3.26, if the statements
contained therein are true. If any Shareholder is not able to execute and
deliver such Certificate, Buyer shall not be obligated to consummate the
transactions contemplated herein.
Section 3.27. Disclosure. No representation, warranty, or statement made
----------
by the Company or any Shareholder in this Agreement or in any document or
certificate furnished or to be furnished to Buyer or IAI pursuant to this
Agreement contains or will contain any untrue statement or omits or will omit to
state any fact necessary to make the statements contained herein or therein not
misleading. All facts known or reasonably available to the Company and all
Shareholders that are material to the financial condition, operation, or
prospects of the Company's business and assets have been disclosed to Buyer and
IAI.
Section 3.28. Truth at Closing. All of the representations, warranties,
----------------
and agreements of the Company and the Shareholders contained in this Article 3
shall be true and correct and in full force and effect on and as of the Closing
Date.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer hereby represents and warrants to the Company as follows:
Section 4.1. Incorporation; Authorization.
----------------------------
(a) Buyer is a corporation duly incorporated, validly existing and in
good standing under the laws of Georgia. IAI is a corporation duly
incorporated, validly existing and in good standing under the laws of Georgia.
(b) Buyer and IAI each has full corporate power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby.
(c) The execution and delivery of this Agreement by Buyer and IAI, the
performance of their respective obligations hereunder and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate proceedings on the part of Buyer and IAI.
(d) This Agreement has been duly executed and delivered by Buyer and
IAI and constitutes the legal, valid and binding obligations of each of them,
enforceable in accordance with its terms.
16
<PAGE>
(e) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not conflict with or
result in a violation, breach, default, right to accelerate or increase in
obligations under the Articles of Incorporation or Bylaws of Buyer and IAI, any
law or statute or any order, judgment or decree by which either of them is bound
or any license, lease or other agreement to which either of them is a party or
by which its respective assets and business may be affected.
(f) The authorized capital stock of the Buyer consists of 10,000,000
shares of Buyer Common Stock and 50,000 shares of preferred stock. As of the
date of this Agreement, 1,550,000 shares of Buyer Common Stock are issued and
outstanding or are being held in reserve, and no shares of preferred stock are
issued and outstanding. All of the outstanding shares of Buyer Common Stock
have been duly authorized, validly issued, and are fully paid and nonassessable.
Upon issuance thereof in accordance with the terms of this Agreement, the shares
of Buyer Common Stock to be delivered to the Shareholders at Closing shall be
duly and validly authorized, issued and fully paid and nonassessable.
Section 4.2. Litigation. There is no claim, action, proceeding or
----------
investigation pending or, to the knowledge of Buyer, threatened, nor is there
any writ, order, decree or injunction that calls into question the Buyer's or
IAI's authority or right to enter into this Agreement and consummate the
transactions contemplated hereby, or would otherwise prevent or delay the
transactions contemplated by this Agreement. Neither the Buyer nor IAI has
received notice of any suit, claim or proceeding against the Buyer, IAI or their
officers or directors in their capacity as officers or directors or notice that
they are subject to any writ, order, injunction or decree of any court or
governmental authority with jurisdiction over the Buyer and IAI.
Section 4.3. Brokers, Finders, etc. Neither Buyer nor IAI has employed
---------------------
any broker, finder, consultant or other intermediary in connection with the
transactions contemplated by this Agreement who might be entitled to a fee or
commission in connection with such transactions.
Section 4.4. Securities Act Compliance. Buyer acknowledges that none of
-------------------------
the shares of the Company's Common Stock to be delivered to Buyer pursuant to
this Agreement will, at the time of delivery, be registered under the Securities
Acts. Buyer represents and warrants that Buyer is acquiring the Company's
Common Stock for investment, and not with a view toward, or for resale in
connection with, a distribution of the Common Stock. Buyer acknowledges that
the Company's Common Stock may be sold, pledged, hypothecated, disposed of, or
otherwise transferred or distributed only (i) pursuant to registration of the
Company Common Stock under the Securities Acts, or (ii) pursuant to an exemption
from the registration requirements of the Securities Acts.
Section 4.5. Sophistication of Buyer. As of the Closing, Buyer shall
-----------------------
deliver to the Company a Buyer's Investment Representation Certificate in the
form attached hereto as Schedule 4.5.
Section 4.6. Disclosure. No representation or warranty of Buyer in this
----------
Agreement, nor any financial statements or other written statements or
certificates furnished to the Company
17
<PAGE>
or the Shareholders in connection with the transactions contemplated by this
Agreement, contain or as of the Closing Date will contain, any untrue statement
of a material fact, or omit or as of the Closing Date will omit to state a
material fact necessary to make the statements herein or therein not misleading.
ARTICLE 5
COVENANTS AND AGREEMENTS OF THE PARTIES
---------------------------------------
Section 5.1. Access to Information. The Buyer and its counsel, personnel,
---------------------
accountants and other representatives shall have full access during normal
business hours to all properties, books, accounts, records, personnel contracts,
and documents of or relating to the Company, and the Company shall furnish or
cause to be furnished to the Buyer and its representatives all data and
information concerning the business, finances and properties of the Company.
The Shareholders acknowledge and agree that they have had full access to all
books, records, documents and other information of and about Buyer that
Shareholders deem material to making a determination to invest in the Buyer
Common Stock pursuant to the Merger. Buyer shall continue to make available its
executive officers for interviews by the Shareholders or their representatives.
Section 5.2. Conduct of Business. Between the date hereof and the Closing
-------------------
Date, the Company shall conduct its business diligently and in the ordinary
course, consistent with past practice. Without limiting the generality of the
foregoing, the Company will use commercially reasonable efforts to:
(a) maintain its status in good standing in all jurisdictions in which
it is required to be qualified or registered to conduct its business;
(b) maintain all of its tangible assets in good operating condition
and maintain the protection of all intellectual property in substantially the
same standing as exists on the date hereof;
(c) continue performance in the ordinary course of its obligations
under its contracts and agreements (including the continued development of the
Microsoft Windows version of its Software);
(d) preserve its business organization intact, keep available its
present officers and employees, and preserve its present relationships with
suppliers, customers and others having business relationships with it; and
(e) maintain its existing insurance, subject to variations in amount
required by the ordinary operations of its business.
Section 5.3. Corporate Matters. The Company will not (a) amend its
-----------------
Articles of Incorporation or Bylaws, (b) issue any shares of its capital stock,
or (c) issue or create any warrants, obligations, subscriptions, options,
convertible securities, or other commitments under
18
<PAGE>
which any additional shares of its capital stock of any class might be directly
or indirectly authorized or issued.
Section 5.4. Employees. Except as consented to in writing by the Buyer,
---------
the Company will not grant any increase in salaries to any officer, employee,
sales agent or representative, or alter or increase benefits payable to any such
person under any Employee Plan or other contract or commitment, other than in
the ordinary course of business.
Section 5.5. New Business. The Company will not, without the Buyer's
------------
written consent:
(a) incur or consent to the incurrence of any single obligation or
other liability in excess of $25,000 except for (i) inventory and supplies
purchased in the ordinary course of business consistent with past practices and
(ii) a loan in the maximum principal amount of $500,000, the proceeds of which
will be used by the Company to purchase and redeem all shares of (and other
rights to acquire any) Common Stock and other capital stock of the Company
directly or indirectly held by Roland Schmitt (the "Stock Purchase");
(b) consent to any Lien on any of its assets, except as set forth in
Schedule 5.5; or
(c) sell or otherwise dispose of any of its assets, except in the
ordinary course of business.
Section 5.6. Agreements. The Company will not modify, amend, cancel or
-----------
terminate any of its existing contracts or agreements with any party named in
Schedule 3.22, or agree to do any of those acts, except in the ordinary course
of business.
Section 5.7. Cooperation. The parties agree (i) to cooperate with each
-----------
other to determine whether any filings (including the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended) (the "HSR Act") are required to
be made or consents required to be obtained in any jurisdiction in connection
with the consummation of the transactions contemplated hereby and to make any
such filings promptly and to obtain in a timely manner any such consents; and
(ii) to use all commercially reasonable efforts to obtain promptly the
satisfaction of the conditions to the Closing of the transactions contemplated
herein. The parties shall furnish to each other and to their counsel all such
information as may be reasonably required in order to effectuate the foregoing.
Section 5.8. Customer Contacts. The Company shall permit the Buyer to
-----------------
conduct a survey or otherwise inquire of certain or all of the Company's key
customers, as selected by the Buyer, regarding the relationship between such
customer and the Company and the impact of a change in control on such
relationship. The Company shall assist the Buyer in making such survey or
inquiries and shall have the right to have a representative of its choice
participate therein. Buyer shall complete such survey within twenty (20) days
from the date this Agreement is duly and completely executed by all parties.
19
<PAGE>
Section 5.9. No-Shop. From and after the date hereof, the Company and the
-------
Shareholders shall not, and shall use their best efforts to cause the Company's
officers, directors, employees, agents and representatives not to, directly or
indirectly, encourage, solicit, engage in discussions with, or provide any
information to any person or group (other than Buyer) concerning any sale or
other disposition of all or any substantial part of the Company. The Company
shall promptly communicate to Buyer any inquiries or communications concerning
any such transaction that it or any of its executive officers may receive or of
which it or any such person may become aware.
Section 5.10. Tax Audits. The Shareholders agree to obtain the consent of
----------
Buyer prior to settling any Tax audit or other examination which relates to
periods ending prior to the Closing Date, which consent will not be unreasonably
withheld.
Section 5.11. Tax Returns. The Buyer will have the responsibility for the
-----------
preparation and filing of all Tax returns, and payment of all Taxes, for the
taxable period ending on the Closing Date. The Shareholders will have the
responsibility for the preparation and filing of all Tax returns and payment of
all Taxes for any taxable period ending prior to the Closing Date and the
payment of any associated interest and penalties for any amounts due for any
such period.
Section 5.12. Interim Financials. As promptly as practicable after each
------------------
month-end or quarter-end, as the case may be, from the date of this Agreement to
the Closing Date, the Company shall deliver to Buyer and IAI all monthly and
quarterly financial reports in the form that it customarily prepares for its
internal purposes concerning itself or its business.
Section 5.13. Intent of the Parties. Although the Schedules to this
---------------------
Agreement are intended to be complete, it is mutually acknowledged that the
Schedules are to be prepared as of the date of execution and delivery of this
Agreement (except as otherwise expressly provided by this Agreement), and may
vary on the Closing Date because of the effect of the ongoing operations of the
Company. Further, because completion of Schedules as to certain items may occur
following the execution of this Agreement, the omission of such Schedules until
such time on or shortly after the date of this Agreement as they have been
completed and the parties have agreed on their contents shall not impair the
effectiveness of this Agreement, unless the items contained therein (in the
aggregate) deviate materially from such information contained in disclosures,
financial statements, balance sheets, documentation, representations and
information made available by the Company to the Buyer with respect to the
period ending August 31, 1996.
Section 5.14. Updating of Information. From the date of this Agreement to
-----------------------
the Closing Date, the Company shall deliver revised or supplementary schedules
to this Agreement, containing accurate information as of the Closing Date, in
order to enable Buyer and IAI to confirm the accuracy of the representations and
warranties set forth in Article 3 of this Agreement and otherwise to give full
effect to the provisions of this Agreement. Such revised or supplementary
schedules shall not modify or be deemed part of this Agreement unless agreed by
Buyer and IAI in writing with reference to the specific schedules to be so
treated. Provided that the Schedules prepared as of the date of this Agreement
are true and correct when submitted for inclusion herein, the foregoing
obligation to furnish updated information shall apply to such
20
<PAGE>
Schedules only insofar as material events or changes occur such as to make the
contents of such schedules unreliable or misleading.
ARTICLE 6
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
-------------------------------------------
The obligations of Buyer to consummate the transactions contemplated by
this Agreement are subject to the satisfaction, at or before the Closing, of all
the conditions set forth below. The Buyer may waive any or all of these
conditions in whole or in part without prior notice; provided, however, that
-------- -------
except to the extent, if any, that such waiver constitutes an election of
remedies under Georgia law, no such waiver of a condition shall constitute a
waiver by the Buyer of any of its other rights or remedies, at law or in equity,
if the Company or the Shareholders shall be in default of any of their
representations, warranties or covenants under this Agreement.
Section 6.1. Accuracy of Representations. The representations and
---------------------------
warranties of the Company and the Shareholders in this Agreement or any Schedule
hereto or in any written statement delivered by them at or prior to the Closing
to the Buyer under this Agreement shall be true in all material respects as of
the date hereof and on and as of the Closing Date as though made at that time.
Section 6.2. Performance of Seller. The Company and the Shareholders
---------------------
shall have performed, satisfied and complied with all covenants, agreements and
conditions required by this Agreement to be performed or complied with by them
on or before the Closing Date.
Section 6.3. No Material Changes. During the period from August 31, 1996
-------------------
to the Closing Date, there shall not have been any material adverse change in
the financial condition or the results of operations of the Company, and the
Company shall not have sustained any material loss or damage to its assets,
whether or not insured, that materially affects its ability to conduct a
material part of its business.
Section 6.4. Certificates of the Shareholders. The Buyer shall have
--------------------------------
received a certificate, dated the Closing Date, signed by the Shareholders (and
as to Section 6.3 only, the Company's principal financial officer), certifying
that the conditions specified in Sections 6.1, 6.2 and 6.3 have been fulfilled.
The Buyer shall have received certificates, dated the Closing Date, signed by
each of the Shareholders, as required pursuant to Section 3.26.
Section 6.5. Opinion of Counsel. The Buyer shall have received an
------------------
opinion, dated the Closing Date, from Flynn McKenna Wright & Karsh, counsel to
the Company, substantially in the form attached as Schedule 6.5 hereto.
Section 6.6. Absence of Litigation. No action, suit or proceeding (other
---------------------
than consideration of any filing under the HSR Act) before any court,
governmental body or authority, other than routine regulatory and tax
inspections, audits and reviews, pertaining to the transactions contemplated by
this Agreement or its consummation, shall have been instituted or threatened.
21
<PAGE>
Section 6.7. Corporate Approval. The execution and delivery of this
------------------
Agreement by the Company, and the performance of its covenants and obligations
hereunder, shall have been duly authorized by the Company's Board of Directors
and the Shareholders, and the Buyer shall have received copies of all
resolutions pertaining to those authorizations, certified by the Secretary of
the Company.
Section 6.8. Approvals. This Agreement and the transactions contemplated
---------
hereby shall have received all approvals, consents, authorizations and waivers
from governmental and regulatory agencies and other third parties (including
lenders and lessors) required to consummate the transactions contemplated hereby
(including the expiration of any applicable waiting period under the HSR Act),
which, either individually or in the aggregate, if not obtained would have a
Material Adverse Effect.
Section 6.9. Customer Inquiries. The Buyer shall be reasonably satisfied
------------------
with the results of its inquiries of the Company's customers with respect to the
impact of a change in control on their relationship with the Company.
Section 6.10. Confidentiality and Work Product Agreements. Each
-------------------------------------------
Shareholder, officer, director, employee and consultant of the Company shall
have executed and delivered a Confidentiality Agreement and an Assignment of
Work Product, each substantially in the form attached as Schedule 6.10 hereto.
Section 6.11. Third Party Consents. The Buyer shall have received
--------------------
consents, in form satisfactory to it, to the transactions contemplated by this
Agreement from the parties listed in Schedule 6.11 hereto.
Section 6.12. Investigations. Neither any investigation of the Company by
--------------
Buyer or IAI, nor the Schedules hereto, nor any other document delivered to
Buyer or IAI as contemplated by this Agreement, shall have revealed any facts or
circumstances that, in the judgment of Buyer or IAI, reflect in a material
adverse way on the Company's assets, business, operations, or prospects.
Section 6.13. Closing of the Stock Purchase and Delivery of Shares.
----------------------------------------------------
Simultaneously with or prior to the Closing, the Company shall have completed
the Stock Purchase upon terms and conditions satisfactory to Buyer and its
counsel in all respects. All outstanding Shares of Common Stock shall be
delivered to Buyer at Closing, together with all endorsements and transfer
certificates required by Buyer.
ARTICLE 7
CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS
-------------------------------------------------
The obligations of the Company and the Shareholders to consummate the
transactions contemplated by this Agreement are subject to the satisfaction, at
or before the Closing, of all the conditions set forth below. The Company and
the Shareholders may waive any or all of these conditions in whole or in part
without prior notice; provided, however, that no such waiver of a condition
-------- -------
shall constitute a waiver by the Company or the Shareholders of any of their
other
22
<PAGE>
rights or remedies, at law or at equity, if the Buyer shall be in default of any
of its representations, warranties or covenants under this Agreement.
Section 7.1. Accuracy of Representations. The representations and
---------------------------
warranties by the Buyer in this Agreement or in any written statement delivered
to the Company under this Agreement shall be true in all material respects as of
the date hereof and on and as of the Closing Date as though made at that time.
Section 7.2. Performance of Buyer. The Buyer shall have performed,
--------------------
satisfied and complied with all covenants, agreements and conditions required by
this Agreement to be performed or complied with by it on or before the Closing
Date.
Section 7.3. Certificates of the Buyer. The Company shall have received a
-------------------------
certificate, dated the Closing Date, signed by the Buyer's president or vice
president and its secretary or assistant secretary, certifying that the
conditions specified in Sections 7.1 and 7.2 have been fulfilled. The Company
shall have received a certificate, dated the Closing Date, signed by Buyer, as
required pursuant to Section 4.5.
Section 7.4. Opinion of Counsel. The Company shall have received an
------------------
opinion, dated the Closing Date, from Nelson Mullins Riley & Scarborough,
L.L.P., counsel for Buyer, substantially in the form attached as Schedule 7.4
hereto.
Section 7.5. Absence of Litigation. No action, suit or proceeding (other
---------------------
than consideration of any filing under the HSR Act) before any court,
governmental body or authority, other than routine regulatory and tax
inspections, audits and reviews, pertaining to the transactions contemplated by
this Agreement or its consummation, shall have been instituted or threatened.
Section 7.6. Corporate Approval. The execution and delivery of this
------------------
Agreement by the Buyer and IAI and the performance of their respective covenants
and obligations hereunder, shall have been duly authorized by the Board of
Directors of Buyer and IAI, and the Company shall have received copies of all
resolutions pertaining to these authorizations, certified by their respective
corporate secretaries.
Section 7.7. Third Party Approvals. This Agreement and the transactions
---------------------
contemplated hereby shall have received all approvals, consents, authorizations
and waivers from governmental and regulatory agencies required to consummate the
transactions (including the expiration of any applicable waiting period under
the HSR Act), which, either individually or in the aggregate, if not obtained
would have a Material Adverse Effect on the financial condition, results of
operation or business of Buyer or the Company.
Section 7.8. No Material Changes. During the period from August 31, 1996
-------------------
to the Closing Date, there shall not have been any material adverse change in
the financial condition of the Buyer and the Buyer shall not have sustained any
material loss or damage to its assets, whether or not insured, that materially
and adversely affects its ability to conduct a material part of its business.
23
<PAGE>
ARTICLE 8
CLOSING
-------
Section 8.1. Time and Place of Closing. The closing ("Closing") of the
-------------------------
transactions contemplated hereunder shall take place as soon as practicable
after execution and delivery of this Agreement on such date as the parties shall
agree, but in no event later than December 6, 1996 ("Closing Date"), and
effective as of the Effective Time. The Closing shall take place at the offices
of Buyer, 3150 Holcomb Bridge Road, Suite 200, Norcross, Georgia 30071 at 10:00
a.m., Eastern Daylight Time, on the Closing Date.
Section 8.2. Deliveries by the Company. At the Closing, the Company shall
-------------------------
deliver to Buyer:
(a) stock certificates evidencing all of the shares of Common Stock,
canceled or duly endorsed in blank or with stock powers endorsed in blank;
(b) Amended and Restated Articles of Incorporation of the Company,
certified by the Secretary of State of the State of Colorado, and a true and
correct copy of the Bylaws of the Company, certified as of the Closing Date by
the Secretary of the Company;
(c) good standing certificates relating to the Company from the State
of Colorado and each other jurisdiction in which the Company is qualified to
conduct business;
(d) letters of resignation effective at the Closing executed by all
directors of the Company;
(e) the corporate seal and all stock ledgers and minute books of the
Company in existence as of the Closing, accompanied by a certificate of the
Secretary of the Company certifying that the stock ledgers and minutes books
are, to the best of his information and belief, true, correct and complete as of
the Closing Date;
(f) the Merger Documents, including the Articles of Merger and Plan of
Merger, duly executed by the Company;
(g) a Secretary's Certificate attesting to the incumbency of the
officers of the Company executing this Agreement and the other certificates and
agreements delivered by the Company at the Closing; and
(h) the documents and instruments referred to in Article 6 and Article
7 hereof.
Section 8.3. Deliveries by Buyer and IAI. At the Closing, Buyer and IAI
---------------------------
shall deliver to the Company:
24
<PAGE>
(a) a Secretary's Certificate attesting to the incumbency of the
officers of Buyer and IAI executing this Agreement and the other certificates
and agreements delivered by Buyer and IAI at the Closing;
(b) resolutions of the Board of Directors of Buyer (if applicable) and
IAI authorizing the execution and delivery of this Agreement and the performance
of the transactions contemplated hereby, certified by the Secretary of Buyer and
IAI, respectively;
(c) the Merger Documents, including the Articles of Merger and Plan of
Merger, duly executed by IAI;
(d) certificates representing the shares of Buyer Common Stock
issuable pursuant to Section 2.1(b), registered in the names of each of the
Shareholders; and
(e) the documents and instruments referred to in Article 6 and Article
7 hereof.
Section 8.4. Post Closing Deliveries and Power of Attorney. The
---------------------------------------------
Shareholders and Buyer agree that, from time to time after the Closing, each of
them will execute and deliver such further instruments of conveyance and
transfer and take such other action as may be necessary to carry out the
purposes and intent of this Agreement. EACH SHAREHOLDER ABSOLUTELY AND
IRREVOCABLY APPOINTS BUYER AS HIS/HER TRUE AND LAWFUL AGENT AND ATTORNEY-IN-
FACT, WITH FULL POWER OF SUBSTITUTION, IN THE NAME OF SUCH SHAREHOLDER, TO
EXECUTE AND DO ALL SUCH ASSURANCES, ACTS AND THINGS WHICH SUCH SHAREHOLDER HAS
COVENANTED AND AGREED TO DO UNDER THIS AGREEMENT BUT WHICH SUCH SHAREHOLDER HAS
FAILED TO EXECUTE OR DO WITHIN THREE (3) DAYS OF BUYER'S REQUEST THEREFOR,
INCLUDING BUT NOT LIMITED TO EXECUTING, ON BEHALF OF SUCH SHAREHOLDER, SUCH
TRANSFER OR CONVEYANCE DOCUMENTS AND OTHER AGREEMENTS THAT BUYER MAY DEEM PROPER
IN AND FOR THE EXERCISE OF ANY SUCH POWERS, AUTHORITIES OR DISCRETION. THIS
POWER OF ATTORNEY GRANTS TO BUYER, AS AGENT FOR EACH SHAREHOLDER, ALL POWERS
GRANTED TO AGENTS GENERALLY UNDER COLORADO'S UNIFORM STATUTORY FORM POWER OF
ATTORNEY ACT (COLO. REV. STAT., (S)15-1-1301 ET SEQ.) AND APPLICABLE LAW. Each
-- ---
Shareholder hereby ratifies and confirms and agrees to ratify and confirm
whatever lawful acts Buyer shall do in the exercise of the power of attorney
granted to Buyer hereby, which power of attorney shall be deemed to be coupled
with an interest, is irrevocable and shall survive the disability, incapacity or
incompetency of each Shareholder.
ARTICLE 9
TERMINATION
-----------
Section 9.1. Termination. Notwithstanding anything herein to the
-----------
contrary, this Agreement may be terminated and the transactions contemplated
hereby abandoned at any time prior to the Closing:
(a) by mutual written consent of the Company and Buyer;
25
<PAGE>
(b) by the party not in breach in the event of a material breach of
this Agreement by the Company or the Shareholders on the one hand or Buyer on
the other hand, which is not cured within ten days after written notice thereof;
or
(c) by either the Company or Buyer if the Closing has not occurred
prior to December 6, 1996.
Section 9.2. Effect of Termination. If this Agreement is terminated as
---------------------
provided above, this Agreement shall become void and be of no further force or
effect, and no party shall have any further liability to any other party
hereunder as a result of such termination.
ARTICLE 10
SURVIVAL; INDEMNIFICATION
-------------------------
Section 10.1. Survival. The parties' respective representations and
--------
warranties contained in this Agreement will survive execution and delivery of
this Agreement and Closing and shall remain in full force and effect until
December 31, 1998; provided, however, that the representations and warranties
-------- -------
set forth in Sections 3.1 and 3.2 shall survive the Closing for a period of five
years from the Closing Date; and provided, further, that the representations and
-------- -------
warranties set forth in Section 3.16 shall survive until expiration of any
applicable statute of limitations (including any extensions thereof) which will
preclude assertion of Tax claims against the Company for matters existing on or
prior to the Closing Date. Any claim made or notice of a claim given as to any
breach or alleged breach of a representation or warranty shall extend the
applicable survival period set forth above until such claim has been resolved
and satisfied by agreement of the parties or by the entry of a final, non-
appealable judgment of a court having jurisdiction over such claim.
Section 10.2. Indemnification.
---------------
(a) Indemnification by Shareholders. Subject to the terms of this
-------------------------------
Article 10, Shareholders hereby, jointly and severally, covenant and agree to
indemnify, defend, save and hold harmless Buyer, IAI and the Company and their
respective officers, directors, employees, agents, affiliates or any of their
respective successors, assigns or personal representatives (collectively, the
"Buyer Indemnified Parties"), from and against any demands, claims, actions,
losses, damages, deficiencies, liabilities, costs and expenses (including,
without limitation, reasonable attorneys' and accountants' fees and expenses),
together with interest and penalties, if any, awarded by court order or
otherwise agreed to (collectively, "Indemnifiable Damages"), suffered by the
Buyer Indemnified Parties which arise out of or result from:
(i) any misrepresentation in or breach of any of the
representations, warranties or covenants made by Shareholders in this
Agreement;
(ii) any misrepresentation in a document, certificate or
affidavit delivered by the Shareholders at the Closing;
26
<PAGE>
(iii) the continued existence after the Closing of any Lien in
violation of this Agreement;
(iv) any guaranty or other material liability of the Company
not otherwise disclosed hereunder or in any Schedule hereto;
(v) the assertion of any claim by any Shareholder or other
person or entity arising out of consummation of the transactions
contemplated by this Agreement; or
(vi) any claim alleging misconduct of, by or under the control
of the Company which is criminal or of a grossly negligent character that
is attributable to events occurring prior to the Closing.
(b) Indemnification by Buyer. Subject to the terms of this Article
------------------------
10, Buyer covenants and agrees to indemnify and hold harmless the Shareholders,
their personal representatives and permitted assigns from and against any
Indemnifiable Damages suffered by them which arise out of or result from:
(i) any misrepresentation in or breach of any of the
representations, warranties or covenants made by Buyer in this Agreement;
or
(ii) any misrepresentation in a document, certificate or
affidavit delivered by Buyer at the Closing.
(c) Limitations. Notwithstanding anything in this Article 10 to the
------------
contrary, the parties agree that the indemnification liability of Buyer with
respect to those items indemnified pursuant to Section 10(b) and of the
Shareholders with respect to those items indemnified pursuant to Section 10(a)
hereof shall not exceed, in the aggregate $2,000,000. Furthermore, the
indemnification liability of each Shareholder with respect to those items
indemnified pursuant to Section 10(a) hereof shall not exceed the amounts set
forth below by such Shareholder's name:
Meinert $500,000
Capel $300,000
Nelson $350,000
Schmitt $500,000
Smith $350,000
Section 10.3. Procedure for Third-Party Claims.
--------------------------------
(a) Promptly after obtaining knowledge of any claim or demand which
has given rise to, or could reasonably give rise to, a claim for indemnification
hereunder, the party seeking indemnification shall give written notice of such
claim ("Notice of Claim") to the other party. The Notice of Claim shall set
forth a brief description of the facts giving rise to such claim and the amount
(or a reasonable estimate) of the liability, loss, damage or expense
27
<PAGE>
suffered, or which may be suffered, by the party seeking indemnification, and
shall be accompanied by all documentation in the case of a third-party claim
against the indemnified party.
(b) Upon receiving the Notice of Claim, the indemnifying party shall
resist, settle or otherwise dispose of such claim in such manner as it shall
deem appropriate, including the employment of counsel, and shall be responsible
for the payment of all settlements, judgments, costs and expenses, including the
reasonable fees and expenses of any counsel retained. The indemnified party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the indemnified party's expense unless:
(i) the employment has been specifically authorized by the
indemnifying party in writing;
(ii) the indemnifying party has improperly failed to assume the
defense and employ counsel; or
(iii) the named parties to any action (including any impleaded
parties) include the Buyer and/or the Company and the Shareholders, and the
indemnified party has been advised by such counsel that representation of
Buyer and/or the Company and Shareholders by the same counsel would be
inappropriate under applicable standards of professional conduct due to
actual or potential differing interests between them (in which case, if the
indemnified party notifies the indemnifying party in writing that the
indemnified party elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall have neither the right nor
the obligation to assume the defense of such action on behalf of the
indemnified party).
(c) The party seeking indemnification shall comply with the foregoing
procedure for each claim arising hereunder, whether or not the amount of such
claims exceeds any minimum amount. The indemnified party shall cooperate with
the indemnifying party in defending any such claim and provide any books,
records, information or testimony requested, which is in the hands of or under
the control of the indemnified party or obtainable by the indemnified party
without unreasonable expense.
ARTICLE 11
MISCELLANEOUS
-------------
Section 11.1. Counterparts. This Agreement may be executed in two or more
------------
counterparts and may be delivered via facsimile transmission, all of which shall
be considered one and the same agreement, and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other parties.
Section 11.2. Governing Law. Notwithstanding the actual place of
-------------
execution and delivery of this Agreement and the Merger Documents, this
Agreement shall be deemed to have been executed and delivered in the State of
Georgia and shall be governed by and construed in
28
<PAGE>
accordance with the laws of the State of Georgia without reference to the choice
of law principles thereof.
Section 11.3. No Third-Party Beneficiaries. Nothing in this Agreement is
----------------------------
intended, nor shall it be construed, to confer any rights or benefits upon any
person (including, but not limited to, any employee or former employee of the
Company) other than Shareholders, Buyer, IAI and Buyer Indemnified Parties, and
their successors and assigns, and no other person not a party hereto shall have
any rights or remedies hereunder.
Section 11.4. Joint and Several Liability. All obligations and
---------------------------
liabilities of the Shareholders hereunder shall be joint and several.
Section 11.5. Entire Agreement. This Agreement and the Schedules and
----------------
Exhibits hereto contain the entire agreement between the parties with respect to
the subject matter hereof, and there are no agreements, understandings,
representations or warranties between the parties other than those set forth or
referred to herein.
Section 11.6. Expenses. All legal, accounting and other costs and
--------
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses.
Section 11.7. Notices. All notices hereunder shall be sufficiently given
-------
for all purposes hereunder if in writing and delivered personally, sent by
documented overnight delivery service, or to the extent receipt is confirmed,
telecopy, telefax or other electronic transmission service to the appropriate
address or number as follows:
To Buyer and IAI:
Intercept Holdings Inc.
3150 Holcomb Bridge Road, Suite 200
Norcross, GA 30071
Attn: John W. Collins
Facsimile: (770) 242-6803
and
Intercept Acquisitions, Inc.
3150 Holcomb Bridge Road, Suite 200
Norcross, GA 30071
Attn: John W. Collins
Facsimile: (770) 242-6803
With a copy to:
Nelson Mullins Riley & Scarborough, L.L.P.
400 Colony Square, Suite 2200
29
<PAGE>
1201 Peachtree Street, N.E.
Atlanta, Georgia 30361
Attention: Glenn W. Sturm
Facsimile: (404) 817-6151
To the Company:
Bank Services Corporation
130 East Kiowa
Colorado Springs, Colorado
Attn: Philip R. Meinert
Facsimile: (___) ________
To the Shareholders:
Charles W. Capel
504 Rosewood
Mt. Pleasant, Texas 75455
and
Darcey E. Smith
568 Trailhead
Monument, Colorado 80132
and
Philip R. Meinert
580 Wembleton Place
Colorado Springs, Colorado 80906
and
Gary L. Nelson
5025 Purcell Drive
Colorado Springs, Colorado 80922
and
Brian W. Schmitt
3910 Valley View Street
Colorado Springs, Colorado 80906
30
<PAGE>
With a copy to:
Flynn McKenna Wright & Karsh
111 South Tejon Street, Suite 202
Colorado Springs, Colorado 80903
Attention: Brian T. Murphy
Facsimile: (719) 578-8836
Section 11.8. Public Announcements. No party hereto shall make any public
--------------------
announcement or other public disclosure regarding this Agreement or its terms
without the consent of the other (which consent shall not be unreasonably
withheld) except to the extent that such disclosure is required by applicable
law. Notwithstanding the foregoing, the parties may communicate with their
respective employees, customers, suppliers, creditors, shareholders and relevant
governmental agencies as may be necessary and appropriate in connection with the
implementation and consummation of the terms of this Agreement. In addition,
the parties shall cooperate and coordinate with one another on the form and
substance of any press release announcing the execution and delivery of this
Agreement or relating to this Agreement prior to Closing.
Section 11.9. Successors and Assigns. This Agreement shall be binding
----------------------
upon and inure to the benefit of the parties hereto and their respective
successors, personal representatives and permitted assigns; provided, however,
except as expressly contemplated hereunder, no party hereto will assign its
rights or delegate its obligations under this Agreement without the express
written consent of the other parties hereto; provided further, that Buyer may,
at its election, assign its rights under this Agreement in whole to any wholly
owned subsidiary of Buyer so long as the representations and warranties of Buyer
made herein are equally true of such assignee, and provided that such assignment
shall not relieve Buyer of liability hereunder. Any attempted assignment made
without the requisite approval shall be null and void.
Section 11.10. Headings. The section and article headings contained in
--------
this Agreement are inserted for convenience and reference only and will not
affect the meaning or interpretation of this Agreement.
Section 11.11. Amendments and Waivers. No amendment, modification, or
----------------------
alteration of the terms or provisions of this Agreement shall be binding unless
the same shall be in writing and duly executed by the parties hereto. Any of
the terms or conditions of this Agreement may be waived in writing at any time
by the party that is entitled to the benefits thereof. No waiver of any of the
provisions of this Agreement shall be deemed to or shall constitute a waiver of
any other provision hereof (whether or not similar).
Section 11.12. Invalidity of any Part. In any provision or part of this
----------------------
Agreement shall for any reason be held invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions of this Agreement and shall be construed as if such invalid,
illegal or unenforceable provision or part thereof had never been contained
herein, but only to the extent of its invalidity, illegality, or
unenforceability.
31
<PAGE>
Section 11.13. Remedies. Each of the parties acknowledges that money
--------
damages would not be a sufficient remedy for any breach of this Agreement and
that irreparable harm would result if this Agreement were not specifically
enforced. Therefore, the rights and obligations of the parties under this
Agreement shall be enforceable by a decree of specific performance issued by any
court of competent jurisdiction, and appropriate injunctive relief may be
applied for and granted in connection therewith. A party's right to specific
performance shall be in addition to all other legal or equitable remedies
available to such party.
Section 11.14. Actions and Proceedings. The Company and each Shareholder
-----------------------
consent to the exclusive jurisdiction and venue of the courts of any county in
the State of Georgia and the United States District Court for any District of
Georgia in any action or judicial proceeding brought to enforce, construe or
interpret this Agreement. The Company and each Shareholder agree that any forum
other than the State of Georgia is an inconvenient forum and that a suit (or
non-compulsory counterclaim) brought by the Company and/or any Shareholder
against Buyer, IAI or any Buyer Indemnified Party in a court of any state other
than the State of Georgia should be forthwith dismissed or transferred to a
court located in the State of Georgia.
IN WITNESS WHEREOF, this Acquisition and Merger Agreement has been executed
by each of the parties as of the date first above written.
Witness: Intercept Holdings Inc.,
A Georgia Corporation
/s/ Billie M. Trembly
- ----------------------------------- By: /s/ Donny R. Jackson
----------------------
President
Witness: Intercept Acquisitions, Inc.,
A Georgia Corporation
/s/ Billie M. Trembly
- ----------------------------------- By: /s/ Donny R. Jackson
----------------------
President
32
<PAGE>
Witness: Bank Services Corporation,
A Colorado Corporation
/s/ Billie M. Trembly
- -----------------------------------
By: /s/ Philip R. Meinert
--------------------------
President
Shareholders
State of Texas, County of Titus, TO WIT:
/s/ Charles W. Capel
Before me, the undersigned notary public in and -----------------------------
for the aforesaid jurisdiction, personally Charles W. Capel
appeared CHARLES W. CAPEL, known to me or
satisfactorily proven to be the person whose
name is ascribed to the foregoing instrument,
and acknowledged that he executed the said
instrument for the purposes and considerations
therein expressed, and as his voluntary act.
Given under my hand and seal this 21st day of
November, 1996.
/s/ Terri Lee (SEAL)
- ---------------------------------------------
Title of Officer
My commission expires: 3/30/97
State of Colorado /s/ Philip R. Meinert
-----------------------------
Philip R. Meinert
County of El Paso
The foregoing instrument was acknowledged before
me this 20th day of November, 1996, by Philip R.
Meinert. Witness my hand and official seal.
/s/ Merri Conley (SEAL)
- ---------------------------------------------
Title of Officer
My commission expires: 2/12/99
-----------------------
33
<PAGE>
State of Colorado /s/ Gary L. Nelson
------------------------------------- -----------------------------
Gary L. Nelson
County of El Paso
------------------------------------
The foregoing instrument was acknowledged before
me this 20th day of November, 1996, by Gary L.
Nelson. Witness my hand and official seal.
/s/ Merri Conley (SEAL)
- ---------------------------------------------
Title of Officer
My commission expires: 2/12/99
-----------------------
State of Colorado /s/ Brian W. Schmitt
------------------------------------- -----------------------------
Brian W. Schmitt
County of El Paso
------------------------------------
The foregoing instrument was acknowledged before
me this 20th day of November, 1996, by Brian W.
Schmitt. Witness my hand and official seal.
/s/ Merri Conley (SEAL)
- ---------------------------------------------
Title of Officer
My commission expires: 2/12/99
-----------------------
State of Colorado /s/ Darcey E. Smith
------------------------------------- -----------------------------
Darcey E. Smith
County of El Paso
------------------------------------
The foregoing instrument was acknowledged before
me this 20th day of November, 1996, by Darcey
E. Smith. Witness my hand and official seal.
/s/ Merri Conley (SEAL)
- ---------------------------------------------
Title of Officer
My commission expires: 2/12/99
-----------------------
34
<PAGE>
Index to Exhibits and Schedules
Exhibit 1.2 Form of Articles of Merger
Exhibit 3.3(a) Audited Financial Statements of Bank Services Corporation for
December 31, 1995 and 1994
Schedule 3.1(f) Company Subsidiaries, Trade Name or Other Fictitious Names
Schedule 3.2 Ownership of Common Stock
Schedule 3.4 Liabilities
Schedule 3.5 Liens
Schedule 3.6 Litigation and Other Proceedings
Schedule 3.7 Software Programs and Documentation
Schedule 3.7(a) Patents, Trademarks, Service Marks, Tradenames and Copyrights
owned or used by the Company and all applications therefor
and registrations thereof
Schedule 3.7(b) Form and placement of the proprietary legends and copyright
notices displayed in or on the Software
Schedule 3.7(c) Form Non-Disclosure & Assignment Agreement; list of employees
and consultants
Schedule 3.7(e) Claims in Software
Schedule 3.9 Software Contracts
Schedule 3.10 Third Party Interests in Software
Schedule 3.13 Casualty, liability, workers' compensation, life and other
forms of insurance
Schedule 3.14 Material Contracts
Schedule 3.15 Brokers, Finders and Consultants
Schedule 3.16(b) Payment of Taxes
Schedule 3.16(c) Audit History
Schedule 3.17 Employee Plans
Schedule 3.18 Labor and Employment Matters
Schedule 3.18(g) Employment, consulting, loan-out, retainer or other contracts
or agreements
Schedule 3.18(h) Names and Compensation Levels of all Employees and
Consultants
Schedule 3.20 Competition Matters
Schedule 3.21 Transactions with Related Parties
Schedule 3.22 List of Distributors, Suppliers, Etc.
Schedule 3.24 Accounts Receivable
Schedule 3.26 Form of Shareholder Investment Representation Certificate
Schedule 4.5 Form of Buyer Investment Representation Certificate
Schedule 5.5 Consent Liens
Schedule 6.5 Form of Opinion of Counsel to Bank Services to be delivered
to Intercept at the effective time
Schedule 6.10 Form of Confidentiality and Work Product Agreement
Schedule 6.11 Third Party Consents
Schedule 7.4 Form of Opinion of Counsel to Intercept to be delivered to
Bank Services at the effective time
<PAGE>
EXHIBIT 2.4
AGREEMENT AND PLAN OF MERGER AMONG
INTERCEPT HOLDINGS INC., PV ACQUISITION CORP.
AND PROVESA, INC.
This Agreement and Plan of Merger (the "Agreement") is made and entered
into as of the 25th day of November, 1996 by and among INTERCEPT HOLDINGS INC.,
a Georgia corporation ("Holdings"), PV ACQUISITION CORP., a Georgia corporation
("PVAC"), and PROVESA, INC., a Georgia corporation ("ProVesa") (Holdings, PVAC
and ProVesa being hereinafter sometimes collectively referred to as the
"Constituent Corporations," and PVAC and ProVesa being sometimes referred to as
the "Merging Corporations").
WITNESSETH
WHEREAS, each of Holdings and PVAC is a corporation organized under the
laws of the State of Georgia, each with its principal office therein located at
6611 Bay Circle, Suite 160, Norcross, Georgia 30071, County of Gwinnett;
WHEREAS, ProVesa, is a corporation organized under the laws of the State of
Georgia with its principal office therein located at 6621 Bay Circle, Suite 170,
Norcross, Georgia 30071, County of Gwinnett;
WHEREAS, Holdings has authorized capital stock consisting of: (i) ten
million (10,000,000) shares of common stock, no par value per share ("Holdings
Common Stock"), of which one million four hundred and forty-five thousand
(1,445,000) shares are issued and outstanding and zero (0) shares are held in
the treasury, and (ii) fifty thousand (50,000) shares of preferred stock
("Holdings Preferred Stock"), of which thirty thousand (30,000) shares have been
designated as "8% Cumulative Preferred Stock, Series A" (the "Holdings Series A
Stock"), and of such Holdings Series A Stock, zero (0) shares are issued and
outstanding and zero (0) shares are held in treasury;
WHEREAS, ProVesa, Inc. has authorized capital stock consisting of: (i) nine
million (9,000,000) shares of common stock, no par value ("ProVesa Common
Stock"), of which one hundred and five thousand (105,000) shares are issued and
outstanding and zero (0) shares are held in treasury, and (ii) one million
(1,000,000) shares of Preferred Stock, no par value (the "ProVesa Preferred
Stock"), of which thirty thousand (30,000) shares have been designated as "8%
Cumulative Preferred Stock, Series A" (the "ProVesa Series A Stock"), and of
such ProVesa Series A Stock, four thousand two hundred and fifty (4,250) shares
are issued and outstanding and zero (0) shares are held in treasury;
WHEREAS, PVAC has authorized capital stock consisting of: (i) nine million
(9,000,000) shares of common stock, no par value
<PAGE>
per share ("PVAC Common Stock"), of which one hundred and five thousand
(105,000) shares are issued and outstanding and zero (0) shares are held in
treasury, and (ii) one million (1,000,000) shares of Preferred Stock, no par
value (the "PVAC Preferred Stock"), of which thirty thousand (30,000) shares
have been designated as Series A 8% Cumulative Preferred Stock (the "PVAC Series
A Stock"), and of such PVAC Series A Stock zero (0) shares are issued and
outstanding and zero (0) shares of same are held in treasury;
WHEREAS, the laws of the State of Georgia permit a merger of PVAC and
ProVesa;
WHEREAS, the Boards of Directors of each of the Constituent Corporations
has determined that it is advisable and for the benefit of each of the
Constituent Corporations and their respective shareholders that ProVesa be
merged with and into PVAC on the terms and conditions hereinafter set forth, and
by resolutions duly adopted have adopted the terms and conditions of this
Agreement; and the Board of Directors of ProVesa has directed that the proposed
merger be submitted to the shareholders of ProVesa and the Board of Directors of
ProVesa has recommended to its shareholders approval of the terms and conditions
hereinafter set forth;
NOW, THEREFORE, for and in consideration of the premises and of the mutual
agreements, promises and covenants contained herein, it is agreed by and between
the parties hereto, subject to the conditions hereinafter set forth and in
accordance with the Georgia Business Corporation Code (the "Code"), that
ProVesa, Inc. shall be and hereby is, at the Effective Date (as hereinafter
defined), merged with and into PVAC (PVAC subsequent to such merger being
hereinafter sometimes referred to as the "Surviving Corporation"), with the
corporate existence of the Surviving Corporation to be continued under the name
"ProVesa Inc.," and that the terms and conditions of the merger hereby agreed
upon, the mode of carrying the same into effect, and the manner of converting
shares are and shall be as follows:
Section 1
Merger
1.1. On the Effective Date, ProVesa shall be merged with and into PVAC, and
PVAC shall continue in existence under the name "ProVesa Inc." and the merger
shall in all respects have the effect provided for in Section 14-2-1106 of the
Georgia Business Corporation Code.
1.2. Without limiting the foregoing, on and after the Effective Date, the
separate existence of ProVesa shall cease, and, in accordance with the terms of
this Agreement, the title to all real estate and other property owned by each of
the Merging Corporations shall be vested in the Surviving Corporation without
2
<PAGE>
reversion or impairment; the Surviving Corporation shall have all liabilities of
each of the Merging Corporations; and any proceeding pending against either
Merging Corporation may be continued as if the merger did not occur or the
Surviving Corporation may be substituted in its place.
1.3. Prior to and from and after the Effective Date, the Constituent
Corporations shall take all such action as shall be necessary or appropriate in
order to effectuate the merger. If at any time the Surviving Corporation shall
consider or be advised that any further assignments or assurances in law or any
other actions are necessary, appropriate or desirable to vest in said
corporation, according to the terms hereof, the title to any property or rights
of ProVesa, the last acting officers of ProVesa, or the corresponding officers
of the Surviving Corporation, shall and will execute and make all such proper
assignments and assurances and take all action necessary and proper to vest
title in such property or rights in the Surviving Corporation, and otherwise to
carry out the purposes of this Agreement.
Section 2
Terms of Transaction
2.1. Upon the Effective Date:
(a) Each share of ProVesa Common Stock issued and outstanding
immediately prior to the Effective Date shall, by virtue of the merger and
without any action on the part of the holder thereof, thereupon be converted
into one share of Holdings Common Stock, subject to the provisions of Section
2.2 below, the shares of Common Stock of Holdings required for such purpose
being drawn from authorized but unissued shares of the Holdings.
(b) Each share of ProVesa Series A Stock issued and outstanding
immediately prior to the Effective Date shall, by virtue of the merger and
without any action on the part of the holder thereof, thereupon be converted
into one share of Holdings Series A Stock, subject to the provisions of Section
2.3 below, the shares of Holdings Series A Stock required for such purpose being
drawn from authorized but unissued shares of Holdings.
(c) Each share of capital stock of ProVesa held in the treasury of
ProVesa immediately prior to the Effective Date of the merger shall by virtue of
the merger and without any action on the part of the holder thereof, be canceled
and retired and cease to exist without any conversion thereof.
(d) Each share of PVAC Common Stock outstanding and owned of record by
its shareholders immediately prior to the Effective Date shall continue to
represent one issued share of Common Stock of the Surviving Corporation.
3
<PAGE>
2.2. After the Effective Date, each holder of an outstanding certificate or
certificates which immediately prior thereto represented shares of ProVesa
Common Stock will, upon surrender of such certificate or certificates, be
entitled to a certificate or certificates representing the number of shares of
Common Stock of Holdings into which the aggregate number of shares of ProVesa
Common Stock previously represented by such certificate or certificates
surrendered shall have been converted pursuant to Section 2.1 of this Agreement.
2.3. After the Effective Date, each holder of an outstanding certificate or
certificates which immediately prior thereto represented shares of ProVesa
Series A Stock will, upon surrender of such certificate or certificates, be
entitled to a certificate or certificates representing the number of shares of
Holdings Series A Stock into which the aggregate number of shares of ProVesa
Series A Stock previously represented by such certificate or certificates
surrendered shall have been converted pursuant to Section 2.1 of this Agreement.
Section 3
Directors and Officers
The persons who are directors and officers of ProVesa immediately prior to
the Effective Date shall become the directors and officers of the Surviving
Corporation on the Effective Date and shall thereafter continue to hold office
as provided in the bylaws of the Surviving Corporation.
Section 4
Articles of Incorporation and Bylaws
4.1. From and after the Effective Date, the Articles of Incorporation of
PVAC, as in effect at such date, shall be the Articles of Incorporation of the
Surviving Corporation and shall continue in effect until the same shall be
altered, amended or repealed as therein provided or as provided by law; provided
that the corporate name of the Surviving Corporation shall be "ProVesa Inc."
4.2. From and after the Effective Date, the bylaws of PVAC, in effect at
such date, shall be the bylaws of the Surviving Corporation and shall continue
in effect until the same shall be altered, amended or repealed as therein
provided or as provided by law.
Section 5
Shareholder Approval, Effectiveness of Merger
This Agreement shall be submitted for approval to the shareholders of
ProVesa as provided by the Code. If this
4
<PAGE>
Agreement is duly authorized and adopted by the unanimous vote or unanimous
written consents of all such shareholders and is not terminated and abandoned
pursuant to the provisions of Section 6 hereof, this Agreement shall be
executed, and this Agreement, and a Certificate of Merger incorporating the
terms of this Agreement, shall be filed and recorded in accordance with the laws
of the State of Georgia as soon as practicable after the approval by such
shareholders. The Boards of Directors and the proper officers of the
Constituent Corporations are authorized, empowered and directed to do any and
all acts and things, and to make, execute, deliver, file, and record any and all
instruments, papers, and documents which shall be or become necessary, proper,
or convenient to carry out or put into effect any of the provisions of this
Agreement or of the merger herein provided for. The merger shall become
effective on the date on which the Certificate of Merger referencing this
Agreement is filed by the Secretary of State of Georgia (said date is herein
referred to as the "Effective Date").
Section 6
Termination
At any time prior to the filing of the Certificate of Merger by the
Secretary of State of Georgia, the Board of Directors of Holdings or ProVesa may
terminate and abandon this Agreement, notwithstanding favorable action on the
merger by the shareholders of ProVesa or earlier approval by the Boards of
Directors of such corporations. Without limiting the generality of the
foregoing, the Board of Directors of Holdings or ProVesa may terminate and
abandon this Agreement at any time prior to such filing, if the holder of any
shares of ProVesa exercises his, her or its dissenters' rights pursuant to
Article 13 of the Code in connection with the merger.
Section 7
Miscellaneous
7.1. This Agreement may be executed in counterparts, each of which when so
executed shall be deemed to be an original and all of which together shall
constitute one and the same agreement.
7.2. This Agreement and the legal relations between the parties hereto
shall be governed by and construed in accordance with the laws of the State of
Georgia.
5
<PAGE>
IN WITNESS WHEREOF, the Constituent Corporations have each caused this
Agreement to be executed, their respective corporate seals to be affixed and the
foregoing attested, all by their respective duly authorized officers, as of the
date hereinabove first written.
INTERCEPT HOLDINGS INC.
By: /s/ Donny R. Jackson
-------------------------------
President
[CORPORATE SEAL]
ATTEST:
By: /s/ Farrell Mashburn
----------------------------
Secretary
PV ACQUISITION CORP.
By: /s/ Donny R. Jackson
-------------------------------
President
[CORPORATE SEAL]
ATTEST:
By: /s/ John W. Collins
----------------------------
Secretary
PROVESA, INC.
By: /s/ Donny R. Jackson
--------------------------------
President
[CORPORATE SEAL]
ATTEST:
By: /s/ John W. Collins
----------------------------
Secretary
6
<PAGE>
EXHIBIT 2.5
AGREEMENT AND PLAN OF MERGER OF
INTERCEPT COMMUNICATIONS TECHNOLOGIES, L.L.C.
WITH AND INTO
THE INTERCEPT GROUP, INC.
This Agreement and Plan of Merger (the "Agreement") is made and entered
into this 30th day of January, 1998 by and between INTERCEPT COMMUNICATIONS
TECHNOLOGIES, L.L.C., a Georgia limited liability company ("ICT"), and THE
INTERCEPT GROUP, INC., a Georgia corporation ("InterCept") (ICT and InterCept
being hereinafter sometimes collectively referred to as the "Constituent
Companies").
WITNESSETH
WHEREAS, ICT is a limited liability company organized under the laws of the
State of Georgia, with its principal office located at 3150 Holcomb Bridge Road,
Suite 200, Norcross (Gwinnett County), Georgia;
WHEREAS, ICT has 17 members holding a total of 1,112 units of limited
liability interest ("Shares");
WHEREAS, InterCept is a corporation organized under the laws of the State
of Georgia with its principal office located at 3150 Holcomb Bridge Road, Suite
200, Norcross (Gwinnett County) Georgia;
WHEREAS, InterCept has authorized capital stock consisting of: (i)
10,000,000 shares of common stock without par value (the "Common Stock"), of
which 1,904,282 shares are issued and outstanding, and (ii) 50,000 of shares of
preferred stock without par value (the "Preferred Stock"), of which 30,000
shares are designated as Series A 8% Cumulative Preferred Stock ("Series A"),
and 4000 of such Series A are issued and outstanding. InterCept has options to
acquire 132,126 shares of Common Stock outstanding.
WHEREAS, the laws of the State of Georgia permit a merger of the
Constituent Companies;
WHEREAS, the Board of Managers of ICT and the Board of Directors of
InterCept have determined that it is advisable and for the benefit of each of
the Constituent Companies and their respective members and shareholders that ICT
be merged with and into InterCept on the terms and conditions hereinafter set
forth, and by resolutions duly adopted have adopted the terms and conditions of
this Agreement; and directed that the proposed merger be submitted to the
members of ICT and recommended to such members for approval of the terms and
conditions hereinafter set forth;
<PAGE>
NOW, THEREFORE, for and in consideration of the premises and of the mutual
agreements, promises and covenants contained herein, it is agreed by and between
the parties hereto, subject to the conditions hereinafter set forth and in
accordance with the Georgia Business Corporation Code (the "Code") and the
Georgia Limited Liability Company Act (the "Act"), that ICT shall be and hereby
is, at the Effective Date (as hereinafter defined), merged with and into
InterCept (InterCept subsequent to such merger being hereinafter sometimes
referred to as the "Surviving Corporation"), with the corporate existence of the
Surviving Corporation to be continued under the name "The InterCept Group,
Inc.," and that the terms and conditions of the merger hereby agreed upon, the
mode of carrying the same into effect, the manner of converting shares and the
changes in the Articles of Incorporation of the Surviving Corporation are and
shall be as follows:
Section 1
Merger
1.1. On the Effective Date, ICT shall be merged with and into InterCept,
and InterCept shall continue in existence and the merger shall in all respects
have the effect provided for in Section 14-2-1106 of the Georgia Business
Corporation Code.
1.2. Without limiting the foregoing, on and after the Effective Date, the
separate existence of ICT shall cease, and, in accordance with the terms of this
Agreement, the title to all real estate and other property owned by each of the
Constituent Companies shall be vested in the Surviving Corporation without
reversion or impairment; the Surviving Corporation shall have all liabilities of
each of the Constituent Companies; and any proceeding pending against any
Constituent Company may be continued as if the merger did not occur or the
Surviving Corporation may be substituted in its place.
1.3. Prior to and from and after the Effective Date, the Constituent
Companies shall take all such action as shall be necessary or appropriate in
order to effectuate the merger. If at any time the Surviving Corporation shall
consider or be advised that any further assignments or assurances in law or any
other actions are necessary, appropriate or desirable to vest in said
corporation, according to the terms hereof, the title to any property or rights
of ICT, the last acting officers of ICT, or the corresponding officers of the
Surviving Corporation, shall and will execute and make all such proper
assignments and assurances and take all action necessary and proper to vest
title in such property or rights in the Surviving Corporation, and otherwise to
carry out the purposes of this Agreement.
Section 2
Terms of Transaction
2.1. Upon the Effective Date:
(a) Each Share of ICT issued and outstanding immediately prior to
the Effective Date (other than Dissenting Shares, as defined in Section 2.3
hereof) shall, by virtue of the
2
<PAGE>
merger and without any action on the part of the holder thereof, thereupon be
converted into 1,170.8327 shares of InterCept Common Stock, subject to the
provisions of Section 2.2 below, the shares of Common Stock of the Surviving
Corporation required for such purpose being drawn from authorized but unissued
shares of the Surviving Corporation.
(b) Each share of InterCept Common Stock and InterCept Preferred
Stock outstanding and owned of record by its shareholders immediately prior to
the Effective Date shall continue to represent one issued share of Common Stock
and Preferred Stock, respectively, of the Surviving Corporation.
(c) After the Effective Date, Intercept shall have 3,206,248 shares
of Common Stock and 4,000 shares of Preferred Stock outstanding, which amounts
do not exceed the total number and kind of shares authorized by Intercept's
Articles of Incorporation immediately prior to the merger.
2.2. After the Effective Date, each holder of an outstanding certificate or
certificates which immediately prior thereto represented Shares of ICT (other
than holders of Dissenting Shares) will, upon surrender of such certificate or
certificates, be entitled to a certificate or certificates representing the
number of shares of InterCept Common Stock into which the aggregate number of
Shares of ICT, previously represented by such certificate or certificates
surrendered shall have been converted pursuant to Section 2.1 of this Agreement.
2.3. Notwithstanding any provision of this Agreement to the contrary,
Shares of ICT which are issued and outstanding immediately prior to the
Effective Date and which are held by members who have timely filed with ICT a
written objection to the merger (the "Dissenting Shares") shall not be converted
into or represent a right to receive shares of InterCept Common Stock pursuant
to Section 2.1 hereof, but the holder thereof shall be entitled only to such
rights as are granted by Article 10 of the Act. Each holder of Dissenting Shares
who becomes entitled to payment for such Shares pursuant to the foregoing
Article 10 of the Act shall receive payment therefor from ICT in accordance with
the Act. If such holder shall have failed to perfect, or shall have effectively
withdrawn or lost, his right to appraisal and payment for his Shares under the
foregoing Article 10 of the Act, each such share shall be converted into and
represent the right to receive 1,170.8327 shares of Intercept Common Stock
pursuant to Section 2.1 hereof, upon surrender of the certificate representing
such share to InterCept.
Section 3
Directors and Officers
The persons who are directors and officers of InterCept immediately prior
to the Effective Date shall continue as the directors and officers of the
Surviving Corporation and shall continue to hold office as provided in the
bylaws of the Surviving Corporation.
3
<PAGE>
Section 4
Articles of Incorporation and Bylaws
4.1. From and after the Effective Date, the Articles of Incorporation of
InterCept, as in effect at such date, shall be the Articles of Incorporation of
the Surviving Corporation and shall continue in effect until the same shall be
altered, amended or repealed as therein provided or as provided by law.
4.2. From and after the Effective Date, the bylaws of InterCept, in effect
at such date, shall be the bylaws of the Surviving Corporation and shall
continue in effect until the same shall be altered, amended or repealed as
therein provided or as provided by law.
Section 5
Shareholder Approval, Effectiveness of Merger
This Agreement shall be submitted for approval to the members of ICT as
provided by the Act (the approval of the shareholders of InterCept not being
required pursuant to Section 14-2-1103 of the Code). If this Agreement is duly
authorized and adopted by the requisite vote or written consents of such members
and is not terminated and abandoned pursuant to the provisions of Section 6
hereof, this Agreement shall be executed, and this Agreement, and Certificate of
Merger incorporating the terms of this Agreement, shall be filed and recorded in
accordance with the laws of the State of Georgia as soon as practicable after
the approval by the members of ICT. The Board of Managers of ICT, the Board of
Directors of InterCept and the proper officers of the Constituent Companies are
authorized, empowered and directed to do any and all acts and things, and to
make, execute, deliver, file, and record any and all instruments, papers, and
documents which shall be or become necessary, proper, or convenient to carry out
or put into effect any of the provisions of this Agreement or of the merger
herein provided for. The merger shall become effective on the date on which the
Certificate of Merger incorporating this Agreement is filed by the Secretary of
State of Georgia (said date is herein referred to as the "Effective Date").
Section 6
Termination
At any time prior to the filing of the Certificate of Merger by the
Secretary of State of Georgia, the Board of Directors of InterCept or the Board
of Managers of ICT may terminate and abandon this Agreement, notwithstanding
favorable action on the merger by the members of ICT or earlier approval by the
Board of Directors of InterCept or the Board of Managers of ICT.
Section 7
Miscellaneous
7.1. This Agreement may be executed in counterparts, each of which when so
executed shall be deemed to be an original and all of which together shall
constitute one and the same agreement.
4
<PAGE>
7.2. This Agreement and the legal relations between the parties hereto
shall be governed by and construed in accordance with the laws of the State of
Georgia.
7.3. If at any time InterCept shall deem or be advised that any further
assignments, assurances in law, or other acts or instruments are necessary or
desirable to vest or confirm in the InterCept the title to any property of ICT,
the proper managers and members of ICT will do all such acts and things as may
be necessary or appropriate to vest or confirm title to such property in
InterCept and otherwise to carry out the purposes of this Agreement.
7.4. It is the intention of the parties hereto that the form of the merger
contemplated by this Agreement shall qualify as a "reorganization" within the
meaning of Section 368 of the Internal Revenue Code of 1986 for federal income
tax purposes
IN WITNESS WHEREOF, the Constituent Companies have each caused this
Agreement to be executed, their respective corporate seals to be affixed and the
foregoing attested, all by their respective duly authorized officers, as of the
date hereinabove first written.
INTERCEPT COMMUNICATIONS
TECHNOLOGIES, L.L.C.
A Georgia Limited Liability Company
By: /s/ John W. Collins
------------------------------
Title: Chairman
---------------------------
[CORPORATE SEAL]
ATTEST:
By: /s/ Marie H. Storey
------------------------------------
Secretary or Assistant Secretary
THE INTERCEPT GROUP, INC.
A Georgia Corporation
By: /s/ Donny R. Jackson
------------------------------
Title: President/COO
---------------------------
[CORPORATE SEAL]
ATTEST:
By: /s/ Marie H. Storey
------------------------------------
Secretary or Assistant Secretary
5
<PAGE>
EXHIBIT 2.6
PLAN OF MERGER
THIS PLAN OF MERGER dated as of January 30, 1998, is between BANK SERVICES
CORPORATION, a Colorado corporation ("Bank Services"), and THE INTERCEPT GROUP,
INC., a Georgia corporation ("TIG" or the "Parent")(Bank Services and TIG are
sometimes referred to collectively as the "Merging Corporations").
W I T N E S S E T H :
- - - - - - - - - - -
WHEREAS, Parent owns all of the outstanding shares of common stock, without
par value, of Bank Services, such common stock being the only issued and
outstanding class of capital stock of Bank Services, and Parent is therefore
deemed to be the "parent corporation" of a "subsidiary corporation" within the
meaning of Section 7-111-104 of the Colorado Business Corporation Act (the
"Colorado Act") and Section 14-2-1104 of the Georgia Business Corporation Code
(the "Georgia Code"); and
WHEREAS, Section 7-111-107 of the Colorado Act permits Bank Services to merge
with TIG if such merger is permitted by the laws of the jurisdiction under which
TIG is organized; and
WHEREAS, Section 14-2-1107 of the Georgia Code permits TIG to merge with Bank
Services if such merger is permitted by the laws of the jurisdiction under which
Bank Services is organized;
WHEREAS, Section 7-111-104 of the Colorado Act and Section 14-2-1104 of the
Georgia Code both authorize the merger of a "subsidiary corporation" into a
"parent corporation" without approval by a vote of the shareholders of the
merging corporations; and
WHEREAS, Bank Services has presently an authorized capital stock consisting of
1,000,000 shares of common stock, without par value ("Bank Services Common
Stock"), and 50,000 shares of preferred stock, without par value ("Bank Services
Preferred Stock"); and
WHEREAS, Bank Services currently has 87,000 shares of Bank Services Common
Stock issued and outstanding, all of which are owned by TIG, and no shares of
Bank Services Preferred Stock issued and outstanding; and
WHEREAS, Parent has presently an authorized capital stock consisting of
10,000,000 shares of common stock, without par value ("Parent Common Stock"), of
which 1,904,282 shares are issued and outstanding, and 50,000 shares of
preferred stock, without par value, of which 30,000 shares are designated "8%
Cumulative Preferred Stock, Series A" (the "Series A Preferred Stock"), of which
4,000 shares of Series A Preferred Stock are issued and outstanding; and
<PAGE>
WHEREAS, the Board of Directors of Parent deems it advisable and for the
benefit of each of the Constituent Corporations and their shareholders that Bank
Services merge into Parent; and
WHEREAS, the Board of Directors of Parent has by resolution approved this Plan
of Merger and the merger contemplated herein;
NOW, THEREFORE, BE IT RESOLVED THAT, Bank Services shall be merged into TIG
(the "Merger") in the manner and with the effect provided by the Colorado Act
and the Georgia Code, whereupon Bank Services' existence shall cease and TIG
(the "Surviving Corporation") shall survive such Merger and shall continue to
exist under, and be governed by, the Georgia Code and other applicable laws, all
in accordance with the following provisions:
1. Names of Merging Corporations and Surviving Corporation. The names of the
corporations proposing to merge are Bank Services Corporation and The InterCept
Group, Inc., which shall be the Surviving Corporation.
2. Terms and Conditions of Merger. The terms and conditions of the Merger
are as follows:
(a) At the effective time of the Merger, the separate existence and corporate
organization of Bank Services shall cease, except insofar as they may be
continued by statute. Except as specifically set forth herein, the identity,
existence, purposes, powers, objects, franchises, privileges, rights and
immunities of TIG shall continue unaffected and unimpaired by the Merger and, at
the effective time of the Merger, the identity, existence, purposes, powers,
objects, franchises, privileges, rights and immunities of Bank Services shall be
merged into TIG and TIG shall, as the Surviving Corporation, be fully vested
therewith. Except as otherwise specifically set forth herein, at the effective
time of the Merger, TIG shall be obligated to perform or pay all obligations and
liabilities of Bank Services, which obligations and liabilities TIG expressly
assumes and agrees to perform or pay, subject to the effectuation of the Merger.
Notwithstanding the foregoing, the parties hereto acknowledge and agree that:
(i) the obligations of the individual shareholders party to that certain
Acquisition and Merger Agreement dated as of November 26, 1996 (the "Prior Bank
Services Merger Agreement") by and among Bank Services, InterCept Holdings Inc.
(n/k/a The InterCept Group, Inc.), Intercept Acquisitions, Inc. and the
individual shareholders named therein shall not be extinguished or merged out of
existence, but shall survive the merger and remain independent obligations of
such shareholders for the duration specified in the Prior Bank Services Merger
Agreement and (ii) any rights Bank Services has pursuant to the Prior Bank
Services Merger Agreement shall inure to the benefit of the Surviving
Corporation.
(b) At the effective time of the Merger, the Articles of Incorporation of TIG
shall become the Articles of Incorporation of the Surviving Corporation and
shall thereafter continue to be the Surviving Corporation's Articles of
Incorporation until changed as provided by law.
<PAGE>
(c) At the effective time of the Merger, the Bylaws of TIG shall become the
Bylaws of the Surviving Corporation and shall thereafter continue to be the
Surviving Corporation's Bylaws until changed as provided therein.
(d) At the effective time of the Merger, the directors and officers of the
Surviving Corporation shall continue in office until they resign or until their
successors are elected and qualified.
3. Manner and Basis of Converting Shares. The manner and basis for
converting the shares of the Merging Corporations into shares or securities of
the Surviving Corporation are as follows:
(a) At the effective time of the Merger, each share of Bank Services Common
Stock outstanding and owned of record by Parent immediately prior to the
effective time of the Merger shall be cancelled and retired and all certificates
representing such shares shall be cancelled and no cash or securities or other
property shall be issued in respect thereof.
(b) At the effective time of the Merger, each share of capital stock of Bank
Services held in the treasury of Bank Services immediately prior to the
effective time of the Merger shall, by virtue of the merger and without any
action on the part of the holder thereof, be cancelled and retired and cease to
exist without any conversion thereof.
(c) At the effective time of the Merger, each share of Parent Common Stock
which is issued and outstanding immediately prior to the effective time of the
Merger shall continue unchanged and shall continue to represent one share of the
common stock of the Surviving Corporation.
(d) After the effective time of the Merger, each share of Series A Preferred
Stock which is issued and outstanding immediately prior to the effective time of
the Merger shall continue unchanged and shall continue to represent one share of
the Series A Preferred Stock of the Surviving Corporation.
4. Effective Time of Merger. The effective time of the Merger shall be the
later of the time of filing articles or a certificate of merger with (a) the
Georgia Secretary of State, pursuant to the applicable provisions of the Georgia
Code and (b) the Colorado Secretary of State, pursuant to the applicable
provisions of the Colorado Act.
5. Further Assurances. If at any time the Surviving Corporation shall deem
or be advised that any further assignments, assurances in law, or other acts or
instruments are necessary or desirable to vest or confirm in the Surviving
Corporation the title to any property of Bank Services, the proper officers and
directors of Bank Services will do all such acts and things as may be necessary
or appropriate to vest or confirm title to such property in the Surviving
Corporation and otherwise to carry out the purposes of this Plan of Merger.
<PAGE>
6. Reorganization. It is the intention of the parties hereto that the form of
the merger contemplated by this Plan of Merger shall, with respect to Parent and
Bank Services, qualify as a "reorganization" within the meaning of Section
368(a)(1)(B) of the Internal Revenue Code of 1986 for federal income tax
purposes.
7. Counterparts. This Agreement may be executed in counterparts, each of
which when so executed shall be deemed to be an original and all of which
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the undersigned corporations have executed this Plan of
Merger as of the day and year first above written.
Bank Services Corporation,
A Colorado Corporation
By: /s/ Philip R. Meinert
--------------------------------
Philip R. Meinert
President
The InterCept Group, Inc.,
A Georgia Corporation
By: /s/ John W. Collins
--------------------------------
John W. Collins
Chief Executive Officer
<PAGE>
EXHIBIT 2.7
PLAN OF MERGER OF
DATA SERVICES CORP., FINET, INC. AND INTERCEPT SYSTEMS, INC.
WITH AND INTO
THE INTERCEPT GROUP, INC.
This Plan of Merger (the "Plan") of Data Services Corp. ("Data"), FiNet, Inc.
("FiNet") and InterCept Systems, Inc. ("Systems"), each a Georgia corporation
(each a "Subsidiary," and collectively the "Subsidiaries"), with and into The
InterCept Group, Inc., a Georgia corporation ("Parent"), is made on this 30th
day of January, 1998, pursuant to Section 14-2-1104 of the Georgia Business
Corporation Code (the "Code"). Parent and Subsidiaries are sometimes
collectively referred to as the "Constituent Corporations."
WITNESSETH:
WHEREAS, Parent owns all of the outstanding shares of common stock, without
par value, of Data, such common stock being the only outstanding class of
capital stock of Data, and Parent is therefore deemed to be the "parent
corporation" of a "subsidiary corporation" within the meaning of Section 14-2-
1104 of the Code; and
WHEREAS, Parent owns all of the outstanding shares of common stock, no par
value, of FiNet, such common stock being the only outstanding class of capital
stock of FiNet, and Parent is therefore deemed to be the "parent corporation" of
a "subsidiary corporation" within the meaning of Section 14-2-1104 of the Code;
and
WHEREAS, Parent owns all of the outstanding shares of common stock, par value
$1.00 per share, of Systems, such common stock being the only outstanding class
of capital stock of Systems, and Parent is therefore deemed to be the "parent
corporation" of a "subsidiary corporation" within the meaning of Section 14-2-
1104 of the Code; and
WHEREAS, Section 14-2-1104 of the Code authorizes the merger of a "subsidiary
corporation" into a "parent corporation" without approval by a vote of the
shareholders of the merging corporations, except that the Articles of
Incorporation of Data require the shareholders of Data to approve the merger of
Data with and into Parent, which approval has been obtained; and
WHEREAS, Data has presently authorized capital stock of 1,000,000 shares of
common stock, without par value ("Data Common Stock"), of which 500 shares are
issued and outstanding; Data Common Stock is vested with all the voting rights
in such corporation; Parent is the owner of 500 shares of Data Common Stock,
constituting 100 percent of the total number of shares of Data Common Stock
issued and outstanding; and no rights to acquire any capital stock of Data are
outstanding; and
WHEREAS, FiNet has presently authorized capital stock of 1,000,000 shares of
common stock, no par value ("FiNet Common Stock"), of which 6,000 shares are
issued and outstanding;
<PAGE>
FiNet Common Stock is vested with all the voting rights in such corporation;
Parent is the owner of 6,000 shares of FiNet Common Stock, constituting 100
percent of the total number of shares of FiNet Common Stock issued and
outstanding; and no rights to acquire any capital stock of FiNet are
outstanding; and
WHEREAS, Systems has presently authorized capital stock of 5,000 shares of
common stock, par value $1.00 per share ("Systems Common Stock"), of which 927
shares are issued and outstanding; Systems Common Stock is vested with all the
voting rights in such corporation; Parent is the owner of 927 shares of Systems
Common Stock, constituting 100 percent of the total number of shares of Systems
Common Stock issued and outstanding; and no rights to acquire any capital stock
of Systems are outstanding; and
WHEREAS, Parent has presently authorized capital stock consisting of
10,000,000 shares of common stock, without par value ("Parent Common Stock"), of
which 1,904,282 shares are issued and outstanding, and 50,000 shares of
preferred stock, without par value, of which 30,000 shares are designated "8%
Cumulative Preferred Stock, Series A" (the "Series A Preferred Stock"); 4,000
shares of Series A Preferred Stock are issued and outstanding; and Parent Common
Stock is vested with all of the voting rights in such corporation; and
WHEREAS, in connection with the merger and contemporaneously with the
execution hereof, certain employees of FiNet, namely, Paul D. England, Jack K.
Lance and Jerry McKamey, in order to induce Parent to merge with and into FiNet
as set forth in this Plan of Merger, have agreed to amend and restate their
employment agreements dated December 17, 1996 with FiNet and to terminate their
stock option agreements dated December 31, 1996 with Parent; and
WHEREAS, the Board of Directors of Parent deems it advisable and for the
benefit of each of the Constituent Corporations and their shareholders that
Subsidiaries merge into Parent; and
WHEREAS, the Board of Directors of Parent has by resolution approved this Plan
and the merger contemplated herein;
NOW, THEREFORE, BE IT RESOLVED THAT, the terms and conditions of the merger
and the mode of carrying the same into effect are and shall be as follows:
1. Terms and Conditions of Merger. The terms and conditions of the merger are
as follows:
(a) On the Effective Date (as defined below), each Subsidiary shall be merged
with and into Parent (Parent being sometimes referred to as the "Surviving
Corporation"), the corporate existence of the Surviving Corporation shall be
continued, and thereafter the individual existence of each Subsidiary shall
cease.
2
<PAGE>
(b) Without limiting the foregoing, upon the Effective Date, the separate
existence of each Subsidiary shall cease, and in accordance with the terms of
this Plan, the title to any real estate and other property vested in each
Subsidiary shall be vested in the Surviving Corporation without reversion or
impairment; the Surviving Corporation shall have all the liabilities of each of
the Constituent Corporations; and any proceeding pending against any Constituent
Corporation may be continued as if the merger did not occur or the Surviving
Corporation may be substituted in the proceeding for any Subsidiary.
Notwithstanding the foregoing, the parties hereto acknowledge and agree that:
(i) the obligations of the individual shareholders party to (a) that certain
Agreement of Share Exchange dated as of June 4, 1996 (the "Share Exchange
Agreement"), by and between InterCept Holdings, Inc. (n/k/a/ The InterCept
Group, Inc.), Data, Systems and the individual shareholders named therein and
(b) that certain Acquisition and Merger Agreement dated as of November 30, 1996
(the "Prior FiNet Merger Agreement") by and among InterCept Holdings Inc. (n/k/a
The InterCept Group, Inc.), Intercept Acquisitions II Inc., FiNet and the
individual shareholders named therein shall not be extinguished or merged out of
existence, but shall survive the merger and remain independent obligations of
such shareholders for the duration specified in the Share Exchange Agreement and
Prior FiNet Merger Agreement and (ii) any rights Data, FiNet or Systems has
pursuant to the Share Exchange Agreement or Prior FiNet Merger Agreement shall
inure to the benefit of the Surviving Corporation.
(c) The directors and officers of the Surviving Corporation shall continue in
office until they resign or until their successors are elected and qualified.
(d) From and after the Effective Date, the Articles of Incorporation of each
Subsidiary shall be deemed repealed, and the Surviving Corporation shall
continue to be governed by its existing Articles of Incorporation under the laws
of the State of Georgia until such Articles of Incorporation are altered,
amended, or repealed as provided by law.
(e) From and after the Effective Date, the bylaws of each Subsidiary shall be
deemed repealed, and the bylaws of the Surviving Corporation shall continue in
effect until the same shall be altered, amended, or repealed as therein provided
or as provided by law.
2. Manner and Basis of Converting Shares. The manner and basis for
converting the shares of the Constituent Corporations into shares or securities
of the Surviving Corporation are as follows:
(a) Upon the Effective Date of the merger, each share of Data, FiNet and
Systems Common Stock outstanding and owned of record by Parent immediately prior
to the Effective Date shall be cancelled and retired and all certificates
representing such shares shall be cancelled and no cash or securities or other
property shall be issued in respect thereof.
(b) Each share of Parent Common Stock issued and outstanding immediately prior
to the Effective Date shall, on and after the Effective Date, continue unchanged
and shall continue to evidence one share of common stock of the Surviving
Corporation.
3
<PAGE>
(c) Each share of a Subsidiary's Common Stock held in the treasury of such
Subsidiary immediately prior to the Effective Date of the merger shall, by
virtue of the merger and without any action on the part of the holder thereof,
be cancelled and retired and cease to exist without any conversion thereof.
3. Effective Date of Merger. The merger herein contemplated shall be
effective as of the time of filing of the Certificate of Merger relating to this
Plan by the Secretary of State of Georgia (the "Effective Date").
4. Required Actions by FiNet Employees. To induce Parent to enter into this
Plan of Merger, Paul D. England ("England"), Jack K. Lance ("Lance") and Jerry
McKamey ("McKamey") shall execute and deliver to Parent the following documents
in a form satisfactory to Parent: (i) Amended and Restated Employment
Agreements by and between Parent and each of England, Lance and McKamey, and
(ii) Stock Option Termination Agreements by and between Parent and each of
England, Lance and McKamey.
5. Further Assurances. If at any time the Surviving Corporation shall
consider or be advised that any further assignments or assurances in law or any
things are necessary or desirable to vest in said corporation, according to the
terms hereof, the title to any property or rights of Subsidiaries, the last
acting officers of Subsidiaries, or the corresponding officers of the Surviving
Corporation, shall and will execute and make all such proper assignments and
assurances and do all things necessary or proper to vest title in such property
or rights in the Surviving Corporation, and otherwise to carry out the purposes
of this Plan.
6. Reorganization. It is the intention of the parties hereto that the form of
the merger contemplated by this Plan shall, with respect to Parent and the
Subsidiaries, qualify as a "reorganization" within the meaning of Section
368(a)(1)(B) of the Internal Revenue Code of 1986 for federal income tax
purposes.
4
<PAGE>
IN WITNESS WHEREOF, the undersigned corporations have executed this Plan of
Merger as of the day and year first above written.
DATA SERVICES CORP.
A Georgia corporation
By: /s/ Farrell Mashburn
-------------------------------------
Farrell Mashburn, President and
Chief Executive Officer
FINET, INC.
A Georgia corporation
By: /s/ Paul D. England
-------------------------------------
Paul D. England, President and
Chief Executive Officer
INTERCEPT SYSTEMS, INC.
A Georgia corporation
By: /s/ John W. Collins
-------------------------------------
John W. Collins, Chairman and
Chief Executive Officer
THE INTERCEPT GROUP, INC.
A Georgia corporation
By: /s/ John W. Collins
-------------------------------------
John W. Collins, Chairman and
Chief Executive Officer
5
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
THE INTERCEPT GROUP, INC.
ARTICLE ONE
NAME
The name of the corporation is The InterCept Group, Inc.
ARTICLE TWO
CAPITALIZATION
The total number of shares of all classes which the Corporation has
authority to issue is fifty-one million (51,000,000), of which fifty million
(50,000,000) shares shall be designated as "Common Stock," and one million
(1,000,000) shares shall be designated as "Preferred Stock." The designations
and the preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption of the shares of each class of stock are as follows:
Preferred Stock
The Preferred Stock may be issued from time to time by the Board of
Directors as shares of one or more series. The description of shares of each
series of Preferred Stock, including any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption shall be as set forth in
resolutions adopted by the Board of Directors, and articles of amendment shall
be filed with the Georgia Secretary of State as required by law to be filed with
respect to issuance of such Preferred Stock, prior to the issuance of any shares
of such series.
The Board of Directors is expressly authorized, at any time, by adopting
resolutions providing for the issuance of, or providing for a change in the
number of, shares of any particular series of Preferred Stock and, if and to the
extent from time to time required by law, by filing articles of amendment which
are effective without shareholder action to increase or decrease the number of
shares included in each series of Preferred Stock, but not below the number of
shares then issued, and to set or change in any one or more respects the
designations, preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms and
conditions of redemption relating to the shares of each such series.
Notwithstanding the foregoing, the Board of Directors shall not be authorized to
change the right of holders of the Common Stock of the Corporation to vote one
vote per share on all matters submitted for shareholder action. The authority of
the Board of Directors with respect to each series of Preferred Stock shall
include, but not be limited to, setting or changing the following:
<PAGE>
(a) the annual dividend rate, if any, on shares of such series, the times
of payment and the date from which dividends shall be accumulated, if dividends
are to be cumulative;
(b) whether the shares of such series shall be redeemable and, if so, the
redemption price and the terms and conditions of such redemption;
(c) the obligation, if any, of the Corporation to redeem shares of such
series pursuant to a sinking fund;
(d) whether shares of such series shall be convertible into, or
exchangeable for, shares of stock of any other class or classes, and, if so, the
terms and conditions of such conversion or exchange, including the price or
prices or the rate or rates of conversion or exchange and the terms of
adjustment, if any;
(e) whether the shares of such series shall have voting rights, in
addition to the voting rights provided by law, and, if so, the extent of such
voting rights;
(f) the rights of the shares of such series in the event of voluntary or
involuntary liquidation, dissolution or winding-up of the Corporation; and
(g) any other relative rights, powers, preferences, qualifications,
limitations or restrictions thereof relating to such series.
The shares of Preferred Stock of any one series shall be identical with
each other in all respects except as to the dates from and after which dividends
thereon shall accumulate, if cumulative.
Series A 8% Cumulative Preferred Stock
--------------------------------------
There is hereby designated, out of the authorized but unissued shares of
Preferred Stock of the Corporation, a series thereof to consist of 30,000
shares, and the powers, designations, preferences and relative, participating,
optional and other special rights, and the qualifications, limitations and
restrictions, of the shares of such series (in addition to those set forth in
the Corporations Articles of Incorporation which are applicable to the Preferred
Stock of all series) shall be as follows:
1. Designation. The designation of this series of Preferred Stock shall
-----------
be 8% Cumulative Preferred Stock, Series A (hereinafter called "Series A"). The
stated value of Series A is $100 per share.
2. Dividends. Holders of shares of Series A shall be entitled to receive,
---------
when, as and if declared by the Board of Directors of the Corporation out of
assets of the Corporation legally available therefor, cash dividends at the
annual rate of 8% of the stated value per share, or $8.00 per share. Dividends
on each share of Series A at such annual rate will be payable quarterly in
arrears on April 1, July 1, October 1 and January 1 of each year, commencing
October 1, 1996, or, if later, the first April 1, July 1, October 1, or January
1 occurring after the issuance of such
2
<PAGE>
share. Each such dividend will be payable to holders of record as they appear on
the stock books of the Corporation on such record dates, not exceeding 45 days
preceding the payment dates thereof, as shall be fixed by the Board of Directors
of the Corporation. Dividends will be cumulative from the date of original
issue, and dividends payable on shares of Series A on October 1, 1996 (or such
later date, if applicable) will be based on the number of days that shall have
elapsed since the date of original issue of such shares of Series A. Dividends
payable on Series A for any period greater or less than a full dividend period
shall be computed on the basis of a 360-day year consisting of twelve 30-day
months. Dividends payable on Series A for each full dividend period shall be
computed by dividing the annual dividend rate by four. Holders of Series A shall
not be entitled to any dividend, whether payable in cash, property or
securities, in excess of full cumulative dividends on Series A. No interest, or
sum of money in lieu of interest, shall be payable in respect of any dividend
payment or payments which may be in arrears. Dividends paid on shares of Series
A in an amount less than the total amount of such dividends at the time
accumulated and payable on such shares shall be allocated pro rata among all
such shares at the time outstanding.
If there shall be outstanding shares of any other series of Preferred Stock
of the Corporation ranking junior to or on a parity with Series A as to
dividends, no full dividends shall be declared or paid or set apart for payment
on any such other series for any period unless full cumulative dividends have
been or contemporaneously are declared and paid or declared and a sum sufficient
for payment thereof is set apart for such payment on Series A for all dividend
payment periods ending on or before the date of payment of such full cumulative
dividends. When dividends are not paid in full or are in arrears on Series A and
on any other series of Preferred Stock ranking on a parity as to dividends with
Series A, all dividends declared upon all outstanding shares of Series A and
shares of such other series of Preferred Stock shall be declared pro rata so
that the amounts of dividends declared per share on Series A and such other
Preferred Stock shall in all cases bear to each other the same ratio that
accrued and unpaid dividends per share on the shares of Series A and such other
Preferred Stock to the date of such dividend payment bear to each other.
Unless full cumulative dividends on all outstanding shares of Series A
shall have been paid or declared and set apart for payment for all past dividend
payment periods, (i) no dividends may be paid or declared and set apart for
payment, or other distribution made (other than dividends or distributions in
Common Stock or any other stock ranking junior to Series A) upon the Common
Stock or on any other stock of the Corporation ranking junior to Series A, and
(ii) no Common Stock, or any other stock of the Corporation ranking as to
dividends or upon liquidation junior to, or on a parity with, Series A, may be
redeemed, purchased or otherwise acquired for any consideration (nor may any
payment be made or made available for a sinking fund for the redemption of any
shares of such stock) by the Corporation (except for conversion of such junior
or parity stock into, or exchange of such junior or parity stock for, stock
ranking junior to Series A as to dividends and upon liquidation).
3. Liquidation Rights. In the event of any voluntary or involuntary
------------------
liquidation, dissolution or winding up of the Corporation, the holders of shares
of Series A are entitled to receive out of the assets of the Corporation
available for distribution to shareholders, before any distribution of assets is
made to holders of Common Stock or of any other shares of stock of the
3
<PAGE>
Corporation ranking as to such a distribution junior to the shares of Series A,
liquidating distributions in the amount of $100 per share plus accrued and
unpaid dividends. After payment of such liquidating distributions, the holders
of shares of Series A will not be entitled to any further participation in any
distribution of assets of the Corporation. If, upon any voluntary or
involuntary dissolution, liquidation or winding up of the Corporation, the
amounts payable with respect to the liquidation preference of the Series A and
any other shares of stock of the Corporation ranking as to any such distribution
on a parity with the Series A are not paid in full, the holders of the Series A
and of such other shares will share ratably in any such distribution of assets
of the Corporation in proportion to the full respective distributable amounts to
which they are entitled. Neither the sale of all or substantially all the
property or business of the Corporation, nor the merger or consolidation of the
Corporation into or with any other corporation, shall be deemed to be a
dissolution, liquidation or winding up, voluntary or involuntary, of the
Corporation.
4. Redemption at the Option of the Corporation. The Series A is redeemable
-------------------------------------------
at the option of the Corporation for cash at any time or from time to time, in
whole or in part, on at least 10 but not more than 90 days' notice. With respect
to any such redemption at the option of the Corporation, shares of Series A will
be redeemable at 110% of the stated value per share, or $110 per share, together
in each case with accrued but unpaid dividends to the date of redemption.
5. Redemption at the Option of the Holder. At any time after the third
--------------------------------------
anniversary of the initial issuance of shares of Series A, any holder of Series
A may tender all or part of his Series A for redemption at a price equal to 100%
of stated value, or $100 per share, together with accrued but unpaid dividends
to the date of redemption. All such tendered shares of Series A received by the
Corporation on or before the thirtieth day prior to the sixth or any subsequent
anniversary date of the initial issuance will be redeemed on such anniversary
date, subject, however, to proration (rounded down to the nearest whole share)
at the Corporation's election if more than twenty percent (20%) of the number of
shares of Series A initially issued have been tendered for redemption during the
twelve months ending on such thirtieth day prior to such anniversary date. The
Corporation must redeem twenty percent (20%) of the number of shares of Series A
initially issued and at its sole discretion may elect to redeem any greater
percentage up to and including one hundred percent (100%) of all tendered
shares.
6. Voting Rights. The holders of the Series A will have no voting rights
-------------
except as otherwise expressly required by applicable law.
7. Other Aspects. No holder of shares of Series A will have any
-------------
preemptive or other rights to subscribe for any other shares or securities, or
any conversion rights. Shares of Series A, when issued, shall be validly issued,
fully paid and nonassessable. The shares of Series A shall not be subject to any
mandatory redemption or sinking fund or other obligation of the Corporation to
redeem or retire Series A, other than the obligation to redeem shares of Series
A at the option of the holders thereof.
The Series A shall rank prior to the Common Stock of the Corporation as to
dividends and upon liquidation of the Corporation.
4
<PAGE>
Common Stock
Subject to all of the rights of the Preferred Stock as expressly provided
herein, by law or by the Board of Directors pursuant to this Article Two, the
Common Stock of the Corporation shall possess all such rights and privileges as
are afforded to capital stock by applicable law in the absence of any express
grant of rights or privileges in the Corporation's Articles of Incorporation,
including, but not limited to, the following rights and privileges:
(a) dividends may be declared and paid or set apart for payment upon the
Common Stock out of any assets or funds of the Corporation legally available for
the payment of dividends;
(b) the holders of Common Stock shall have the right to vote for the
election of directors and on all other matters requiring stockholder action,
each share being entitled to one vote; and
(c) upon the voluntary or involuntary liquidation, dissolution or winding-
up of the Corporation, the net assets of the Corporation available for
distribution shall be distributed pro rata to the holders of the Common Stock in
accordance with their respective rights and interests.
ARTICLE THREE
REGISTERED OFFICE AND AGENT
The registered agent of the Corporation shall be John W. Collins at the
Company's principal office indicated below.
ARTICLE FOUR
MAILING ADDRESS OF PRINCIPAL OFFICE
The mailing address of the principal office of the Corporation is 3150
Holcomb Bridge Road, Suite 200, Norcross, Georgia 30371.
ARTICLE FIVE
LIMITATION ON DIRECTOR LIABILITY
No director of the corporation shall be personally liable to the
corporation or its shareholders for monetary damages for breach of the duty of
care or any other duty as a director, except that such liability shall not be
eliminated for:
(a) any appropriation, in violation of the director's duties, of any
business opportunity of the corporation;
5
<PAGE>
(b) acts or omissions that involve intentional misconduct or a knowing
violation of law;
(c) liability under Section 14-2-832 (or any successor provision or
redesignation thereof) of the Georgia Business Corporation Code (the "Code");
and
(d) any transaction from which the director derived an improper personal
benefit.
If at any time the Code shall have been amended to authorize the further
elimination or limitation of the liability of a director, then the liability of
each director of the corporation shall be eliminated or limited to the fullest
extent permitted by the Code, as so amended, without further action by the
shareholders, unless the provisions of the Code, as amended, require further
action by the shareholders.
Any repeal or modification of the foregoing provisions of this Article Five
shall not adversely affect the elimination or limitation of liability or alleged
liability pursuant hereto of any director of the corporation for or with respect
to any alleged act or omission of the director occurring prior to such a repeal
or modification.
ARTICLE SIX
BOARD AND SHAREHOLDER ACTION
REQUIRED FOR CERTAIN TRANSACTIONS
The affirmative vote of at least 66 2/3% of the directors is required for
the following actions by the Corporation to be submitted to a vote of the
shareholders:
(a) a sale of all or substantially all of the assets of the Corporation;
(b) a liquidation or dissolution of the Corporation;
(c) the merger, consolidation or reorganization of the Corporation, unless
the shareholders of the Corporation immediately prior to such
transaction own at least a majority of the combined voting power of
the Corporation resulting from such merger, consolidation or
reorganization; or
(d) any increase in the number of directors above 12 directors;
provided, further, that the affirmative vote of 66 2/3% of the holders of the
- -------- -------
Common Stock is required for shareholder approval of any action outlined in the
clauses above.
ARTICLE SEVEN
DIRECTORS
The Corporation shall have not less than four nor more than 12 directors,
and the number of directors shall be set by the Board of Directors as provided
in the Company's bylaws. The Board of Directors shall be divided into three
classes to be known as Class I,
6
<PAGE>
Class II, and Class III, which shall be as nearly equal in number as possible.
Except in the case of death, resignation, disqualification, or removal for
cause, each director shall serve for a term ending on the date of the third
annual meeting of shareholders following the annual meeting at which the
director was elected; provided, however, that each initial director in Class I
-------- -------
shall hold office until the first annual meeting of shareholders after his
election; each initial director in Class II shall hold office until the second
annual meeting of shareholders after his election; and each initial director in
Class III shall hold office until the third annual meeting of shareholders after
his election. Despite the expiration of a director's term, such director shall
continue to serve until his or her successor, if there is to be any, has been
elected and has qualified. In the event of any increase or decrease in the
authorized number of directors, the newly created or eliminated directorships
resulting from such an increase or decrease shall be apportioned among the three
classes of directors so that the three classes remain as nearly equal in size as
possible; provided, however, that there shall be no classification of additional
-------- -------
directors elected by the Board of Directors until the next meeting of
shareholders called for the purposes of electing directors, at which meeting the
terms of all such additional directors shall expire, and such additional
directors positions, if they are to be continued, shall be apportioned among the
classes of directors and nominees therefor shall be submitted to the
shareholders for their vote.
In discharging the duties of their respective positions and in determining
what is believed to be in the best interests of the Corporation, the Board of
Directors, committees of the Board of Directors, and individual directors, in
addition to considering the effects of any action on the Corporation or its
shareholders, may consider the interests of the employees, customers, suppliers
and creditors of the Corporation and its subsidiaries, the communities in which
offices or other establishments of the Corporation and its subsidiaries are
located, and all other factors such directors consider pertinent. This
provision solely grants discretionary authority to the directors and shall not
be deemed to provide to any other constituency any right to be considered.
These Amended and Restated Articles of Incorporation were duly approved by
the Board of Directors, on January 16, 1998 and by the shareholders in
accordance with Section 14-2-1003 of the Georgia Business Corporation Code.
IN WITNESS WHEREOF, the Corporation has caused these Amended and Restated
Articles of Incorporation to be executed and attested by its duly authorized
officer on January 30, 1998.
/s/ John W. Collins
----------------------------
John W. Collins
Chief Executive Officer
7
<PAGE>
EXHIBIT 3.2
BYLAWS (AMENDED AND RESTATED)
OF
THE INTERCEPT GROUP, INC.
Adopted January 16, 1998
<PAGE>
BYLAWS
OF
THE INTERCEPT GROUP, INC.
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE ONE...........................................................................1
1.1 Registered Office and Agent.......................................1
1.2 Principal Office..................................................1
1.3 Other Offices.....................................................1
ARTICLE TWO...........................................................................2
2.1 Place of Meetings.................................................2
2.2 Annual Meetings...................................................2
2.3 Special Meetings..................................................2
2.4 Notice of Meetings................................................2
2.5 Waiver of Notice..................................................3
2.6 Voting Group; Quorum; Vote Required to Act........................3
2.7 Voting of Shares..................................................3
2.8 Proxies...........................................................3
2.9 Presiding Officer.................................................4
2.10 Adjournments......................................................4
2.11 Conduct of the Meeting............................................4
2.12 Action of Shareholders Without a Meeting..........................4
ARTICLE THREE.........................................................................5
3.1 General Powers....................................................5
3.2 Number, Election and Term of Office...............................5
3.3 Removal of Directors..............................................6
3.4 Vacancies.........................................................6
3.5 Compensation......................................................7
3.6 Committees of the Board of Directors..............................7
3.7 Qualification of Directors........................................7
3.8 Certain Nomination Requirements...................................7
ARTICLE FOUR..........................................................................8
4.1 Regular Meetings..................................................8
4.2 Special Meetings..................................................8
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
4.3 Place of Meetings.................................................8
4.4 Notice of Meetings................................................8
4.5 Quorum............................................................8
4.6 Vote Required for Action..........................................9
4.7 Participation by Conference Telephone.............................9
4.8 Action by Directors Without a Meeting.............................9
4.9 Adjournments......................................................9
4.10 Waiver of Notice..................................................9
ARTICLE FIVE.........................................................................10
5.1 Offices..........................................................10
5.2 Term.............................................................10
5.3 Compensation.....................................................10
5.4 Removal..........................................................10
5.5 Chairman of the Board............................................10
5.6 President........................................................11
5.7 Vice Presidents..................................................11
5.8 Secretary........................................................11
5.9 Treasurer........................................................11
ARTICLE SIX..........................................................................12
ARTICLE SEVEN........................................................................12
7.1 Share Certificates...............................................12
7.2 Rights of Corporation with Respect to Registered Owners..........12
7.3 Transfers of Shares..............................................12
7.4 Duty of Corporation to Register Transfer.........................13
7.5 Lost, Stolen, or Destroyed Certificates..........................13
7.6 Fixing of Record Date............................................13
7.7 Record Date if None Fixed........................................13
ARTICLE EIGHT........................................................................14
8.1 Indemnification of Directors.....................................14
8.2 Indemnification of Others........................................14
8.3 Other Organizations..............................................14
8.4 Determination....................................................15
8.5 Advances.........................................................15
8.6 Non-Exclusivity..................................................15
8.7 Insurance........................................................15
8.8 Notice...........................................................16
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
8.9 Security.........................................................16
8.10 Amendment........................................................16
8.11 Agreements.......................................................16
8.12 Continuing Benefits..............................................16
8.13 Successors.......................................................17
8.14 Severability.....................................................17
8.15 Additional Indemnification.......................................17
ARTICLE NINE.........................................................................17
9.1 Inspection of Books and Records..................................17
9.2 Fiscal Year......................................................17
9.3 Corporate Seal...................................................17
9.4 Annual Statements................................................18
9.5 Notice...........................................................18
ARTICLE TEN..........................................................................18
</TABLE>
iii
<PAGE>
BYLAWS (AMENDED AND RESTATED)
OF
THE INTERCEPT GROUP, INC.
References in these Bylaws to "Articles of Incorporation" are to the
Articles of Incorporation of THE INTERCEPT GROUP, INC., a Georgia corporation
(the "Corporation"), as amended and restated from time to time (the "Articles of
Incorporation").
All of these Bylaws are subject to contrary provisions, if any, of the
Articles of Incorporation (including provisions designating the preferences,
limitations, and relative rights of any class or series of shares), the Georgia
Business Corporation Code (the "Code"), and other applicable law, as in effect
on and after the effective date of these Bylaws. References in these Bylaws to
"Sections" shall refer to sections of the Bylaws, unless otherwise indicated.
ARTICLE ONE
Office
1.1 Registered Office and Agent. The Corporation shall maintain a
---------------------------
registered office and shall have a registered agent whose business office is the
same as the registered office.
1.2 Principal Office. The principal office of the Corporation shall be
----------------
at the place designated in the Corporation's annual registration with the
Georgia Secretary of State.
1.3 Other Offices. In addition to its registered office and principal
-------------
office, the Corporation may have offices at other locations either in or outside
the State of Georgia.
ARTICLE TWO
Shareholders' Meetings
2.1 Place of Meetings. Meetings of the Corporation's shareholders may
-----------------
be held at any location inside or outside the State of Georgia designated by the
Board of Directors or any other person or persons who properly call the meeting,
or if the Board of Directors or such other person or persons do not specify a
location, at the Corporation's principal office.
<PAGE>
2.2 Annual Meetings. The Corporation shall hold an annual meeting of
---------------
shareholders, at a time determined by the Board of Directors, to elect directors
and to transact any business that properly may come before the meeting. The
annual meeting may be combined with any other meeting of shareholders, whether
annual or special.
2.3 Special Meetings. Special meetings of shareholders of one or more
----------------
classes or series of the Corporation's shares may be called at any time by the
Board of Directors, the Chairman of the Board, or the President, and shall be
called by the Corporation upon the written request (in compliance with
applicable requirements of the Code) of the holders of shares representing
twenty-five percent (25%) or more of the votes entitled to be cast on each issue
proposed to be considered at the special meeting; provided, however, that at any
time the Corporation has more than 100 beneficial owners (as defined in Section
14-2-1110 of the Code) of its shares, such written request must be made by the
holders of a majority of such votes. The business that may be transacted at any
special meeting of shareholders shall be limited to that proposed in the notice
of the special meeting given in accordance with Section 2.4 (including related
or incidental matters that may be necessary or appropriate to effectuate the
proposed business).
2.4 Notice of Meetings. In accordance with Section 9.5 and subject to
------------------
waiver by a shareholder pursuant to Section 2.5, the Corporation shall give
written notice of the date, time, and place of each annual and special
shareholders' meeting no fewer than 10 days nor more than 60 days before the
meeting date to each shareholder of record entitled to vote at the meeting. The
notice of an annual meeting need not state the purpose of the meeting unless
these Bylaws require otherwise. The notice of a special meeting shall state the
purpose for which the meeting is called. If an annual or special shareholders'
meeting is adjourned to a different date, time, or location, the Corporation
shall give shareholders notice of the new date, time, or location of the
adjourned meeting, unless a quorum of shareholders was present at the meeting
and information regarding the adjournment was announced before the meeting was
adjourned; provided, however, that if a new record date is or must be fixed in
accordance with Section 7.6, the Corporation must give notice of the adjourned
meeting to all shareholders of record as of the new record date who are entitled
to vote at the adjourned meeting.
2.5 Waiver of Notice. A shareholder may waive any notice required by
----------------
the Code, the Articles of Incorporation, or these Bylaws, before or after the
date and time of the matter to which the notice relates, by delivering to the
Corporation a written waiver of notice signed by the shareholder entitled to the
notice. In addition, a shareholder's attendance at a meeting shall be (a) a
waiver of objection to 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 (b) a waiver of objection to
consideration of a particular matter at the meeting that is not within the
purpose stated in the meeting notice, unless the shareholder objects to
considering the matter when it is presented. Except as otherwise required by the
Code, neither the purpose of nor the business transacted at the meeting need be
specified in any waiver.
2.6 Voting Group; Quorum; Vote Required to Act. (a) Unless otherwise
------------------------------------------
required by the Code or the Articles of Incorporation, all classes or series of
the Corporation's shares
2
<PAGE>
entitled to vote generally on a matter shall for that purpose be considered a
single voting group (a "Voting Group"). If either the Articles of Incorporation
or the Code requires separate voting by two or more Voting Groups on a matter,
action on that matter is taken only when voted upon by each such Voting Group
separately. At all meetings of shareholders, any Voting Group entitled to vote
on a matter may take action on the matter only if a quorum of that Voting Group
exists at the meeting, and if a quorum exists, the Voting Group may take action
on the matter notwithstanding the absence of a quorum of any other Voting Group
that may be entitled to vote separately on the matter. Unless the Articles of
Incorporation, these Bylaws, or the Code provides otherwise, the presence (in
person or by proxy) of shares representing a majority of votes entitled to be
cast on a matter by a Voting Group shall constitute a quorum of that Voting
Group with regard to that matter. Once a shareholder is present at any meeting
other than solely to object to holding the meeting or transacting business at
the meeting, the shareholder shall be deemed present for quorum purposes for the
remainder of the meeting and for any adjournments of that meeting, unless a new
record date for the adjourned meeting is or must be set pursuant to Section 7.6
of these Bylaws.
(b) Except as provided in Section 3.4, if a quorum exists, action on a
matter by a Voting Group is approved by that Voting Group if the votes cast
within the Voting Group favoring the action exceed the votes cast opposing the
action, unless the Articles of Incorporation, a provision of these Bylaws that
has been adopted pursuant to Section 14-2-1021 of the Code (or any successor
provision), or the Code requires a greater number of affirmative votes.
2.7 Voting of Shares. Unless otherwise required by the Code or the
----------------
Articles of Incorporation, each outstanding share of any class or series having
voting rights shall be entitled to one vote on each matter that is submitted to
a vote of shareholders.
2.8 Proxies. A shareholder entitled to vote on a matter may vote in
-------
person or by proxy pursuant to an appointment executed in writing by the
shareholder or by his or her attorney-in-fact. An appointment of a proxy shall
be valid for 11 months from the date of its execution, unless a longer or
shorter period is expressly stated in the proxy.
2.9 Presiding Officer. Except as otherwise provided in this Section
-----------------
2.9, the Chairman of the Board, and in his or her absence or disability the
President shall preside at every shareholders' meeting (and any adjournment
thereof) as its chairman, if either of them is present and willing to serve. If
neither the Chairman of the Board nor the President is present and willing to
serve as chairman of the meeting, and if the Chairman of the Board has not
designated another person who is present and willing to serve, then a majority
of the Corporation's directors present at the meeting shall be entitled to
designate a person to serve as chairman. If no director of the Corporation is
present at the meeting or if a majority of the directors who are present cannot
be established, then a chairman of the meeting shall be selected by a majority
vote of (a) the shares present at the meeting that would be entitled to vote in
an election of directors, or (b) if no such shares are present at the meeting,
then the shares present at the meeting comprising the Voting Group with the
largest number of shares present at the meeting and entitled to vote on a matter
properly proposed to be considered at the meeting. The chairman of the meeting
may designate other persons to assist with the meeting.
3
<PAGE>
2.10 Adjournments. At any meeting of shareholders (including an
------------
adjourned meeting), a majority of shares of any Voting Group present and
entitled to vote at the meeting (whether or not those shares constitute a
quorum) may adjourn the meeting, but only with respect to that Voting Group, to
reconvene at a specific time and place. If more than one Voting Group is present
and entitled to vote on a matter at the meeting, then the meeting may be
continued with respect to any such Voting Group that does not vote to adjourn as
provided above, and such Voting Group may proceed to vote on any matter to which
it is otherwise entitled to do so; provided, however, that if (a) more than one
Voting Group is required to take action on a matter at the meeting and (b) any
one of those Voting Groups votes to adjourn the meeting (in accordance with the
preceding sentence), then the action shall not be deemed to have been taken
until the requisite vote of any adjourned Voting Group is obtained at its
reconvened meeting. The only business that may be transacted at any reconvened
meeting is business that could have been transacted at the meeting that was
adjourned, unless further notice of the adjourned meeting has been given in
compliance with the requirements for a special meeting that specifies the
additional purpose or purposes for which the meeting is called. Nothing
contained in this Section 2.10 shall be deemed or otherwise construed to limit
any lawful authority of the chairman of a meeting to adjourn the meeting.
2.11 Conduct of the Meeting. At any meeting of shareholders, the
----------------------
chairman of the meeting shall be entitled to establish the rules of order
governing the conduct of business at the meeting.
2.12 Action of Shareholders Without a Meeting. Action required or
----------------------------------------
permitted to be taken at a meeting of shareholders may be taken without a
meeting if the action is taken by all shareholders entitled to vote on the
action or, if permitted by the Articles of Incorporation, by persons who would
be entitled to vote at a meeting shares having voting power to cast the
requisite number of votes (or numbers, in the case of voting by groups) that
would be necessary to authorize or take the action at a meeting at which all
shareholders entitled to vote were present and voted. The action must be
evidenced by one or more written consents describing the action taken, signed by
shareholders entitled to take action without a meeting, and delivered to the
Corporation for inclusion in the minutes or filing with the corporate records.
Where required by Section 14-2-704 or other applicable provision of the Code,
the Corporation shall provide shareholders with written notice of actions taken
without a meeting.
2.13 Matters Considered at Annual Meetings. Notwithstanding anything to
-------------------------------------
the contrary in these Bylaws, the only business that may be conducted at an
annual meeting of shareholders shall be business brought before the meeting (a)
by or at the direction of the Board of Directors prior to the meeting, (b) by or
at the direction of the Chairman of the Board or the President, or (c) by a
shareholder of the Corporation who is entitled to vote with respect to the
business and who complies with the notice procedures set forth in this Section
2.13. For business to be brought properly before an annual meeting by a
shareholder, the shareholder must have given timely notice of the business in
writing to the Secretary of the Corporation. To be timely, a shareholder's
notice must be delivered or mailed to and received at the principal office of
the Corporation not less than sixty (60) nor more than ninety (90) days prior to
the first anniversary
4
<PAGE>
of the previous year's annual meeting. A shareholder's notice to the Secretary
shall set forth a brief description of each matter of business the shareholder
proposes to bring before the meeting and the reasons for conducting that
business at the meeting; the name, as it appears on the Corporation's books, and
address of the shareholder proposing the business; the series or class and
number of shares of the Corporation's capital stock that are beneficially owned
by the shareholder; and any material interest of the shareholder in the proposed
business. The chairman of the meeting shall have the discretion to declare to
the meeting that any business proposed by a shareholder to be considered at the
meeting is out of order and that such business shall not be transacted at the
meeting if (i) the chairman concludes that the matter has been proposed in a
manner inconsistent with this Section 2.13 or (ii) the chairman concludes that
the subject matter of the proposed business is inappropriate for consideration
by the shareholders at the meeting.
ARTICLE THREE
Board of Directors
3.1 General Powers. All corporate powers shall be exercised by or under
--------------
the authority of, and the business and affairs of the Corporation shall be
managed by, the Board of Directors, subject to any limitation set forth in the
Articles of Incorporation, in bylaws approved by the shareholders, or in
agreements among all the shareholders that are otherwise lawful.
3.2 Number, Election and Term of Office. Except as otherwise provided
-----------------------------------
in the Articles of Incorporation, the Board of Directors shall consist of a
maximum of twelve members. The Board of Directors shall have the authority to
change the number of directors from time to time by resolution so long as the
number of directors does not exceed twelve; provided, however, that no decrease
in the number of directors (if more than one director is elected by a resolution
of the Board of Directors or the shareholders) shall have the effect of
shortening the term of an incumbent director. The Board of Directors shall be
divided into three classes to be known as Class I, Class II, and Class III,
which shall be as nearly equal in number as possible. Except in the case of
death, resignation, disqualification, or removal for cause, each director shall
serve for a term ending on the date of the third annual meeting of shareholders
following the annual meeting at which the director was elected; provided,
however, that each initial director in Class I shall hold office until the first
annual meeting of shareholders after his election; each initial director in
Class II shall hold office until the second annual meeting of shareholders after
his election; and each initial director in Class III shall hold office until the
third annual meeting of shareholders after his election. Despite the expiration
of a director's term, such director shall continue to serve until his or her
successor, if there is to be any, has been elected and has qualified. In the
event of any increase or decrease in the authorized number of directors, the
newly created or eliminated directorships resulting from such an increase or
decrease shall be apportioned among the three classes of directors so that the
three classes remain as nearly equal in size as possible; provided, however,
that there shall be no classification of additional directors elected by the
Board of Directors until the next meeting of shareholders called for the
purposes of electing directors, at which meeting the terms of all such
additional directors shall expire, and such additional directors positions, if
they are to be continued, shall be apportioned among the
5
<PAGE>
classes of directors and nominees therefor shall be submitted to the
shareholders for their vote.
3.3 Removal of Directors. The entire Board of Directors or any
--------------------
individual director may be removed with cause by the shareholders, provided that
directors elected by a particular Voting Group may be removed only by the
shareholders in that Voting Group. Removal action may be taken only at a
shareholders' meeting for which notice of the removal action has been given, and
a director may be removed only by the holders of 66 2/3% of the votes entitled
to be cast. If any removed director is a member of any committee of the Board of
Directors, he shall cease to be a member of that committee when he ceases to be
a director. A removed director's successor, if any, may be elected at the same
meeting to serve the unexpired term. Directors may not be removed without cause.
3.4 Vacancies. A vacancy or vacancies in the Board of Directors may
---------
result from the death, resignation, disqualification, or removal of any
director, or from an increase in the number of directors. Any vacancy occurring
on the Board of Directors, including a vacancy resulting from an increase in the
number of directors, may only be filled by the affirmative vote of the remaining
directors, even if the remaining directors constitute less than a quorum of the
Board of Directors; provided, however, that if the vacant office was held by a
director elected by a particular Voting Group, only the holders of shares of
that Voting Group or the remaining directors elected by that Voting Group shall
be entitled to fill the vacancy; provided further, however, that if the vacant
office was held by a director elected by a particular Voting Group and there is
no remaining director elected by that Voting Group, the other remaining
directors or director (elected by another Voting Group or Groups) may fill the
vacancy during an interim period before the shareholders of the vacated
director's Voting Group act to fill the vacancy. A director elected to fill a
vacancy shall hold office only until the next election of directors by the
shareholders.
3.5 Compensation. Directors may receive such compensation for their
------------
services as directors as may be fixed by the Board of Directors from time to
time. A director may also serve the Corporation in one or more capacities other
than that of director and receive compensation for services rendered in those
other capacities.
3.6 Committees of the Board of Directors. The Board of Directors may
------------------------------------
designate from among its members an executive committee or one or more other
standing or ad hoc committees, each consisting of one or more directors, who
serve at the pleasure of the Board of Directors. Subject to the limitations
imposed by the Code, each committee shall have the authority set forth in the
resolution establishing the committee or in any other resolution of the Board of
Directors specifying, enlarging, or limiting the authority of the committee. Any
such committee, to the extent provided in the resolution, shall have and may
exercise all of the authority of the Board of Directors in the management of the
business and affairs of the Corporation, except that it shall have no authority
with respect to (1) amending the Articles of Incorporation or these Bylaws; (2)
adopting a plan of merger or consolidation; (3) the sale, lease, exchange or
other disposition of all or substantially all of the property and assets of the
Corporation; and (4) a voluntary dissolution of the Corporation or a revocation
thereof. Such committee or committees shall have such name or names as may be
determined from time to time
6
<PAGE>
by resolution adopted by the Board of Directors. A majority of each committee
may determine its action and may fix the time and places of its meetings, unless
otherwise provided by the Board of Directors. Each committee shall keep regular
minutes of its meetings and report the same to the Board of Directors when
required.
3.7 Qualification of Directors. No person elected to serve as a
--------------------------
director of the Corporation shall assume office and begin serving unless and
until duly qualified to serve, as determined by reference to the Code, the
Articles of Incorporation, and any further eligibility requirements established
in these Bylaws.
3.8 Certain Nomination Requirements. No person may be nominated for
-------------------------------
election as a director at any annual or special meeting of shareholders unless
(a) the nomination has been or is being made pursuant to a recommendation or
approval of the Board of Directors of the Corporation or a properly constituted
committee of the Board of Directors previously delegated authority to recommend
or approve nominees for director; (b) the person is nominated by a shareholder
of the Corporation who is entitled to vote for the election of the nominee at
the subject meeting, and the nominating shareholder has furnished written notice
to the Secretary of the Corporation, at the Corporation's principal office,
provided, however, that if at any time the number of beneficial owners (as
defined in Section 14-2-1110 of the Code) of the shares of the Corporation
exceeds 100, then such notice shall be delivered to the Secretary of the
Corporation at the Corporation's principal office not less than sixty (60) nor
more than ninety (90) days prior to the first anniversary of the previous year's
annual meeting, and such notice shall (i) set forth with respect to the person
to be nominated his or her name, age, business and residence addresses,
principal business or occupation during the past five years, any affiliation
with or material interest in the Corporation or any transaction involving the
Corporation, and any affiliation with or material interest in any person or
entity having an interest materially adverse to the Corporation, and (ii) shall
be accompanied by the sworn or certified statement of the shareholder that the
nominee has consented to being nominated and that the shareholder believes the
nominee will stand for election and will serve if elected; or (c) (i) the person
is nominated to replace a person previously identified as a proposed nominee (in
accordance with the provisions of subpart (b) of this Section 3.8) who has since
become unable or unwilling to be nominated or to serve if elected, (ii) the
shareholder who furnished such previous identification makes the replacement
nomination and delivers to the Secretary of the Corporation (at the time of or
prior to making the replacement nomination) an affidavit or other sworn
statement affirming that the shareholder had no reason to believe the original
nominee would be so unable or unwilling, and (iii) such shareholder also
furnishes in writing to the Secretary of the Corporation (at the time of or
prior to making the replacement nomination) the same type of information about
the replacement nominee as required by subpart (b) of this Section 3.8 to have
been furnished about the original nominee. The chairman of any meeting of
shareholders at which one or more directors are to be elected, for good cause
shown and with proper regard for the orderly conduct of business at the meeting,
may waive in whole or in part the operation of this Section 3.8.
7
<PAGE>
ARTICLE FOUR
Meetings of the Board of Directors
4.1 Regular Meetings. A regular meeting of the Board of Directors shall
----------------
be held in conjunction with each annual meeting of shareholders. In addition,
the Board of Directors may, by prior resolution, hold regular meetings at other
times.
4.2 Special Meetings. Special meetings of the Board of Directors may be
----------------
called by or at the request of the Chairman of the Board, the President, or the
majority of directors in office at that time.
4.3 Place of Meetings. Directors may hold their meetings at any place
-----------------
in or outside the State of Georgia that the Board of Directors may establish
from time to time.
4.4 Notice of Meetings. Directors need not be provided with notice of
------------------
any regular meeting of the Board of Directors. Unless waived in accordance with
Section 4.10, the Corporation shall give at least two days' notice to each
director of the date, time, and place of each special meeting. Notice of a
meeting shall be deemed to have been given to any director in attendance at any
prior meeting at which the date, time, and place of the subsequent meeting was
announced.
4.5 Quorum. At meetings of the Board of Directors, a majority of the
------
directors then in office shall constitute a quorum for the transaction of
business.
4.6 Vote Required for Action. If a quorum is present when a vote is
------------------------
taken, the vote of a majority of the directors present at the time of the vote
will be the act of the Board of Directors, unless the vote of a greater number
is required by the Code, the Articles of Incorporation, or these Bylaws. A
director who is present at a meeting of the Board of Directors when corporate
action is taken is deemed to have assented to the action taken unless (a) he or
she objects at the beginning of the meeting (or promptly upon his or her
arrival) to holding the meeting or transacting business at such meeting; (b) his
or her dissent or abstention from the action taken is entered in the minutes of
the meeting; or (c) he or she delivers written notice of dissent or abstention
to the presiding officer of the meeting before its adjournment or to the
Corporation immediately after adjournment of the meeting. The right of dissent
or abstention is not available to a director who votes in favor of the action
taken.
4.7 Participation by Conference Telephone. Members of the Board of
-------------------------------------
Directors may participate in a meeting of the Board by means of conference
telephone or similar communications equipment through which all persons
participating may hear and speak to each other. Participation in a meeting
pursuant to this Section 4.7 shall constitute presence in person at the meeting.
4.8 Action by Directors Without a Meeting. Any action required or
-------------------------------------
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if a written consent, describing the action taken, is signed
by each director and delivered to the Corporation for inclusion in the minutes
or filing with the corporate records. The consent may be executed in
8
<PAGE>
counterpart, and shall have the same force and effect as a unanimous vote of the
Board of Directors at a duly convened meeting.
4.9 Adjournments. A meeting of the Board of Directors, whether or not
------------
a quorum is present, may be adjourned by a majority of the directors present to
reconvene at a specific time and place. It shall not be necessary to give notice
to the directors of the reconvened meeting or of the business to be transacted,
other than by announcement at the meeting that was adjourned, unless a quorum
was not present at the meeting that was adjourned, in which case notice shall be
given to directors in the same manner as for a special meeting. At any such
reconvened meeting at which a quorum is present, any business may be transacted
that could have been transacted at the meeting that was adjourned.
4.10 Waiver of Notice. A director may waive any notice required by the
----------------
Code, the Articles of Incorporation, or these Bylaws before or after the date
and time of the matter to which the notice relates, by a written waiver signed
by the director and delivered to the Corporation for inclusion in the minutes or
filing with the corporate records. Attendance by a director at a meeting shall
constitute waiver of notice of the meeting, except where a director at the
beginning of the meeting (or promptly upon his or her arrival) objects to
holding the meeting or to transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting.
ARTICLE FIVE
Officers
5.1 Offices. The officers of the Corporation shall consist of a
-------
Chairman of the Board, a President, a Secretary, and a Treasurer, each of whom
shall be elected or appointed by the Board of Directors. The Chairman of the
Board shall be elected by the Board of Directors from among its members. The
Board of Directors from time to time may create and establish the duties of
other offices and may elect or appoint, or authorize specific senior officers to
appoint, the persons who shall hold such other offices, including one or more
Vice Presidents (including Executive Vice Presidents, Senior Vice Presidents,
Assistant Vice Presidents, and the like), one or more Assistant Secretaries, and
one or more Assistant Treasurers. Whether or not so provided by the Board of
Directors, the Chairman of the Board may appoint one or more Assistant
Secretaries and one or more Assistant Treasurers. Any two or more offices may be
held by the same person.
5.2 Term. Each officer shall serve at the pleasure of the Board of
----
Directors (or, if appointed by a senior officer pursuant to this Article Five,
at the pleasure of the Board of Directors or any senior officer authorized to
have appointed the officer) until his or her death, resignation, or removal, or
until his or her replacement is elected or appointed in accordance with this
Article Five.
9
<PAGE>
5.3 Compensation. The compensation of all officers of the Corporation
------------
shall be fixed by the Board of Directors or by a committee or officer appointed
by the Board of Directors. Officers may serve without compensation.
5.4 Removal. All officers (regardless of how elected or appointed) may
-------
be removed, with or without cause, by the Board of Directors, and any officer
appointed by another officer may also be removed, with or without cause, by any
senior officer authorized to have appointed the officer to be removed. Removal
will be without prejudice to the contract rights, if any, of the person removed,
but shall be effective notwithstanding any damage claim that may result from
infringement of such contract rights.
5.5 Chairman of the Board. The Chairman of the Board shall preside at
---------------------
and serve as chairman of meetings of the shareholders and of the Board of
Directors (unless another person is selected under Section 2.9 to act as
chairman). Unless otherwise provided in these Bylaws or by the Board of
Directors, the Chairman of the Board shall be the Chief Executive Officer of the
Corporation, shall be charged with the general and active management of the
business of the Corporation, shall see that all orders and resolutions of the
Board of Directors are carried into effect, and shall have the authority to
select and appoint employees and agents of the Corporation. The Chairman of the
Board shall perform other duties and have other authority as may from time to
time be delegated by the Board of Directors.
5.6 President. Unless otherwise provided in these Bylaws or by the
---------
Board of Directors, the President shall be the Chief Operating Officer of the
Corporation, and shall, in the absence or disability of the Chairman of the
Board, perform the duties and exercise the powers of the Chairman of the Board.
The President shall perform any other duties and have any other authority as may
be delegated from time to time by the Board of Directors, and shall be subject
to the limitations fixed from time to time by the Board of Directors.
5.7 Vice Presidents. The Vice President (if there be one) shall, in the
---------------
absence or disability of the President, or at the direction of the President,
perform the duties and exercise the powers of the President, whether the duties
and powers are specified in these Bylaws or otherwise. If the Corporation has
more than one Vice President, the one designated by the Board of Directors or
the President (in that order of precedence) shall act in the event of the
absence or disability of the President. Vice Presidents shall perform any other
duties and have any other authority as from time to time may be delegated by the
Board of Directors or the President.
5.8 Secretary. The Secretary shall be responsible for preparing minutes
---------
of the meetings of shareholders, directors, and committees of directors and for
authenticating records of the Corporation. The Secretary or any Assistant
Secretary shall have authority to give all notices required by law or these
Bylaws. The Secretary shall be responsible for the custody of the corporate
books, records, contracts, and other documents. The Secretary or any Assistant
Secretary may affix the corporate seal to any lawfully executed documents
requiring it, may attest to the signature of any officer of the Corporation, and
shall sign any instrument that requires the Secretary's signature. The Secretary
or any Assistant Secretary shall perform any other duties
10
<PAGE>
and have any other authority as from time to time may be delegated by the Board
of Directors or the President.
5.9 Treasurer. Unless otherwise provided by the Board of Directors, the
---------
Treasurer shall be the Chief Financial Officer and shall be responsible for the
custody of all funds and securities belonging to the Corporation and for the
receipt, deposit, or disbursement of these funds and securities under the
direction of the Board of Directors. The Treasurer shall cause full and true
accounts of all receipts and disbursements to be maintained and shall make
reports of these receipts and disbursements to the Board of Directors and
President upon request. The Treasurer or Assistant Treasurer shall perform any
other duties and have any other authority as from time to time may be delegated
by the Board of Directors or the President.
11
<PAGE>
ARTICLE SIX
Distributions and Dividends
Unless the Articles of Incorporation provide otherwise, the Board of
Directors, from time to time in its discretion, may authorize or declare
distributions or share dividends in accordance with the Code.
ARTICLE SEVEN
Shares
7.1 Share Certificates. The interest of each shareholder in the
------------------
Corporation shall be evidenced by a certificate or certificates representing
shares of the Corporation, which shall be in such form as the Board of Directors
from time to time may adopt in accordance with the Code. Share certificates
shall be in registered form and shall indicate the date of issue, the name of
the Corporation, that the Corporation is organized under the laws of the State
of Georgia, the name of the shareholder, and the number and class of shares and
designation of the series, if any, represented by the certificate. Each
certificate shall be signed by the President or a Vice President (or in lieu
thereof, by the Chairman of the Board or Chief Executive Officer, if there be
one) and may be signed by the Secretary or an Assistant Secretary; provided,
however, that where the certificate is signed (either manually or by facsimile)
by a transfer agent, or registered by a registrar, the signatures of those
officers may be facsimiles.
7.2 Rights of Corporation with Respect to Registered Owners. Prior to
-------------------------------------------------------
due presentation for transfer of registration of its shares, the Corporation may
treat the registered owner of the shares (or the beneficial owner of the shares
to the extent of any rights granted by a nominee certificate on file with the
Corporation pursuant to any procedure that may be established by the Corporation
in accordance with the Code) as the person exclusively entitled to vote the
shares, to receive any dividend or other distribution with respect to the
shares, and for all other purposes; and the Corporation shall not be bound to
recognize any equitable or other claim to or interest in the shares on the part
of any other person, whether or not it has express or other notice of such a
claim or interest, except as otherwise provided by law.
7.3 Transfers of Shares. Transfers of shares shall be made upon the
-------------------
books of the Corporation kept by the Corporation or by the transfer agent
designated to transfer the shares, only upon direction of the person named in
the certificate or by an attorney lawfully constituted in writing. Before a new
certificate is issued, the old certificate shall be surrendered for cancellation
or, in the case of a certificate alleged to have been lost, stolen, or
destroyed, the provisions of Section 7.5 of these Bylaws shall have been
complied with.
7.4 Duty of Corporation to Register Transfer. Notwithstanding any of
----------------------------------------
the provisions of Section 7.3 of these Bylaws, the Corporation is under a duty
to register the transfer
12
<PAGE>
of its shares only if: (a) the share certificate is endorsed by the appropriate
person or persons;(b) reasonable assurance is given that each required
endorsement is genuine and effective; (c) the Corporation has no duty to inquire
into adverse claims or has discharged any such duty; (d) any applicable law
relating to the collection of taxes has been complied with; (e) the transfer is
in fact rightful or is to a bona fide purchaser; and (f) the transfer is in
compliance with applicable provisions of any transfer restrictions of which the
Corporation shall have notice.
7.5 Lost, Stolen, or Destroyed Certificates. Any person claiming a
---------------------------------------
share certificate to be lost, stolen, or destroyed shall make an affidavit or
affirmation of this claim in such a manner as the Corporation may require and
shall, if the Corporation requires, give the Corporation a bond of indemnity in
form and amount, and with one or more sureties satisfactory to the Corporation,
as the Corporation may require, whereupon an appropriate new certificate may be
issued in lieu of the one alleged to have been lost, stolen or destroyed.
7.6 Fixing of Record Date. For the purpose of determining shareholders
---------------------
(a) entitled to notice of or to vote at any meeting of shareholders or, if
necessary, any adjournment thereof, (b) entitled to receive payment of any
distribution or dividend, or (c) for any other proper purpose, the Board of
Directors may fix in advance a date as the record date. The record date may not
be more than 70 days (and, in the case of a notice to shareholders of a
shareholders' meeting, not less than 10 days) prior to the date on which the
particular action, requiring the determination of shareholders, is to be taken.
A separate record date may be established for each Voting Group entitled to vote
separately on a matter at a meeting. A determination of shareholders of record
entitled to notice of or to vote at a meeting of shareholders shall apply to any
adjournment of the meeting, unless the Board of Directors shall fix a new record
date for the reconvened meeting, which it must do if the meeting is adjourned to
a date more than 120 days after the date fixed for the original meeting.
7.7 Record Date if None Fixed. If no record date is fixed as provided
-------------------------
in Section 7.6, then the record date for any determination of shareholders that
may be proper or required by law shall be, as appropriate, the date on which
notice of a shareholders' meeting is mailed, the date on which the Board of
Directors adopts a resolution declaring a dividend or authorizing a
distribution, or the date on which any other action is taken that requires a
determination of shareholders.
13
<PAGE>
ARTICLE EIGHT
Indemnification
8.1 Indemnification of Directors. The Corporation shall indemnify and
----------------------------
hold harmless any person (an "Indemnified Person") who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative,
whether formal or informal, including any action or suit by or in the right of
the Corporation (for purposes of this Article Eight, collectively, a
"Proceeding") because he or she is or was a director or officer of the
Corporation, against any judgment, settlement, penalty, fine, or reasonable
expenses (including, but not limited to, attorneys' fees and disbursements,
court costs, and expert witness fees) incurred with respect to the Proceeding
(for purposes of this Article Eight, a "Liability"), if such person acted in a
manner he or she believed in good faith to be in or not opposed to the best
interests of the Corporation, and, in the case of any criminal proceeding, had
no reasonable cause to believe his conduct was unlawful; provided, however, that
no indemnification shall be made for any Liability for which, under the Code,
indemnification may not be authorized by action of the Board of Directors, the
shareholders, or otherwise, including, but not limited to, any Liability of a
person to the Corporation for: (a) any appropriation by such person, in
violation of his or her duties, of any business opportunity of the corporation;
(b) any acts or omissions of such person that involve intentional misconduct or
a knowing violation of law; (c) the types of liability set forth in Code Section
14-2-832; or (d) any transaction from which such person received an improper
personal benefit. Indemnification in connection with a Proceeding brought by or
in the right of the Corporation is limited to reasonable expenses incurred in
connection with the Proceeding.
8.2 Indemnification of Others. The Board of Directors shall have the
-------------------------
power to cause the Corporation to provide to employees and agents of the
Corporation all or any part of the right to indemnification and other rights of
the type provided under Sections 8.1, 8.5, and 8.11 of this Article Eight
(subject to the conditions, limitations, and obligations specified in those
sections) upon a resolution to that effect identifying such employees or agents
(by position or name) to be indemnified and specifying the particular rights
provided, which may be different for each of the persons identified. Each
employee or agent of the Corporation so identified shall be an "Indemnified
Person" for purposes of the provisions of this Article Eight.
8.3 Other Organizations. The Board of Directors shall provide to each
-------------------
director, and the Board of Directors shall have the power to cause the
Corporation to provide to any officer, employee, or agent, of the Corporation
who is or was serving at the Corporation's request as a director, officer,
partner, trustee, employee, or agent of another corporation, partnership, joint
venture, trust, employee benefit plan, or other enterprise all or any part of
the right to indemnification and other rights of the type provided under
Sections 8.1, 8.5, and 8.11 of this Article Eight (subject to the conditions,
limitations, and obligations specified in those sections) upon a resolution to
that effect identifying the persons to be identified and specifying the
particular rights provided, which may be different for each of the persons
identified. Each person so identified shall be an "Indemnified Person" for
purposes of the provisions of this Article Eight.
14
<PAGE>
8.4 Determination. Notwithstanding any judgment, order, settlement,
-------------
conviction, or plea in any Proceeding, an Indemnified Person shall be entitled
to indemnification as provided in Section 8.1 if a determination that such
Indemnified Person is entitled to such indemnification shall be made (a) by the
Board of Directors by a majority vote of a quorum consisting of directors who
are not at the time parties to the Proceeding; (b) if a quorum cannot be
obtained under (a) above, by majority vote of a committee duly designated by the
Board of Directors (in which designated directors who are parties may
participate), consisting solely of two or more directors who are not at the time
parties to the Proceeding; (c) in a written opinion by special legal counsel
selected as required by the Code; or (d) by the shareholders; provided, however,
that shares owned by or voted under the control of directors who are at the time
parties to the Proceeding may not be voted on the determination.
8.5 Advances. To the extent the Corporation has funds reasonably
--------
available to be used for this purpose, expenses (including, but not limited to,
attorneys' fees and disbursements, court costs, and expert witness fees)
incurred by the Indemnified Person in defending any Proceeding of the kind
described in Section 8.1 (or in Sections 8.2 or 8.3, if the Board of Directors
has specified that advancement of expenses be made available to such Indemnified
Person) shall be paid by the Corporation in advance of the final disposition of
such Proceeding as set forth herein. The Corporation shall promptly pay the
amount of such expenses to the Indemnified Person, but in no event later than 10
days following the Indemnified Person's delivery to the Corporation of a written
request for an advance pursuant to this Section 8.5, together with a reasonable
accounting of such expenses; provided, however, that the Indemnified Person
shall furnish the Corporation a written affirmation of his good faith belief
that he has met the standard of conduct set forth in the Code and a written
undertaking and agreement to repay to the Corporation any advances made pursuant
to this Section 8.5 if it shall be determined that the Indemnified Person is not
entitled to be indemnified by the Corporation for such amounts. The Corporation
may make the advances contemplated by this Section 8.5 regardless of the
Indemnified Person's financial ability to make repayment. Any advances and
undertakings to repay pursuant to this Section 8.5 may be unsecured and
interest-free.
8.6 Non-Exclusivity. Subject to any applicable limitation imposed by
---------------
the Code or the Articles of Incorporation, the indemnification and advancement
of expenses provided by or granted pursuant to this Article Eight shall not be
deemed exclusive of any other rights to which a person seeking indemnification
or advancement of expenses may be entitled under any provision of the Articles
of Incorporation, or any Bylaw, resolution, or agreement specifically or in
general terms approved or ratified by the affirmative vote of holders of a
majority of the shares entitled to be voted thereon.
8.7 Insurance. The Corporation shall have the power to purchase and
---------
maintain insurance on behalf of any person who is or was a director, officer,
employee, or agent of the Corporation, or who, while serving in such a capacity,
is also or was also serving at the request of the Corporation as a director,
officer, trustee, partner, employee, or agent of any corporation, partnership,
joint venture, trust, employee benefit plan, or other enterprise, against any
Liability that may be asserted against him or incurred by him in any such
capacity, or arising out of his
15
<PAGE>
status as such, whether or not the Corporation would have the power to indemnify
him against such liability under the provisions of this Article Eight.
8.8 Notice. If the Corporation indemnifies or advances expenses to a
------
director under any of Sections 14-2-851 through 14-2-854 of the Code (or any
equivalent provision of these Bylaws) in connection with a Proceeding by or in
the right of the Corporation, the Corporation shall, to the extent required by
Section 14-2-1621 or any other applicable provision of the Code, report the
indemnification or advance in writing to the shareholders with or before the
notice of the next shareholders' meeting.
8.9 Security. The Corporation may designate certain of its assets as
--------
collateral, provide self-insurance, establish one or more indemnification
trusts, or otherwise secure or facilitate its ability to meet its obligations
under this Article Eight, or under any indemnification agreement or plan of
indemnification adopted and entered into in accordance with the provisions of
this Article Eight, as the Board of Directors deems appropriate.
8.10 Amendment. Any amendment to this Article Eight that limits or
---------
otherwise adversely affects the right of indemnification, advancement of
expenses, or other rights of any Indemnified Person hereunder shall, as to such
Indemnified Person, apply only to Proceedings based on actions, events, or
omissions occurring after such amendment and after delivery of notice of such
amendment to the Indemnified Person so affected (collectively, "Post Amendment
Events"). Any Indemnified Person shall, as to any Proceeding based on actions,
events, or omissions occurring prior to the date of receipt of such notice, be
entitled to the right of indemnification, advancement of expenses, and other
rights under this Article Eight to the same extent as if such provisions had
continued as part of the Bylaws of the Corporation without such amendment. This
Section 8.10 cannot be altered, amended, or repealed in a manner effective as to
any Indemnified Person (except as to Post Amendment Events) without the prior
written consent of such Indemnified Person.
8.11 Agreements. The provisions of this Article Eight shall be deemed
----------
to constitute an agreement between the Corporation and each Indemnified Person
hereunder. In addition to the rights provided in this Article Eight, the
Corporation shall have the power, upon authorization by the Board of Directors,
to enter into an agreement or agreements providing to any Indemnified Person
indemnification rights substantially similar to those provided in this Article
Eight.
8.12 Continuing Benefits. The rights of indemnification and advancement
-------------------
of expenses permitted or authorized by this Article Eight shall, unless
otherwise provided when such rights are granted or conferred, continue as to a
person who has ceased to be a director, officer, employee, or agent and shall
inure to the benefit of the heirs, executors, and administrators of such person.
8.13 Successors. For purposes of this Article Eight, the term
----------
"Corporation" shall include any corporation, joint venture, trust, partnership,
or unincorporated business association that is the successor to all or
substantially all of the business or assets of this Corporation, as a result of
merger, consolidation, sale, liquidation, or otherwise, and any such successor
shall be
16
<PAGE>
liable to the persons indemnified under this Article Eight on the same terms and
conditions and to the same extent as this Corporation.
8.14 Severability. Each of the Sections of this Article Eight, and each
------------
of the clauses set forth herein, shall be deemed separate and independent, and
should any part of any such Section or clause be declared invalid or
unenforceable by any court of competent jurisdiction, such invalidity or
unenforceability shall in no way render invalid or unenforceable any other part
thereof or any separate Section or clause of this Article Eight that is not
declared invalid or unenforceable.
8.15 Additional Indemnification. In addition to the specific
--------------------------
indemnification rights set forth herein, the Corporation shall indemnify each of
its directors and such of its officers as have been designated by the Board of
Directors to the full extent permitted by action of the Board of Directors
without shareholder approval under the Code or other laws of the State of
Georgia as in effect from time to time.
ARTICLE NINE
Miscellaneous
9.1 Inspection of Books and Records. The Board of Directors shall have
-------------------------------
the power to determine which accounts, books, and records of the Corporation
shall be available for shareholders to inspect or copy, except for those books
and records required by the Code to be made available upon compliance by a
shareholder with applicable requirements, and shall have the power to fix
reasonable rules and regulations (including confidentiality restrictions and
procedures) not in conflict with applicable law for the inspection and copying
of accounts, books, and records that by law or by determination of the Board of
Directors are made available. Unless required by the Code or otherwise provided
by the Board of Directors, a shareholder of the Corporation holding less than
two percent of the total shares of the Corporation then outstanding shall have
no right to inspect the books and records of the Corporation.
9.2 Fiscal Year. The Board of Directors is authorized to fix the fiscal
-----------
year of the Corporation and to change the fiscal year from time to time as it
deems appropriate.
9.3 Corporate Seal. The corporate seal will be in such form as the
--------------
Board of Directors may from time to time determine. The Board of Directors may
authorize the use of one or more facsimile forms of the corporate seal. The
corporate seal need not be used unless its use is required by law, by these
Bylaws, or by the Articles of Incorporation.
9.4 Annual Statements. Not later than four months after the close of
-----------------
each fiscal year, and in any case prior to the next annual meeting of
shareholders, the Corporation shall prepare (a) a balance sheet showing in
reasonable detail the financial condition of the Corporation as of the close of
its fiscal year, and (b) a profit and loss statement showing the results of its
operations during its fiscal year. Upon receipt of written request, the
Corporation promptly shall mail to any
17
<PAGE>
shareholder of record a copy of the most recent such balance sheet and profit
and loss statement, in such form and with such information as the Code may
require.
9.5 Notice. (a) Whenever these Bylaws require notice to be given to any
------
shareholder or to any director, the notice may be given by mail, in person, by
courier delivery, by telephone, or by telecopier, telegraph, or similar
electronic means. Whenever notice is given to a shareholder or director by mail,
the notice shall be sent by depositing the notice in a post office or letter box
in a postage-prepaid, sealed envelope addressed to the shareholder or director
at his or her address as it appears on the books of the Corporation. Any such
written notice given by mail shall be effective: (i) if given to shareholders,
at the time the same is deposited in the United States mail; and (ii) in all
other cases, at the earliest of (x) when received or when delivered, properly
addressed, to the addressee's last known principal place of business or
residence, (y) five days after its deposit in the mail, as evidenced by the
postmark, if mailed with first-class postage prepaid and correctly addressed, or
(z) on the date shown on the return receipt, if sent by registered or certified
mail, return receipt requested, and the receipt is signed by or on behalf of the
addressee. Whenever notice is given to a shareholder or director by any means
other than mail, the notice shall be deemed given when received.
(b) In calculating time periods for notice, when a period of time
measured in days, weeks, months, years, or other measurement of time is
prescribed for the exercise of any privilege or the discharge of any duty, the
first day shall not be counted but the last day shall be counted.
ARTICLE TEN
Amendments
Except as otherwise provided under the Code, the Board of Directors
shall have the power to alter, amend, or repeal these Bylaws or adopt new
Bylaws. Any Bylaws adopted by the Board of Directors may be altered, amended, or
repealed, and new Bylaws adopted, by the shareholders. The shareholders may
prescribe in adopting any Bylaw or Bylaws that the Bylaw or Bylaws so adopted
shall not be altered, amended, or repealed by the Board of Directors.
18
<PAGE>
EXHIBIT 9.1
VOTING TRUST AGREEMENT
THIS VOTING TRUST AGREEMENT ("Agreement") is made and entered into as
of the 31st day of December, 1996, by and between Paul D. England, an individual
resident of the State of Tennessee, Jack K. Lance, an individual resident of the
State of Tennessee, Jerry McKamey, an individual resident of the State of
Tennessee, Glenn W. Sturm, an individual resident of the State of Georgia and
Salem Capital Corporation, a Tennessee corporation (collectively, the
"Shareholders"), John W. Collins, an individual resident of the State of Georgia
(the "Trustee"), and Intercept Holdings Inc., a Georgia corporation (the
"Corporation").
W I T N E S S E T H:
WHEREAS, in consideration of the Shareholders' services to the
Corporation and/or one or more of its affiliates, the Corporation has granted,
in the aggregate, options to purchase 271,250 shares of the common stock, no par
value per share (the "Stock"), of the Corporation and may in the future grant
other options (all such existing and hereafter granted options, collectively,
the "Options") to purchase additional shares of the Stock (collectively, the
"Option Shares") pursuant to the Corporation's 1996 Stock Option Plan and one or
more Stock Option Agreements executed pursuant thereto by and between the
Corporation and the Shareholders (collectively, the "Option Agreements"); and
WHEREAS, pursuant to the Option Agreements, each Shareholder agreed to
place upon exercise of the Options, all of the Option Shares (collectively with
all other securities of the Corporation which the Shareholders hereafter own or
acquire, the "Trust Shares") into a voting trust; and
WHEREAS, the Trustee is the Chief Executive Officer of the
Corporation; and
WHEREAS, the Shareholders deem it in the best interests of the
Shareholders and the Corporation to have the Trust Shares held and voted by the
Trustee in accordance with the terms of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1. Transfer of Shares to Trustee. (a) Each Shareholder hereby assigns
and transfers all of their Shares, as set forth at the end of this Agreement, to
the Trustee, which Trust Shares shall be held by the Trustee subject to the
terms and conditions of this Agreement. In addition, the Shareholders agree to
transfer and assign, and hereby transfer and assign to the Trustee all Trust
Shares, including but not limited to Stock, issued to them by the Corporation or
otherwise acquired by them during the term of this Agreement, and the
Shareholders agree that all such Trust Shares shall automatically be subject to
this Agreement.
<PAGE>
(b) The share certificates of the Corporation respecting all of the Trust
Shares assigned and transferred by the Shareholders to the Trustee pursuant to
this Agreement shall be immediately endorsed in blank by each of the
shareholders of record thereof with such endorsement guaranteed by a national
bank or by a member broker of the New York or American Stock Exchange
("Medallion Guaranteed") and, as so endorsed, immediately delivered by the
Shareholders to the Trustee. In addition, each Shareholder shall execute and
deliver any other documents, powers, certificates or agreement required by the
Corporation, its transfer agent or the Trustee for the purpose of transferring
record ownership of any Trust Shares to the Trustee.
(b) Upon receipt of certificates representing the Trust Shares and all
other documents, powers or agreements required to transfer such certificates (i)
the Trustee shall surrender such certificates to the Corporation to be
transferred of record on the books of the Corporation to the Trustee, and (ii)
upon receipt by the Trustee of new certificates, as so transferred, the Trustee
shall deliver to the Shareholder one or more Voting Trust Certificates for the
Trust Shares represented by such stock certificate each in the form attached
hereto as Exhibit A.
---------
2. Term of Voting Trust and Powers of Trust. The Voting Trust hereby
declared and created shall, subject to earlier termination as hereinafter
provided, continue for the full term of five (5) years from the first date on
which any Shares subject hereto are transferred to the Trustee pursuant to this
Agreement, and throughout such period the Trustee, as Trustee of an active
trust, shall have the exclusive and unlimited right to act in respect of and to
vote the Trust Shares held by him hereunder or to give written consent in lieu
of voting thereon as if he were the exclusive owner of such shares, in person or
by proxy at any and all meetings of the shareholders of the Corporation, for
whatsoever purpose called or held, and in any and all proceedings, whether at
meetings of the shareholders of the Corporation or otherwise, wherein the vote
or written consent of shareholders of the Corporation may be required or
authorized by law. Except as expressly limited in this Agreement, until the
expiration of the term of this Agreement, the Trustee shall, in his sole and
uncontrolled discretion, in respect of any and all of the Trust Shares held by
him hereunder, possess and be entitled to exercise the right to vote thereon for
every purpose, to execute any agreement, certificate or other document affecting
the Trust Shares and the Shareholder's rights therein (including but not limited
to a lock-up agreement), to waive Shareholder's any privilege in respect
thereof, and to consent to any lawful act of the Corporation, as though absolute
owner of the Shares, it being expressly agreed that no voting right shall pass
to others by or under the Voting Trust Certificates, or by or under this
Agreement, or by or under any other agreement, express or implied. The Trustee
may also be a shareholder or a registered holder of one or more Voting Trust
Certificates, and may serve as a director and compensated officer of the
Corporation and may vote for himself, as such. The Trustee, or his successor as
hereinafter provided, may directly or indirectly transact any lawful business
with the Corporation, notwithstanding his position as a Trustee. The Trustee is
hereby excused from the necessity of giving bond hereunder.
3. Transfer. (a) During the term of this Agreement, no Shareholder
shall sell, assign, transfer or otherwise convey or attempt to sell, assign,
transfer or convey all or any of the Trust Shares or any rights therein.
<PAGE>
(b) Voting Trust Certificates issued by the Trustee hereunder may be
transferred on the books of the Trustee upon the surrender and cancellation of
such certificates duly endorsed by the registered holder thereof, with signature
Medallion Guaranteed. Except as provided in Section 6 of this Agreement,
delivery of such voting trust certificates, duly endorsed in blank, by the
registered holder thereof, as aforesaid, shall vest title thereto and all rights
thereunder in the transferees to the same extent and for all purposes as would
delivery under like circumstances of negotiable instruments payable to bearer;
provided, however, that the Trustee may treat the holders of record thereof, or
when presented duly endorsed, as aforesaid in blank, the bearers thereof, as the
owners thereof for all purposes whatsoever, and shall not be affected by any
notice to the contrary; provided further, that the Trustee shall not be required
to deliver any certificates hereunder without the surrender of Voting Trust
Certificates calling therefor. Title to the Voting Trust Certificates, when
duly endorsed and Medallion Guaranteed as aforesaid, shall, to the extent
permitted by law, be transferable with the same effect as in the case of
negotiable instruments.
Every transferee of any Voting Trust Certificate or certificates issued
hereunder shall by the acceptance of such Voting Trust Certificate or
certificates become a party hereto with like effect as though an original party
hereto, and shall be embraced within the meaning of the term "Shareholders"
whenever used herein.
(c) In connection with, and as a condition of, making or permitting
any transfer or delivery of share certificates or other securities or Voting
Trust Certificates under any provision of this Agreement, the Trustee may
require the payment of a sum sufficient to pay or reimburse him for any stamp
tax or other governmental charge in connection therewith. The transfer books
for Voting Trust Certificates may be closed by the Trustee, at any time prior to
the payment or distribution of dividends, or for any other purpose, or the
Trustee, in his discretion, in lieu of closing the transfer books, may fix a
date as the day as of which the registered holders of voting trust certificates
entitled to such payment or distribution or for such other purpose shall be
determined.
4. Exchange of Shares. In case any reclassification of the shares of the
Corporation shall occur due to amendment of the Articles of Incorporation of the
Corporation, distribution, dividend, or otherwise the Trustee surrender the
Trust Shares as may be required under the terms pursuant to which such
reclassification is to be effected, and to receive and hold any and all shares
issued in exchange for such surrendered Trust Shares. Following any such action,
the Voting Trust Certificates issued and outstanding pursuant hereto shall be
deemed to represent a proportionate number of shares or other securities so
received in exchange by the Trustee. Upon any duly authorized agreement of
consolidation, merger or share exchange becoming effective as by law and herein
provided, then the Trustee may surrender the Trust Shares as may be required
thereby, and to receive and hold hereunder any and all shares or other
securities issued to him in exchange for such surrendered the Trust Shares or
otherwise. The Voting Trust Certificates shall thereupon be deemed to represent
a proportionate number of the shares or other securities so received by the
Trustee. In the event of the distribution of the assets of the Corporation upon
the dissolution thereof, the Trustee shall promptly distribute the amount
thereof received by him according to the interests of such registered Voting
Trust Certificate holders, upon the surrender of the Voting Trust Certificates
held by them respectively, duly endorsed in blank by each of the Shareholders
and Medallion Guaranteed. Upon the distribution of such assets by the Trustee,
as aforesaid, this Agreement shall terminate
<PAGE>
and all liability of the Trustee for the delivery of share certificates
representing the Trust Shares held by the Trustee shall likewise terminate.
5. Dividends. During the term of this Agreement, the Shareholders shall
be entitled to all dividends and other distributions on or in regard to the
Trust Shares, and the Trustee shall promptly pay to the Shareholders the amount
of any such dividends and distributions received by the Trustee.
6. Restrictive Legend; Investment Intent. (a) Anything contained herein
to the contrary notwithstanding, the Shareholders covenant and agree that all
Voting Trust Certificates subject hereto shall be conspicuously imprinted with
and subject to the terms of the following legend:
This Voting Trust Certificate is subject to the terms, restrictions and
conditions of a Voting Trust Agreement on file with Intercept Holdings
Inc., dated as of December 31, 1996. The securities represented by this
Voting Trust Certificate have not been registered under the Securities Act
of 1933 (the "Act") or applicable state securities laws (the "State Acts"),
and shall not be sold, pledged, hypothecated, donated or otherwise
transferred (whether or not for consideration) by the holder except upon
the issuance to the Trustee of a favorable opinion of his counsel and
submission to the Trustee of such other evidence as may be satisfactory to
counsel to the Trustee, to the effect that any such transfer shall not be
in violation of the Act and the State Acts.
(b) Each of the Shareholders represents and warrants that the voting
trust certificates being acquired by such Shareholder pursuant hereto are being
acquired for investment for such Shareholder's own account and not with a view
to offer for sale or for sale in connection with the distribution or transfer
thereof. Each of the Shareholders further warrants and represents that such
Shareholder is neither participating in or has a direct or indirect
participation in the distribution or transfer of such voting trust certificates,
nor is participating in or has a participation in the direct or indirect
underwriting of any such distribution or transfer of the voting trust
certificates. Each of the Shareholders acknowledges and represents that he has
been advised by the Trustee that the Voting Trust Certificates are not
registered under the Securities Act of 1933, as amended ("1933 Act") and that
the Trustee is neither presently required to file nor does it presently intend
to voluntarily register under Section 12 of the Securities and Exchange Act of
1934 (the "1934 Act") and file periodic reports with the Securities Exchange
Commission (the "S.E.C.") pursuant to Section 13 or 15(d) of the 1934 Act. Each
of the Shareholders further warrants and represents that he has been advised by
the Trustee that the Trustee has not agreed with any of the Shareholders to
register any or all of the voting trust certificates for distribution in
accordance with the 1933 Act, and that Corporation has not agreed with any
Shareholder to comply with any exemption under the 1933 Act respecting the
resale or other transfer for consideration of the Voting Trust Certificates. The
Trustee has not agreed to supply any Shareholder with such information as shall
be required to enable any Shareholder to make routine sales of any or all of the
Voting Trust Certificates under the provisions of Rule 144 promulgated by the
S.E.C. under the 1933 Act respecting "restricted securities." Accordingly, each
of the Shareholders warrants and represents that he has been advised by the
Trustee that the Voting Trust Certificates that each of the Shareholders is
acquiring pursuant hereto must be held by each such Shareholder indefinitely
unless and until
<PAGE>
subsequently registered under the 1933 Act and applicable state securities laws
or unless an exemption from such registration is available.
7. Share Issuances. In the event that the Trustee shall receive any
additional securities (as defined by the 1933 Act) of the Corporation, including
by way of example, and not of limitation, by way of dividend upon shares held by
it under this Agreement, the Trustee shall hold such share certificates likewise
subject to the terms of this Agreement, and shall issue Voting Trust
Certificates representing such share certificates to the respective registered
holder of the then outstanding Voting Trust Certificate entitled to such
issuance.
8. Termination. Notwithstanding anything to the contrary provided for
herein, this Agreement shall terminate upon the earlier of the expiration of the
term herein provided, or the closing of an underwritten initial public offering
of the Corporation's Stock. Upon the termination of this Agreement as above
specified, the Trustee, his guardian or personal representative, as the case may
be, in exchange for, and upon surrender of, any Voting Trust Certificate then
outstanding, duly endorsed in blank by the registered holder thereof with
signature Medallion Guaranteed shall, in accordance with the terms hereof, and
out of the Shares held by him hereunder, deliver certificates of shares of the
Corporation to the registered holders of Voting Trust Certificates and thereupon
all liability of the Trustee for the delivery of said share certificates shall
cease and terminate. Upon termination the Trustee may call upon and require the
registered holders of Voting Trust Certificates to surrender them in exchange
for certificates of shares of the number of Trust Shares to which they are
entitled hereunder.
9. Expenses. The Trustee shall not be entitled to any compensation for his
services as Trustee, but the Corporation shall reimburse him for all expenses
and disbursements reasonably incurred by him in the performance of his duties
hereunder.
10. Liability and Indemnification. The Shareholders and the Corporation,
jointly and severally, shall indemnify, defend and hold harmless the Trustee
from, against and in respect of all liabilities, damages, losses, costs and
expenses (including, but not limited to, attorneys' fees) incurred by him as a
result of any act or omission in connection with his serving as Trustee,
provided such act or omission does not constitute willful misconduct or gross
negligence.
11. Successor Trustee. In the event the Trustee resigns as Trustee, or
ceases to be the Chief Executive Officer of the Corporation, or dies or is
legally adjudicated incompetent during the term of this Agreement, the Board of
Directors of the Corporation shall select a successor Trustee, who shall have
all of the powers and duties of the Trustee hereunder. The authority, powers,
duties, obligations and limitations of the original Trustee shall devolve upon
such successors with the same effect as if such successors had been named as
original Trustee. The successor of any person acting as Trustee shall, by
written agreement, undertake the performance of the Trustee's privileges and
duties under this Agreement in accordance with its terms. Whenever the sense of
this Agreement so requires, the term Trustee shall mean the original Trustee or
any successor Trustee.
12. Standard of Care. In voting the Trust Shares represented by the share
certificate or certificates issued to the Trustee as hereinbefore provided, the
Trustee shall exercise his best judgment to the end that the business and
affairs of the Corporation shall be
<PAGE>
properly managed, but, except for his own willful misconduct, the Trustee shall
not assume any responsibility or liability in respect of such management, or in
respect of any action taken by the Trustee, or taken in pursuance of his consent
thereto, or in pursuance of his vote so cast, and the Trustee shall not incur
any responsibility or liability, as Shareholder, officer or director of the
Corporation, Trustee or otherwise, by reason of any error of fact or law or of
any matter or thing done or omitted to be done. Other than as set forth in the
preceding sentence, Trustee shall have no duty with respect to any of the Trust
Shares other than the duty to use reasonable care in the safe custody of the
Trust Shares in his possession. Without limiting the generality of the
foregoing, Trustee shall be under no obligation to take any steps necessary to
preserve the value of any of the Trust Shares or to preserve rights in the Trust
Shares against any other parties, but may do so at its option, and all expenses
incurred in connection therewith shall be for the sole account of the
Shareholders and shall be repaid to the Trustee immediately upon demand.
13. Notices. All notices to the registered holders of Voting Trust
Certificates shall be given by mail addressed to the registered holders of such
Voting Trust Certificates at the addresses furnished by such registered holders
to the Trustee, and any notice whatsoever when so mailed by the Trustee shall be
taken and considered as though personally served on all parties hereto including
the registered holders of said Voting Trust Certificates, and upon all parties
becoming bound hereby, and such mailing shall be the only notice required to be
given under any provision of this Agreement.
14. Captions. The captions set forth herein are for convenience and
reference only and are not intended to modify, limit, describe or affect in any
way the contents, scope or intent of this Agreement.
15. Definitions. All terms used herein which are defined in this Agreement
shall have the meaning set forth in this Agreement, unless the context clearly
indicates otherwise.
16. Gender and Plural. Whenever the sense of this Agreement so requires,
the masculine and/or feminine gender shall be substituted for or deemed to
include the neuter and the plural the singular, and vice versa.
17. Counterparts. This Agreement may be executed in several counterparts,
each of which so executed shall be deemed to be an original, and such
counterparts shall together constitute one and the same instrument.
18. Actions and Proceedings. The Trustee, the Corporation and each
Shareholder irrevocably consent to the exclusive jurisdiction and venue of the
courts of any county in the State of Georgia and the United States District
Court for any District of Georgia in any action or judicial proceeding brought
to enforce, construe or interpret this Agreement. The Trustee, the Corporation
and each Shareholder agree that any forum other than the State of Georgia is an
inconvenient forum and that a suit (or non-compulsory counterclaim) brought by
the Trustee, the Corporation and/or any Shareholder against the Trustee or the
Corporation in a court of any state other than the State of Georgia should be
forthwith dismissed or transferred to a court located in the State of Georgia.
<PAGE>
19. Miscellaneous. (a) This Agreement shall be deemed to have been made in
the State of Georgia and shall be governed by and construed in all respects in
accordance with the laws of the State of Georgia (excluding conflict of law
principles).
(b) Each and all of the terms and provisions of this Agreement shall
be and are hereby made binding upon and inure to the benefit of the
Shareholders, their heirs, legatees, personal representatives, guardians and
permitted assigns.
(c) The Trustee shall have not duty to hold meetings of holders of
Voting Trust Certificates, but he shall be entitled to do so if he wishes. At
least one (1) day's prior written notice of every meeting of holders of Voting
Trust Certificates shall be given and such notice shall state the place, day and
hour and the purpose, if any, of such meeting, but any holder of voting trust
certificates may waive such notice in writing, either before or after the
holding of the meeting. No notice of any adjourned meeting need be given. Every
such meeting shall be held in the State of Georgia at a place designated by the
Trustee, unless the holders of Voting Trust Certificates representing two-thirds
of the stock held by the Trustee consent in writing to the holding thereof at
another place. The failure to hold meetings, shall not in any manner or degree
impair or reduce the authority of Trustee hereunder.
(d) The holder of any Voting Trust Certificate shall immediately
notify the Trustee of any mutilation, loss or destruction thereof, and the
Trustee may, in his discretion, cause one or more new certificates representing
the same number of Trust Shares in the aggregate, to be issued to such holder
upon the surrender of the mutilated certificates, or in case of loss or
destruction, upon satisfactory proof of such loss or destruction, and the
deposit of indemnity by way of bond or otherwise, in such form and amount and
with such surety or sureties as the Trustee may require to indemnify him against
loss or liability by reason of the issuance of such new certificates, but the
Trustee may, in his discretion, refuse to issue such new certificates, save upon
the order of a court having jurisdiction in such matters.
(e) This Agreement shall be filed with the Trustee, and a duplicate
hereof (together with updated lists of Trust Shares covered hereby) shall be
filed in the principal office of the Corporation.
(f) No amendment, modification, or alteration of the terms or
provisions of this Agreement shall be binding unless the same shall be in
writing and duly executed by the parties hereto. Any of the terms or conditions
of this Agreement may be waived in writing at any time by the party that is
entitled to the benefits thereof. No waiver of any of the provisions of this
Agreement shall be deemed to or shall constitute a waiver of any other provision
hereof (whether or not similar).
(g) In any provision or part of this Agreement shall for any reason be
held invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions of this
Agreement and shall be construed as if such invalid, illegal or unenforceable
provision or part thereof had never been contained herein, but only to the
extent of its invalidity, illegality, or unenforceability.
(h) Each of the parties acknowledges that money damages would not be a
sufficient remedy for any breach of this Agreement and that irreparable harm
would result if
<PAGE>
this Agreement were not specifically enforced. Therefore, the rights and
obligations of the parties under this Agreement shall be enforceable by a decree
of specific performance issued by any court of competent jurisdiction, and
appropriate injunctive relief may be applied for and granted in connection
therewith. A party's right to specific performance shall be in addition to all
other legal or equitable remedies available to such party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 31st day of December, 1996.
SHAREHOLDERS:
State of Tennessee /s/ Paul D. England
------------------------------ -------------------------------
Paul D. England
County of Davidson
-----------------------------
The foregoing instrument was
acknowledged before me this 14th day of
December, 1996, by Paul D. England.
Witness my hand and official seal.
/s/ Steven J. Eisen
- ---------------------------------------
Title of Officer
My commission expires: 5/23/98
-----------------
State of Tennessee /s/ Jack K. Lance
------------------------------ --------------------------------
Jack K. Lance
County of Davidson
-----------------------------
The foregoing instrument was
acknowledged before me this 14th day of
December, 1996, by Jack K. Lance.
Witness my hand and official seal.
/s/ Steven J. Eisen
- ---------------------------------------
Title of Officer
My commission expires: 5/23/98
-----------------
<PAGE>
State of Tennessee /s/ Jerry McKamey
------------------------------ --------------------------------
Jerry McKamey
County of Davidson
-----------------------------
The foregoing instrument was
acknowledged before me this 14th day of
December, 1996, by Jerry McKamey.
Witness my hand and official seal.
/s/ Steven J. Eisen
- ---------------------------------------
Title of Officer
My commission expires: 5/23/98
-----------------
/s/ Glenn W. Sturm
--------------------------------
State of Georgia Glenn W. Sturm
------------------------------
County of Gwinnett
-----------------------------
The foregoing instrument was
acknowledged before me this 20th day of
December, 1996, by Glenn W. Sturm.
Witness my hand and official seal.
/s/ Sharon Jessie
- ---------------------------------------
Title of Officer
My commission expires: 10/24/99
-----------------
State of Tennessee SALEM CAPITAL CORPORATION
------------------------------
By: /s/ Edward Murrey
-----------------------------
Title: President
--------------------------
County of Davidson
-----------------------------
The foregoing instrument was
acknowledged before me this 14th day of
December, 1996, by ________________,
a duly authorized officer of Salem Capital
Corporation.
Witness my hand and official seal.
/s/ Steven J. Eisen
- ---------------------------------------
Title of Officer
My commission expires: 5/23/98
----------------
<PAGE>
TRUSTEE:
/s/ John W. Collins
--------------------------------
John W. Collins
CORPORATION:
INTERCEPT HOLDINGS INC.
By: /s/ Donny R. Jackson
-----------------------------
Title: President
----------------------
<PAGE>
EXHIBIT A
---------
INTERCEPT HOLDINGS INC.
NO PAR VALUE COMMON STOCK
VOTING TRUST CERTIFICATE
No. ____ ________ Shares
John W. Collins, voting trustee (the "Trustee") of __________
shares of the common stock of Intercept Holdings Inc., a Georgia corporation
(the "Corporation"), under that certain Voting Trust Agreement dated as of
December 31, 1996 (the "Agreement"), having received the above-stated number of
shares of such stock (the "Trust Shares") from _______________ (the
"Shareholder") pursuant to the Agreement, hereby certifies that the Shareholder
shall be entitled to receive a stock certificate for _________ fully paid shares
of stock of the Corporation at the time provided in and pursuant to the terms
and conditions of the Agreement. Until the Agreement terminates, the Shareholder
shall be entitled to receive payments equal to any dividends and other
distributions on or in regard to the Trust Shares that may be paid or
distributed to the Trustee. All other rights as a shareholder associated with
the Trust Shares reside in the Trustee.
This Certificate is transferable only upon the presentation and
surrender hereof to the Trustee in accordance with the Agreement. Each
transferee of this Certificate takes the same subject to all the terms and
conditions of the Agreement.
IN WITNESS WHEREOF, the Trustee has executed this certificate,
effective as of the _____ day of _____________, 199____.
--------------------------------
John W. Collins, Trustee
THIS VOTING TRUST CERTIFICATE IS SUBJECT TO THE TERMS, RESTRICTIONS AND
CONDITIONS OF A VOTING TRUST AGREEMENT ON FILE WITH INTERCEPT HOLDINGS INC.,
DATED DECEMBER 31, 1996. THE SECURITIES REPRESENTED BY THIS VOTING TRUST
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"ACT") OR APPLICABLE STATE SECURITIES LAWS (THE "STATE ACTS"), AND SHALL NOT BE
SOLD, PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED (WHETHER OR NOT
FOR CONSIDERATION) BY THE HOLDER EXCEPT UPON THE ISSUANCE TO THE TRUSTEE OF A
FAVORABLE OPINION OF HIS COUNSEL AND SUBMISSION TO THE TRUSTEE OF SUCH OTHER
EVIDENCE AS MAY BE SATISFACTORY TO COUNSEL TO THE TRUSTEE, TO THE EFFECT THAT
ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE ACT AND THE STATE ACTS.
<PAGE>
EXHIBIT 10.1
THE INTERCEPT GROUP, INC.
AMENDED AND RESTATED
1996 STOCK OPTION PLAN
<PAGE>
THE INTERCEPT GROUP, INC.
AMENDED AND RESTATED 1996 STOCK OPTION PLAN
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - DEFINITIONS.................................................... 1
ARTICLE II - THE PLAN...................................................... 5
Name.................................................................. 5
Purpose............................................................... 5
Effective Date........................................................ 5
Shareholder Approval.................................................. 5
ARTICLE III - PARTICIPANTS................................................ 5
ARTICLE IV - ADMINISTRATION................................................ 6
Duties and Powers of the Committee.................................... 6
Interpretation; Rules................................................. 6
No Liability.......................................................... 6
Majority Rule......................................................... 6
Company Assistance.................................................... 7
ARTICLE V - SHARES OF STOCK SUBJECT TO PLAN................................ 7
Limitations........................................................... 7
Antidilution.......................................................... 8
ARTICLE VI - OPTIONS....................................................... 9
Types of Options Granted.............................................. 9
Option Grant and Agreement............................................ 9
Optionee Limitation................................................... 10
$100,000 Limitation................................................... 10
Exercise Price........................................................ 11
Exercise Period....................................................... 11
Option Exercise....................................................... 11
Reload Options........................................................ 12
Nontransferability of Option.......................................... 13
Termination of Employment or Service.................................. 13
Employment Rights..................................................... 13
Certain Successor Options............................................. 14
Effect of Change in Control........................................... 14
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE VII - RESTRICTED STOCK............................................. 14
Awards of Restricted Stock............................................ 14
Non-Transferability................................................... 15
Lapse of Restrictions................................................. 15
Termination of Employment............................................. 15
Treatment of Dividends................................................ 15
Delivery of Shares.................................................... 15
ARTICLE VIII - STOCK APPRECIATION RIGHTS................................... 15
SAR Grants............................................................ 15
Determination of Price................................................ 16
Exercise of a SAR..................................................... 16
Payment for a SAR..................................................... 16
Status of a SAR under the Plan........................................ 16
Termination of Employment............................................. 16
No Shareholder Rights................................................. 16
ARTICLE IX - STOCK CERTIFICATES............................................ 16
ARTICLE X - TERMINATION AND AMENDMENT...................................... 17
Termination and Amendment............................................. 17
Effect on Grantee's Rights............................................ 17
ARTICLE XI - RELATIONSHIP TO OTHER COMPENSATION PLANS...................... 18
ARTICLE XII - MISCELLANEOUS................................................ 18
Replacement or Amended Grants......................................... 18
Forfeiture for Competition............................................ 18
Plan Binding on Successors............................................ 18
Singular, Plural; Gender.............................................. 18
Headings, etc., No Part of Plan....................................... 18
Interpretation........................................................ 19
</TABLE>
EXHIBIT A (Stock Option Agreement)
SCHEDULE A (Option Terms)
SCHEDULE B (Notice of Exercise)
<PAGE>
THE INTERCEPT GROUP, INC.
AMENDED AND RESTATED 1996 STOCK OPTION PLAN
ARTICLE I
DEFINITIONS
As used herein, the following terms have the following meanings unless the
context clearly indicates to the contrary:
1.1 "Award" shall mean a grant of Restricted Stock or an SAR.
-----
1.2 "Board" shall mean the Board of Directors of the Company.
-----
1.3 "Cause" (i) with respect to the Company or any subsidiary which
-----
employs the recipient of an Award or Option (the "recipient") or for
which such recipient primarily performs services, the commission by
the recipient of an act of fraud, embezzlement, theft or proven
dishonesty, or any other illegal act or practice (whether or not
resulting in criminal prosecution or conviction), or any act or
practice which the Committee shall, in good faith, deem to have
resulted in the recipient's becoming unbondable under the Company's or
the subsidiary's fidelity bond; (ii) the willful engaging by the
recipient in misconduct which is deemed by the Committee, in good
faith, to be materially injurious to the Company or any subsidiary,
monetarily or otherwise, including, but not limited, improperly
disclosing trade secrets or other confidential or sensitive business
information and data about the Company or any subsidiaries and
competing with the Company or its subsidiaries, or soliciting
employees, consultants or customers of the Company in violation of law
or any employment or other agreement to which the recipient is a
party; or (iii) the willful and continued failure or habitual neglect
by the recipient to perform his or her duties with the Company or the
subsidiary substantially in accordance with the operating and
personnel policies and procedures of the Company or the subsidiary
generally applicable to all their employees. For purposes of this
Plan, no act or failure to act by the recipient shall be deemed be
"willful" unless done or omitted to be done by recipient not in good
faith and without reasonable belief that the recipient's action or
omission was in the best interest of the Company and/or the
subsidiary. Notwithstanding the foregoing, if the recipient has
entered into an employment agreement that is binding as of the date of
employment termination, and if such employment agreement defines
"Cause," then the definition of "Cause" in such agreement shall apply
to the recipient in this Plan. "Cause" under either (i), (ii) or (iii)
shall be determined by the Committee.
1.4 "Change in Control" shall mean the occurrence of either of the
-----------------
following events:
(i) A change in the composition of the Board as a result of which
fewer than one-half of the incumbent directors are directors who
either:
<PAGE>
(A) Had been directors of the Company 24 months prior to such
change; or
(B) Were elected, or nominated for election, to the Board with
the affirmative votes of at least a majority of the
directors who had been directors of the Company 24 months
prior to such change and who were still in office at the
time of the election or nomination; or
(ii) Any "person" (as such term is used in sections 13(d) and 14(d) of
the Exchange Act), other than any person who is a shareholder of
the Company on or before the Effective Date, by the acquisition
or aggregation of securities is or becomes the beneficial owner,
directly or indirectly, of securities of the Company representing
50 percent or more of the combined voting power of the Company's
then outstanding securities ordinarily (and apart from rights
accruing under special circumstances) having the right to vote at
elections of directors (the "Base Capital Stock"); except that
any change in the relative beneficial ownership of the Company's
securities by any person resulting solely from a reduction in the
aggregate number of outstanding shares of Base Capital Stock, and
any decrease thereafter in such person's ownership of securities,
shall be disregarded until such person increases in any manner,
directly or indirectly, such person's beneficial ownership of any
securities of the Company.
1.5 "Code" shall mean the United States Internal Revenue Code of 1986,
----
including effective date and transition rules (whether or not
codified). Any reference herein to a specific section of the Code
shall be deemed to include a reference to any corresponding provision
of future law.
1.6 "Committee" shall mean a committee of at least two Directors appointed
---------
from time to time by the Board, having the duties and authority set
forth herein in addition to any other authority granted by the Board.
In selecting the Committee, the Board shall consider (i) the benefits
under Section 162(m) of the Code of having a Committee composed of
"outside directors" (as that term is defined in the Code) for certain
grants of Options to highly compensated executives, and (ii) the
benefits under Rule 16b-3 of having a Committee composed of either the
entire Board or a Committee of at least two Directors who are Non-
Employee Directors for Options granted to or held by any Section 16
Insider. At any time that the Board shall not have appointed a
committee as described above, any reference herein to the Committee
shall mean the Board.
1.7 "Company" shall mean The InterCept Group, Inc., a Georgia corporation.
-------
1.8 "Effective Date" shall mean November 12, 1996.
--------------
2
<PAGE>
1.9 "Director" shall mean a member of the Board and any person who is an
--------
advisory or honorary director of the Company if such person is
considered a director for the purposes of Section 16 of the Exchange
Act, as determined by reference to such Section 16 and to the rules,
regulations, judicial decisions, and interpretative or "no-action"
positions with respect thereto of the Securities and Exchange
Commission, as the same may be in effect or set forth from time to
time.
1.10 "Exchange Act" shall mean the Securities Exchange Act of 1934. Any
------------
reference herein to a specific section of the Exchange Act shall be
deemed to include a reference to any corresponding provision of future
law
1.11 "Exercise Price" shall mean the price at which an Optionee may
--------------
purchase a share of Stock under a Stock Option Agreement.
1.12 "Fair Market Value" on any date shall mean (i) the closing sales price
-----------------
of the Stock, regular way, on such date on the national securities
exchange having the greatest volume of trading in the Stock during the
thirty-day period preceding the day the value is to be determined or,
if such exchange was not open for trading on such date, the next
preceding date on which it was open; (ii) if the Stock is not traded
on any national securities exchange, the average of the closing high
bid and low asked prices of the Stock on the over-the-counter market
on the day such value is to be determined, or in the absence of
closing bids on such day, the closing bids on the next preceding day
on which there were bids; or (iii) if the Stock also is not traded on
the over-the-counter market, the fair market value as determined in
good faith by the Board or the Committee based on such relevant facts
as may be available to the Board, which may include opinions of
independent experts, the price at which recent sales have been made,
the book value of the Stock, and the Company's current and future
earnings.
1.13 "Grantee" shall mean a person who is an Optionee or a person who has
-------
received an Award of Restricted Stock or an SAR.
1.14 "Incentive Stock Option" shall mean an option to purchase any stock of
----------------------
the Company, which complies with and is subject to the terms,
limitations and conditions of Section 422 of the Code and any
regulations promulgated with respect thereto
1.15 "Non-Employee Director" shall have the meaning set forth in Rule 16b-3
---------------------
under the Exchange Act, as the same may be in effect from time to
time, or in any successor rule thereto, and shall be determined for
all purposes under the Plan according to interpretative or "no-action"
positions with respect thereto issued by the Securities and Exchange
Commission.
1.16 "Officer" shall mean a person who constitutes an officer of the
-------
Company for the purposes of Section 16 of the Exchange Act, as
determined by reference to such
3
<PAGE>
Section 16 and to the rules, regulations, judicial decisions, and
interpretative or "no-action" positions with respect thereto of the
Securities and Exchange Commission, as the same may be in effect or
set forth from time to time.
1.17 "Option" shall mean an option, whether or not an Incentive Stock
------
Option, to purchase Stock granted pursuant to the provisions of
Article VI hereof.
1.18 "Optionee" shall mean a person to whom an Option has been granted
--------
hereunder.
1.19 "Permanent and Total Disability" shall have the same meaning as given
------------------------------
to that term by Code Section 22(e)(3) and any regulations or rulings
promulgated thereunder.
1.20 "Plan" shall mean The Intercept Group, Inc. Amended and Restated 1996
----
Stock Option Plan, the terms of which are set forth herein.
1.21 "Purchasable" shall refer to Stock which may be purchased by an
-----------
Optionee under the terms of this Plan on or after a certain date
specified in the applicable Stock Option Agreement.
1.22 "Qualified Domestic Relations Order" shall have the meaning set forth
----------------------------------
in the Code or in the Employee Retirement Income Security Act of
1974, or the rules and regulations promulgated under the Code or such
Act.
1.23 "Reload Option" shall have the meaning set forth in Section 6.8
-------------
hereof.
1.24 "Restricted Stock" shall mean Stock issued, subject to restrictions,
----------------
to a Grantee pursuant to Article VII hereof.
1.25 "Restriction Agreement" shall mean the agreement setting forth the
---------------------
terms of an Award, and executed by a Grantee as provided in Section
7.1 hereof.
1.26 "SAR" means a stock appreciation right, which is the right to receive
---
an amount equal to the appreciation, if any, in the Fair Market Value
of a share of Stock from the date of the grant of the right to the
date of its payment, all as provided in Article VIII hereof.
1.27 "SAR Price" means the base value established by the Committee for a
---------
SAR on the date the SAR is granted and which is used in determining
the amount of benefit, if any, paid to a Grantee.
1.28 "Section 16 Insider" shall mean any person who is subject to the
------------------
provisions of Section 16 of the Exchange Act, as provided in Rule
16a-2 promulgated pursuant to the Exchange Act.
4
<PAGE>
1.29 "Stock" shall mean the Common Stock, no par value, of the Company or,
-----
in the event that the outstanding shares of Stock are hereafter
changed into or exchanged for shares of a different stock or
securities of the Company or some other entity, such other stock or
securities.
1.30 "Stock Option Agreement" shall mean an agreement between the Company
----------------------
and an Optionee under which the Optionee may purchase Stock
hereunder, a sample form of which is attached hereto as Exhibit A
(which form may be varied by the Committee in granting an Option).
ARTICLE II
THE PLAN
2.1 Name. This Plan shall be known as "The Intercept Group, Inc. Amended
----
and Restated 1996 Stock Option Plan."
2.2 Purpose. The purpose of the Plan is to advance the interests of the
-------
Company, its subsidiaries, and its shareholders by affording certain
employees and Directors of the Company and its subsidiaries, as well
as key consultants and advisors to the Company or any subsidiary, an
opportunity to acquire or increase their proprietary interests in the
Company. The objective of the issuance of the Options and Awards is
to promote the growth and profitability of the Company and its
subsidiaries because the Grantees will be provided with an additional
incentive to achieve the Company's objectives through participation
in its success and growth and by encouraging their continued
association with or service to the Company.
2.3 Effective Date. The Plan shall become effective on November 12, 1996.
--------------
2.4 Shareholder Approval. The Company obtained shareholder approval of
--------------------
the Plan on November 12, 1996 and approval of the amendment and
restatement hereof has been or will be obtained. If, at the time of
any amendment to the Plan, shareholder approval is required by the
Code for Incentive Stock Options and such shareholder approval has
not been obtained (or is not obtained within 12 months thereof), any
Incentive Stock Options issued under the Plan shall automatically
become options which do not qualify as Incentive Stock Options.
ARTICLE III
PARTICIPANTS
The class of persons eligible to participate in the Plan shall consist of
all persons whose participation in the Plan the Committee determines to be in
the best interests of the Company which shall include, but not be limited to,
all Directors and employees, including but not limited to executive personnel,
of the Company or any subsidiary, as well as key consultants and advisors to the
Company or any subsidiary.
5
<PAGE>
ARTICLE IV
ADMINISTRATION
4.1 Duties and Powers of the Committee. The Plan shall be administered by
----------------------------------
the Committee. The Committee shall select one of its members as its
Chairman and shall hold its meetings at such times and places as it
may determine. The Committee shall keep minutes of its meetings and
shall make such rules and regulations for the conduct of its business
as it may deem necessary. The Committee shall have the power to act
by unanimous written consent in lieu of a meeting, and to meet by
telephone. In administering the Plan, the Committee's actions and
determinations shall be binding on all interested parties. The
Committee shall have the power to grant Options or Awards in
accordance with the provisions of the Plan and may grant Options and
Awards singly, in combination, or in tandem. Subject to the
provisions of the Plan, the Committee shall have the discretion and
authority to determine those individuals to whom Options or Awards
will be granted and whether such Options shall be accompanied by the
right to receive Reload Options, the number of shares of Stock subject
to each Option or Award, such other matters as are specified herein,
and any other terms and conditions of a Stock Option Agreement or
Restriction Agreement. The Committee shall also have the discretion
and authority to delegate to any Officer its powers to grant Options
or Awards under the Plan to any person who is an employee of the
Company but not an Officer or Director. To the extent not inconsistent
with the provisions of the Plan, the Committee may give a Grantee an
election to surrender an Option or Award in exchange for the grant of
a new Option or Award, and shall have the authority to amend or modify
an outstanding Stock Option Agreement or Restriction Agreement, or to
waive any provision thereof, provided that the Grantee consents to
such action.
4.2 Interpretation; Rules. Subject to the express provisions of the Plan,
---------------------
the Committee also shall have complete authority to interpret the
Plan, to prescribe, amend, and rescind rules and regulations relating
to it, to determine the details and provisions of each Stock Option
Agreement, and to make all other determinations necessary or advisable
for the administration of the Plan, including, without limitation, the
amending or altering of the Plan and any Options or Awards granted
hereunder as may be required to comply with or to conform to any
federal, state, or local laws or regulations.
4.3 No Liability. Neither any member of the Board nor any member of the
------------
Committee shall be liable to any person for any act or determination
made in good faith with respect to the Plan or any Option or Award
granted hereunder.
4.4 Majority Rule. A majority of the members of the Committee shall
-------------
constitute a quorum, and any action taken by a majority at a meeting
at which a quorum is
6
<PAGE>
present, or any action taken without a meeting evidenced by a writing
executed by all the members of the Committee, shall constitute the
action of the Committee.
4.5 Company Assistance. The Company shall supply full and timely
------------------
information to the Committee on all matters relating to eligible
persons, their employment, death, retirement, disability, or other
termination of employment, and such other pertinent facts as the
Committee may require. The Company shall furnish the Committee with
such clerical and other assistance as is necessary in the performance
of its duties.
ARTICLE V
SHARES OF STOCK SUBJECT TO PLAN
5.1 Limitations. Subject to any antidilution adjustment pursuant to the
-----------
provisions of Section 5.2 hereof, the maximum number of shares of
Stock that may be issued hereunder shall be 600,000, and not more than
150,000 shares of Stock may be made subject to Options to any
individual in the aggregate in any one fiscal year of the Company,
such limitation to be applied in a manner consistent with the
requirements of, and only to the extent required for compliance with,
the exclusion from the limitation on deductibility of compensation
under Section 162(m) of the Code. The number of shares of Stock
available for issuance hereunder shall automatically increase on the
first trading day each calendar year beginning January 1, 1999, by an
amount equal to three percent (3%) of the shares of Stock outstanding
on the trading day immediately preceding January 1; but in no event
shall any such annual increase exceed 150,000 shares (subject to
adjustment under Section 5.2). Any or all shares of Stock subject to
the Plan may be issued in any combination of Incentive Stock Options,
non-Incentive Stock Options, Restricted Stock, or SARs, and the amount
of Stock subject to the Plan may be increased from time to time in
accordance with Article X, provided that the total number of shares of
Stock issuable pursuant to Incentive Stock Options may not be
increased to more than 600,000 (other than pursuant to anti-dilution
adjustments and the annual increase provided above) without
shareholder approval. Shares subject to an Option or issued as an
Award may be either authorized and unissued shares or shares issued
and later acquired by the Company. The shares covered by any
unexercised portion of an Option or Award that has terminated for any
reason (except as set forth in the following paragraph), or any
forfeited portion of an Option or Award, and shares tendered for
cashless exercise and withheld for taxes may again be optioned or
awarded under the Plan, and such shares shall not be considered as
having been optioned or issued in computing the number of shares of
Stock remaining available for option or award hereunder.
If Options are issued in respect of options to acquire stock of
any entity acquired, by merger or otherwise, by the Company (or any
subsidiary of the Company), to the extent that such issuance shall not
be inconsistent with the terms,
7
<PAGE>
limitations and conditions of Code Section 422 or Rule 16b-3 under the
Exchange Act, the aggregate number of shares of Stock for which
Options may be granted hereunder shall automatically be increased by
the number of shares subject to the Options so issued; provided,
however, that the aggregate number of shares of Stock for which
Options may be granted hereunder shall automatically be decreased by
the number of shares covered by any unexercised portion of an Option
so issued that has terminated for any reason, and the shares subject
to any such unexercised portion may not be optioned to any other
person.
5.2 Antidilution.
------------
(a) If (1) the outstanding shares of Stock are changed into or
exchanged for a different number or kind of shares or other
securities of the Company by reason of merger, consolidation,
reorganization, recapitalization, reclassification, combination
or exchange of shares, or stock split or stock dividend, (2) any
spin-off, spin-out or other distribution of assets materially
affects the price of the Company's stock, or (3) there is any
assumption and conversion to the Plan by the Company of an
acquired company's outstanding option grants, then:
(iii) the aggregate number and kind of shares of Stock for which
Options or Awards may be granted hereunder shall be
adjusted proportionately by the Committee; and
(iv) the rights of Optionees (concerning the number of shares
subject to Options and the Exercise Price) under
outstanding Options and the rights of the holders of
Awards (concerning the terms and conditions of the lapse
of any then-remaining restrictions), shall be adjusted
proportionately by the Committee.
(b) In the event of an anticipated Change in Control or the Company
shall be a party to any reorganization, involving merger,
consolidation, or acquisition of the stock or substantially all
the assets of the Company, the Board or the Committee, in its
discretion, may:
(i) notwithstanding other provisions hereof, declare that all
Options granted under the Plan shall become exercisable
immediately notwithstanding the provisions of the
respective Stock Option Agreements regarding
exercisability, that all such Options shall terminate 90
days after the Committee gives written notice of the
immediate right to exercise all such Options and of the
decision to terminate all Options not exercised within
such 90-day period, and that all then-remaining
restrictions pertaining to Awards under the Plan shall
immediately lapse; and/or
8
<PAGE>
(ii) notify all Grantees that all Options or Awards granted
under the Plan shall be assumed by the successor
corporation or substituted on an equitable basis with
options or restricted stock issued by such successor
corporation.
(c) If the Company is to be liquidated or dissolved in connection
with a reorganization described in Section 5.2(b), the provisions
of such Section shall apply. In all other instances, the
adoption of a plan of dissolution or liquidation of the Company
shall, notwithstanding other provisions hereof, cause all then-
remaining restrictions pertaining to Awards under the Plan to
lapse, and shall cause every Option outstanding under the Plan to
terminate to the extent not exercised prior to the adoption of
the plan of dissolution or liquidation by the shareholders,
provided that, notwithstanding other provisions hereof, the
Committee may declare all Options granted under the Plan to be
exercisable at any time on or before the fifth business day
following such adoption notwithstanding the provisions of the
respective Stock Option Agreements regarding exercisability.
(d) The adjustments described in paragraphs (a) through (c) of this
Section 5.2, and the manner of their application, shall be
determined solely by the Board or the Committee, and any such
adjustment may provide for the elimination of fractional share
interests; provided, however, that any adjustment made by the
Board or the Committee shall be made in a manner that will not
cause an Incentive Stock Option to be other than an Incentive
Stock Option under applicable statutory and regulatory
provisions. The adjustments required under this Article V shall
apply to any successors of the Company and shall be made
regardless of the number or type of successive events requiring
such adjustments.
ARTICLE VI
OPTIONS
6.1 Types of Options Granted. The Committee may, under this Plan, grant
------------------------
either Incentive Stock Options or Options which do not qualify as
Incentive Stock Options. Within the limitations provided in this Plan,
both types of Options may be granted to the same person at the same
time, or at different times, under different terms and conditions, as
long as the terms and conditions of each Option are consistent with
the provisions of the Plan. Without limitation of the foregoing,
Options may be granted subject to conditions based on the financial
performance of the Company or any other factor the Committee deems
relevant.
6.2 Option Grant and Agreement. Each Option granted hereunder shall be
--------------------------
evidenced by minutes of a meeting or the written consent of the
Committee and by a written Stock Option Agreement executed by the
Company and the Optionee. The terms
9
<PAGE>
of the Option, including the Option's duration, time or times of
exercise, exercise price, whether the Option is intended to be an
Incentive Stock Option, and whether the Option is to be accompanied by
the right to receive a Reload Option, shall be stated in the Stock
Option Agreement. No Incentive Stock Option may be granted more than
ten years after the earlier to occur of the Effective Date or the date
the Plan is approved by the Company's shareholders.
Separate Stock Option Agreements may be used for Options intended
to be Incentive Stock Options and those not so intended, but any
failure to use such separate agreements shall not invalidate, or
otherwise adversely affect the Optionee's interest in, the Options
evidenced thereby.
6.3 Optionee Limitation. The Committee shall not grant an Incentive Stock
-------------------
Option to any person who, at the time the Incentive Stock Option is
granted:
(a) is not an employee of the Company or any of its subsidiaries; or
(b) owns or is considered to own stock possessing at least 10% of the
total combined voting power of all classes of stock of the
Company or any of its parent or subsidiary corporations;
provided, however, that this limitation shall not apply if at the
time an Incentive Stock Option is granted the Exercise Price is
at least 110% of the Fair Market Value of the Stock subject to
such Option and such Option by its terms would not be exercisable
after five years from the date on which the Option is granted.
6.4 $100,000 Limitation. Except as provided below, the Committee shall not
-------------------
grant an Incentive Stock Option to, or modify the exercise provisions
of outstanding Incentive Stock Options held by, any person who, at the
time the Incentive Stock Option is granted (or modified), would
thereby receive or hold any Incentive Stock Options of the Company and
any parent or subsidiary of the Company, such that the aggregate Fair
Market Value (determined as of the respective dates of grant or
modification of each option) of the stock with respect to which such
Incentive Stock Options are exercisable for the first time during any
calendar year is in excess of $100,000 (or such other limit as may be
prescribed by the Code from time to time); provided that the foregoing
--------
restriction on modification of outstanding Incentive Stock Options
shall not preclude the Committee from modifying an outstanding
Incentive Stock Option if, as a result of such modification and with
the consent of the Optionee, such Option no longer constitutes an
Incentive Stock Option; and provided that, if the $100,000 limitation
(or such other limitation prescribed by the Code) described in this
Section 6.4 is exceeded, the Incentive Stock Option, the granting or
modification of which resulted in the exceeding of such limit, shall
be treated as an Incentive Stock Option up to the limitation and the
excess shall be treated as an Option not qualifying as an Incentive
Stock Option.
10
<PAGE>
6.5 Exercise Price. The Exercise Price of the Stock subject to each
--------------
Option shall be determined by the Committee. Subject to the provisions
of Section 6.3(b) hereof, the Exercise Price of an Incentive Stock
Option shall not be less than the Fair Market Value of the Stock as of
the date the Option is granted (or in the case of an Incentive Stock
Option that is subsequently modified, on the date of such
modification).
6.6 Exercise Period. The period for the exercise of each Option granted
---------------
hereunder shall be determined by the Committee, but the Stock Option
Agreement with respect to each Option intended to be an Incentive
Stock Option shall provide that such Option shall not be exercisable
after the expiration of ten years from the date of grant (or
modification) of the Option. In addition, no Incentive Stock Option
granted under the Plan shall be exercisable prior to shareholder
approval of the Plan.
6.7 Option Exercise.
---------------
(a) Unless otherwise provided in the Stock Option Agreement or
Section 6.6 hereof, an Option may be exercised at any time or
from time to time during the term of the Option as to any or all
full shares which have become Purchasable under the provisions of
the Option, but not at any time as to less than 100 shares unless
the remaining shares that have become so Purchasable are less
than 100 shares. The Committee shall have the authority to
prescribe in any Stock Option Agreement that the Option may be
exercised only in accordance with a vesting schedule during the
term of the Option.
(b) An Option shall be exercised by (i) delivery to the Company at
its principal office a written notice of exercise with respect to
a specified number of shares of Stock and (ii) payment to the
Company at that office of the full amount of the Exercise Price
for such number of shares in accordance with Section 6.7(c). If
requested by an Optionee, an Option may be exercised with the
involvement of a stockbroker in accordance with the federal
margin rules set forth in Regulation T (in which case the
certificates representing the underlying shares will be delivered
by the Company directly to the stockbroker).
(c) The Exercise Price is to be paid in full in cash upon the
exercise of the Option and the Company shall not be required to
deliver certificates for the shares purchased until such payment
has been made; provided, however, that in lieu of cash, all or
any portion of the Exercise Price may be paid by tendering to the
Company shares of Stock duly endorsed for transfer and owned by
the Optionee, or by authorization to the Company to withhold
shares of Stock otherwise issuable upon exercise of the Option,
in each case to be credited against the Exercise Price at the
Fair Market Value of
11
<PAGE>
such shares on the date of exercise (however, no fractional
shares may be so transferred, and the Company shall not be
obligated to make any cash payments in consideration of any
excess of the aggregate Fair Market Value of shares transferred
over the aggregate Exercise Price); provided further, that the
Board may provide in a Stock Option Agreement (or may otherwise
determine in its sole discretion at the time of exercise) that,
in lieu of cash or shares, all or a portion of the Exercise Price
may be paid by the Optionee's execution of a recourse note equal
to the Exercise Price or relevant portion thereof, subject to
compliance with applicable state and federal laws, rules and
regulations.
(d) In addition to and at the time of payment of the Exercise Price,
the Optionee shall pay to the Company in cash the full amount of
any federal, state, and local income, employment, or other
withholding taxes applicable to the taxable income of such
Optionee resulting from such exercise. However, in the
discretion of the Committee any Stock Option Agreement may
provide that all or any portion of such tax obligations, together
with additional taxes not exceeding the actual additional taxes
to be owed by the Optionee as a result of such exercise, may,
upon the irrevocable election of the Optionee, be paid by
tendering to the Company whole shares of Stock duly endorsed for
transfer and owned by the Optionee, or by authorization to the
Company to withhold shares of Stock otherwise issuable upon
exercise of the Option, in either case in that number of shares
having a Fair Market Value on the date of exercise equal to the
amount of such taxes thereby being paid, and subject to such
restrictions as to the approval and timing of any such election
as the Committee may from time to time determine to be necessary
or appropriate to satisfy the conditions of the exemption set
forth in Rule 16b-3 under the Exchange Act, if such rule is
applicable.
(e) The holder of an Option shall not have any of the rights of a
shareholder with respect to the shares of Stock subject to the
Option until such shares have been issued and transferred to the
Optionee upon the exercise of the Option.
6.8 Reload Options.
--------------
12
<PAGE>
(a) The Committee may specify in a Stock Option Agreement (or may
otherwise determine in its sole discretion) that a Reload Option
shall be granted, without further action of the Committee, (i) to
an Optionee who exercises an Option (including a Reload Option)
by surrendering shares of Stock in payment of amounts specified
in Sections 6.7(c) or 6.7(d) hereof, (ii) for the same number of
shares as are surrendered to pay such amounts, (iii) as of the
date of such payment and at an Exercise Price equal to the Fair
Market Value of the Stock on such date, and (iv) otherwise on the
same terms and conditions as the Option whose exercise has
occasioned such payment, subject to such other conditions or
terms as the Committee shall specify at the time such exercised
Option is granted.
(b) Unless provided otherwise in the Stock Option Agreement, a Reload
Option may not be exercised by an Optionee (i) prior to the end
of a one-year period from the date that the Reload Option is
granted, and (ii) unless the Optionee retains beneficial
ownership of the shares of Stock issued to such Optionee upon
exercise of the Option referred to above in Section 6.8(a)(i) for
a period of one year from the date of such exercise.
6.9 Nontransferability of Option. No Option shall be transferable by an
----------------------------
Optionee other than by will or the laws of descent and distribution
or, in the case of non-Incentive Stock Options, pursuant to a
Qualified Domestic Relations Order, and no Option shall be
transferable by an Optionee who is a Section 16 Insider prior to
shareholder approval of the Plan. During the lifetime of an Optionee,
Options shall be exercisable only by such Optionee (or by such
Optionee's guardian or legal representative, should one be appointed).
6.10 Termination of Employment or Service. The Committee shall have the
------------------------------------
power to specify, with respect to the Options granted to a particular
Optionee, the effect upon such Optionee's right to exercise an Option
of termination of such Optionee's employment or service under various
circumstances, which effect may include immediate or deferred
termination of such Optionee's rights under an Option, or acceleration
of the date at which an Option may be exercised in full; provided,
however, that in no event may an Incentive Stock Option be exercised
after the expiration of ten years from the date of grant thereof.
Unless a Stock Option Agreement specifically provides otherwise, in
the event the recipient of an Option or Award is terminated from his
or her employment or other service to the Company or its subsidiaries
for Cause, Options and Awards, whether vested or unvested, granted to
such person shall terminate immediately and shall not thereafter be
exercisable.
6.11 Employment Rights. Nothing in the Plan or in any Stock Option
-----------------
Agreement shall confer on any person any right to continue in the
employ of the Company or any of its subsidiaries, or shall interfere
in any way with the right of the Company or any of its subsidiaries to
terminate such person's employment at any time.
13
<PAGE>
6.12 Certain Successor Options. To the extent not inconsistent with the
-------------------------
terms, limitations and conditions of Code Section 422 and any
regulations promulgated with respect thereto, an Option issued in
respect of an option held by an employee to acquire stock of any
entity acquired, by merger or otherwise, by the Company (or any
subsidiary of the Company) may contain terms that differ from those
stated in this Article VI, but solely to the extent necessary to
preserve for any such employee the rights and benefits contained in
such predecessor option, or to satisfy the requirements of Code
Section 424(a).
6.13 Effect of Change in Control. The Committee may determine, at the time
---------------------------
of granting an Option or thereafter, that such Option shall become
exercisable on an accelerated basis in the event that a Change in
Control occurs with respect to the Company (and the Committee shall
have the discretion to modify the definition of a Change in Control in
a particular Option Agreement). If the Committee finds that there is a
reasonable possibility that, within the succeeding six months, a
Change in Control will occur with respect to the Company, then the
Committee may determine that all outstanding Options shall be
exercisable on an accelerated basis.
ARTICLE VII
RESTRICTED STOCK
7.1 Awards of Restricted Stock. The Committee may grant Awards of
--------------------------
Restricted Stock, which shall be governed by a Restriction Agreement
between the Company and the Grantee. Each Restriction Agreement shall
contain such restrictions, terms, and conditions as the Committee may,
in its discretion, determine, and may require that an appropriate
legend be placed on the certificates evidencing the subject Restricted
Stock. Shares of Restricted Stock granted pursuant to an Award
hereunder shall be issued in the name of the Grantee as soon as
reasonably practicable after the Award is granted, provided that the
Grantee has executed the Restriction Agreement governing the Award,
the appropriate blank stock powers, and, in the discretion of the
Committee, an escrow agreement and any other documents which the
Committee may require as a condition to the issuance of such shares.
If a Grantee shall fail to execute the foregoing documents within any
time period prescribed by the Committee, the Award shall be void. At
the discretion of the Committee, shares issued in connection with an
Award may be held by the Company for the account of the Grantee or
deposited together with the stock powers with an escrow agent
designated by the Committee. Unless the Committee determines otherwise
and as set forth in the Restriction Agreement, upon issuance of the
shares, the Grantee shall have all of the rights of a shareholder with
respect to such shares, including the right to vote the shares and to
receive all dividends or other distributions paid or made with respect
to the shares.
14
<PAGE>
7.2 Non-Transferability. Until any restrictions upon Restricted Stock
-------------------
awarded to a Grantee shall have lapsed in a manner set forth in
Section 7.3, such shares of Restricted Stock shall not be transferable
other than by will or the laws of descent and distribution, or
pursuant to a Qualified Domestic Relations Order, nor shall they be
delivered to the Grantee.
7.3 Lapse of Restrictions. Restrictions upon Restricted Stock awarded
---------------------
hereunder shall lapse at such time or times and on such terms and
conditions as the Committee may, in its discretion, determine at the
time the Award is granted or thereafter.
7.4 Termination of Employment. The Committee shall have the power to
-------------------------
specify, with respect to each Award granted to any particular Grantee,
the effect upon such Grantee's rights with respect to such Restricted
Stock of the termination of such Grantee's employment under various
circumstances, which effect may include immediate or deferred
forfeiture of such Restricted Stock or acceleration of the date at
which any then-remaining restrictions shall lapse.
7.5 Treatment of Dividends. At the time an Award of Restricted Stock is
----------------------
made the Committee may, in its discretion, determine that the payment
to the Grantee of any dividends, or a specified portion thereof,
declared or paid on such Restricted Stock shall be (i) deferred until
the lapsing of the relevant restrictions and (ii) held by the Company
for the account of the Grantee until such lapsing. In the event of
such deferral, there shall be credited at the end of each year (or
portion thereof) interest on the amount of the account at the
beginning of the year at a rate per annum determined by the Committee.
Payment of deferred dividends, together with interest thereon, shall
be made upon the lapsing of restrictions imposed on such Restricted
Stock, and any dividends deferred (together with any interest thereon)
in respect of Restricted Stock shall be forfeited upon any forfeiture
of such Restricted Stock.
7.6 Delivery of Shares. Except as provided otherwise in Article IX below,
------------------
within a reasonable period of time following the lapse of the
restrictions on shares of Restricted Stock, the Committee shall cause
a stock certificate to be delivered to the Grantee with respect to
such shares and such shares shall be free of all restrictions
hereunder.
ARTICLE VIII
STOCK APPRECIATION RIGHTS
8.1 SAR Grants. The Committee, in its sole discretion, may grant to any
----------
Grantee a SAR. The Committee may impose such conditions or
restrictions on the exercise of any SAR as it may deem appropriate,
including, without limitation, restricting the time of exercise of the
SAR to specified periods as may be necessary to satisfy the
requirements of Rule 16b-3.
15
<PAGE>
8.2 Determination of Price. The SAR Price shall be established by the
----------------------
Committee in its sole discretion. The SAR Price shall not be less than
100% of the Fair Market Value of the Stock on the date the SAR is
granted for a SAR issued in tandem with an Incentive Stock Option.
8.3 Exercise of a SAR. Upon exercise of a SAR, the Grantee shall be
-----------------
entitled, subject to the terms and conditions of this Plan and the
Agreement, to receive the excess for each share of Stock being
exercised under the SAR of (i) the Fair Market Value of such share of
Stock on the date of exercise over (ii) the SAR Price for such share
of Stock.
8.4 Payment for a SAR. At the sole discretion of the Committee, the
-----------------
payment of such excess shall be made in (i) cash, (ii) shares of
Stock, or (iii) a combination of both. Shares of Stock used for this
payment shall be valued at their Fair Market Value on the date of
exercise of the applicable SAR.
8.5 Status of a SAR under the Plan. Shares of Stock subject to an Award
------------------------------
of a SAR shall be considered shares of Stock which may be issued under
the Plan for purposes of Section 5.1 hereof, unless the Agreement
making the Award of the SAR provides that the exercise of such SAR
results in the termination of an unexercised Option for the same
number of shares of Stock.
8.6 Termination of Employment. The Committee shall have the power to
-------------------------
specify, with respect to each SAR granted to any particular Grantee,
the effect upon such Grantee's rights with respect to such SAR of the
termination of such Grantee's employment under various circumstances,
which effect may include immediate or deferred forfeiture of such SAR
or acceleration of the date at which any then-remaining restrictions
shall lapse.
8.7 No Shareholder Rights. The Grantee shall have no rights as a
---------------------
shareholder with respect to a SAR. In addition, no adjustment shall be
made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or rights except as
provided in Section 5.2 hereof.
ARTICLE IX
STOCK CERTIFICATES
The Company shall not be required to issue or deliver any certificate for
shares of Stock purchased upon the exercise of any Option granted hereunder or
any portion thereof, or deliver any certificate for shares of Restricted Stock
granted hereunder, prior to fulfillment of all of the following conditions:
16
<PAGE>
(a) The admission of such shares to listing on all stock exchanges on
which the Stock is then listed;
(b) The completion of any registration or other qualification of such
shares which the Committee shall deem necessary or advisable under any
federal or state law or under the rulings or regulations of the
Securities and Exchange Commission or any other governmental
regulatory body;
(c) The obtaining of any approval or other clearance from any federal or
state governmental agency or body which the Committee shall determine
to be necessary or advisable; and
(d) The lapse of such reasonable period of time following the exercise of
the Option as the Board from time to time may establish for reasons of
administrative convenience.
Stock certificates issued and delivered to Grantees shall bear such
restrictive legends as the Company shall deem necessary or advisable pursuant to
applicable federal and state securities laws.
ARTICLE X
TERMINATION AND AMENDMENT
10.1 Termination and Amendment. The Board may at any time terminate the
-------------------------
Plan, and may at any time and from time to time and in any respect
amend the Plan; provided, however, that the Board (unless its actions
are approved or ratified by the shareholders of the Company within
twelve months of the date that the Board amends the Plan) may not
amend the Plan to:
(a) Increase the total number of shares of Stock issuable pursuant to
Incentive Stock Options, except as contemplated in Sections 5.1
and 5.2;
(b) Change the class of employees eligible to receive Incentive Stock
Options that may participate in the Plan; or
(c) Otherwise materially increase the benefits accruing to recipients
of Incentive Stock Options under the Plan.
10.2 Effect on Grantee's Rights. No termination, amendment, or
--------------------------
modification of the Plan shall affect adversely a Grantee's rights
under a Stock Option Agreement or Restriction Agreement without the
consent of the Grantee or his legal representative.
17
<PAGE>
ARTICLE XI
RELATIONSHIP TO OTHER COMPENSATION PLANS
The adoption of the Plan shall not affect any other stock option,
incentive, or other compensation plans in effect for the Company or any of its
subsidiaries; nor shall the adoption of the Plan preclude the Company or any of
its subsidiaries from establishing any other form of incentive or other
compensation plan for employees or Directors of the Company or any of its
subsidiaries.
ARTICLE XII
MISCELLANEOUS
12.1 Replacement or Amended Grants. At the sole discretion of the
-----------------------------
Committee, and subject to the terms of the Plan, the Committee may
modify outstanding Options or Awards or accept the surrender of
outstanding Options or Awards and grant new Options or Awards in
substitution for them. However no modification of an Option or Award
shall adversely affect a Grantee's rights under a Stock Option
Agreement or Restriction Agreement without the consent of the Grantee
or his legal representative.
12.2 Forfeiture for Competition. If a Grantee provides services to a
--------------------------
competitor of the Company or any of its subsidiaries, whether as an
employee, officer, director, independent contractor, consultant,
agent, or otherwise, such services being of a nature that can
reasonably be expected to involve the skills and experience used or
developed by the Grantee while an employee of the Company or
subsidiary, then that Grantee's rights under any Options outstanding
hereunder shall be forfeited and terminated, and any shares of
Restricted Stock held by such Grantee subject to remaining
restrictions shall be forfeited, subject in each case to a
determination to the contrary by the Committee.
12.3 Plan Binding on Successors. The Plan shall be binding upon the
--------------------------
successors and assigns of the Company.
12.4 Singular, Plural; Gender. Whenever used herein, nouns in the singular
------------------------
shall include the plural, and the masculine pronoun shall include the
feminine gender.
12.5 Headings, etc., No Part of Plan. Headings of Articles and Sections
-------------------------------
hereof are inserted for convenience and reference; they do not
constitute part of the Plan.
18
<PAGE>
12.6 Interpretation. With respect to Section 16 Insiders, transactions
--------------
under this Plan are intended to comply with all applicable conditions
of Rule 16b-3 or its successors under the Exchange Act. To the extent
any provision of the Plan or action by the Plan administrators fails
to so comply, it shall be deemed void to the extent permitted by law
and deemed advisable by the Plan administrators.
* * * * *
19
<PAGE>
EXHIBIT 10.2
THE INTERCEPT GROUP, INC.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement"), entered into as of this
____ day of ________, _____, by and between The Intercept Group, Inc., a Georgia
corporation (the "Company"), and _________________ (the "Optionee").
WHEREAS, effective as of November 12, 1996, the Board of Directors of the
Company adopted a stock option plan known as the "The Intercept Group, Inc.
Amended and Restated 1996 Stock Option Plan" (the "Plan"), and recommended that
the Plan be approved by the Company's shareholders; and
WHEREAS, the Committee has granted the Optionee a stock option to purchase
the number of shares of the Company's common stock as set forth below, and in
consideration of the granting of that stock option the Optionee intends to
remain in the employ of the Company; and
WHEREAS, the Company and the Optionee desire to enter into a written
agreement with respect to such option in accordance with the Plan.
NOW, THEREFORE, as an employment incentive and to encourage stock
ownership, and also in consideration of the mutual covenants contained herein,
the parties hereto agree as follows.
1. Incorporation of Plan. This option is granted pursuant to the
---------------------
provisions of the Plan and the terms and definitions of the Plan are
incorporated herein by reference and made a part hereof. A copy of the
Plan has been delivered to, and receipt is hereby acknowledged by, the
Optionee.
2. Grant of Option. Subject to the terms, restrictions, limitations and
---------------
conditions stated herein, the Company hereby evidences its grant to
the Optionee, not in lieu of salary or other compensation, of the
right and option (the "Option") to purchase all or any part of the
number of shares of the Company's Common Stock, no par value (the
"Stock"), set forth on Schedule A attached hereto and incorporated
herein by reference. The Option shall be exercisable in the amounts
and at the time specified on Schedule A. The Option shall expire and
shall not be exercisable on the date specified on Schedule A or on
such earlier date as determined pursuant to Section 8, 9, or 10
hereof. Schedule A states whether the Option is intended to be an
Incentive Stock Option.
3. Purchase Price. The price per share to be paid by the Optionee for the
--------------
shares subject to this Option (the "Exercise Price") shall be as
specified on Schedule A, which price shall be an amount not less than
the Fair Market Value of a
i
<PAGE>
share of Stock as of the Date of Grant (as defined in Section 11
below) if the Option is an Incentive Stock Option.
4. Exercise Terms. The Optionee must exercise the Option for at least the
--------------
lesser of 100 shares or the number of shares of Purchasable Stock as
to which the Option remains unexercised. In the event this Option is
not exercised with respect to all or any part of the shares subject to
this Option prior to its expiration, the shares with respect to which
this Option was not exercised shall no longer be subject to this
Option.
5. Option Non-Transferable. No Option shall be transferable by an
-----------------------
Optionee other than by will or the laws of descent and distribution
or, in the case of non-Incentive Stock Options, pursuant to a
Qualified Domestic Relations Order, and no Option shall be
transferable by an Optionee who is a Section 16 Insider prior to
shareholder approval of the Plan. During the lifetime of an Optionee,
Options shall be exercisable only by such Optionee (or by such
Optionee's guardian or legal representative, should one be appointed).
6. Notice of Exercise of Option. This Option may be exercised by the
----------------------------
Optionee, or by the Optionee's administrators, executors or personal
representatives, by a written notice (in substantially the form of the
Notice of Exercise attached hereto as Schedule B) signed by the
Optionee, or by such administrators, executors or personal
representatives, and delivered or mailed to the Company as specified
in Section 14 hereof to the attention of the President or such other
officer as the Company may designate. Any such notice shall (a)
specify the number of shares of Stock which the Optionee or the
Optionee's administrators, executors or personal representatives, as
the case may be, then elects to purchase hereunder, (b) contain such
information as may be reasonably required pursuant to Section 12
hereof, and (c) be accompanied by (i) a certified or cashier's check
payable to the Company in payment of the total Exercise Price
applicable to such shares as provided herein, (ii) shares of Stock
owned by the Optionee and duly endorsed or accompanied by stock
transfer powers having a Fair Market Value equal to the total Exercise
Price applicable to such shares purchased hereunder, or (iii) a
certified or cashier's check accompanied by the number of shares of
Stock whose Fair Market Value when added to the amount of the check
equals the total Exercise Price applicable to such shares purchased
hereunder. Upon receipt of any such notice and accompanying payment,
and subject to the terms hereof, the Company agrees to issue to the
Optionee or the Optionee's administrators, executors or personal
representatives, as the case may be, stock certificates for the number
of shares specified in such notice registered in the name of the
person exercising this Option.
7. Adjustment in Option. The number of shares subject to this Option, the
--------------------
Exercise Price and other matters are subject to adjustment during the
term of this Option in accordance with Section 5.2 of the Plan.
ii
<PAGE>
8. Termination of Employment.
-------------------------
(a) Except as otherwise specified in Schedule A hereto, in the event
of the termination of the Optionee's employment with the Company
or any of its subsidiaries, other than a termination that is
either (i) for Cause, (ii) voluntary on the part of the Optionee
and without written consent of the Company, or (iii) for reasons
of death or disability or retirement, the Optionee may exercise
this Option at any time within 90 days after such termination to
the extent of the number of shares which were Purchasable
hereunder at the date of such termination.
(b) Except as specified in Schedule A attached hereto, in the event
of a termination of the Optionee's employment that is either (i)
for Cause or (ii) voluntary on the part of the Optionee and
without the written consent of the Company, this Option, to the
extent not previously exercised, shall terminate immediately and
shall not thereafter be or become exercisable.
(c) Unless and to the extent otherwise provided in Exhibit A hereto,
in the event of the retirement of the Optionee at the normal
retirement date as prescribed from time to time by the Company or
any subsidiary, the Optionee shall continue to have the right to
exercise any Options for shares which were Purchasable at the
date of the Optionee's retirement (provided that, on the date
which is three months after the date of retirement, the Options
will become void and unexercisable unless on the date of
retirement the Optionee enters into a noncompete agreement with
The Intercept Group, Inc. and continues to comply with such
noncompete agreement). This Option does not confer upon the
Optionee any right with respect to continuance of employment by
the Company or by any of its subsidiaries. This Option shall not
be affected by any change of employment so long as the Optionee
continues to be an employee of the Company or one of its
subsidiaries.
9. Disabled Optionee. In the event of termination of employment because
-----------------
of the Optionee's becoming a Disabled Optionee, the Optionee (or his
or her personal representative) may exercise this Option, within a
period ending on the earlier of (a) the last day of the one year
period following the Optionee's death or (b) the expiration date of
this Option, to the extent of the number of shares which were
Purchasable hereunder at the date of such termination.
iii
<PAGE>
10. Death of Optionee. Except as otherwise set forth in Schedule A with
-----------------
respect to the rights of the Optionee upon termination of employment
under Section 8(a) above, in the event of the Optionee's death while
employed by the Company or any of its subsidiaries or within three
months after a termination of such employment (if such termination was
neither (i) for cause nor (ii) voluntary on the part of the Optionee
and without the written consent of the Company), the appropriate
persons described in Section 6 hereof or persons to whom all or a
portion of this Option is transferred in accordance with Section 5
hereof may exercise this Option at any time within a period ending on
the earlier of (a) the last day of the one year period following the
Optionee's death or (b) the expiration date of this Option. If the
Optionee was an employee of the Company at the time of death, this
Option may be so exercised to the extent of the number of shares that
were Purchasable hereunder at the date of death. If the Optionee's
employment terminated prior to his or her death, this Option may be
exercised only to the extent of the number of shares covered by this
Option which were Purchasable hereunder at the date of such
termination.
11. Date of Grant. This Option was granted by the Board of Directors of
-------------
the Company on the date set forth in Schedule A (the "Date of Grant").
12. Compliance with Regulatory Matters. The Optionee acknowledges that the
----------------------------------
issuance of capital stock of the Company is subject to limitations
imposed by federal and state law and the Optionee hereby agrees that
the Company shall not be obligated to issue any shares of Stock upon
exercise of this Option that would cause the Company to violate law or
any rule, regulation, order or consent decree of any regulatory
authority (including without limitation the Securities and Exchange
Commission) having jurisdiction over the affairs of the Company. The
Optionee agrees that he or she will provide the Company with such
information as is reasonably requested by the Company or its counsel
to determine whether the issuance of Stock complies with the
provisions described by this Section 12.
13. Restriction on Disposition of Shares. The shares purchased pursuant to
------------------------------------
the exercise of an Incentive Stock Option shall not be transferred by
the Optionee except pursuant to the Optionee's will, or the laws of
descent and distribution, until such date which is the later of two
years after the grant of such Incentive Stock Option or one year after
the transfer of the shares to the Optionee pursuant to the exercise of
such Incentive Stock Option.
14. Miscellaneous.
-------------
(a) This Agreement shall be binding upon the parties hereto and their
representatives, successors and assigns.
iv
<PAGE>
(b) This Agreement is executed and delivered in, and shall be
governed by the laws of, the State of Georgia.
(c) Any requests or notices to be given hereunder shall be deemed
given, and any elections or exercises to be made or accomplished
shall be deemed made or accomplished, upon actual delivery
thereof to the designated recipient, or three days after deposit
thereof in the United States mail, registered, return receipt
requested and postage prepaid, addressed, if to the Optionee, at
the address set forth below and, if to the Company, to the
executive offices of the Company at 3150 Holcomb Bridge Road,
Suite 200, Norcross, Georgia 30071.
(d) This Agreement may not be modified except in writing executed by
each of the parties hereto.
IN WITNESS WHEREOF, the Board of Directors of the Company has caused this
Stock Option Agreement to be executed on behalf of the Company and the Company's
seal to be affixed hereto and attested by the Secretary or an Assistant
Secretary of the Company, and the Optionee has executed this Stock Option
Agreement under seal, all as of the day and year first above written.
THE INTERCEPT GROUP, INC. OPTIONEE
By:__________________________ ________________________
Name: Name:
Title: Address:
ATTEST:
_____________________________
Secretary/Assistant Secretary
[SEAL]
v
<PAGE>
SCHEDULE A
TO
STOCK OPTION AGREEMENT
BETWEEN
THE INTERCEPT GROUP, INC.
AND
_____________________________
Dated: _______________
1. Number of Shares Subject to Option: _____________________ shares.
----------------------------------
2. This Option (Check one) [_] is [_] is not an Incentive Stock Option.
----------- -- --------------------------------
3. Option Exercise Price: $_______________ per share.
---------------------
4. Date of Grant: _____________________
-------------
5. Option Vesting Schedule:
-----------------------
Check one:
( ) Options are exercisable with respect to all shares on or after
the date hereof
( ) Options are exercisable with respect to the number of shares
indicated below on or after the date indicated next to the number
of shares:
No. of Shares Vesting Date
------------- ------------
6. Option Exercise Period:
----------------------
Check One:
( ) All options expire and are void unless exercised on or before
______________, 199___.
( ) Options expire and are void unless exercised on or before the
date indicated next to the number of shares:
No. of Shares Expiration Date
------------- ---------------
vi
<PAGE>
7. Effect of Termination of Employment of Optionee (if different from that set
-----------------------------------------------
forth in Sections 8, 9 and 10 of the Stock Option Agreement):
vii
<PAGE>
SCHEDULE B
NOTICE OF EXERCISE
The undersigned hereby notifies Intercept Holdings Inc. (the
"Company") of this election to exercise the undersigned's stock option to
purchase ______________ shares of the Company's common stock, no par value (the
"Common Stock"), pursuant to the Stock Option Agreement (the "Agreement")
between the undersigned and the Company dated ________________. Accompanying
this Notice is (1) a certified or a cashier's check in the amount of $__________
payable to the Company, and/or (2) __________ shares of the Company's Common
Stock presently owned by the undersigned and duly endorsed or accompanied by
stock transfer powers, having an aggregate Fair Market Value (as defined in The
Intercept Group, Inc. Amended and Restated 1996 Stock Option Plan) as of the
date hereof of $____________, such amounts being equal, in the aggregate, to the
purchase price per share set forth in Section 3 of the Agreement multiplied by
the number of shares being purchased hereby (in each instance subject to
appropriate adjustment pursuant to Section 5.2 of the Agreement).
IN WITNESS WHEREOF, the undersigned has set his hand and seal, this
_____ day of ______________, _______.
OPTIONEE [OR OPTIONEE'S
ADMINISTRATOR,
EXECUTOR OR PERSONAL
REPRESENTATIVE]
______________________________________
Name:
Position (if other than Optionee):
viii
<PAGE>
EXHIBIT 10.3
PROVESA, INC.
1994 STOCK OPTION PLAN
<PAGE>
PROVESA, INC.
1994 STOCK OPTION PLAN
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - DEFINITIONS.................................................. 1
1.1 "Award....................................................... 1
1.2 "Board....................................................... 1
1.3 "Change in Control........................................... 1
1.4 "Code........................................................ 1
1.5 "Committee................................................... 1
1.6 "Company..................................................... 2
1.7 "Director.................................................... 2
1.8 "Disinterested Person........................................ 2
1.9 "Employee.................................................... 2
1.10 "Employer.................................................... 2
1.11 "Exchange Act................................................ 2
1.12 "Exercise Price.............................................. 2
1.13 "Fair Market Value........................................... 2
1.14 "Grantee..................................................... 3
1.15 "Incentive Stock Option...................................... 3
1.16 "Officer..................................................... 3
1.17 "Option...................................................... 3
1.18 "Optionee.................................................... 3
1.19 "Parent...................................................... 3
1.20 "Permitted Transferee........................................ 3
1.21 "Plan........................................................ 3
1.22 "Purchasable................................................. 3
1.23 "Qualified Domestic Relations Order.......................... 3
1.24 "Reload Option............................................... 3
1.25 "Restricted Stock............................................ 4
1.26 "Restriction Agreement....................................... 4
1.27 "Section 16 Insider.......................................... 4
1.28 "Stock....................................................... 4
1.29 "Stock Option Agreement...................................... 4
1.30 "Subsidiary.................................................. 4
ARTICLE II - THE PLAN.................................................... 4
2.1 Name......................................................... 4
----
2.2 Purpose...................................................... 4
-------
2.3 Effective Date............................................... 4
--------------
ARTICLE III - PARTICIPANTS............................................... 5
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE IV - ADMINISTRATION.............................................. 5
4.1 Duties and Powers of the Committee........................... 5
----------------------------------
4.2 Interpretation; Rules........................................ 5
---------------------
4.3 No Liability................................................. 5
------------
4.4 Majority Rule................................................ 6
-------------
4.5 Company Assistance........................................... 6
------------------
ARTICLE V - SHARES OF STOCK SUBJECT TO PLAN.............................. 6
5.1 Limitations.................................................. 6
-----------
5.2 Antidilution................................................. 6
------------
ARTICLE VI - OPTIONS..................................................... 8
6.1 Types of Options Granted..................................... 8
------------------------
6.2 Option Grant and Agreement................................... 8
--------------------------
6.3 Optionee Limitations......................................... 8
--------------------
6.4 $100,000 Limitation.......................................... 9
-------------------
6.5 Exercise Price............................................... 9
--------------
6.6 Exercise Period.............................................. 9
---------------
6.7 Option Exercise.............................................. 9
---------------
6.8 Reload Options............................................... 10
--------------
6.9 Nontransferability of Option................................. 11
----------------------------
6.10 Termination of Employment or Service......................... 11
------------------------------------
6.11 Employment Rights............................................ 11
-----------------
6.12 Certain Successor Options.................................... 12
-------------------------
6.13 Effect of Change in Control.................................. 12
---------------------------
ARTICLE VII - RESTRICTED STOCK........................................... 12
7.1 Awards of Restricted Stock................................... 12
--------------------------
7.2 Non-Transferability.......................................... 12
-------------------
7.3 Lapse of Restrictions........................................ 13
---------------------
7.4 Termination of Employment.................................... 13
-------------------------
7.5 Treatment of Dividends....................................... 13
----------------------
7.6 Delivery of Shares........................................... 13
------------------
ARTICLE VIII - STOCK CERTIFICATES........................................ 13
ARTICLE IX - TERMINATION AND AMENDMENT OF PLAN........................... 14
ARTICLE X - RELATIONSHIP TO OTHER COMPENSATION PLANS..................... 14
ARTICLE XI - MISCELLANEOUS............................................... 15
11.1 Replacement or Amended Grants................................ 15
-----------------------------
11.2 Forfeiture for Competition................................... 15
--------------------------
11.3 Plan Binding on Successors................................... 15
--------------------------
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
11.4 Singular, Plural; Gender..................................... 15
------------------------
11.5 Headings, etc.,.............................................. 15
---------------
11.6 Interpretation............................................... 15
--------------
</TABLE>
iii
<PAGE>
PROVESA, INC.
1994 STOCK OPTION PLAN
ARTICLE I
DEFINITIONS
As used herein, the following terms have the following meanings unless the
context clearly indicates to the contrary:
1.1 "Award" shall mean a grant of Restricted Stock.
1.2 "Board" shall mean the Board of Directors of the Company.
1.3 "Change in Control" shall mean the occurrence of either of the
following events:
(a) A change in the composition of the Board of Directors as a result
of which fewer than one-half of the incumbent directors are directors who
either:
(i) Had been directors of the Company 24 months prior to such
change; or
(ii) Were elected, or nominated for election, to the Board of
Directors with the affirmative votes of at least a majority of the
directors who had been directors of the Company 24 months prior to
such change and who were still in office at the time of the election
or nomination; or
(b) Any "person" (as such term is used in sections 13(d) and 14(d) of
the Exchange Act), other than any person who is a shareholder of the Company on
or before the effective date of the Plan, by the acquisition or aggregation of
securities is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 50 percent or more of the combined voting
power of the Company's then outstanding securities ordinarily (and apart from
rights accruing under special circumstances) having the right to vote at
elections of directors (the "Base Capital Stock"); except that any change in the
relative beneficial ownership of the Company's securities by any person
resulting solely from a reduction in the aggregate number of outstanding shares
of Base Capital Stock, and any decrease thereafter in such person's ownership of
securities, shall be disregarded until such person increases in any manner,
directly or indirectly, such person's beneficial ownership of any securities of
the Company.
1.4 "Code" shall mean the United States Internal Revenue Code of 1986,
including effective date and transition rules (whether or not codified). Any
reference herein to a specific section of the Code shall be deemed to include a
reference to any corresponding provision of future law.
1.5 "Committee" shall mean a committee of at least two Directors appointed
from time to time by the Board, having the duties and authority set forth herein
in addition to any other authority granted by the Board; provided, however, that
-------- -------
with respect to any Options or Awards granted to an individual who is also a
Section 16 Insider, the Committee shall consist
<PAGE>
of at least two Directors (who need not be members of the Committee with respect
to Options or Awards granted to any other individuals) who are Disinterested
Persons, and all authority and discretion shall be exercised by such
Disinterested Persons, and references herein to the "Committee" shall mean such
Disinterested Persons insofar as any actions or determinations of the Committee
shall relate to or affect Options or Awards made to or held by any Section 16
Insider. At any time that the Board shall not have appointed a committee as
described above, any reference herein to the Committee shall mean a reference to
the Board.
1.6 "Company" shall mean Provesa, Inc., a Georgia corporation.
1.7 "Director" shall mean a member of the Board and any person who is an
advisory, honorary or emeritus director of the Company if such person is
considered a director for the purposes of Section 16 of the Exchange Act, as
determined by reference to such Section 16 and to the rules, regulations,
judicial decisions, and interpretative or "no-action" positions with respect
thereto of the Securities and Exchange Commission, as the same may be in effect
or set forth from time to time.
1.8 "Disinterested Person" shall have the meaning set forth in Rule 16b-3
under the Exchange Act, as the same may be in effect from time to time, or in
any successor rule thereto, and shall be determined for all purposes under the
Plan according to interpretative or "no-action" positions with respect thereto
issued by the Securities and Exchange Commission.
1.9 "Employee" shall mean an employee of the Employer.
1.10 "Employer" shall mean the corporation that employs a Grantee.
1.11 "Exchange Act" shall mean the Securities Exchange Act of 1934. Any
reference herein to a specific section of the Exchange Act shall be deemed to
include a reference to any corresponding provision of future law.
1.12 "Exercise Price" shall mean the price at which an Optionee may
purchase a share of Stock under a Stock Option Agreement.
1.13 "Fair Market Value" on any date shall mean (i) the closing sales price
of the Stock, regular way, on such date on the national securities exchange
having the greatest volume of trading in the Stock during the thirty-day period
preceding the day the value is to be determined or, if such exchange was not
open for trading on such date, the next preceding date on which it was open;
(ii) if the Stock is not traded on any national securities exchange, the average
of the closing high bid and low asked prices of the Stock on the over-the-
counter market on the day such value is to be determined, or in the absence of
closing bids on such day, the closing bids on the next preceding day on which
there were bids; or (iii) if the Stock also is not traded on the over-the-
counter market, the fair market value as determined in good faith by the Board
or the Committee based on such relevant facts as may be available to the Board,
which may include opinions of independent experts, the price at which recent
sales have been made, the book value of the Stock, and the Company's current and
future earnings.
2
<PAGE>
1.14 "Grantee" shall mean a person who is an Optionee or a person who has
received an Award of Restricted Stock.
1.15 "Incentive Stock Option" shall mean an option to purchase any stock of
the Company which complies with and is subject to the terms, limitations, and
conditions of Section 422 of the Code and any regulations promulgated with
respect thereto.
1.16 "Officer" shall mean a person who constitutes an officer of the
Company for the purposes of Section 16 of the Exchange Act, as determined by
reference to such Section 16 and to the rules, regulations, judicial decisions,
and interpretative or "no-action" positions with respect thereto of the
Securities and Exchange Commission, as the same may be in effect or set forth
from time to time.
1.17 "Option" shall mean an option, whether or not an Incentive Stock
Option, to purchase Stock granted pursuant to the provisions of Article VII
hereof.
1.18 "Optionee" shall mean a person to whom an Option has been granted
hereunder.
1.19 "Parent" shall mean any corporation (other than the Employer) in an
unbroken chain of corporations ending with the Employer if, at the time of the
grant (or modification) of the Option, each of the corporations other than the
Employer owns stock possessing 50 percent or more of the total combined voting
power of the classes of stock in one of the other corporations in such chain.
1.20 "Permitted Transferee" shall mean, with respect to an Optionee, any
member of such Optionee's immediate family and any charitable, religious,
scientific, or educational organization, contributions to which are deductible
for federal or state income tax purposes, and any trust or other vehicle for the
benefit of such a family member or organization.
1.21 "Plan" shall mean the Provesa, Inc. 1994 Stock Option Plan, the terms
of which are set forth herein.
1.22 "Purchasable" shall refer to Stock which may be purchased by an
Optionee under the terms of this Plan on or after a certain date specified in
the applicable Stock Option Agreement.
1.23 "Qualified Domestic Relations Order" shall have the meaning set forth
in the Code or in the Employee Retirement Income Security Act of 1974, or the
rules and regulations promulgated under the Code or such Act.
1.24 "Reload Option" shall have the meaning set forth in Section 68 hereof.
1.25 "Restricted Stock" shall mean Stock issued, subject to restrictions,
to a Grantee pursuant to Article VII hereof.
3
<PAGE>
1.26 "Restriction Agreement" shall mean the agreement setting forth the
terms of an Award and executed by a Grantee as provided in Section 7.1 hereof.
1.27 "Section 16 Insider" shall mean any person who is subject to the
provisions of Section 16 of the Exchange Act, as provided in Rule 16a-2
promulgated pursuant to the Exchange Act.
1.28 "Stock" shall mean the Common Stock, no par value, of the Company, as
adjusted pursuant to Section 52 hereof.
1.29 "Stock Option Agreement" shall mean an agreement between the Company
and an Optionee under which the Optionee may purchase Stock hereunder, a sample
form of which is attached hereto as Exhibit A (which form may be varied by the
------- -
Committee in granting an Option).
1.30 "Subsidiary" shall mean any corporation (other than the Employer) in
an unbroken chain of corporations beginning with the Employer if, at the time of
the grant (or modification) of the Option, each of the corporations other than
the last corporation in the unbroken chain owns stock possessing 50 percent or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
ARTICLE II
THE PLAN
2.1 Name. This plan shall be known as the "Provesa, Inc. 1994 Stock
----
Option Plan."
2.2 Purpose. The purpose of the Plan is to advance the interests of the
-------
Company, its Subsidiaries and its shareholders by affording certain employees
and Directors of the Company and its Subsidiaries and certain key consultants
and employees of the Company's suppliers and contractors an opportunity to
acquire or increase their proprietary interests in the Company. The objective of
the issuance of the Options and Awards is to promote the growth and
profitability of the Company and its Subsidiaries because the Grantees will be
provided with an additional incentive to achieve the Company's objectives
through participation in its success and growth and by encouraging their
continued association with or service to the Company.
2.3 Effective Date. The Plan shall become effective on September 1, 1994,
--------------
provided, however, that the Plan shall terminate, and all Options or Awards
- -------- -------
theretofore granted or awarded shall become void and may not be exercised, on
September 1, 1995, if the shareholders of the Company shall not by that date
have approved the Plan's adoption.
ARTICLE III
PARTICIPANTS
The class of persons eligible to participate in the Plan shall consist of
all persons whose participation in the Plan the Committee determines to be in
the best interests of the Company, which shall include, but not be limited to,
all Directors and employees, including but not limited
4
<PAGE>
to executive personnel, of the Company or any Subsidiary, as well as key
consultants and employees of the Company's suppliers and contractors.
ARTICLE IV
ADMINISTRATION
4.1 Duties and Powers of the Committee. The Plan shall be administered by
----------------------------------
the Committee. The Committee shall select one of its members as its Chairman and
shall hold its meetings at such times and places as it may determine. The
Committee shall keep minutes of its meetings and shall make such rules and
regulations for the conduct of its business as it may deem necessary. The
Committee shall have the power to act by unanimous written consent in lieu of a
meeting and to meet telephonically. In administering the Plan, the Committee's
actions and determinations shall be binding on all interested parties. The
Committee shall have the power to grant Options or Awards in accordance with the
provisions of the Plan and may grant Options and Awards singly, in combination,
or in tandem. Subject to the provisions of the Plan, the Committee shall have
the discretion and authority to determine those individuals to whom Options or
Awards will be granted and whether such Options shall be accompanied by the
right to receive Reload Options, the number of shares of Stock subject to each
Option or Award, such other matters as are specified herein, and any other terms
and conditions of a Stock Option Agreement or Restriction Agreement. The
Committee shall also have the discretion and authority to delegate to any
Officer its powers to grant Options or Awards under the Plan to any person who
is an employee of the Company but not an Officer or Director. To the extent not
inconsistent with the provisions of the Plan, the Committee may give a Grantee
an election to surrender an Option or Award in exchange for the grant of a new
Option or Award, and shall have the authority to amend or modify an outstanding
Option Agreement or Restriction Agreement, or to waive any provision thereof,
provided that the Grantee consents to such action.
4.2 Interpretation; Rules. Subject to the express provisions of the Plan,
---------------------
the Committee also shall have complete authority to interpret the Plan, to
prescribe, amend, and rescind rules and regulations relating to it, to determine
the details and provisions of each Stock Option Agreement, and to make all other
determinations necessary or advisable for the administration of the Plan,
including, without limitation, the amending or altering of the Plan and any
Options or Awards granted hereunder as may be required to comply with or to
conform to any federal, state, or local laws or regulations.
4.3 No Liability. Neither any member of the Board nor any member of the
------------
Committee shall be liable to any person for any act or determination made in
good faith with respect to the Plan or any Option or Award granted hereunder.
4.4 Majority Rule. A majority of the members of the Committee shall
-------------
constitute a quorum, and any action taken by a majority at a meeting at which a
quorum is present, or any action taken without a meeting evidenced by a writing
executed by all the members of the Committee, shall constitute the action of the
Committee.
4.5 Company Assistance. The Company shall supply full and timely
------------------
information to the Committee on all matters relating to eligible persons, their
employment, death, retirement,
5
<PAGE>
disability, or other termination of employment, and such other pertinent facts
as the Committee may require. The Company shall furnish the Committee with such
clerical and other assistance as is necessary in the performance of its duties.
ARTICLE V
SHARES OF STOCK SUBJECT TO PLAN
5.1 Limitations. Subject to any antidilution adjustment pursuant to the
-----------
provisions of Section 52 hereof, the maximum number of shares of Stock that may
be issued hereunder shall be 25,000. Any or all shares of Stock subject to the
Plan may be issued in any combination of Incentive Stock Options, non-Incentive
Stock Options, or Restricted Stock, and the amount of Stock subject to the Plan
may be increased from time to time in accordance with Article IX, provided that
the total number of shares of Stock issuable pursuant to Incentive Stock Options
may not be increased to more than 25,000 (other than pursuant to antidilution
adjustments) without shareholder approval. Shares subject to an Option or issued
as an Award may be either authorized and unissued shares or shares issued and
later acquired by the Company. The shares covered by any unexercised portion of
an Option that has terminated for any reason (except as set forth in the
following paragraph), or any forfeited portion of an Award, may again be
optioned or awarded under the Plan, and such shares shall not be considered as
having been optioned or issued in computing the number of shares of Stock
remaining available for option or award hereunder.
In the event of the issuance of Options in respect of options to acquire
stock of any entity acquired, by merger or otherwise, by the Company (or any
Subsidiary of the Company), to the extent that such issuance shall not be
inconsistent with the terms, limitations and conditions of Code section 422 or
Rule 16b-3 under the Exchange Act, the aggregate number of shares of Stock for
which Options may be granted hereunder shall automatically be increased by the
number of shares subject to the Options so issued; provided, however, that the
-------- -------
aggregate number of shares of Stock for which Options may be granted hereunder
shall automatically be decreased by the number of shares covered by any
unexercised portion of an Option so issued that has terminated for any reason,
and the shares subject to any such unexercised portion may not be optioned to
any other person.
5.2 Antidilution.
------------
(a) In the event that the outstanding shares of Stock are changed
into or exchanged for a different number or kind of shares or other securities
of the Company by reason of merger, consolidation, reorganization,
recapitalization, reclassification, combination or exchange of shares, stock
split or stock dividend, in the event that any spin-off, spin-out or other
distribution of assets materially affects the price of the Company's stock, or
in the event of any assumption and conversion to the Plan by the Company of an
acquired company's outstanding option grants:
(i) The aggregate number and kind of shares of Stock for which
Options or Awards may be granted hereunder shall be adjusted
proportionately by the Committee; and
6
<PAGE>
(ii) The rights of Optionees (concerning the number of shares
subject to Options and the Exercise Price) under outstanding Options
and the rights of the holders of Awards (concerning the terms and
conditions of the lapse of any then-remaining restrictions), shall be
adjusted proportionately by the Committee.
(b) If the Company shall be a party to any reorganization in which it
does not survive, involving merger, consolidation, or acquisition of the stock
or substantially all the assets of the Company, the Committee, in its
discretion, may:
(i) notwithstanding other provisions hereof, declare that all
Options granted under the Plan shall become exercisable immediately
notwithstanding the provisions of the respective Option Agreements
regarding exercisability, that all such Options shall terminate 30
days after the Committee gives written notice of the immediate right
to exercise all such Options and of the decision to terminate all
Options not exercised within such 30-day period, and that all then-
remaining restrictions pertaining to Awards under the Plan shall
immediately lapse; and/or
(ii) notify all Grantees that all Options or Awards granted under
the Plan shall be assumed by the successor corporation or substituted
on an equitable basis with options or restricted stock issued by such
successor corporation.
(c) If the Company is to be liquidated or dissolved in connection
with a reorganization described in Section 52, the provisions of such section
shall apply. In all other instances, the adoption of a plan of dissolution or
liquidation of the Company shall, notwithstanding other provisions hereof, cause
all then-remaining restrictions pertaining to Awards under the Plan to lapse,
and shall cause every Option outstanding under the Plan to terminate to the
extent not exercised prior to the adoption of the plan of dissolution or
liquidation by the shareholders, provided that, notwithstanding other provisions
--------
hereof, the Committee may declare all Options granted under the Plan to be
exercisable at any time on or before the fifth business day following such
adoption notwithstanding the provisions of the respective Option Agreements
regarding exercisability.
(d) The adjustments described in paragraphs (a) through (c) of this
section, and the manner of their application, shall be determined solely by the
Committee, and any such adjustment may provide for the elimination of fractional
share interests; provided, however, that any adjustment made by the Board or the
-------- -------
Committee shall be made in a manner that will not cause an Incentive Stock
Option to be other than an incentive stock option under applicable statutory and
regulatory provisions. The adjustments required under this Article shall apply
to any successors of the Company and shall be made regardless of the number or
type of successive events requiring such adjustments.
ARTICLE VI
OPTIONS
6.1 Types of Options Granted. The Committee may, under this Plan, grant
------------------------
either Incentive Stock Options or Options which do not qualify as Incentive
Stock Options. Within the
7
<PAGE>
limitations provided in this Plan, both types of Options may be granted to the
same person at the same time, or at different times, under different terms and
conditions, as long as the terms and conditions of each Option are consistent
with the provisions of the Plan. Without limitation of the foregoing, Options
may be granted subject to conditions based on the financial performance of the
Company or any other factor the Committee deems relevant.
6.2 Option Grant and Agreement. Each Option granted hereunder shall be
--------------------------
evidenced by minutes of a meeting or the written consent of the Committee and by
a written Stock Option Agreement executed by the Company and the Optionee. The
terms of the Option, including the Option's duration, time or times of exercise,
exercise price, whether the Option is intended to be an Incentive Stock Option,
and whether the Option is to be accompanied by the right to receive a Reload
Option, shall be stated in the Option Agreement. No Incentive Stock Option may
be granted more than ten years after the earlier to occur of the effective date
of the Plan or the date the Plan is approved by the Company's shareholders.
Separate Option Agreements may be used for Options intended to be Incentive
Stock Options and those not so intended, but any failure to use such separate
agreements shall not invalidate, or otherwise adversely affect the Optionee's
interest in, the Options evidenced thereby.
6.3 Optionee Limitations. The Committee shall not grant an Incentive
--------------------
Stock Option to any person who, at the time the Incentive Stock Option is
granted:
(a) is not an employee of the Company or any of its Subsidiaries; or
(b) owns or is considered to own stock possessing at least 10% of the
total combined voting power of all classes of stock of the Company or any of its
Parent or Subsidiary corporations; provided, however, that this limitation shall
-------- -------
not apply if at the time an Incentive Stock Option is granted the Exercise Price
is at least 110% of the Fair Market Value of the Stock subject to such Option
and such Option by its terms would not be exercisable after five years from the
date on which the Option is granted. For the purpose of this subsection (b), a
person shall be considered to own (i) the stock owned, directly or indirectly,
by or for his or her brothers and sisters (whether by whole or half blood),
spouse, ancestors and lineal descendants; (ii) the stock owned, directly or
indirectly, by or for a corporation, partnership, estate, or trust in proportion
to such person's stock interest, partnership interest or beneficial interest
therein; and (iii) the stock which such person may purchase under any
outstanding options of the Employer or of any Parent or Subsidiary of the
Employer.
6.4 $100,000 Limitation. Except as provided below, the Committee shall
--------------------
not grant an Incentive Stock Option to, or modify the exercise provisions of
outstanding Incentive Stock Options held by, any person who, at the time the
Incentive Stock Option is granted (or modified), would thereby receive or hold
any Incentive Stock Options of the Employer and any Parent or Subsidiary of the
Employer such that the aggregate Fair Market Value (determined as of the
respective dates of grant or modification of each option) of the stock with
respect to which such Incentive Stock Options are exercisable for the first time
during any calendar year is in excess of $100,000 (or such other limit as may be
prescribed by the Code from time to time);
8
<PAGE>
provided that the foregoing restriction on modification of outstanding Incentive
- --------
Stock Options shall not preclude the Committee from modifying an outstanding
Incentive Stock Option if, as a result of such modification and with the consent
of the Optionee, such Option no longer constitutes an Incentive Stock Option;
and provided that, if the $100,000 limitation (or such other limitation
--------
prescribed by the Code) described in this Section is exceeded, the Incentive
Stock Option the granting or modification of which resulted in the exceeding of
such limit shall be treated as an Incentive Stock Option up to the limitation
and the excess shall be treated as an Option not qualifying as an Incentive
Stock Option.
6.5 Exercise Price. The Exercise Price of the Stock subject to each
--------------
Option shall be determined by the Committee. Subject to the provisions of
Section 63 hereof, the Exercise Price of an Incentive Stock Option shall not be
less than the Fair Market Value of the Stock as of the date the Option is
granted (or in the case of an Incentive Stock Option that is subsequently
modified, on the date of such modification). The Exercise Price of a non-
Incentive Stock Option shall not be less than the Fair Market Value of the Stock
on the date that the Option is granted.
6.6 Exercise Period. The period for the exercise of each Option granted
---------------
hereunder shall be determined by the Committee, but the Option Agreement with
respect to each Option intended to be an Incentive Stock Option shall provide
that such Option shall not be exercisable after the expiration of ten years from
the date of grant (or modification) of the Option. In addition, no Option
granted to a Section 16 Insider shall be exercisable prior to the expiration of
six months from the date such Option is granted, other than in the case of the
death or disability of the Optionee, and no Option shall be exercisable prior to
shareholder approval of the Plan.
6.7 Option Exercise.
---------------
(a) Unless otherwise provided in the Stock Option Agreement or Section
66 hereof, an Option may be exercised at any time or from time to time during
the term of the Option as to any or all full shares which have become
Purchasable under the provisions of the Option, but not at any time as to less
than 100 shares unless the remaining shares that have become so Purchasable are
less than 100 shares. The Committee shall have the authority to prescribe in
any Stock Option Agreement that the Option may be exercised only in accordance
with a vesting schedule during the term of the Option.
(b) An Option shall be exercised by (i) delivery to the Company at its
principal office a written notice of exercise with respect to a specified number
of shares of Stock and (ii) payment to the Company at that office of the full
amount of the Exercise Price for such number of shares in accordance with
Section 67.
(c) The Exercise Price is to be paid in full in cash upon the exercise
of the Option and the Company shall not be required to deliver certificates for
the shares purchased until such payment has been made; provided, however, that
-------- -------
in lieu of cash, all or any portion of the Exercise Price may be paid by
tendering to the Company shares of Stock duly endorsed for transfer and owned by
the Optionee, or by authorization to the Company to withhold shares of Stock
otherwise issuable upon exercise of the Option, in each case to be credited
against the
9
<PAGE>
Exercise Price at the Fair Market Value of such shares on the date of exercise
(however, no fractional shares may be so transferred, and the Company shall not
be obligated to make any cash payments in consideration of any excess of the
aggregate Fair Market Value of shares transferred over the aggregate option
price); provided further, that the Board may provide in a Stock Option Agreement
-------- -------
or may otherwise determine in its sole discretion at the time of exercise that,
in lieu of cash or shares, all or a portion of the Exercise Price may be paid by
the Optionee's execution of a recourse note equal to the Exercise Price or
relevant portion thereof, subject to compliance with applicable state and
federal laws, rules and regulations.
(d) In addition to and at the time of payment of the Exercise Price,
the Optionee shall pay to the Company in cash the full amount of any federal,
state, and local income, employment, or other withholding taxes applicable to
the taxable income of such Optionee resulting from such exercise; provided,
--------
however, that in the discretion of the Committee any Option Agreement may
- -------
provide that all or any portion of such tax obligations, together with
additional taxes not exceeding the actual additional taxes to be owed by the
Optionee as a result of such exercise, may, upon the irrevocable election of the
Optionee, be paid by tendering to the Company whole shares of Stock duly
endorsed for transfer and owned by the Optionee, or by authorization to the
Company to withhold shares of Stock otherwise issuable upon exercise of the
Option, in either case in that number of shares having a Fair Market Value on
the date of exercise equal to the amount of such taxes thereby being paid, and
subject to such restrictions as to the approval and timing of any such election
as the Committee may from time to time determine to be necessary or appropriate
to satisfy the conditions of the exemption set forth in Rule 16b-3 under the
Exchange Act, if such rule is applicable.
(e) The holder of an Option shall not have any of the rights of a
shareholder with respect to the shares of Stock subject to the Option until such
shares have been issued and transferred to the Optionee upon the exercise of the
Option.
6.8 Reload Options.
--------------
(a) The Committee may specify in a Stock Option Agreement (or may
otherwise determine in its sole discretion) that a Reload Option shall be
granted, without further action of the Committee, (i) to an Optionee who
exercises an Option (including a Reload Option) by surrendering shares of Stock
in payment of amounts specified in Sections 67 or 67 hereof, (ii) for the same
number of shares as are surrendered to pay such amounts, (iii) as of the date of
such payment and at an Exercise Price equal to the Fair Market Value of the
Stock on such date, and (iv) otherwise on the same terms and conditions as the
Option whose exercise has occasioned such payment, except as provided below and
subject to such other contingencies, conditions, or other terms as the Committee
shall specify at the time such exercised Option is granted; provided that the
--------
shares surrendered by a Section 16 Insider in payment as provided above must
have been held by the Optionee for at least six months prior to such surrender.
(b) Unless provided otherwise in the Stock Option Agreement, a Reload
Option may not be exercised by an Optionee (i) prior to the end of a one-year
period from the date that the Reload Option is granted, and (ii) unless the
Optionee retains beneficial ownership
10
<PAGE>
of the shares of Stock issued to such Optionee upon exercise of the Option
referred to above in Section 68 for a period of one year from the date of such
exercise.
6.9 Nontransferability of Option.
----------------------------
(a) No Incentive Stock Option shall be transferable by an Optionee
other than by will or the laws of descent and distribution, and no Option shall
be transferable by an Optionee who is a Section 16 Insider prior to shareholder
approval of the Plan or, after such approval, other than by will or the laws of
descent and distribution or pursuant to a Qualified Domestic Relations Order.
During the lifetime of an Optionee, Incentive Stock Options shall be exercisable
only by such Optionee (or by such Optionee's guardian or legal representative,
should one be appointed).
(b) Except as provided above and unless provided otherwise in the
Stock Option Agreement, Optionees and Permitted Transferees of Optionees may
transfer Options to any person, including a broker-dealer, but the Option shall
not be transferable by any person other than an Optionee or Permitted Transferee
except by will or the laws of descent and distribution or pursuant to a
Qualified Domestic Relations Order. Except as provided above and unless
provided otherwise in the Stock Option Agreement, Options shall be exercisable
by any person to whom such Option has been validly transferred.
6.10 Termination of Employment or Service. The Committee shall have the
------------------------------------
power to specify, with respect to the Options granted to a particular Optionee,
the effect upon such Optionee's right to exercise an Option of termination of
such Optionee's employment or service under various circumstances, which effect
may include immediate or deferred termination of such Optionee's rights under an
Option, or acceleration of the date at which an Option may be exercised in full;
provided, however, that in no event may an Incentive Stock Option be exercised
- -------- -------
after the expiration of ten years from the date of grant thereof.
6.11 Employment Rights. Nothing in the Plan or in any Stock Option
-----------------
Agreement shall confer on any person any right to continue in the employ of the
Company or any of its Subsidiaries, or shall interfere in any way with the right
of the Company or any of its Subsidiaries to terminate such person's employment
at any time.
6.12 Certain Successor Options. To the extent not inconsistent with the
-------------------------
terms, limitations and conditions of Code section 422 and any regulations
promulgated with respect thereto, an Option issued in respect of an option held
by an employee to acquire stock of any entity acquired, by merger or otherwise,
by the Company (or any Subsidiary of the Company) may contain terms that differ
from those stated in this Article, but solely to the extent necessary to
preserve for any such employee the rights and benefits contained in such
predecessor option, or to satisfy the requirements of Code section 424(a).
6.13 Effect of Change in Control. The Committee may determine, at the time
---------------------------
of granting an Option or thereafter, that such Option shall become exercisable
on an accelerated basis in the event that a Change in Control occurs with
respect to the Company. If the Committee finds that there is a reasonable
possibility that, within the succeeding six months, a
11
<PAGE>
Change in Control will occur with respect to the Company, then the Committee may
determine that all outstanding Options shall be exercisable on an accelerated
basis.
ARTICLE VII
RESTRICTED STOCK
7.1 Awards of Restricted Stock. The Committee may grant Awards of
--------------------------
Restricted Stock, which shall be governed by a Restriction Agreement between the
Company and the Grantee. Each Restriction Agreement shall contain such
restrictions, terms, and conditions as the Committee may, in its discretion,
determine, and may require that an appropriate legend be placed on the
certificates evidencing the subject Restricted Stock.
Shares of Restricted Stock granted pursuant to an Award hereunder shall be
issued in the name of the Grantee as soon as reasonably practicable after the
Award is granted, provided that the Grantee has executed the Restriction
Agreement governing the Award, the appropriate blank stock powers and, in the
discretion of the Committee, an escrow agreement and any other documents which
the Committee may require as a condition to the issuance of such Shares. If a
Grantee shall fail to execute the foregoing documents within any time period
prescribed by the Committee, the Award shall be void. At the discretion of the
Committee, Shares issued in connection with an Award shall be deposited together
with the stock powers with an escrow agent designated by the Committee. Unless
the Committee determines otherwise and as set forth in the Restriction
Agreement, upon delivery of the Shares to the escrow agent, the Grantee shall
have all of the rights of a shareholder with respect to such Shares, including
the right to vote the Shares and to receive all dividends or other distributions
paid or made with respect to the Shares.
7.2 Non-Transferability. Until any restrictions upon Restricted Stock
-------------------
awarded to a Grantee shall have lapsed in a manner set forth in Section 73, such
shares of Restricted Stock shall not be transferable other than by will or the
laws of descent and distribution, or pursuant to a Qualified Domestic Relations
Order, nor shall they be delivered to the Grantee.
7.3 Lapse of Restrictions. Restrictions upon Restricted Stock awarded
---------------------
hereunder shall lapse at such time or times (but, with respect to any award to a
Grantee who is also a Section 16 Insider, not less than six months after the
date of the Award) and on such terms and conditions as the Committee may, in its
discretion, determine at the time the Award is granted or thereafter.
7.4 Termination of Employment. The Committee shall have the power to
-------------------------
specify, with respect to each Award granted to any particular Grantee, the
effect upon such Grantee's rights with respect to such Restricted Stock of the
termination of such Grantee's employment under various circumstances, which
effect may include immediate or deferred forfeiture of such Restricted Stock or
acceleration of the date at which any then-remaining restrictions shall lapse.
7.5 Treatment of Dividends. At the time an Award of Restricted Stock is
----------------------
made the Committee may, in its discretion, determine that the payment to the
Grantee of any dividends, or a specified portion thereof, declared or paid on
such Restricted Stock shall be (i) deferred
12
<PAGE>
until the lapsing of the relevant restrictions and (ii) held by the Company for
the account of the Grantee until such lapsing. In the event of such deferral,
there shall be credited at the end of each year (or portion thereof) interest on
the amount of the account at the beginning of the year at a rate per annum
determined by the Committee. Payment of deferred dividends, together with
interest thereon, shall be made upon the lapsing of restrictions imposed on such
Restricted Stock, and any dividends deferred (together with any interest
thereon) in respect of Restricted Stock shall be forfeited upon any forfeiture
of such Restricted Stock.
7.6 Delivery of Shares. Except as provided otherwise in Article below,
------------------
within a reasonable period of time following the lapse of the restrictions on
shares of Restricted Stock, the Committee shall cause a stock certificate to be
delivered to the Grantee with respect to such shares and such shares shall be
free of all restrictions hereunder.
ARTICLE VIII
STOCK CERTIFICATES
The Company shall not be required to issue or deliver any certificate for
shares of Stock purchased upon the exercise of any Option granted hereunder or
any portion thereof, or deliver any certificate for shares of Restricted Stock
granted hereunder, prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on
which the Stock is then listed;
(b) The completion of any registration or other qualification of such
shares which the Committee shall deem necessary or advisable under any federal
or state law or under the rulings or regulations of the Securities and Exchange
Commission or any other governmental regulatory body;
(c) The obtaining of any approval or other clearance from any federal
or state governmental agency or body which the Committee shall determine to be
necessary or advisable; and
(d) The lapse of such reasonable period of time following the exercise
of the Option as the Board from time to time may establish for reasons of
administrative convenience.
Stock certificates issued and delivered to Grantees shall bear such
restrictive legends as the Company shall deem necessary or advisable pursuant to
applicable federal and state securities laws.
ARTICLE IX
TERMINATION AND AMENDMENT OF PLAN
The Board may at any time terminate the Plan, and may at any time and from
time to time and in any respect amend the Plan; provided, however, that the
-------- -------
Board (unless its actions
13
<PAGE>
are approved or ratified by the shareholders of the Company within twelve months
of the date that the Board amends the Plan) may not amend the Plan to:
(a) Increase the total number of shares of Stock issuable pursuant to
Incentive Stock Options under the Plan or materially increase the number of
shares of Stock subject to the Plan, in each case except as contemplated in
Section 52 hereof;
(b) Change the class of employees eligible to receive Incentive Stock
Options that may participate in the Plan or materially change the class of
persons that may participate in the Plan; or
(c) Otherwise materially increase the benefits accruing to
participants under the Plan.
No termination or amendment modification of the Plan shall affect adversely
a Grantee's rights under an Option Agreement or Restriction Agreement without
the consent of the Grantee or his legal representative.
ARTICLE X
RELATIONSHIP TO OTHER COMPENSATION PLANS
The adoption of the Plan shall not affect any other stock option,
incentive, or other compensation plans in effect for the Company or any of its
Subsidiaries; nor shall the adoption of the Plan preclude the Company or any of
its Subsidiaries from establishing any other form of incentive or other
compensation plan for employees or Directors of the Company or any of its
Subsidiaries.
ARTICLE XI
MISCELLANEOUS
11.1 Replacement or Amended Grants. At the sole discretion of the
-----------------------------
Committee, and subject to the terms of the Plan, the Committee may modify
outstanding Options or Awards or accept the surrender of outstanding Options or
Awards and grant new Options or Awards in substitution for them. However no
modification of an Option or Award shall adversely affect a Grantee's rights
under an Option Agreement or Restriction Agreement without the consent of the
Grantee or his legal representative.
11.2 Forfeiture for Competition. If a Grantee provides services to a
--------------------------
competitor of the Company or any of its Subsidiaries, whether as an employee,
officer, director, independent contractor, consultant, agent, or otherwise, such
services being of a nature that can reasonably be expected to involve the skills
and experience used or developed by the Grantee while an Employee, then that
Grantee's rights under any Options outstanding hereunder shall be forfeited and
terminated, and any shares of Restricted Stock held by such Grantee subject to
remaining restrictions shall be forfeited, subject in each case to a
determination to the contrary by the Committee.
14
<PAGE>
11.3 Plan Binding on Successors. The Plan shall be binding upon the
--------------------------
successors and assigns of the Company.
11.4 Singular, Plural; Gender. Whenever used herein, nouns in the singular
------------------------
shall include the plural, and the masculine pronoun shall include the feminine
gender.
11.5 Headings, etc.,. Headings of Articles and Sections hereof are
---------------
inserted for convenience and reference; they do not constitute part of the Plan.
11.6 Interpretation. With respect to Section 16 Insiders, transactions
--------------
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the Exchange Act. To the extent any provision of
the Plan or action by the Plan administrators fails to so comply, it shall be
deemed void to the extent permitted by law and deemed advisable by the Plan
administrators.
* * * * *
15
<PAGE>
Exhibit A to Provesa, Inc.
1994 Stock Option Plan -
Form of Stock Option
Agreement
PROVESA, INC.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement"), entered into as of this
_____ day of ________________________, by and between Provesa, Inc., a Georgia
corporation (the "Company"), and _________________ (the "Optionee").
WHEREAS, on ________________________, the Board of Directors and
shareholders of the Company adopted a stock option plan known as the "Provesa,
Inc. 1994 Stock Option Plan" (the "Plan"); and
WHEREAS, the Committee has granted the Optionee a stock option to purchase
the number of shares of the Company's common stock as set forth below, and in
consideration of the granting of that stock option the Optionee intends to
remain in the employ of the Company; and
WHEREAS, the Company and the Optionee desire to enter into a written
agreement with respect to such option in accordance with the Plan.
NOW, THEREFORE, as an employment incentive and to encourage stock
ownership, and also in consideration of the mutual covenants contained herein,
the parties hereto agree as follows.
1. Incorporation of Plan. This option is granted pursuant to the
---------------------
provisions of the Plan and the terms and definitions of the Plan are
incorporated herein by reference and made a part hereof. A copy of the Plan has
been delivered to, and receipt is hereby acknowledged by, the Optionee.
2. Grant of Option. Subject to the terms, restrictions, limitations, and
---------------
conditions stated herein, the Company hereby evidences its grant to the
Optionee, not in lieu of salary or other compensation, of the right and option
(the "Option") to purchase all or any part of the number of shares of the
Company's Common Stock, no par value (the "Stock"), set forth on Schedule A
attached hereto and incorporated herein by reference. The Option shall be
exercisable in the amounts and at the time specified on Schedule A. The Option
shall expire and shall not be exercisable on the date specified on Schedule A or
on such earlier date as determined pursuant to Section 8, 9, or 10 hereof.
Schedule A states whether the Option is intended to be an Incentive Stock
Option.
A-1
<PAGE>
3. Purchase Price. The price per share to be paid by the Optionee for
--------------
the shares subject to this Option (the "Exercise Price") shall be as specified
on Schedule A, which price shall be an amount not less than the Fair Market
Value of a share of Stock as of the Date of Grant (as defined in Section 11
below) if the Option is an Incentive Stock Option.
4. Exercise Terms. The Optionee must exercise the Option for at least
--------------
the lesser of 100 shares or the number of shares of Purchasable Stock as to
which the Option remains unexercised. In the event this Option is not exercised
with respect to all or any part of the shares subject to this Option prior to
its expiration, the shares with respect to which this Option was not exercised
shall no longer be subject to this Option.
5. Restrictions on Transferability.
-------------------------------
(a) No Incentive Stock Option shall be transferable by an Optionee
other than by will or the laws of descent and distribution, and no Option shall
be transferable by an Optionee who is a Section 16 Insider prior to shareholder
approval of the Plan or, after such approval, other than by will or the laws of
descent and distribution or pursuant to a Qualified Domestic Relations Order.
During the lifetime of an Optionee, Incentive Stock Options shall be exercisable
only by such Optionee (or by such Optionee's guardian or legal representative,
should one be appointed).
(b) Except as provided above [and except list any other restrictions
---------------------------
on transfer], Optionees and Permitted Transferees of Optionees may transfer
- -----------
Options to any person, including a broker-dealer, but the Option shall not be
transferable by any person other than an Optionee or Permitted Transferee except
by will or the laws of descent and distribution or pursuant to a Qualified
Domestic Relations Order. Except as provided above [and list any other specific
-----------------------
exceptions], Options shall be exercisable by any person to whom such Option has
- ----------
been validly transferred.
6. Notice of Exercise of Option. This Option may be exercised by the
----------------------------
Optionee, or by the Optionee's administrators, executors or personal
representatives, by a written notice (in substantially the form of the Notice of
Exercise attached hereto as Schedule B) signed by the Optionee, or by such
administrators, executors or personal representatives, and delivered or mailed
to the Company as specified in Section 14 hereof to the attention of the
President or such other officer as the Company may designate. Any such notice
shall (a) specify the number of shares of Stock which the Optionee or the
Optionee's administrators, executors or personal representatives, as the case
may be, then elects to purchase hereunder, (b) contain such information as may
be reasonably required pursuant to Section 12 hereof, and (c) be accompanied by
(i) a certified or cashier's check payable to the Company in payment of the
total Exercise Price applicable to such shares as provided herein, (ii) shares
of Stock owned by the Optionee and duly endorsed or accompanied by stock
transfer powers having a Fair Market Value equal to the total Exercise Price
applicable to such shares purchased hereunder, or (iii) a certified or cashier's
check accompanied by the number of shares of Stock whose Fair Market Value when
added to the amount of the check equals the total Exercise Price applicable to
such shares purchased hereunder. Upon receipt of any such notice and
accompanying payment, and subject to the terms hereof, the Company agrees to
issue to the Optionee or the Optionee's
A-2
<PAGE>
administrators, executors or personal representatives, as the case may be, stock
certificates for the number of shares specified in such notice registered in the
name of the person exercising this Option.
7. Adjustment in Option. The number of Shares subject to this Option,
--------------------
the Exercise Price and other matters are subject to adjustment during the term
of this Option in accordance with Section 52 of the Plan.
8. Termination of Employment.
-------------------------
(a) Except as otherwise specified in Schedule A hereto, in the event
of the termination of the Optionee's employment with the Company or any of its
Subsidiaries, other than a termination that is either (i) for cause, (ii)
voluntary on the part of the Optionee and without written consent of the
Company, or (iii) for reasons of death or disability or retirement, the Optionee
may exercise this Option at any time within 30 days after such termination to
the extent of the number of shares which were Purchasable hereunder at the date
of such termination.
(b) Except as specified in Schedule A attached hereto, in the event of
a termination of the Optionee's employment that is either (i) for cause or (ii)
voluntary on the part of the Optionee and without the written consent of the
Company, this Option, to the extent not previously exercised, shall terminate
immediately and shall not thereafter be or become exercisable.
(c) Unless and to the extent otherwise provided in Exhibit A hereto,
in the event of the retirement of the Optionee at the normal retirement date as
prescribed from time to time by the Company or any Subsidiary, the Optionee
shall continue to have the right to exercise any Options for shares which were
Purchasable at the date of the Optionee's retirement. This Option does not
confer upon the Optionee any right with respect to continuance of employment by
the Company or by any of its Subsidiaries. This Option shall not be affected by
any change of employment so long as the Optionee continues to be an employee of
the Company or one of its Subsidiaries.
9. Disabled Optionee. In the event of termination of employment because
-----------------
of the Optionee's becoming a Disabled Optionee, the Optionee (or his or her
personal representative) may exercise this Option at any time within three
months after such termination to the extent of the number of shares which were
Purchasable hereunder at the date of such termination.
10. Death of Optionee. Except as otherwise set forth in Schedule A with
-----------------
respect to the rights of the Optionee upon termination of employment under
Section 8(a) above, hereof, in the event of the Optionee's death while employed
by the Company or any of its Subsidiaries or within three months after a
termination of such employment (if such termination was neither (i) for cause
nor (ii) voluntary on the part of the Optionee and without the written consent
of the Company), the appropriate persons described in Section 6 hereof or
persons to whom all or a portion of this Option is transferred in accordance
with Section 5 hereof may exercise this Option at any time within a period
ending on the earlier of (a) the last day of the three month
A-3
<PAGE>
period following the Optionee's death or (b) the expiration date of this Option.
If the Optionee was an employee of the Company at the time of death, this Option
may be so exercised to the extent of the number of shares that were Purchasable
hereunder at the date of death. If the Optionee's employment terminated prior
to his or her death, this Option may be exercised only to the extent of the
number of shares covered by this Option which were Purchasable hereunder at the
date of such termination.
11. Date of Grant. This Option was granted by the Board of Directors of
-------------
the Company on the date set forth in Schedule A (the "Date of Grant").
12. Compliance with Regulatory Matters. The Optionee acknowledges that
----------------------------------
the issuance of capital stock of the Company is subject to limitations imposed
by federal and state law and the Optionee hereby agrees that the Company shall
not be obligated to issue any shares of Stock upon exercise of this Option that
would cause the Company to violate law or any rule, regulation, order or consent
decree of any regulatory authority (including without limitation the Securities
and Exchange Commission) having jurisdiction over the affairs of the Company.
The Optionee agrees that he or she will provide the Company with such
information as is reasonably requested by the Company or its counsel to
determine whether the issuance of Stock complies with the provisions described
by this Section.
13. Restriction on Disposition of Shares. The shares purchased pursuant
------------------------------------
to the exercise of an Incentive Stock Option shall not be transferred by the
Optionee except pursuant to the Optionee's will or the laws of descent and
distribution until such date which is the later of two years after the grant of
such Incentive Stock Option or one year after the transfer of the shares to the
Optionee pursuant to the exercise of such Incentive Stock Option.
14. Miscellaneous.
-------------
(a) This Agreement shall be binding upon the parties hereto and their
representatives, successors and assigns.
(b) This Agreement is executed and delivered in, and shall be governed
by the laws of, the State of Georgia.
(c) Any requests or notices to be given hereunder shall be deemed
given, and any elections or exercises to be made or accomplished shall be deemed
made or accomplished, upon actual delivery thereof to the designated recipient,
or three days after deposit thereof in the United States mail, registered,
return receipt requested and postage prepaid, addressed, if to the Optionee, at
the address set forth below and, if to the Company, to the executive offices of
the Company at 5730 Oakbrook Parkway, Suite 140, Norcross, Georgia 30093.
(d) This Agreement may not be modified except in writing executed by
each of the parties hereto.
A-4
<PAGE>
(e) THE OPTIONEE ACKNOWLEDGES THAT THIS OPTION AND ALL SHARES OF STOCK
ACQUIRED PURSUANT TO THE EXERCISE OF THIS OPTION ARE DEEMED TO BE "RESTRICTED
SECURITIES" AS DEFINED IN RULE 144 PROMULGATED PURSUANT TO THE SECURITIES ACT OF
1933 AND, THEREFORE, RESALE OF SUCH SHARES MUST BE MADE PURSUANT TO THE
REGISTRATION PROVISIONS OF SUCH ACT OR AN EXEMPTION THEREFROM.
IN WITNESS WHEREOF, the Board of Directors of the Company has caused this
Stock Option Agreement to be executed on behalf of the Company and the Company's
seal to be affixed hereto and attested by the Secretary or an Assistant
Secretary of the Company, and the Optionee has executed this Stock Option
Agreement under seal, all as of the day and year first above written.
COMPANY:
PROVESA, INC.
Attest:
By:___________________________
- -------------------------
Secretary Name:_________________________
[SEAL] Title:________________________
OPTIONEE:
______________________________
Name:_________________________
Address:______________________
______________________
______________________
A-5
<PAGE>
SCHEDULE A
TO
STOCK OPTION AGREEMENT
BETWEEN
PROVESA, INC.
AND
[NAME OF OPTIONEE]
----------------
Dated ________________
1. Number of Shares Subject to Option: ________________ Shares.
----------------------------------
2. This Option (Check one) [ ] is [ ] is not an Incentive Stock Option.
----------- -- --------------------------------
3. Option Exercise Price: $ ________ per Share.
---------------------
4. Date of Grant: ________________________
-------------
5. Option Vesting Schedule:
-----------------------
Check one:
( ) Options are exercisable with respect to all shares on or after
the date hereof
( ) Options are exercisable with respect to the number of shares
indicated below on or after the date indicated next to the number
of shares:
No. of Shares Vesting Date
------------- ------------
6. Option Exercise Period:
----------------------
Check One:
( ) All options expire and are void unless exercised on or before
________________________.
( ) Options expire and are void unless exercised on or before the
date indicated next to the number of shares:
No. of Shares Expiration Date
------------- ---------------
7. Effect of Termination of Employment of Optionee (if different from that set
-----------------------------------------------
forth in Sections 8 and 10 of the Stock Option Agreement): On the date
which is three months after the date of retirement, as defined in the Stock
Option Agreement of the Optionee, the Options will become void and
unexercisable unless on the date of retirement the Optionee enters into a
noncompete agreement with Provesa, Inc. and continues to comply with such
noncompete agreement.
<PAGE>
SCHEDULE B
TO
STOCK OPTION AGREEMENT
BETWEEN
PROVESA, INC.
AND
[NAME OF OPTIONEE]
----------------
Dated ________________
NOTICE OF EXERCISE
The undersigned hereby notifies Provesa, Inc. (the "Company") of this
election to exercise the undersigned's stock option to purchase ________________
shares of the Company's common stock, no par value (the "Common Stock"),
pursuant to the Stock Option Agreement (the "Agreement") between the undersigned
and the Company dated ________________. Accompanying this Notice is (1) a
certified or a cashier's check in the amount of $________________ payable to the
Company, and/or (2) _______________ shares of the Company's Common Stock
presently owned by the undersigned and duly endorsed or accompanied by stock
transfer powers, having an aggregate Fair Market Value (as defined in the
Provesa, Inc. 1994 Stock Option Plan) as of the date hereof of
$__________________, such amounts being equal, in the aggregate, to the purchase
price per share set forth in Section 3 of the Agreement multiplied by the number
of shares being purchased hereby (in each instance subject to appropriate
adjustment pursuant to Section 7 of the Agreement).
IN WITNESS WHEREOF, the undersigned has set his hand and seal, this
________ day of ________________, ______.
OPTIONEE [OR OPTIONEE'S
ADMINISTRATOR,
EXECUTOR OR PERSONAL
REPRESENTATIVE]
_________________________________
Name:
Position (if other than Optionee):
<PAGE>
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT (this "Agreement") is made by and between
THE INTERCEPT GROUP, INC., a Georgia corporation (the "Company"), and JOHN W.
COLLINS, an individual resident of Georgia (the "Executive"), as of the 30th day
of January, 1998 (the "Effective Date").
The Company presently employs the Executive as its Chief Executive
Officer. The Board of Directors of the Company (the "Board") recognizes that
the Executive's contribution to the growth and success of the Company is
substantial. The Board desires to provide for the continued employment of the
Executive and to make certain changes in the Executive's employment arrangements
which the Board has determined will reinforce and encourage the continued
dedication of the Executive to the Company and will promote the best interests
of the Company and its shareholders. The Executive is willing to continue to
serve the Company on the terms and conditions herein provided.
Certain capitalized terms used in this Agreement are defined in
Section 20.
In consideration of the foregoing, the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree (as of the Effective Date) that:
1. Employment. The Company shall continue to employ the Executive,
----------
and the Executive shall continue to serve the Company, as Chief Executive
Officer upon the terms and conditions set forth herein. The Executive shall
have such authority and responsibilities as are consistent with his position and
which may be set forth in the Bylaws or assigned by the Board from time to time.
The Executive shall devote his full business time, attention, skill and efforts
to the performance of his duties hereunder, except during periods of illness or
periods of vacation and leaves of absence consistent with Company policy. The
Executive may devote reasonable periods of time to serve as a director or
advisor to other organizations, to perform charitable and other community
activities, and to manage his personal investments; provided, however, that such
-------- -------
activities do not materially interfere with the performance of his duties
hereunder and are not in conflict or competitive with, or adverse to, the
interests of the Company.
2. Term. Unless earlier terminated as provided herein, the
----
Executive's employment under this Agreement shall be for a continuing term (the
"Term") of three years, which shall be extended automatically (without further
action of the Company or the Executive) each day for an additional day so that
the remaining term shall continue to be three years; provided, however, that
-------- -------
either party may at any time, by written notice to the other, fix the Term to a
finite term of three years, without further automatic extension, commencing with
the date of such notice.
3. Compensation and Benefits.
-------------------------
a. The Company shall pay the Executive a salary at a rate of not less
than $265,000 per annum in accordance with the salary payment practices of the
Company. The
<PAGE>
Board (or the Compensation Committee) shall review the Executive's salary at
least annually (on or before January 30, 1999, for the first review) and may
increase the Executive's base salary if it determines in its sole discretion
that an increase is appropriate.
b. The Executive shall be eligible to participate in any management
incentive programs established by the Company and to receive incentive
compensation based upon achievement of targeted levels of performance and such
other criteria as the Board or Compensation Committee may establish from time to
time. In addition, the Board or the Compensation Committee shall annually
consider the Executive's performance and determine if any additional bonus is
appropriate.
c. The Executive may participate in the Plan and shall be eligible
for the grant of stock options, restricted stock and other awards thereunder.
d. The Executive shall continue to participate in all retirement,
welfare, deferred compensation, life and health insurance (including health
insurance for Executive's spouse and his dependents), and other benefit plans or
programs of the Company now or hereafter applicable to the Executive or
applicable generally to Executives of the Company or to a class of Executives
that includes senior executives of the Company; provided, however, that during
-------- -------
any period during the Term that the Executive is subject to a Disability, and
during the 180-day period of physical or mental infirmity leading up to the
Executive's Disability, the amount of the Executive's compensation provided
under this Section 3 shall be reduced by the sum of the amounts, if any, paid to
the Executive for the same period under any disability benefit or pension plan
of the Company or any of its subsidiaries.
e. The Company shall provide to the Executive an automobile owned or
leased by the Company of a make and model appropriate to the Executive's status
(in the reasonable opinion of the Executive) or, in lieu thereof, shall provide
the Executive with an annual allowance of not less than $15,000 to partially
cover the cost of the business use of an automobile owned or leased by the
Executive.
f. The Company shall reimburse the Executive's reasonable expenses
for dues and capital assessments for country and dining club memberships
currently held by the Executive; provided, however, that if the Executive during
-------- -------
the term of his employment with the Company ceases his membership in any such
clubs and any bonds or other capital payments made by the Company are repaid to
the Executive, the Executive shall pay over such payments to the Company.
g. The Company shall continue to reimburse the Executive for travel,
seminar and other expenses related to the Executive's duties which are incurred
and accounted for in accordance with the historic practices of the Company.
4. Termination.
-----------
2
<PAGE>
a. The Executive's employment under this Agreement may be terminated
prior to the end of the Term only as follows:
(i) upon the death of the Executive;
(ii) by the Company due to the Disability of
the Executive upon delivery of a Notice of Termination to the
Executive;
(iii) by the Company for Cause upon delivery of a Notice of
Termination to the Executive;
(iv) prior to a Change in Control, by the Company without
Cause upon no less than ninety (90) days written notice to the
Executive, provided the Company satisfies the provisions of Section
4(d); and
(v) by the Executive for any reason upon delivery of a
Notice of Termination to the Company within a 90-day period beginning
on the 30th day after any occurrence of a Change in Control or within
a 90-day period beginning on the one year anniversary of the
occurrence of any Change in Control.
b. If the Executive's employment with the Company shall be
terminated during the Term (i) by reason of the Executive's death, or (ii) by
the Company for Disability or Cause, the Company shall pay to the Executive (or
in the case of his death, the Executive's estate) within 15 days after the
Termination Date, a lump sum cash payment equal to the Accrued Compensation and,
if such termination is other than by the Company for Cause, the Pro Rata Bonus.
c. If the Executive's employment with the Company shall be
terminated after a Change in Control either (i) by the Company without Cause or
otherwise in violation of this Agreement or (ii) by the Executive for any
reason, in addition to other rights and remedies available in law or equity, the
Executive shall be entitled to the following:
(i) the Company shall pay the Executive in cash within 15
days of the Termination Date an amount equal to all Accrued
Compensation and the Pro Rata Bonus;
(ii) the Company shall pay to the Executive in cash at the
end of each of the 36 consecutive 30-day periods following the
Termination Date an amount equal to one-twelfth of the sum of the Base
Amount and the Bonus Amount.
(iii) for the period from the Termination Date through the
date that Executive attains the age of 65 (the "Continuation Period"),
the Company shall at its expense continue on behalf of the Executive
and his dependents and beneficiaries the life insurance, disability,
medical, dental and hospitalization benefits provided (x) to the
Executive at any time during the 90-day period prior to
3
<PAGE>
the Change in Control or at any time thereafter or (y) to other
similarly situated executives who continue in the employ of the
Company during the Continuation Period, if permitted, in either case,
by the applicable benefit plan. The coverage and benefits (including
deductibles and costs) provided in this Section 4(c)(iii) during the
Continuation Period shall be no less favorable to the Executive and
his dependents and beneficiaries than the most favorable of such
coverages and benefits during any of the periods referred to in
clauses (x) and (y) above. The Company's obligation hereunder with
respect to the foregoing benefits shall be limited to the extent that
the Executive obtains any such benefits pursuant to a subsequent
employer's benefit plans, in which case the Company may reduce the
coverage of any benefits it is required to provide the Executive
hereunder as long as the aggregate coverages and benefits of the
combined benefit plans is no less favorable to the Executive than the
coverages and benefits required to be provided hereunder. This
subsection (iii) shall not be interpreted so as to limit any benefits
to which the Executive or his dependents or beneficiaries may be
entitled under any of the Company's Executive benefit plans, programs
or practices following the Executive's termination of employment,
including without limitation, retiree medical and life insurance
benefits; and
(iv) the restrictions on any outstanding incentive awards
(including stock options) granted to the Executive under the Plan or
under any other incentive plan or arrangement shall lapse and such
incentive award shall become 100% vested, and all stock options and
stock appreciation rights granted to the Executive shall become
immediately exercisable and shall become 100% vested.
d. If, prior to a Change in Control, the Company terminates the
Executive without Cause, the Company shall pay the Executive in cash:
(i) within fifteen (15) days of the Termination Date, an
amount equal to all Accrued Compensation and the Pro Rata Bonus; and
(ii) at the end of each of the twelve (12) consecutive
thirty (30) day periods following the Termination Date, an amount
equal to (1/12) of the sum of the Base Amount and the Bonus Amount.
e. In the event that the Executive shall no longer be the Chief
Executive Officer of the Company, other than by voluntary resignation, the
Company shall, within 10 days after termination as Chief Executive Officer,
offer to repurchase all of the Company's common stock owned by the Executive, at
a purchase price equal to the Fair Market Value of the common stock, as
determined in accordance with the provisions below. The question of the Fair
Market Value of the Company's common stock shall be submitted to three impartial
and reputable appraisers. The Executive and the Company shall each select one
appraiser, and such appraisers shall select a third, independent appraiser. The
three appraisers shall thereafter proceed as expeditiously as possible to
determine (by concurrence of a majority of such appraisers) the Fair Market
Value of the common stock, and the appraisers shall deliver an appraisal report
to the
4
<PAGE>
Executive and the Company as soon as practicable after it is completed. The
determination of the question of the Fair Market Value of the common stock by
such appraisers shall be final and binding on the Executive and the Company for
purposes of this Agreement. The Company shall pay the reasonable fees and
expenses of such appraisers. For the purposes hereof, "Fair Market Value" shall
mean the relevant percentage of the fair value of the business of the Company
represented by the shares of common stock as to which such determination is
being made, which shall be determined on a going concern basis and as between a
willing seller and a willing buyer, taking into account the Company's financial
condition, performance, market share and other relevant criteria, but not taking
into account the absence of a public market for the shares or that the shares
constitute a minority interest in the Company.
f. The Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
and no such payment shall be offset or reduced by the amount of any compensation
or benefits provided to the Executive in any subsequent employment except as
provided in Section 4(c)(iii).
g. In the event that any payment or benefit (within the meaning of
Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code")) to the Executive or for his benefit paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise in connection
with, or arising out of, his employment with the Company or a change in
ownership or effective control of the Company or of a substantial portion of its
assets (a "Payment" or "Payments"), would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive will be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties, other than interest
and penalties imposed by reason of the Executive's failure to file timely a tax
return or pay taxes shown due on his return, imposed with respect to such taxes
and the Excise Tax), including any Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
h. The severance pay and benefits provided for in this Section 4
shall be in lieu of any other severance or termination pay to which the
Executive may be entitled under any Company severance or termination plan,
program, practice or arrangement. The Executive's entitlement to any other
compensation or benefits shall be determined in accordance with the Company's
Executive benefit plans and other applicable programs, policies and practices
then in effect.
5. Protection of Trade Secrets and Confidential Information .
---------------------------------------------------------
a. Through exercise of his rights and performance of his obligations
under this Agreement, Executive will be exposed to "Trade Secrets" and
"Confidential Information" (as those terms are defined below). "Trade Secrets"
shall mean information or data of or about the Company or any affiliated entity,
including, but not limited to, technical or nontechnical data,
5
<PAGE>
formulas, patterns, compilations, programs, devices, methods, techniques,
drawings, processes, financial data, financial plans, products plans, or lists
of actual or potential customers, clients, distributors, or licensees, that: (i)
derive economic value, actual or potential, from not being generally known to,
and not being readily ascertainable by proper means by, other persons who can
obtain economic value from their disclosure or use; and (ii) are the subject of
efforts that are reasonable under the circumstances to maintain their secrecy.
To the extent that the foregoing definition is inconsistent with a definition of
"trade secret" mandated under applicable law, the latter definition shall govern
for purposes of interpreting Executive's obligations under this Agreement.
Except as required to perform his obligations under this Agreement or except
with Company's prior written permission, Executive shall not use, redistribute,
market, publish, disclose or divulge to any other person or entity any Trade
Secrets of the Company. The Executive's obligations under this provision shall
remain in force (during or after the Term) for so long as such information or
data shall continue to constitute a "trade secret" under applicable law.
Executive agrees to cooperate with any and all confidentiality requirements of
the Company and Executive shall immediately notify the Company of any
unauthorized disclosure or use of any Trade Secrets of which Executive becomes
aware.
b. The Executive agrees to maintain in strict confidence and, except
as necessary to perform his duties for the Company, not to use or disclose any
Confidential Business Information at any time, either during the term of his
employment or for a period of one year after the Executive's last date of
employment, so long as the pertinent data or information remains Confidential
Business Information. "Confidential Business Information" shall mean any non-
public information of a competitively sensitive or personal nature, other than
Trade Secrets, acquired by the Executive, directly or indirectly, in connection
with the Executive's employment (including his employment with the Company prior
to the date of this Agreement), including (without limitation) oral and written
information concerning the Company or its affiliates relating to financial
position and results of operations (revenues, margins, assets, net income,
etc.), annual and long-range business plans, marketing plans and methods,
account invoices, oral or written customer information, and personnel
information. Confidential Business Information also includes information
recorded in manuals, memoranda, projections, minutes, plans, computer programs,
and records, whether or not legended or otherwise identified by the Company and
its affiliates as Confidential Business Information, as well as information
which is the subject of meetings and discussions and not so recorded; provided,
however, that Confidential Business Information shall not include information
that is generally available to the public, other than as a result of disclosure,
directly or indirectly, by the Executive, or was available to the Executive on a
non-confidential basis prior to its disclosure to the Executive.
c. Upon termination of employment, the Executive shall leave with
the Company all business records relating to the Company and its affiliates
including, without limitation, all contracts, calendars, and other materials or
business records concerning its business or customers, including all physical,
electronic, and computer copies thereof, whether or not the Executive prepared
such materials or records himself. Upon such termination, the Executive shall
retain no copies of any such materials.
6
<PAGE>
d. As set forth above, the Executive shall not disclose Trade
Secrets or Confidential Business Information. However, nothing in this
provision shall prevent the Executive from disclosing Trade Secrets or
Confidential Business Information pursuant to a court order or court-issued
subpoena, so long as the Executive first notifies the Company of said order or
subpoena in sufficient time to allow the Company to seek an appropriate
protective order. The Executive agrees that if he receives any formal or
informal discovery request, court order, or subpoena requesting that he disclose
Trade Secrets or Confidential Business Information, he will immediately notify
the Company and provide the Company with a copy of said request, court order, or
subpoena.
6. Non-Solicitation and Related Matters.
------------------------------------
a. If the Executive is terminated for Cause or if the Executive
resigns without Adequate Justification, then for a period of two years following
the date of termination, the Executive shall not (except on behalf of or with
the prior written consent of the Company) either directly or indirectly, on the
Executive's own behalf or in the service or on behalf of others, (i) solicit,
divert, or appropriate to or for a Competing Business, or (ii) attempt to
solicit, divert, or appropriate to or for a Competing Business, any person or
entity that was a customer or prospective customer of the Company on the date of
termination and with whom the Executive had direct material contact within six
months of the Executive's last date of employment.
b. If the Executive is terminated for Cause or if the Executive
resigns without Adequate Justification, then for a period of two years following
the date of termination, the Executive will not, either directly or indirectly,
on the Executive's own behalf or in the service or on behalf of others, (i)
solicit, divert, or hire away, or (ii) attempt to solicit, divert, or hire away
any employee of or consultant to the Company or any of its affiliates engaged or
experienced in the Business, regardless of whether the employee or consultant is
full-time or temporary, the employment or engagement is pursuant to written
agreement, or the employment is for a determined period or is at will.
c. The Executive acknowledges and agrees that great loss and
irreparable damage would be suffered by the Company if the Executive should
breach or violate any of the terms or provisions of the covenants and agreements
set forth in this Section 6. The Executive further acknowledges and agrees that
each of these covenants and agreements is reasonably necessary to protect and
preserve the interests of the Company. The parties agree that money damages for
any breach of clauses (a) and (b) of this Section 6 will be insufficient to
compensate for any breaches thereof, and that the Executive or any of the
Executive's affiliates, as the case may be, will, to the extent permitted by
law, waive in any proceeding initiated to enforce such provisions any claim or
defense that an adequate remedy at law exists. The existence of any claim,
demand, action, or cause of action against the Company, whether predicated upon
this Agreement or otherwise, shall not constitute a defense to the enforcement
by the Company of any of the covenants or agreements in this Agreement;
provided, however, that nothing in this Agreement shall be deemed to deny the
- -------- -------
Executive the right to defend against this enforcement on the basis that the
Company has no right to its enforcement under the terms of this Agreement.
7
<PAGE>
d. The Executive acknowledges and agrees that: (i) the covenants
and agreements contained in clauses (a) through (e) of this Section 6 are the
essence of this Agreement; (ii) that the Executive has received good, adequate
and valuable consideration for each of these covenants; and (iii) each of these
covenants is reasonable and necessary to protect and preserve the interests and
properties of the Company. The Executive also acknowledges and agrees that:
(i) irreparable loss and damage will be suffered by the Company should the
Executive breach any of these covenants and agreements; (ii) each of these
covenants and agreements in clauses (a) and (b) of this Section 6 is separate,
distinct and severable not only from the other covenants and agreements but also
from the remaining provisions of this Agreement; and (iii) the unenforceability
of any covenants or agreements shall not affect the validity or enforceability
of any of the other covenants or agreements or any other provision or provisions
of this Agreement. The Executive acknowledges and agrees that if any of the
provisions of clauses (a) and (b) of this Section 6 shall ever be deemed to
exceed the time, activity, or geographic limitations permitted by applicable
law, then such provisions shall be and hereby are reformed to the maximum time,
activity, or geographical limitations permitted by applicable law.
e. The Executive and the Company hereby acknowledge that it may be
appropriate from time to time to modify the terms of this Section 6 and the
definition of the term "Business" to reflect changes in the Company's business
and affairs so that the scope of the limitations placed on the Executive's
activities by this Section 6 accomplishes the parties' intent in relation to the
then current facts and circumstances. Any such amendment shall be effective
only when completed in writing and signed by the Executive and the Company.
7. Successors; Binding Agreement.
-----------------------------
a. This Agreement shall be binding upon and shall inure to the
benefit of the Company, its Successors and Assigns and the Company shall require
any Successors and Assigns to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place.
b. Neither this Agreement nor any right or interest hereunder shall
be assignable or transferable by the Executive, his beneficiaries or legal
representatives, except by will or by the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal personal representative.
8. Fees and Expenses. The Company shall pay all reasonable legal
-----------------
fees and related expenses (including but not limited to the costs of experts,
accountants and counsel) incurred by the Executive as they become due as a
result of (a) the termination of the Executive's employment (including all such
fees and expenses, if any, incurred in contesting or disputing any such
termination of employment) and (b) the Executive seeking to obtain or enforce
any right or benefit provided by this Agreement; provided, however, that the
-------- -------
circumstances set forth in clauses (a) and (b) above occurred on or after a
Change in Control.
8
<PAGE>
9. Notice. For the purposes of this Agreement, notices and all
------
other communications provided for in this Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses last given by each party
to the other; provided, however, that all notices to the Company shall be
-------- -------
directed to the attention of the Board with a copy to the Secretary of the
Company. All notices and communications shall be deemed to have been received
on the date of delivery thereof.
10. Settlement of Claims. The Company's obligation to make the
--------------------
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Executive or others. The Company may, however,
withhold from any benefits payable under this Agreement all federal, state,
city, or other taxes as shall be required pursuant to any law or governmental
regulation or ruling.
11. Modification and Waiver. No provisions of this Agreement may be
-----------------------
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and the Company. No waiver by
any party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
12. Governing Law. This Agreement shall be governed by and
-------------
construed and enforced in accordance with the laws of the State of Georgia
without giving effect to the conflict of laws principles thereof. Any action
brought by any party to this Agreement shall be brought and maintained in a
court of competent jurisdiction in State of Georgia.
13. Severability. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
14. Entire Agreement. This Agreement constitutes the entire
----------------
agreement between the parties hereto and supersedes all prior agreements, if
any, understandings and arrangements, oral or written, between the parties
hereto with respect to the subject matter hereof.
15. Headings. The headings of Sections herein are included solely
--------
for convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement.
16. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
17. Demand Registration Rights.
--------------------------
9
<PAGE>
a. Rights. Subject to the provisions of this Section 17(a), upon
-------
the termination of the Executive's employment for any reason, the Executive may
request registration for sale under the Act of all or part of the Common Stock
then held by him (excluding, for purposes of this Section 17(a), shares subject
to the stock options held by the Executive as to which the vesting provisions
shall not have lapsed pursuant to this Agreement or otherwise). Any such
request shall specify the number of shares proposed to be registered and sold
and the name of the managing underwriter of the proposed offering (who must be
acceptable to the Company in its reasonable discretion).
b. Exceptions. The Company shall not be required to effect a demand
----------
registration under the Act pursuant to Section 17(a) above if: (i) the
aggregate market value of the shares of Common Stock proposed to be registered
does not equal or exceed $12,000,000 prior to the Initial Public Offering or
$2,000,000 after the Initial Public Offering; (ii) within 12 months prior to any
such request for registration, a registration of securities of the Company has
been effected in which the Executive had the right to participate pursuant to
this Section 17 or Section 18 hereof; (iii) the Company receives such request
for registration within 180 days preceding the anticipated effective date of a
proposed underwritten public offering of securities of the Company approved by
the Board prior to the Company's receipt of such request; or (iv) the Board
reasonably determines in good faith that effecting such a demand registration at
such time would have a material adverse effect upon a proposed sale of all (or
substantially all) of the assets of the Company, or a merger, reorganization,
recapitalization, or similar transaction materially affecting the capital
structure or equity ownership of the Company which is actively being negotiated
with another party whose identity is disclosed to the Executive; provided,
--------
however, that the Company may only delay a demand registration pursuant to this
- -------
Section 17(b)(iv) for a period not exceeding six months (or until such earlier
time as such transaction is consummated or no longer proposed). The Company
shall promptly notify in writing the Executive of any decision not to effect any
such request for registration pursuant to this Section 17(b), which notice shall
set forth in reasonable detail the reason for such decision and shall include an
undertaking by the Company promptly to notify the Executive as soon as a demand
registration may be effected.
c. Reduction. If the managing underwriters, the Company and the
---------
Executive determine, after reasonable negotiations, that the number of shares of
Common Stock held by the Executive which the Executive requested to be included
in such registration exceeds the number which can be sold in such offering, then
the amount of such shares that may be included in such registration shall be
reduced to the number of shares that the managing underwriters, the Company and
the Executive determine is marketable, after reasonable negotiations.
d. Withdrawal. The Executive may withdraw at any time before a
----------
registration statement filed pursuant to this Section 17 is declared effective,
in which event the Company may withdraw such registration statement. If the
Company withdraws a registration statement under this Section 17(d) in respect
of a registration for which the Company would otherwise be required to pay some
expenses under Sections 19(c), (d) and (e) hereof, then the Executive shall be
liable to the Company for all expenses of such registration specified in
Sections 19(c), (d) and (e) hereof.
10
<PAGE>
18. Piggyback Registration Rights.
-----------------------------
a. Rights. Subject to the provision of this Section 18, if the
------
Company proposes to make a registered public offering, including an initial
public offering, of any of its securities under the Act (whether to be sold by
it or by one or more third parties), other than an offering pursuant to a demand
registration under Section 17 hereof or an offering registered on Form S-8, Form
S-4, or comparable forms, the Company shall, not less than 45 days prior to the
proposed filing date of the registration form, give written notice of the
proposed registration to the Executive, and at the written request of the
Executive delivered to the Company within 15 days after the receipt of such
notice, shall include in such registration and offering, and in any underwriting
of such offering, all shares of Common Stock as may have been designated in the
Executive's request.
b. Primary Offering Reduction. If a registration in which the
--------------------------
Executive has the right to participate pursuant to this Section 18 is an
underwritten primary registration on behalf of the Company, and the managing
underwriters, the Company and the Executive determine, after reasonable
negotiations, that the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering, then the
Company shall include in such registration the number of shares of Common Stock
requested to be sold by the Company, any other person who has registration
rights pursuant to a written agreement with the Company and the shares requested
by Executive in proportion to the number of shares of Common Stock so requested
by each of them to be so included.
c. Secondary Offering Reduction. If a registration in which the
----------------------------
Executive has the right to participate pursuant to this Section 18 is an
underwritten secondary registration, and the managing underwriters, the Company
and the Executive determine, after reasonable negotiations, that the number of
shares requested to be included in such registration exceeds the number of
shares which can be sold in such offering, then the Company shall include in
such offering the number of shares of Common Stock owned and proposed to be sold
by the Company and by any other participants (including the Executive) proposing
(and entitled) to sell shares pursuant to such registration which the managing
underwriters, the Company and the Executive determine, after reasonable
negotiations, can be sold in the offering, in proportion to the number of shares
of Common Stock so requested by each of them to be included.
19. Other Registration Issues.
-------------------------
a. The Company shall have no obligation to file a registration
statement pursuant to Section 17 hereof, or to include shares of Common Stock
owned by the Executive in a registration statement pursuant to Section 18
hereof, unless and until the Executive has furnished the Company with all
information and statements about or pertaining to the Executive in such
reasonable detail as is reasonably deemed by the Company to be necessary or
appropriate with respect to the preparation of the registration statement.
Whenever the Executive has requested that any shares of Common Stock be
registered pursuant to Section 17 or 18 hereof, subject to the provisions of
those Sections, the Company shall, as expeditiously as reasonably possible:
11
<PAGE>
(i) prepare and file with the SEC a registration statement with
respect to such shares and use its best efforts to cause such registration
statement to become effective as soon as reasonably practicable thereafter
(provided that before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company shall furnish counsel for the
Executive with copies of all such documents proposed to be filed);
(ii) prepare and file with the SEC such amendments and supplements
to such registration statement and prospectus used in connection therewith as
may be necessary to keep such registration statement effective for a period
of not less than nine months or until the underwriters have completed the
distribution described in such registration statement, whichever occurs
first;
(iii) furnish to the Executive such number of copies of such
registration statement, each amendment and supplement thereto, the prospectus
included in such registration statement (including each preliminary
prospectus), and such other documents as the Executive may reasonably
request;
(iv) use its best efforts to register or qualify such shares under
such other securities or Blue Sky Laws of such jurisdictions as the Executive
reasonably requests (and to maintain such registrations and qualifications
effective for a period of nine months or until the underwriters have
completed the distribution of such shares, whichever occurs first), and to do
any and all other acts and things which may be necessary or advisable to
enable the Executive or underwriters to consummate the disposition in such
jurisdictions of such shares; provided, however, that the Company will not be
-------- -------
required to (a) qualify generally to do business in any jurisdiction where it
would not be required but for this Section 19(a)(iv), or (b) subject itself
to taxation in any such jurisdiction; provided, further, however, that,
-------- ------- -------
notwithstanding anything to the contrary in this Agreement with respect to
the bearing of expenses, if any such jurisdiction shall require that expenses
incurred in connection with the qualification of such shares in that
jurisdiction be borne in part or full by the Executive, then the Executive
shall pay such expenses to the extent required by such jurisdiction;
(v) cause all such shares to be listed on securities exchanges, if
any, on which similar securities issued by the Company are then listed;
(vi) provide a transfer agent and registrar for all such shares not
later than the effective date of such registration statements;
(vii) enter into such customary agreements (including an underwriting
agreement in customary form) and take all such other actions as the Executive
and underwriters reasonably request (and subject to approval by the Company's
counsel) in order to expedite or facilitate the disposition of such shares;
and
12
<PAGE>
(viii) make available for inspection by the Executive, by any
underwriter participating in any distribution pursuant to such registration
statement, and by any attorney, accountant or other agent retained by the
Executive or underwriter, or by any such underwriter, all financial and other
records, pertinent corporate documents, and properties (other than
confidential intellectual property) of the Company; provided, however, that
-------- -------
the Company can condition delivery of any information, records or corporate
documents upon the receipt from the Executive and the underwriter and their
counsel, accountants, advisors and agents, of a confidentiality agreement in
form and substance acceptable to the Company and its counsel in the exercise
of their exclusive discretion.
b. Holdback Agreement. In the event that the Company effects an
------------------
underwritten public offering of any of the Company's equity securities, the
Executive agrees, if requested by the managing underwriters, not to effect any
sale or distribution, including any sale pursuant to Rule 144 under the Act, of
any equity securities (except as part of such underwritten offering) during the
180-day period commencing with the effective date of the registration statement
for such offering.
c. Stockholder Expenses. If, pursuant to Section 17 or 18 hereof,
--------------------
shares of Common Stock owned by the Executive are included in a registration
statement, then the Executive shall pay all transfer taxes, if any, relating to
the sale of its shares, the fees and expenses of his own counsel, and its pro
rata portion of any underwriting discounts, fees or commissions or the
equivalent thereof.
d. The Company's Expenses. Except for the fees and expenses
----------------------
specified in Section 19(c) hereof and except as provided below in this Section
19(d), the Company shall pay all expenses incident to the registration and to
the Company's performance of or compliance with this Agreement, including,
without limitation, all registration and filing fees, fees and expenses of
compliance with securities or Blue Sky Laws, underwriting discounts, fees and
commissions (other than the Executive's pro rata portion of any underwriting
discounts or commissions or the equivalent thereof), printing expenses,
messenger and delivery expenses, and fees and expenses of counsel for the
Company and all independent certified public accountants and other persons
retained by the Company. If the Company shall previously have paid, pursuant to
this Section 19(d), the expenses of a registration, then the Executive shall pay
all expenses described in this Section 19(d) (but not expenses described in
Section 19(e) hereof).
e. Other. With respect to any registration pursuant to Section 17
-----
or 18 hereof, the Company shall pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties) and the expenses and fees for listing the securities
to be registered on exchanges on which similar securities issued by the Company
are then listed.
f. Indemnity. In the event that any shares of Common Stock owned by
---------
the Executive are offered or sold by means of a registration statement pursuant
to Section 17 or 18
13
<PAGE>
hereof, the Company agrees to indemnify and hold harmless the Executive and each
person, if any, who controls or may control the Executive within the meaning of
the Act (the Executive and any such other persons being hereinafter referred to
individually as an "Indemnified Person" and collectively as "Indemnified
Persons") from and against all demands, claims, actions or causes of action,
assessments, losses, damages, liabilities, costs, and expenses, including,
without limitation, interest, penalties, and reasonable attorneys fees and
disbursements, asserted against, resulting to, imposed upon or incurred by such
Indemnified Person, jointly or severally, directly or indirectly (hereinafter
referred to in this Section 19(f) in the singular as a "claim" and in the plural
as "claims"), based upon, arising out of, or resulting from any untrue statement
or alleged untrue statement of a material fact contained in the registration
statement, any preliminary or final prospectus contained therein, or any
amendment or supplement thereto, or any document incident to registration or
qualification of any such shares, or any omission or alleged omission to state
therein a material fact necessary to make the statements made therein, in the
light of the circumstances under which they were made, not misleading, or any
violation by the Company of the Act of any state securities or Blue Sky Laws,
except insofar as such claim is based upon, arises out of or results from
information developed or certified by the Executive for use in connection with
the registration statement or arises out of or results from the omission of
information known to the Executive prior to the violation or alleged violation.
The Executive agrees to indemnify and hold harmless the Company, its officers
and directors, and each person, if any, who controls or may control the Company
within the meaning of the Act (the Company, its officers and directors, and any
such persons also being hereinafter referred to individually in this context as
an "Indemnified Person" and collectively as "Indemnified Persons") from and
against all claims based upon, arising out of, or resulting from any untrue
statement of a material fact contained in the registration statement, or any
omission to state therein a material fact necessary in order to make the
statement made therein, in the light of the circumstances under which they were
made, not misleading, to the extent that such claim is based upon, arises out
of, or results from information developed or certified by the Executive for use
in connection with the registration statement or arises out of, or results from
an omission of information known to the Executive prior to the violation or
alleged violation; provided, however, that the maximum amount of liability
-------- -------
in respect of such indemnification shall be limited to an amount equal to the
net proceeds actually received by the Company or the Executive from the sale of
such shares effected pursuant to such registration. The indemnifications set
forth herein shall be in addition to any liability the Company or the Executive
may otherwise have to the Indemnified Persons. Promptly after actually receiving
definitive notice of any claim in respect of which an Indemnified Person may
seek indemnification under this Section 19(f), such Indemnified Person shall
submit written notice thereof to either the Company or the Executive, as the
case may be (sometimes being hereinafter referred to as an "Indemnifying
Person"). The omission of the Indemnified Person so to notify the Indemnifying
Person of any such claim shall not relieve the Indemnifying Person from any
liability it may have hereunder except to the extent that (a) such liability was
caused or increased by such omission, or (b) the ability of the Indemnifying
Person to reduce such liability was materially adversely affected by such
omission. In addition, the omission of the Indemnified Person to notify the
Indemnifying Person of any such claim shall not relieve the Indemnifying Person
from any liability it may have otherwise than hereunder. The Indemnifying Person
shall have the right to undertake, by counsel or representatives of its own
choosing, the defense, compromise or settlement (without admitting liability of
the Indemnified Person) of any such
14
<PAGE>
claim asserted, such defense, compromise or settlement to be undertaken at the
expense and risk of the Indemnifying Person, and the Indemnified Person shall
have the right to engage separate counsel, at its own expense, whom counsel for
the Indemnifying Person shall keep informed and consult with in a reasonable
manner. In the event the Indemnifying Person shall elect not to undertake such
defense by its own representatives, the Indemnifying Person shall give prompt
written notice of such election to the Indemnified Person, and the Indemnified
Person shall undertake the defense, compromise or settlement (without admitting
liability of the Indemnified Person) thereof on behalf of and for the account
and risk of the Indemnifying Person by counsel or other representatives designed
by the Indemnified Person. In the event that any claim shall arise out of a
transaction or cover any period or periods wherein the Company and the Executive
shall each be liable hereunder for part of the liability or obligation arising
therefrom, then the parties shall, each choosing its own counsel and bearing its
own expenses, defend such claim, and no settlement or compromise of such claim
may be made without the joint consent or approval of the Company and the
Executive. Notwithstanding the foregoing, no Indemnifying Person shall be
obligated hereunder with respect to amounts paid in settlement or any claim if
such settlement is effected without the consent of such Indemnifying Person
(which consent shall not be unreasonably withheld).
20. Definitions. For purposes of this Agreement, the following terms
-----------
shall have the following meanings:
a. "Accrued Compensation" shall mean an amount which shall include
all amounts earned or accrued through the Termination Date but not paid as of
the Termination Date including (i) base salary, (ii) reimbursement for
reasonable and necessary expenses incurred by the Executive on behalf of the
Company during the period ending on the Termination Date, and (iii) bonuses and
incentive compensation (other than the Pro Rata Bonus).
b. "Act" shall mean the Securities Act of 1933, as amended.
c. "Adequate Justification" shall mean the occurrence after a Change
in Control of any of the following events or conditions: (i) a material failure
of the Company to comply with the terms of this Agreement; (ii) any relocation
of the Executive outside the metropolitan area where the Company's principal
executive office is located that is not approved by members of the Incumbent
Board (as such term is defined under Section 20(j)); or (iii) other than as
provided for herein, the removal of the Executive from the position of Chief
Executive Officer or any other substantial diminution in the Executive's
authority or the Executive's responsibilities that is not approved by members of
the Incumbent Board.
d. "Base Amount" shall mean the greater of the Executive's annual
base salary (i) at the rate in effect on the Termination Date or (ii) at the
highest rate in effect at any time during the 90-day period prior to the Change
in Control, and shall include all amounts of his base salary that are deferred
under the qualified and non-qualified employee benefit plans of the Company or
any other agreement or arrangement.
e. "Board" shall have the meaning set forth in the recitals.
15
<PAGE>
f. "Bonus Amount" shall mean the greater of (i) the most recent
annual bonus paid or payable to the Executive, or, if greater, the annual bonus
paid or payable for the full fiscal year ended prior to the fiscal year during
which a Change in Control occurred or (ii) the average of the annual bonuses
paid or payable during the three full fiscal years ended prior to the
Termination Date or, if greater, the three full fiscal years ended prior to the
Change in Control (or, in each case, such lesser period for which annual bonuses
were paid or payable to the Executive).
g. "Business" shall mean the design, development, marketing and
implementation of electronic commerce products and services for community
financial institutions.
h. "Bylaws" shall mean the Amended and Restated Bylaws of the
Company, as amended, supplemented or otherwise modified from time to time.
i. "Cause" shall mean the result of:
(i) any act that (X) constitutes, on the part of the Executive,
fraud, dishonesty, or gross malfeasance of duty, and (Y) is
demonstrably likely to lead to material injury to the Company or
resulted or was intended to result in direct or indirect gain to or
personal enrichment of the Executive; provided, however, that such
-------- -------
conduct shall not constitute Cause:
(A) unless (1) there shall have been delivered to the
Executive a written notice setting forth with specificity the
reasons that the Board believes the Executive's conduct
constitutes the criteria set forth in clause (i), (2) the
Executive shall have been provided the opportunity, if such
behavior is susceptible to cure, to cure the specific
inappropriate behavior within 30 days following written notice,
(3) after such 30-day period, the Board of Directors determines
that the behavior has not been cured, and (4) the termination is
evidenced by a resolution adopted in good faith by two-thirds of
the members of the Board (other than the Executive); or
(B) if such conduct (1) was believed by the Executive in
good faith to have been in or not opposed to the interests of the
Company, and (2) was not intended to and did not result in the
direct or indirect gain to or personal enrichment of the
Executive; or
(ii) the conviction (from which no appeal may be or is timely
taken) of the Executive of a felony.
j. A "Change in Control" shall mean the occurrence during the Term
of any the following events:
16
<PAGE>
(i) An acquisition (other than directly from the Company) of any
voting securities of the Company (the "Voting Securities") by any
"Person" (as the term person is used for purposes of Section 13(d) or
14(d) of the Securities Exchange Act of 1934 (the "1934 Act"))
immediately after which such Person has "Beneficial Ownership" (within
the meaning of Rule 13d-3 promulgated under the 1934 Act) of 20% or
more of the combined voting power of the Company's then outstanding
Voting Securities; provided, however, that in determining whether a
-------- -------
Change in Control has occurred, Voting Securities which are acquired
in a "Non-Control Acquisition" (as hereinafter defined) shall not
constitute an acquisition which would cause a Change in Control. A
"Non-Control Acquisition" shall mean an acquisition by (1) an employee
benefit plan (or a trust forming a part thereof) maintained by (x) the
Company or (y) any corporation or other Person of which a majority of
its voting power or its equity securities or equity interest is owned
directly or indirectly by the Company (a "Subsidiary"), (2) the
Company or any Subsidiary, or (3) any Person in connection with a
"Non-Control Transaction" (as hereinafter defined);
(ii) The individuals who, as of the date of the Initial Public
Offering, are members of the Board (the "Incumbent Board") cease for
any reason to constitute at least two-thirds of the Board; provided,
--------
however, that if the election, or nomination for election by the
-------
Company's stockholders, of any new director was approved by a vote of
at least two-thirds of the Incumbent Board, such new director shall,
for purposes of this Agreement, be considered as a member of the
Incumbent Board; provided, further, however, that no individual shall
-------- ------- -------
be considered a member of the Incumbent Board if such individual
initially assumed office as a result of either an actual or threatened
"Election Contest" (as described in Rule 14a-11 promulgated under the
1934 Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board (a "Proxy
Contest") including by reason of any agreement intended to avoid or
settle any Election Contest or Proxy Contest; or
(iii) Approval by stockholders of the Company of:
(A) A merger, consolidation or reorganization involving the
Company, unless
(1) the stockholders of the Company, immediately before
such merger, consolidation or reorganization, own, directly
or indirectly, immediately following such merger,
consolidation or reorganization, at least two-thirds of the
combined voting power of the outstanding voting securities
of the corporation resulting from such merger or
consolidation or reorganization (the "Surviving
Corporation") in substantially the same proportion as their
ownership of the Voting Securities immediately before such
merger, consolidation or reorganization, and
17
<PAGE>
(2) the individuals who were members of the Incumbent
Board immediately prior to the execution of the agreement
providing for such merger, consolidation or reorganization
constitute at least two-thirds of the members of the board
of directors of the Surviving Corporation.
(A transaction described in clauses (1) and (2) shall
herein be referred to as a "Non-Control Transaction").
(B) A complete liquidation or dissolution of the Company;
or
(C) An agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any Person
(other than a transfer to a Subsidiary).
(iv) Notwithstanding anything contained in this Agreement to the
contrary, if the Executive's employment is terminated prior to a
Change in Control and the Executive reasonably demonstrates that such
termination (A) was at the request of a third party who has indicated
an intention or taken steps reasonably calculated to effect a Change
in Control and who effectuates a Change in Control (a "Third Party")
or (B) otherwise occurred in connection with, or in anticipation of, a
Change in Control which actually occurs, then for all purposes of this
Agreement, the date of a Change in Control with respect to the
Executive shall mean the date immediately prior to the date of such
termination of the Executive's employment.
k. "Compensation Committee" shall mean the compensation committee of
the Board.
l. "Competing Business" shall mean any business that, in whole or in
part, is the same or substantially the same as the Business.
m. "Confidential Business Information" shall have the meaning
ascribed to it in Section 5(b).
n. "Continuation Period" shall have the meaning ascribed to it in
Section 4(c)(iii).
o. "Disability" shall mean the inability of the Executive to perform
substantially all of his current duties as required hereunder for a continuous
period of 90 days because of mental or physical condition, illness or injury.
p. "Effective Date" shall mean January 30, 1998.
18
<PAGE>
q. "Fair Market Value" shall have the meaning ascribed to it in
Section 4(e).
r. "Initial Public Offering" shall mean the closing of the first
public offering of the Company's common stock registered under the Act in which
aggregate proceeds to the Company, net of all underwriting discounts and
commissions and other expenses of issuance and distribution as stated in the
prospectus relating to such offering, are equal to at least twelve million
dollars ($12,000,000).
s. "Notice of Termination" shall mean a written notice of
termination from the Company or the Executive which specifies an effective date
of termination, indicates the specific termination provision in this Agreement
relied upon, and sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated.
t. "Plan" shall mean The InterCept Group, Inc. Amended and Restated
1996 Stock Option Plan effective as of November 12, 1996.
u. "Pro Rata Bonus" shall mean an amount equal to the Bonus Amount
multiplied by a fraction the numerator of which is the number of days in the
fiscal year through the Termination Date and the denominator of which is 365.
v. "Successors and Assigns" shall mean a corporation or other entity
acquiring all or substantially all the assets and business of the Company
(including this Agreement), whether by operation of law or otherwise.
w. "Termination Date" shall mean, in the case of the Executive's
death, his date of death, and in all other cases, the date specified in the
Notice of Termination.
x. "Trade Secrets" shall have the meaning ascribed to it in Section
5(a).
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
and its seal to be affixed hereunto by its officers thereunto duly authorized,
and the Executive has signed and sealed this Agreement, effective as of the date
first above written.
[End of page]
19
<PAGE>
THE INTERCEPT GROUP, INC.
ATTEST:
By:/s/ Marie Storey By:/s/ Donny R. Jackson
------------------------- ---------------------------
Name: Marie Storey Name: Donny R. Jackson
----------------------- ------------------------
Title: Assistant Secretary Title: President
---------------------- ------------------------
(CORPORATE SEAL)
EXECUTIVE
/s/ John W. Collins
-------------------------------
John W. Collins
<PAGE>
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT (this "Agreement") is made by and between THE
INTERCEPT GROUP, INC., a Georgia corporation (the "Company"), and DONNY R.
JACKSON, an individual resident of Georgia (the "Executive"), as of this 30th
day of January 1998.
The Company presently employs the Executive as its President and Chief
Operating Officer. The Board of Directors of the Company (the "Board")
recognizes that the Executive's contribution to the growth and success of the
Company is substantial. The Board desires to provide for the continued
employment of the Executive and to make certain changes in the Executive's
employment arrangements which the Board has determined will reinforce and
encourage the continued dedication of the Executive to the Company and will
promote the best interests of the Company and its stockholders. The Executive
is willing to continue to serve the Company on the terms and conditions herein
provided.
This Agreement will supersede in its entirety any prior understanding of
the parties, whether written or oral. Certain terms used in this Agreement are
defined in Section 20.
In consideration of the foregoing, the mutual covenants contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto, intending to be legally bound,
hereby agree (as of the Effective Date) that:
1. Employment. The Company shall continue to employ the Executive,
----------
and the Executive shall continue to serve the Company, as President and Chief
Operating Officer upon the terms and conditions set forth herein. The Executive
shall have such authority and responsibilities as are consistent with his
position and which may be set forth in the Bylaws or assigned by the Board or
the Chief Executive Officer from time to time. The Executive shall devote his
full business time, attention, skill and efforts to the performance of his
duties hereunder, except during periods of illness or periods of vacation and
leaves of absence consistent with Company policy. The Executive may devote
reasonable periods of time to serve as a director or advisor to other
organizations, to perform charitable and other community activities, and to
manage his personal investments; provided, however, that such activities do not
-------- -------
materially interfere with the performance of his duties hereunder and are not in
conflict or competitive with, or adverse to, the interests of the Company.
2. Term. Unless earlier terminated as provided herein, the
----
Executive's employment under this Agreement shall be for a continuing term (the
"Term") of three years, which shall be extended automatically (without further
action of the Company or the Executive) each day for an additional day so that
the remaining term shall continue to be three years; provided, however, that
-------- -------
either party may at any time, by written notice to the other, fix the Term to a
finite term of three years, without further automatic extension, commencing with
the date of such notice.
<PAGE>
3. Compensation and Benefits.
-------------------------
a. The Company shall pay the Executive a salary at a rate of not less
than $190,000 per annum in accordance with the salary payment practices of the
Company. The Board (or the Compensation Committee) shall review the Executive's
salary at least annually (on January 30, 1999, for the first review) and may
increase the Executive's base salary if it determines in its sole discretion
that an increase is appropriate.
b. The Executive shall be eligible to participate in any management
incentive programs established by the Company and to receive incentive
compensation based upon achievement of targeted levels of performance and such
other criteria as the Board or the Compensation Committee may establish from
time to time. In addition, the Board or the Compensation Committee shall
annually consider the Executive's performance and determine if a bonus is
appropriate.
c. The Executive may participate in the Plan and shall be eligible
for the grant of stock options, restricted stock and other awards thereunder.
d. The Executive shall continue to participate in all retirement,
welfare, deferred compensation, life and health insurance (including health
insurance for Executive's spouse and his dependents), and other benefit plans or
programs of the Company now or hereafter applicable to the Executive or
applicable generally to employees of the Company or to a class of employees that
includes senior executives of the Company; provided, however, that during any
-------- -------
period during the Term that the Executive is subject to a Disability, and during
the 180-day period of physical or mental infirmity leading up to the Executive's
Disability, the amount of the Executive's compensation provided under this
Section 3 shall be reduced by the sum of the amounts, if any, paid to the
Executive for the same period under any disability benefit or pension plan of
the Company or any of its subsidiaries.
e. The Company shall provide to the Executive an automobile owned or
leased by the Company of a make and model appropriate to the Executive's status
(in the reasonable opinion of the Executive) or, in lieu thereof, shall provide
the Executive with an annual allowance of not less than $12,000 to partially
cover the cost of the business use of an automobile owned or leased by the
Executive.
f. The Company shall continue to reimburse the Executive for travel,
seminar and other expenses related to the Executive's duties which are incurred
and accounted for in accordance with the historic practices of the Company.
4. Termination.
-----------
a. The Executive's employment under this Agreement may be terminated
prior to the end of the Term only as follows:
(i) upon the death of the Executive;
2
<PAGE>
(ii) by the Company due to the Disability of the Executive
upon delivery of a Notice of Termination to the Executive;
(iii) by the Company for Cause upon delivery of a Notice of
Termination to the Executive;
(iv) prior to a Change in Control, by the Company without
Cause upon no less than ninety (90) days written notice to
the Executive, provided the Company satisfies the provisions
of Section 4(d); and
(v) by the Executive for any reason upon delivery of a
Notice of Termination to the Company within a 90-day period
beginning on the 30th day after any occurrence of a Change
in Control or within a 90-day period beginning on the one
year anniversary of the occurrence of a Change in Control.
b. If the Executive's employment with the Company shall be terminated
during the Term (i) by reason of the Executive's death, or (ii) by the Company
for Disability or Cause, the Company shall pay to the Executive (or in the case
of his death, the Executive's estate) within 15 days after the Termination Date,
a lump sum cash payment equal to the Accrued Compensation and, if such
termination is other than by the Company for Cause, the Pro Rata Bonus.
c. If the Executive's employment with the Company shall be terminated
after a Change in Control either (i) by the Company without Cause or otherwise
in violation of this Agreement or (ii) by the Executive for any reason, in
addition to other rights and remedies available in law or equity, the Executive
shall be entitled to the following:
(i) the Company shall pay the Executive in cash within 15
days of the Termination Date an amount equal to all Accrued
Compensation and the Pro Rata Bonus;
(ii) the Company shall pay to the Executive in cash at the
end of each of the 36 consecutive 30-day periods following
the Termination Date an amount equal to one-twelfth of the
sum of the Base Amount and the Bonus Amount.
(iii) for the period from the Termination Date through the
date that Executive attains the age of 65 (the "Continuation
Period"), the Company shall at its expense continue on
behalf of the Executive and his dependents and beneficiaries
the life insurance, disability, medical, dental and
hospitalization benefits provided (x) to the Executive at
any time during the 90-day period prior to the Change in
Control or at any time thereafter or (y) to other similarly
situated executives who continue in the employ of the
Company during the Continuation Period, if permitted, in
either case, by the applicable
3
<PAGE>
benefit plan. The coverage and benefits (including
deductibles and costs) provided in this Section 4(c)(iii)
during the Continuation Period shall be no less favorable to
the Executive and his dependents and beneficiaries than the
most favorable of such coverages and benefits during any of
the periods referred to in clauses (x) and (y) above. The
Company's obligation hereunder with respect to the foregoing
benefits shall be limited to the extent that the Executive
obtains any such benefits pursuant to a subsequent
employer's benefit plans, in which case the Company may
reduce the coverage of any benefits it is required to
provide the Executive hereunder as long as the aggregate
coverages and benefits of the combined benefit plans is no
less favorable to the Executive than the coverages and
benefits required to be provided hereunder. This subsection
(iii) shall not be interpreted so as to limit any benefits
to which the Executive or his dependents or beneficiaries
may be entitled under any of the Company's employee benefit
plans, programs or practices following the Executive's
termination of employment, including without limitation,
retiree medical and life insurance benefits; and
(iv) the restrictions on any outstanding incentive awards
(including stock options) granted to the Executive under the
Plan or under any other incentive plan or arrangement shall
lapse and such incentive award shall become 100% vested and
all stock options and stock appreciation rights granted to
the Executive shall become immediately exercisable and shall
become 100% vested.
d. If, prior to a Change in Control, the Company terminates the
Executive without Cause, the Company shall pay the Executive in cash:
(i) within fifteen (15) days of the Termination Date, an
amount equal to all Accrued Compensation on the Pro Rata
Bonus; and
(ii) at the end of each of the twelve (12) consecutive
thirty (30) day periods following the Termination Date, an
amount equal to (1/12) of the sum of the Base Amount and the
Bonus Amounts.
e. The Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
and no such payment shall be offset or reduced by the amount of any compensation
or benefits provided to the Executive in any subsequent employment except as
provided in Section 4(c)(iii).
f. In the event that any payment or benefit (within the meaning of
Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code")) to the Executive or for his benefit paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise in connection
with, or arising out of, his employment with the Company
4
<PAGE>
or a change in ownership or effective control of the Company or of a substantial
portion of its assets (a "Payment" or "Payments"), would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Executive will be entitled to receive
an additional payment (a "Gross-Up Payment") in an amount such that after
payment by the Executive of all taxes (including any interest or penalties,
other than interest and penalties imposed by reason of the Executive's failure
to file timely a tax return or pay taxes shown due on his return, imposed with
respect to such taxes and the Excise Tax), including any Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
g. The severance pay and benefits provided for in this Section 4
shall be in lieu of any other severance or termination pay to which the
Executive may be entitled under any Company severance or termination plan,
program, practice or arrangement. The Executive's entitlement to any other
compensation or benefits shall be determined in accordance with the Company's
employee benefit plans and other applicable programs, policies and practices
then in effect.
h. In the event that the Executive's employment hereunder is
terminated for any reason, the Executive shall, and does hereby, tender his
resignation as a director of the Company and its affiliates effective as of the
date of termination.
5. Protection of Trade Secrets and Confidential Information .
---------------------------------------------------------
a. Through exercise of his rights and performance of his obligations
under this Agreement, Executive will be exposed to "Trade Secrets" and
"Confidential Information" (as those terms are defined below). "Trade Secrets"
shall mean information or data of or about the Company or any affiliated entity,
including, but not limited to, technical or nontechnical data, formulas,
patterns, compilations, programs, devices, methods, techniques, drawings,
processes, financial data, financial plans, products plans, or lists of actual
or potential customers, clients, distributors, or licensees, that: (i) derive
economic value, actual or potential, from not being generally known to, and not
being readily ascertainable by proper means by, other persons who can obtain
economic value from their disclosure or use; and (ii) are the subject of efforts
that are reasonable under the circumstances to maintain their secrecy. To the
extent that the foregoing definition is inconsistent with a definition of "trade
secret" mandated under applicable law, the latter definition shall govern for
purposes of interpreting Executive's obligations under this Agreement. Except
as required to perform his obligations under this Agreement or except with
Company's prior written permission, Executive shall not use, redistribute,
market, publish, disclose or divulge to any other person or entity any Trade
Secrets of the Company. The Executive's obligations under this provision shall
remain in force (during or after the Term) for so long as such information or
data shall continue to constitute a "trade secret" under applicable law.
Executive agrees to cooperate with any and all confidentiality requirements of
the Company and Executive shall immediately notify the Company of any
unauthorized disclosure or use of any Trade Secrets of which Executive becomes
aware.
5
<PAGE>
b. The Executive agrees to maintain in strict confidence and, except
as necessary to perform his duties for the Company, not to use or disclose any
Confidential Business Information at any time, either during the term of his
employment or for a period of one year after the Executive's last date of
employment, so long as the pertinent data or information remains Confidential
Business Information. "Confidential Business Information" shall mean any non-
public information of a competitively sensitive or personal nature, other than
Trade Secrets, acquired by the Executive, directly or indirectly, in connection
with the Executive's employment (including his employment with the Company prior
to the date of this Agreement), including (without limitation) oral and written
information concerning the Company or its affiliates relating to financial
position and results of operations (revenues, margins, assets, net income,
etc.), annual and long-range business plans, marketing plans and methods,
account invoices, oral or written customer information, and personnel
information. Confidential Business Information also includes information
recorded in manuals, memoranda, projections, minutes, plans, computer programs,
and records, whether or not legended or otherwise identified by the Company and
its affiliates as Confidential Business Information, as well as information
which is the subject of meetings and discussions and not so recorded; provided,
however, that Confidential Business Information shall not include information
that is generally available to the public, other than as a result of disclosure,
directly or indirectly, by the Executive, or was available to the Executive on a
non-confidential basis prior to its disclosure to the Executive.
c. Upon termination of employment, the Executive shall leave with the
Company all business records relating to the Company and its affiliates
including, without limitation, all contracts, calendars, and other materials or
business records concerning its business or customers, including all physical,
electronic, and computer copies thereof, whether or not the Executive prepared
such materials or records himself. Upon such termination, the Executive shall
retain no copies of any such materials.
d. As set forth above, the Executive shall not disclose Trade Secrets
or Confidential Business Information. However, nothing in this provision shall
prevent the Executive from disclosing Trade Secrets or Confidential Business
Information pursuant to a court order or court-issued subpoena, so long as the
Executive first notifies the Company of said order or subpoena in sufficient
time to allow the Company to seek an appropriate protective order. The
Executive agrees that if he receives any formal or informal discovery request,
court order, or subpoena requesting that he disclose Trade Secrets or
Confidential Business Information, he will immediately notify the Company and
provide the Company with a copy of said request, court order, or subpoena.
6. Non-Solicitation and Related Matters
------------------------------------
a. If the Executive is terminated for Cause or if the Executive
resigns without Adequate Justification, then for a period of two years following
the date of termination, the Executive shall not (except on behalf of or with
the prior written consent of the Company) either directly or indirectly, on the
Executive's own behalf or in the service or on behalf of others, (i) solicit,
divert, or appropriate to or for a Competing Business, or (ii) attempt to
solicit, divert, or appropriate to or for a Competing Business, any person or
entity that was a customer or
6
<PAGE>
prospective customer of the Company on the date of termination and with whom the
Executive had direct material contact within six months of the Executive's last
date of employment.
b. If the Executive is terminated for Cause or if the Executive
resigns without Adequate Justification, then for a period of two years following
the date of termination, the Executive will not, either directly or indirectly,
on the Executive's own behalf or in the service or on behalf of others, (i)
solicit, divert, or hire away, or (ii) attempt to solicit, divert, or hire away
any employee of or consultant to the Company or any of its affiliates engaged or
experienced in the Business, regardless of whether the employee or consultant is
full-time or temporary, the employment or engagement is pursuant to written
agreement, or the employment is for a determined period or is at will.
c. The Executive acknowledges and agrees that great loss and
irreparable damage would be suffered by the Company if the Executive should
breach or violate any of the terms or provisions of the covenants and agreements
set forth in this Section 6. The Executive further acknowledges and agrees that
each of these covenants and agreements is reasonably necessary to protect and
preserve the interests of the Company. The parties agree that money damages for
any breach of clauses (a) and (b) of this Section 6 will be insufficient to
compensate for any breaches thereof, and that the Executive or any of the
Executive's affiliates, as the case may be, will, to the extent permitted by
law, waive in any proceeding initiated to enforce such provisions any claim or
defense that an adequate remedy at law exists. The existence of any claim,
demand, action, or cause of action against the Company, whether predicated upon
this Agreement or otherwise, shall not constitute a defense to the enforcement
by the Company of any of the covenants or agreements in this Agreement;
provided, however, that nothing in this Agreement shall be deemed to deny the
- -------- -------
Executive the right to defend against this enforcement on the basis that the
Company has no right to its enforcement under the terms of this Agreement.
d. The Executive acknowledges and agrees that: (i) the covenants and
agreements contained in clauses (a) through (e) of this Section 6 are the
essence of this Agreement; (ii) that the Executive has received good, adequate
and valuable consideration for each of these covenants; and (iii) each of these
covenants is reasonable and necessary to protect and preserve the interests and
properties of the Company. The Executive also acknowledges and agrees that:
(i) irreparable loss and damage will be suffered by the Company should the
Executive breach any of these covenants and agreements; (ii) each of these
covenants and agreements in clauses (a) and (b) of this Section 6 is separate,
distinct and severable not only from the other covenants and agreements but also
from the remaining provisions of this Agreement; and (iii) the unenforceability
of any covenants or agreements shall not affect the validity or enforceability
of any of the other covenants or agreements or any other provision or provisions
of this Agreement. The Executive acknowledges and agrees that if any of the
provisions of clauses (a) and (b) of this Section 6 shall ever be deemed to
exceed the time, activity, or geographic limitations permitted by applicable
law, then such provisions shall be and hereby are reformed to the maximum time,
activity, or geographical limitations permitted by applicable law.
e. The Executive and the Company hereby acknowledge that it may be
appropriate from time to time to modify the terms of this Section 6 and the
definition of the term "Business" to reflect changes in the Company's business
and affairs so that the scope of the
7
<PAGE>
limitations placed on the Executive's activities by this Section 6 accomplishes
the parties' intent in relation to the then current facts and circumstances. Any
such amendment shall be effective only when completed in writing and signed by
the Executive and the Company.
7. Successors; Binding Agreement.
-----------------------------
a. This Agreement shall be binding upon and shall inure to the
benefit of the Company, its Successors and Assigns and the Company shall require
any Successors and Assigns to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place.
b. Neither this Agreement nor any right or interest hereunder shall
be assignable or transferable by the Executive, his beneficiaries or legal
representatives, except by will or by the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal personal representative.
8. Fees and Expenses. The Company shall pay all legal fees and
-----------------
related expenses (including but not limited to the costs of experts, accountants
and counsel) incurred by the Executive as they become due as a result of (a) the
termination of the Executive's employment (including all such fees and expenses,
if any, incurred in contesting or disputing any such termination of employment)
and (b) the Executive seeking to obtain or enforce any right or benefit provided
by this Agreement; provided, however, that the circumstances set forth in
-------- -------
clauses (a) and (b) above occurred on or after a Change in Control.
9. Notice. For the purposes of this Agreement, notices and all
------
other communications provided for in this Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses last given by each party
to the other; provided, however, that all notices to the Company shall be
-------- -------
directed to the attention of the Board with a copy to the Secretary of the
Company. All notices and communications shall be deemed to have been received
on the date of delivery thereof.
10. Settlement of Claims. The Company's obligation to make the
--------------------
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Executive or others. The Company may, however,
withhold from any benefits payable under this Agreement all federal, state,
city, or other taxes as shall be required pursuant to any law or governmental
regulation or ruling.
11. Modification and Waiver. No provisions of this Agreement may be
-----------------------
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and the Company. No waiver by
any party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of
8
<PAGE>
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
12. Governing Law. This Agreement shall be governed by and construed
-------------
and enforced in accordance with the laws of the State of Georgia without giving
effect to the conflict of laws principles thereof. Any action brought by any
party to this Agreement shall be brought and maintained in a court of competent
jurisdiction in State of Georgia.
13. Severability. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
14. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties hereto and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof.
15. Headings. The headings of Sections herein are included solely for
--------
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
16. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
17. Demand Registration Rights.
--------------------------
a. Rights. Subject to the provisions of this Section 17(a), upon
-------
the termination of the Executive's employment, for any reason, the Executive may
request registration for sale under the Act of all or part of the Common Stock
then held by him (excluding, for purposes of this Section 17(a), shares subject
to the stock options held by the Executive as to which the vesting provisions
shall not have lapsed pursuant to this Agreement or otherwise). Any such
request shall specify the number of shares proposed to be registered and sold
and the name of the managing underwriter of the proposed offering (who must be
acceptable to the Company in its reasonable discretion).
b. Exceptions. The Company shall not be required to effect a demand
----------
registration under the Act pursuant to Section 17(a) above if: (i) the
aggregate market value of the shares of Common Stock proposed to be registered
does not equal or exceed $12,000,000 prior to the Initial Public Offering or
$2,000,000 after the Initial Public Offering; (ii) within 12 months prior to any
such request for registration, a registration of securities of the Company has
been effected in which the Executive had the right to participate pursuant to
this Section 17 or Section 18 hereof; (iii) the Company receives such request
for registration within 180 days preceding the anticipated effective date of a
proposed underwritten public offering of securities of the Company approved by
the Board prior to the Company's receipt of such request; or (iv) the Board
reasonably determines in good faith that effecting such a demand registration at
such time would have a material adverse effect upon a proposed sale of all (or
substantially all) of the assets
9
<PAGE>
of the Company, or a merger, reorganization, recapitalization, or similar
transaction materially affecting the capital structure or equity ownership of
the Company which is actively being negotiated with another party whose identity
is disclosed to the Executive; provided, however, that the Company may only
-------- -------
delay a demand registration pursuant to this Section 17(b)(iv) for a period not
exceeding six months (or until such earlier time as such transaction is
consummated or no longer proposed). The Company shall promptly notify in writing
the Executive of any decision not to effect any such request for registration
pursuant to this Section 17(b), which notice shall set forth in reasonable
detail the reason for such decision and shall include an undertaking by the
Company promptly to notify the Executive as soon as a demand registration may be
effected.
c. Reduction. If the managing underwriters, the Company and the
---------
Executive determine, after reasonable negotiations, that the number of shares of
Common Stock held by the Executive which the Executive requested to be included
in such registration exceeds the number which can be sold in such offering, then
the amount of such shares that may be included in such registration shall be
reduced to the number of shares that the managing underwriters, the Company and
the Executive determine is marketable, after reasonable negotiations.
d. Withdrawal. The Executive may withdraw at any time before a
----------
registration statement filed pursuant to this Section 17 is declared effective,
in which event the Company may withdraw such registration statement. If the
Company withdraws a registration statement under this Section 17(d) in respect
of a registration for which the Company would otherwise be required to pay some
expenses under Sections 19(c), (d) and (e) hereof, then the Executive shall be
liable to the Company for all expenses of such registration specified in
Sections 19(c), (d) and (e) hereof.
18. Piggyback Registration Rights.
-----------------------------
a. Rights. Subject to the provision of this Section 18, if the
------
Company proposes to make a registered public offering, including an initial
public offering, of any of its securities under the Act (whether to be sold by
it or by one or more third parties), other than an offering pursuant to a demand
registration under Section 17 hereof or an offering registered on Form S-8, Form
S-4, or comparable forms, the Company shall, not less than 45 days prior to the
proposed filing date of the registration form, give written notice of the
proposed registration to the Executive, and at the written request of the
Executive delivered to the Company within 15 days after the receipt of such
notice, shall include in such registration and offering, and in any underwriting
of such offering, all shares of Common Stock as may have been designated in the
Executive's request.
b. Primary Offering Reduction. If a registration in which the
--------------------------
Executive has the right to participate pursuant to this Section 18 is an
underwritten primary registration on behalf of the Company, and the managing
underwriters, the Company and the Executive determine, after reasonable
negotiations, that the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering, then the
Company shall include in such registration the number of shares of the Common
Stock requested to be sold by the Company, any other person who has registration
rights pursuant to a written agreement with
10
<PAGE>
the Company and the shares requested by Executive in proportion to the number of
shares of Common Stock so requested by each of them to be so included.
c. Secondary Offering Reduction. If a registration in which the
----------------------------
Executive has the right to participate pursuant to this Section 18 is an
underwritten secondary registration, and the managing underwriters, the Company
and the Executive determine, after reasonable negotiations, that the number of
shares requested to be included in such registration exceeds the number of
shares which can be sold in such offering, then the Company shall include in
such offering the number of shares of Common Stock owned and proposed to be sold
by the Company and by any other participants (including the Executive) proposing
(and entitled) to sell shares pursuant to such registration which the managing
underwriters, the Company and the Executive determine, after reasonable
negotiations, can be sold in the offering, in proportion to the number of shares
of Common Stock so requested by each of them to be included.
19. Other Registration Issues.
-------------------------
a. The Company shall have no obligation to file a registration
statement pursuant to Section 17 hereof, or to include shares of Common Stock
owned by the Executive in a registration statement pursuant to Section 18
hereof, unless and until the Executive has furnished the Company with all
information and statements about or pertaining to the Executive in such
reasonable detail as is reasonably deemed by the Company to be necessary or
appropriate with respect to the preparation of the registration statement.
Whenever the Executive has requested that any shares of Common Stock be
registered pursuant to Section 17 or 18 hereof, subject to the provisions of
those Sections, the Company shall, as expeditiously as reasonably possible:
(i) prepare and file with the SEC a registration statement with
respect to such shares and use its best efforts to cause such registration
statement to become effective as soon as reasonably practicable thereafter
(provided that before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company shall furnish counsel for the
Executive with copies of all such documents proposed to be filed);
(ii) prepare and file with the SEC such amendments and supplements to
such registration statement and prospectus used in connection therewith as may
be necessary to keep such registration statement effective for a period of not
less than nine months or until the underwriters have completed the distribution
described in such registration statement, whichever occurs first;
(iii) furnish to the Executive such number of copies of such
registration statement, each amendment and supplement thereto, the prospectus
included in such registration statement (including each preliminary prospectus),
and such other documents as the Executive may reasonably request;
(iv) use its best efforts to register or qualify such shares under
such other securities or Blue Sky Laws of such jurisdictions as the Executive
reasonably requests (and to maintain such registrations and qualifications
effective for a period
11
<PAGE>
of nine months or until the underwriters have completed the distribution of such
shares, whichever occurs first), and to do any and all other acts and things
which may be necessary or advisable to enable the Executive or underwriters to
consummate the disposition in such jurisdictions of such shares; provided,
--------
however, that the Company will not be required to (a) qualify generally to do
- -------
business in any jurisdiction where it would not be required but for this Section
19(a)(iv), or (b) subject itself to taxation in any such jurisdiction; provided,
--------
further, however, that, notwithstanding anything to the contrary in this
- ------- -------
Agreement with respect to the bearing of expenses, if any such jurisdiction
shall require that expenses incurred in connection with the qualification of
such shares in that jurisdiction be borne in part or full by the Executive, then
the Executive shall pay such expenses to the extent required by such
jurisdiction;
(v) cause all such shares to be listed on securities exchanges, if
any, on which similar securities issued by the Company are then listed;
(vi) provide a transfer agent and registrar for all such shares not
later than the effective date of such registration statements;
(vii) enter into such customary agreements (including an underwriting
agreement in customary form) and take all such other actions as the Executive
and underwriters reasonably request (and subject to approval by the Company's
counsel) in order to expedite or facilitate the disposition of such shares; and
(viii) make available for inspection by the Executive, by any
underwriter participating in any distribution pursuant to such registration
statement, and by any attorney, accountant or other agent retained by the
Executive or underwriter, or by any such underwriter, all financial and other
records, pertinent corporate documents, and properties (other than confidential
intellectual property) of the Company; provided, however, that the Company can
-------- -------
condition delivery of any information, records or corporate documents upon the
receipt from the Executive and the underwriter and their counsel, accountants,
advisors and agents, of a confidentiality agreement in form and substance
acceptable to the Company and its counsel in the exercise of their exclusive
discretion.
b. Holdback Agreement. In the event that the Company effects an
------------------
underwritten public offering of any of the Company's equity securities, the
Executive agrees, if requested by the managing underwriters, not to effect any
sale or distribution, including any sale pursuant to Rule 144 under the Act, of
any equity securities (except as part of such underwritten offering) during the
180-day period commencing with the effective date of the registration statement
for such offering.
c. Stockholder Expenses. If, pursuant to Section 17 or 18 hereof,
--------------------
shares of Common Stock owned by the Executive are included in a registration
statement, then the Executive shall pay all transfer taxes, if any, relating to
the sale of its shares, the fees and
12
<PAGE>
expenses of his own counsel, and its pro rata portion of any underwriting
discounts, fees or commissions or the equivalent thereof.
d. The Company's Expenses. Except for the fees and expenses
----------------------
specified in Section 19(c) hereof and except as provided below in this Section
19(d), the Company shall pay all expenses incident to the registration and to
the Company's performance of or compliance with this Agreement, including,
without limitation, all registration and filing fees, fees and expenses of
compliance with securities or Blue Sky Laws, underwriting discounts, fees and
commissions (other than the Executive's pro rata portion of any underwriting
discounts or commissions or the equivalent thereof), printing expenses,
messenger and delivery expenses, and fees and expenses of counsel for the
Company and all independent certified public accountants and other persons
retained by the Company. If the Company shall previously have paid, pursuant to
this Section 19(d), the expenses of a registration, then the Executive shall pay
all expenses described in this Section 19(d) (but not expenses described in
Section 19(e) hereof).
e. Other. With respect to any registration pursuant to Section 17
-----
or 18 hereof, the Company shall pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties) and the expenses and fees for listing the securities
to be registered on exchanges on which similar securities issued by the Company
are then listed.
f. Indemnity. In the event that any shares of Common Stock owned by
---------
the Executive are offered or sold by means of a registration statement pursuant
to Section 17 or 18 hereof, the Company agrees to indemnify and hold harmless
the Executive and each person, if any, who controls or may control the Executive
within the meaning of the Act (the Executive and any such other persons being
hereinafter referred to individually as an "Indemnified Person" and collectively
as "Indemnified Persons") from and against all demands, claims, actions or
causes of action, assessments, losses, damages, liabilities, costs, and
expenses, including, without limitation, interest, penalties, and reasonable
attorneys fees and disbursements, asserted against, resulting to, imposed upon
or incurred by such Indemnified Person, jointly or severally, directly or
indirectly (hereinafter referred to in this Section 19(f) in the singular as a
"claim" and in the plural as "claims"), based upon, arising out of, or resulting
from any untrue statement or alleged untrue statement of a material fact
contained in the registration statement, any preliminary or final prospectus
contained therein, or any amendment or supplement thereto, or any document
incident to registration or qualification of any such shares, or any omission or
alleged omission to state therein a material fact necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading, or any violation by the Company of the Act of any state
securities or Blue Sky Laws, except insofar as such claim is based upon, arises
out of or results from information developed or certified by the Executive for
use in connection with the registration statement or arises out of or results
from the omission of information known to the Executive prior to the violation
or alleged violation. The Executive agrees to indemnify and hold harmless the
Company, its officers and directors, and each person, if any, who controls or
may control the Company within the meaning of the Act (the Company, its officers
and directors, and any such persons also being hereinafter referred to
individually in this context as an "Indemnified Person" and collectively as
"Indemnified Persons") from and against all claims based upon, arising out of,
or resulting from any untrue statement of a material
13
<PAGE>
fact contained in the registration statement, or any omission to state therein a
material fact necessary in order to make the statement made therein, in the
light of the circumstances under which they were made, not misleading, to the
extent that such claim is based upon, arises out of, or results from information
developed or certified by the Executive for use in connection with the
registration statement or arises out of, or results from an omission of
information known to the Executive prior to the violation or alleged violation;
provided, however, that the maximum amount of liability in respect of such
- -------- -------
indemnification shall be limited, to an amount equal to the net proceeds
actually received by the Company or the Executive from the sale of such shares
effected pursuant to such registration. The indemnifications set forth herein
shall be in addition to any liability the Company or the Executive may otherwise
have to the Indemnified Persons. Promptly after actually receiving definitive
notice of any claim in respect of which an Indemnified Person may seek
indemnification under this Section 19(f), such Indemnified Person shall submit
written notice thereof to either the Company or the Executive, as the case may
be (sometimes being hereinafter referred to as an "Indemnifying Person"). The
omission of the Indemnified Person so to notify the Indemnifying Person of any
such claim shall not relieve the Indemnifying Person from any liability it may
have hereunder except to the extent that (a) such liability was caused or
increased by such omission, or (b) the ability of the Indemnifying Person to
reduce such liability was materially adversely affected by such omission. In
addition, the omission of the Indemnified Person to notify the Indemnifying
Person of any such claim shall not relieve the Indemnifying Person from any
liability it may have otherwise than hereunder. The Indemnifying Person shall
have the right to undertake, by counsel or representatives of its own choosing,
the defense, compromise or settlement (without admitting liability of the
Indemnified Person) of any such claim asserted, such defense, compromise or
settlement to be undertaken at the expense and risk of the Indemnifying Person,
and the Indemnified Person shall have the right to engage separate counsel, at
its own expense, whom counsel for the Indemnifying Person shall keep informed
and consult with in a reasonable manner. In the event the Indemnifying Person
shall elect not to undertake such defense by its own representatives, the
Indemnifying Person shall give prompt written notice of such election to the
Indemnified Person, and the Indemnified Person shall undertake the defense,
compromise or settlement (without admitting liability of the Indemnified Person)
thereof on behalf of and for the account and risk of the Indemnifying Person by
counsel or other representatives designed by the Indemnified Person. In the
event that any claim shall arise out of a transaction or cover any period or
periods wherein the Company and the Executive shall each be liable hereunder for
part of the liability or obligation arising therefrom, then the parties shall,
each choosing its own counsel and bearing its own expenses, defend such claim,
and no settlement or compromise of such claim may be made without the joint
consent or approval of the Company and the Executive. Notwithstanding the
foregoing, no Indemnifying Person shall be obligated hereunder with respect to
amounts paid in settlement or any claim if such settlement is effected without
the consent of such Indemnifying Person (which consent shall not be unreasonably
withheld).
20. Definitions. For purposes of this Agreement, the following terms
-----------
shall have the following meanings:
a. "Accrued Compensation" shall mean an amount which shall include
all amounts earned or accrued through the Termination Date but not paid as of
the Termination Date including (i) base salary, (ii) reimbursement for
reasonable and necessary expenses incurred by
14
<PAGE>
the Executive on behalf of the Company during the period ending on the
Termination Date, and (iii) bonuses and incentive compensation (other than the
Pro Rata Bonus).
b. "Act" shall mean the Securities Act of 1933, as amended.
c. "Adequate Justification" shall mean the occurrence after a Change
in Control of any of the following events or conditions: (i) a material failure
of the Company to comply with the terms of this Agreement; (ii) any relocation
of the Executive outside the metropolitan area where the Company's principal
executive office is located that is not approved by members of the Incumbent
Board (as such term is defined under Section 20(j)); or (iii) other than as
provided for herein, the removal of the Executive from the position of President
and Chief Operating Officer or any other substantial diminution in the
Executive's authority or the Executive's responsibilities that is not approved
by members of the Incumbent Board.
d. "Base Amount" shall mean the greater of the Executive's annual
base salary (i) at the rate in effect on the Termination Date or (ii) at the
highest rate in effect at any time during the 90-day period prior to the Change
in Control, and shall include all amounts of his base salary that are deferred
under the qualified and non-qualified employee benefit plans of the Company or
any other agreement or arrangement.
e. "Board" shall have the meaning set forth in the recitals.
f. "Bonus Amount" shall mean the greater of (i) the most recent
annual bonus paid or payable to the Executive, or, if greater, the annual bonus
paid or payable for the full fiscal year ended prior to the fiscal year during
which a Change in Control occurred or (ii) the average of the annual bonuses
paid or payable during the three full fiscal years ended prior to the
Termination Date or, if greater, the three full fiscal years ended prior to the
Change in Control (or, in each case, such lesser period for which annual bonuses
were paid or payable to the Executive).
g. "Business" shall mean the design, development, marketing and
implementation of electronic commerce products and services for community
financial institutions.
h. "Bylaws" shall mean the Amended and Restated Bylaws of the
Company, as amended, supplemented or otherwise modified from time to time.
i. The termination of the Executive's employment shall be for
"Cause" if it is the result of:
(i) any act that (A) constitutes, on the part of the Executive,
fraud, dishonesty, or gross malfeasance of duty, or conduct
grossly inappropriate to the Executive's office, and (B) is
demonstrably likely to lead to material injury to the
Company or resulted or was intended to result in direct or
indirect gain to or personal
15
<PAGE>
enrichment of the Executive; provided, however, that such
-------- ------
conduct shall not constitute Cause:
(A) unless (1) there shall have been delivered to the
Executive a written notice setting forth with
specificity the reasons that the Board believes the
Executive's conduct constitutes the criteria set forth
in clause (i), (2) the Executive shall have been
provided the opportunity, if such behavior is
susceptible to cure, to cure the specific inappropriate
behavior within 30 days following written notice, and
(3) after such 30-day period, the Board of Directors
determines that the behavior has not been cured, and
(4) the termination is evidenced by a resolution
adopted in good faith by two-thirds of the members of
the Board (other than the Executive); or
(B) if such conduct (1) was believed by the Executive in
good faith to have been in or not opposed to the
interests of the Company, and (2) was not intended to
and did not result in the direct or indirect gain to or
personal enrichment of the Executive; or
(ii) the conviction (from which no appeal may be or is timely
taken) of the Executive of a felony; or
(iii) the failure of the Executive to perform his duties
hereunder in a manner satisfactory to the Board of
Directors, as recommended by the Chief Executive Officer and
as determined by the Board of Directors in its sole
discretion; provided, however, that the Executive shall have
-------- -------
60 days to cure such failure after receiving notice from the
Company. The Company shall be obligated to provide only one
notice to the Executive pursuant to this Section 20(i)(iii).
Thereafter, the Company may terminate the Executive, without
the Executive having a right to cure, if the Executive fails
to perform his duties in a manner satisfactory to the Board
of Directors, as recommended by the Chief Executive Officer
and as determined by the Board of Directors in its sole
discretion.
j. A "Change in Control" shall mean the occurrence during the Term
of any of the following events after the Initial Public Offering:
(i) An acquisition (other than directly from the Company) of any
voting securities of the Company (the "Voting Securities")
by any "Person" (as the term person is used for purposes of
Section 13(d) or 14(d) of the Securities Exchange Act of
1934 (the "1934 Act")) immediately after which such Person
has "Beneficial Ownership"
16
<PAGE>
(within the meaning of Rule 13d-3 promulgated under the
1934 Act) of 20% or more of the combined voting power of
the Company's then outstanding Voting Securities;
provided, however, that in determining whether a Change in
-------- -------
Control has occurred, Voting Securities which are acquired
in a "Non-Control Acquisition" (as hereinafter defined)
shall not constitute an acquisition which would cause a
Change in Control. A "Non-Control Acquisition" shall mean
an acquisition by (1) an employee benefit plan (or a trust
forming a part thereof) maintained by (x) the Company or
(y) any corporation or other Person of which a majority of
its voting power or its equity securities or equity
interest is owned directly or indirectly by the Company (a
"Subsidiary"), (2) the Company or any Subsidiary, or (3)
any Person in connection with a "Non-Control Transaction"
(as hereinafter defined);
(ii) The individuals who, as of the date of the Initial Public
Offering, are members of the Board (the "Incumbent Board")
cease for any reason to constitute at least two-thirds of
the Board; provided, however, that if the election, or
-------- -------
nomination for election by the Company's stockholders, of
any new director was approved by a vote of at least two-
thirds of the Incumbent Board, such new director shall,
for purposes of this Agreement, be considered as a member
of the Incumbent Board; provided, further, however, that
-------- ------- -------
no individual shall be considered a member of the
Incumbent Board if such individual initially assumed
office as a result of either an actual or threatened
"Election Contest" (as described in Rule 14a-11
promulgated under the 1934 Act) or other actual or
threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board (a "Proxy
Contest") including by reason of any agreement intended to
avoid or settle any Election Contest or Proxy Contest; or
(iii) Approval by stockholders of the Company of:
(A) A merger, consolidation or reorganization involving
the Company, unless
(1) the stockholders of the Company, immediately
before such merger, consolidation or
reorganization, own, directly or indirectly,
immediately following such merger, consolidation
or reorganization, at least two-thirds of the
combined voting power of the outstanding voting
securities of the corporation resulting from
such merger or consolidation or reorganization
(the "Surviving Corporation") in
17
<PAGE>
substantially the same proportion as their
ownership of the Voting Securities immediately
before such merger, consolidation or
reorganization, and
(2) the individuals who were members of the Incumbent
Board immediately prior to the execution of the
agreement providing for such merger, consolidation
or reorganization constitute at least two-thirds
of the members of the board of directors of the
Surviving Corporation.
(A transaction described in clauses (1) and (2) shall
herein be referred to as a "Non-Control Transaction").
(B) A complete liquidation or dissolution of the Company;
or
(C) An agreement for the sale or other disposition of all
or substantially all of the assets of the Company to
any Person (other than a transfer to a Subsidiary).
(iv) Notwithstanding anything contained in this Agreement to the
contrary, if the Executive's employment is terminated prior
to a Change in Control and the Executive reasonably
demonstrates that such termination (A) was at the request of
a third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control and who
effectuates a Change in Control (a "Third Party") or (B)
otherwise occurred in connection with, or in anticipation
of, a Change in Control which actually occurs, then for all
purposes of this Agreement, the date of a Change in Control
with respect to the Executive shall mean the date
immediately prior to the date of such termination of the
Executive's employment.
k. "Compensation Committee" shall mean the compensation committee of
the Board.
l. "Competing Business" shall mean any business that, in whole or in
part, is the same or substantially the same as the Business.
m. "Confidential Business Information" shall have the meaning
ascribed to it in Section 5(b).
n. "Continuation Period" shall have the meaning ascribed to it in
Section 4(c)(iii).
18
<PAGE>
o. "Disability" shall mean the inability of the Executive to perform
substantially all of his current duties as required hereunder for a continuous
period of 90 days because of mental or physical condition, illness or injury.
p. "Effective Date" shall mean January 30, 1998.
q. "Fair Market Value" shall have the meaning ascribed to it in
Section 4(e).
r. "Initial Public Offering" shall mean the closing of the first
public offering of the Company's common stock registered under the Securities
Act of 1933 in which aggregate proceeds to the Company, net of all underwriting
discounts and commissions and other expenses of issuance and distribution as
stated in the prospectus relating to such offering, are equal to at least twelve
million dollars ($12,000,000).
s. "Notice of Termination" shall mean a written notice of
termination from the Company or the Executive which specifies an effective date
of termination, indicates the specific termination provision in this Agreement
relied upon, and sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated.
t. "Plan" shall mean The InterCept Group, Inc. Amended and Restated
1996 Stock Option Plan, effective as of November 12, 1996.
u. "Pro Rata Bonus" shall mean an amount equal to the Bonus Amount
multiplied by a fraction the numerator of which is the number of days in the
fiscal year through the Termination Date and the denominator of which is 365.
v. "Successors and Assigns" shall mean a corporation or other
entity acquiring all or substantially all the assets and business of the Company
(including this Agreement), whether by operation of law or otherwise.
w. "Termination Date" shall mean, in the case of the Executive's
death, his date of death, and in all other cases, the date specified in the
Notice of Termination.
x. "Trade Secrets" shall have the meaning ascribed to it in Section
5(a).
[End of page]
19
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
and its seal to be affixed hereunto by its officers thereunto duly authorized,
and the Executive has signed and sealed this Agreement, effective as of the date
first above written.
THE INTERCEPT GROUP, INC.
ATTEST:
By: /s/ Marie Storey By: /s/ John W. Collins
------------------- -----------------------
Name: Marie Storey Name: John W. Collins
------------------- -----------------------
Title: Assistant Secretary Title: Chief Executive Officer
------------------- -----------------------
(CORPORATE SEAL)
EXECUTIVE
/s/ Donny R. Jackson
---------------------
Donny R. Jackson
<PAGE>
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT (this "Agreement") is made by and between THE
INTERCEPT GROUP, INC., a Georgia corporation (the "Company"), and SCOTT R.
MEYERHOFF, an individual resident of Georgia (the "Employee"), as of this 1st
day of February, 1998 (the "Effective Date").
The Company desires to employ the Employee as its Chief Financial Officer.
The Employee is willing to serve as the Company's Chief Financial Officer on the
terms and conditions herein provided.
Certain terms used in this Agreement are defined in Section 17.
In consideration of the foregoing, the mutual covenants contained herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree that on the Effective Date:
1. Employment. The Company shall employ the Employee, and the Employee shall
----------
serve the Company, as Chief Financial Officer upon the terms and conditions set
forth herein. The Employee shall have such authority and responsibilities as
are consistent with his position and which may be set forth in this Agreement,
in the Bylaws or assigned by the CEO or the President from time to time. The
Employee shall devote his full business time, attention, skill and efforts to
the performance of his duties hereunder, except during periods of illness or
periods of vacation and leaves of absence consistent with Company policy. The
Employee may devote reasonable periods of time to perform charitable and other
community activities and to manage his personal investments; provided, however,
-------- -------
that such activities do not materially interfere with the performance of his
duties hereunder and are not in conflict or competitive with, or adverse to, the
interests of the Company.
2. Term. Unless earlier terminated as provided herein, the Employee's
----
employment under this Agreement shall be for a term (the "Term") of one year.
The Term shall be automatically extended by twelve (12) months upon expiration
of the initial Term and each anniversary thereafter unless either the Company or
the Employee has given written notice to the other at least ninety (90) days
prior to the expiration of the Term or any renewal period, of its or his intent
not to extend the Agreement.
3. Compensation and Benefits.
-------------------------
a. The Company shall pay the Employee a salary at a rate of not less than
$130,000 per annum in accordance with the salary payment practices of the
Company. The CEO and President shall review the Employee's salary at least
annually (on or before February 1, 1999, for the first review) and may increase
the Employee's base salary if they determine in their sole discretion that an
increase is appropriate.
<PAGE>
b. The Employee shall be eligible to participate in certain management
incentive or bonus programs as the Board of Directors may establish from time to
time.
c. The Employee may participate in the Plan and shall be eligible for the
grant of stock options, restricted stock and other awards thereunder.
d. The Employee may participate in all retirement, welfare, deferred
compensation, life and health insurance, and other benefit plans or programs of
the Company now or hereafter applicable to the Employee or applicable generally
to employees of the Company.
e. The Company shall reimburse the Employee for travel and other expenses
related to the Employee's duties which are incurred and accounted for in
accordance with the historic practices of the Company.
f. The Employee shall be entitled to three (3) weeks paid vacation during
each calendar year.
4. Termination.
-----------
a. The Employee's employment under this Agreement may be terminated prior to
the end of the Term only as follows:
(i) upon the death of the Employee;
(ii) by the Company due to the Disability of the Employee upon delivery
of a Notice of Termination to the Employee; and
(iii) by the Company for Cause upon delivery of a Notice of Termination
to the Employee.
(iv) prior to a Change in Control, by the Company without Cause upon no
less than sixty (60) days' written notice to Employee, provided the
Company complies with Section 4.b(iii) hereof, whichever
applies.
b. Prior to the Initial Public Offering, if the Employee's employment with the
Company shall be terminated during the Term (i) by reason of the Employee's
death, (ii) by the Company for Disability or Cause, or (iii) by the Company
without Cause, the Company shall pay to the Employee (or in the case of his
death, the Employee's estate) within 15 days after the Termination Date, a lump
sum cash payment equal to one-fourth (1/4) of the Base Amount and all of the
Employee's incentive awards, stock options and stock appreciation rights which
remain unvested as of the Termination Date shall lapse.
c. Prior to the Initial Public Offering, if the Employee's employment with
the Company shall be terminated for any reason within one year after a Change in
Control or by the Employee with Adequate Justification, the Company shall pay to
the Employee, within 15 days of
2
<PAGE>
the Termination Date, a lump sum cash payment equal to three-quarters (3/4) of
the Base Amount and the restrictions on any outstanding incentive awards
(including stock options) granted to the Employee under the Plan or under any
other incentive plan or arrangement shall lapse and such incentive award shall
become 100% vested, and all stock options and stock appreciation rights granted
to the Employee shall become 100% vested and immediately exercisable.
d. After the Initial Public Offering, if the Employee's employment with the
Company shall be terminated during the Term (i) by reason of the Employee's
death, or (ii) by the Company for Disability or Cause, the Company shall pay to
the Employee (or in the case of his death, the Employee's estate) within 15 days
after the Termination Date, a lump sum cash payment equal to the Accrued
Compensation and, if such termination is other than by the Company for Cause,
the Pro Rata Bonus, and all of the Employee's incentive awards, stock options
and stock appreciation rights which remain unvested as of the Termination Date
shall lapse.
e. After the Initial Public Offering, if the Employee's employment with the
Company shall be terminated by the Company for any reason within one year after
a Change in Control or by the Employee with Adequate Justification, in addition
to other rights and remedies available in law or equity, the Employee shall be
entitled to the following:
(i) the Company shall pay the Employee in cash within 15 days of
the Termination Date an amount equal to all Accrued
Compensation and the Pro Rata Bonus;
(ii) the Company shall pay to the Employee in cash at the end of
each of the nine consecutive 30-day periods following the
Termination Date an amount equal to one-twelfth (1/12) of
the sum of the Base Amount and the Bonus Amount.
(iii) for the period from the Termination Date through the
date that is nine months from the Termination Date (the
"Continuation Period"), the Company shall at its expense
continue on behalf of the Employee the life insurance,
disability, medical, dental and hospitalization benefits
provided (x) to the Employee at any time during the 90-day
period prior to the Change in Control or at any time
thereafter or (y) to other similarly situated employees who
continue in the employ of the Company during the
Continuation Period. The coverage and benefits (including
deductibles and costs) provided in this Section 4(e)(iii)
during the Continuation Period shall be no less favorable to
the Employee than the most favorable of such coverages and
benefits during any of the periods referred to in clauses
(x) and (y) above. The Company's obligation hereunder with
respect to the foregoing benefits shall be limited to the
extent that the Employee obtains any such benefits pursuant
to a subsequent employer's benefit plans, in which case the
Company may reduce the coverage of any benefits it is
required to provide
3
<PAGE>
the Employee hereunder as long as the aggregate coverages
and benefits of the combined benefit plans is no less
favorable to the Employee than the coverages and benefits
required to be provided hereunder. This subsection (iii)
shall not be interpreted so as to limit any benefits to
which the Employee may be entitled under any of the
Company's employee benefit plans, programs or practices
following the Employee's termination of employment,
including without limitation, retiree medical and life
insurance benefits; and
(iv) the restrictions on any outstanding incentive awards
(including stock options) granted to the Employee under the
Plan or under any other incentive plan or arrangement shall
lapse and such incentive award shall become 100% vested, and
all stock options and stock appreciation rights granted to
the Employee shall become 100% vested and immediately
exercisable.
f. After the Initial Public Offering, if the Company terminates the Employee
without Cause, the Company shall pay to the Employee in cash at the end of each
of the six consecutive 30-day periods following the Termination Date an amount
equal to one-twelfth (1/12) of the sum of the Base Amount and the Bonus Amount.
g. The severance pay and benefits provided for in this Section 4 shall be in
lieu of any other severance or termination pay to which the Employee may be
entitled under any Company severance or termination plan, program, practice or
arrangement and shall be in consideration for the Employee's agreements in
Section 5 hereof. The Employee's entitlement to any other compensation or
benefits shall be determined in accordance with the Company's employee benefit
plans and other applicable programs, policies and practices then in effect.
h. In the event that the Employee is a director of the Company or any of its
affiliates and his employment hereunder is terminated for any reason, the
Employee shall, and does hereby, tender his resignation as a director of the
Company and any of its affiliates effective as of the Termination Date.
5. Protection of Trade Secrets and Confidential Information
---------------------------------------------------------
a. Through exercise of his rights and performance of his obligations under
this Agreement, Employee will be exposed to "Trade Secrets" and "Confidential
Information" (as those terms are defined below). "Trade Secrets" shall mean
information or data of or about the Company or any affiliated entity, including,
but not limited to, technical or nontechnical data, formulas, patterns,
compilations, programs, devices, methods, techniques, drawings, processes,
financial data, financial plans, products plans, or lists of actual or potential
customers, clients, distributors, or licensees, that: (i) derive economic value,
actual or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from their disclosure or use; and (ii) are the subject of efforts that are
reasonable under the circumstances to maintain their secrecy. To the extent
that the foregoing definition is inconsistent with a definition of "trade
secret" mandated under applicable law, the
4
<PAGE>
latter definition shall govern for purposes of interpreting Employee's
obligations under this Agreement. Except as required to perform his obligations
under this Agreement or except with Company's prior written permission, Employee
shall not use, redistribute, market, publish, disclose or divulge to any other
person or entity any Trade Secrets of the Company. The Employee's obligations
under this provision shall remain in force (during or after the Term) for so
long as such information or data shall continue to constitute a "trade secret"
under applicable law. Employee agrees to cooperate with any and all
confidentiality requirements of the Company and Employee shall immediately
notify the Company of any unauthorized disclosure or use of any Trade Secrets of
which Employee becomes aware.
b. The Employee agrees to maintain in strict confidence and, except as
necessary to perform his duties for the Company, not to use or disclose any
Confidential Business Information at any time, either during the term of his
employment or for a period of one year after the Employee's last date of
employment, so long as the pertinent data or information remains Confidential
Business Information. "Confidential Business Information" shall mean any non-
public information of a competitively sensitive or personal nature, other than
Trade Secrets, acquired by the Employee, directly or indirectly, in connection
with the Employee's employment (including his employment with the Company prior
to the date of this Agreement), including (without limitation) oral and written
information concerning the Company or its affiliates relating to financial
position and results of operations (revenues, margins, assets, net income,
etc.), annual and long-range business plans, marketing plans and methods,
account invoices, oral or written customer information, and personnel
information. Confidential Business Information also includes information
recorded in manuals, memoranda, projections, minutes, plans, computer programs,
and records, whether or not legended or otherwise identified by the Company and
its affiliates as Confidential Business Information, as well as information
which is the subject of meetings and discussions and not so recorded; provided,
however, that Confidential Business Information shall not include information
that is generally available to the public, other than as a result of disclosure,
directly or indirectly, by the Employee, or was available to the Employee on a
non-confidential basis prior to its disclosure to the Employee.
c. Upon termination of employment, the Employee shall leave with the Company
all business records relating to the Company and its affiliates including,
without limitation, all contracts, calendars, and other materials or business
records concerning its business or customers, including all physical,
electronic, and computer copies thereof, whether or not the Employee prepared
such materials or records himself. Upon such termination, the Employee shall
retain no copies of any such materials.
d. As set forth above, the Employee shall not disclose Trade Secrets or
Confidential Business Information. However, nothing in this provision shall
prevent the Employee from disclosing Trade Secrets or Confidential Business
Information pursuant to a court order or court-issued subpoena, so long as the
Employee first notifies the Company of said order or subpoena in sufficient time
to allow the Company to seek an appropriate protective order. The Employee
agrees that if he receives any formal or informal discovery request, court
order, or subpoena requesting that he disclose Trade Secrets or Confidential
Business Information, he will immediately notify the Company and provide the
Company with a copy of said request, court order, or subpoena.
5
<PAGE>
6. Non-Solicitation and Related Matters
------------------------------------
a. If the Employee is terminated for Cause or if the Employee resigns without
Adequate Justification, then for a period of two years following the date of
termination, the Employee shall not (except on behalf of or with the prior
written consent of the Company) either directly or indirectly, on the Employee's
own behalf or in the service or on behalf of others, (i) solicit, divert, or
appropriate to or for a Competing Business, or (ii) attempt to solicit, divert,
or appropriate to or for a Competing Business, any person or entity that was a
customer or prospective customer of the Company on the date of termination and
with whom the Employee had direct material contact within six months of the
Employee's last date of employment.
b. If the Employee is terminated for Cause or if the Employee resigns without
Adequate Justification, then for a period of two years following the date of
termination, the Employee will not, either directly or indirectly, on the
Employee's own behalf or in the service or on behalf of others, (i) solicit,
divert, or hire away, or (ii) attempt to solicit, divert, or hire away any
employee of or consultant to the Company or any of its affiliates engaged or
experienced in the Business, regardless of whether the employee or consultant is
full-time or temporary, the employment or engagement is pursuant to written
agreement, or the employment is for a determined period or is at will.
c. The Employee acknowledges and agrees that great loss and irreparable
damage would be suffered by the Company if the Employee should breach or violate
any of the terms or provisions of the covenants and agreements set forth in this
Section 6. The Employee further acknowledges and agrees that each of these
covenants and agreements is reasonably necessary to protect and preserve the
interests of the Company. The parties agree that money damages for any breach
of clauses (a) and (b) of this Section 6 will be insufficient to compensate for
any breaches thereof, and that the Employee or any of the Employee's affiliates,
as the case may be, will, to the extent permitted by law, waive in any
proceeding initiated to enforce such provisions any claim or defense that an
adequate remedy at law exists. The existence of any claim, demand, action, or
cause of action against the Company, whether predicated upon this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of
any of the covenants or agreements in this Agreement; provided, however, that
-------- -------
nothing in this Agreement shall be deemed to deny the Employee the right to
defend against this enforcement on the basis that the Company has no right to
its enforcement under the terms of this Agreement.
d. The Employee acknowledges and agrees that: (i) the covenants and
agreements contained in clauses (a) through (e) of this Section 6 are the
essence of this Agreement; (ii) that the Employee has received good, adequate
and valuable consideration for each of these covenants; and (iii) each of these
covenants is reasonable and necessary to protect and preserve the interests and
properties of the Company. The Employee also acknowledges and agrees that: (i)
irreparable loss and damage will be suffered by the Company should the Employee
breach any of these covenants and agreements; (ii) each of these covenants and
agreements in clauses (a) and (b) of this Section 6 is separate, distinct and
severable not only from the other covenants and agreements but also from the
remaining provisions of this Agreement; and (iii) the unenforceability of any
covenants or agreements shall not affect the validity or
6
<PAGE>
enforceability of any of the other covenants or agreements or any other
provision or provisions of this Agreement. The Employee acknowledges and agrees
that if any of the provisions of clauses (a) and (b) of this Section 6 shall
ever be deemed to exceed the time, activity, or geographic limitations permitted
by applicable law, then such provisions shall be and hereby are reformed to the
maximum time, activity, or geographical limitations permitted by applicable law.
e. The Employee and the Company hereby acknowledge that it may be appropriate
from time to time to modify the terms of this Section 5 and the definition of
the term "Business" to reflect changes in the Company's business and affairs so
that the scope of the limitations placed on the Employee's activities by this
Section 6 accomplishes the parties' intent in relation to the then current facts
and circumstances. Any such amendment shall be effective only when completed in
writing and signed by the Employee and the Company.
7. Successors; Binding Agreement
-----------------------------
a. This Agreement shall be binding upon and shall inure to the benefit of the
Company, its Successors and Assigns and the Company shall require any Successors
and Assigns to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession or assignment had taken place.
b. Neither this Agreement nor any right or interest hereunder shall be
assignable or transferable by the Employee, his beneficiaries or legal
representatives, except by will or by the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Employee's legal personal representative.
8. Fees and Expenses The Company shall pay all legal fees and related
------------------
expenses (including but not limited to the costs of experts, accountants and
counsel) incurred by the Employee as they become due as a result of (a) the
termination of employment (including all such fees and expenses, if any,
incurred in contesting or disputing any such termination of employment) and (b)
the Employee seeking to obtain or enforce any right or benefit provided by this
Agreement; provided, however, that the circumstances set forth in clauses (a)
-------- -------
and (b) above occurred on or after a Change in Control.
9. Notice For the purposes of this Agreement, notices and all other
-------
communications provided for in this Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses last given by each party
to the other; provided, however, that all notices to the Company shall be
-------- -------
directed to the attention of the CEO with a copy to the Secretary of the
Company. All notices and communications shall be deemed to have been received
on the date of delivery thereof.
10. Settlement of Claims. The Company's obligation to make the payments
--------------------
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Employee or others.
7
<PAGE>
The Company may, however, withhold from any benefits payable under this
Agreement all federal, state, city, or other taxes as shall be required pursuant
to any law or governmental regulation or ruling.
11. Modification and Waiver No provisions of this Agreement may be modified,
-----------------------
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Employee and the Company. No waiver by any party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time.
12. Governing Law This Agreement shall be governed by and construed and
-------------
enforced in accordance with the laws of the State of Georgia without giving
effect to the conflict of laws principles thereof. Any action brought by any
party to this Agreement shall be brought and maintained in a court of competent
jurisdiction in State of Georgia.
13. Severability The provisions of this Agreement shall be deemed severable
------------
and the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof.
14. Entire Agreement This Agreement constitutes the entire agreement between
----------------
the parties hereto and supersedes all prior agreements, if any, understandings
and arrangements, oral or written, between the parties hereto with respect to
the subject matter hereof.
15. Headings The headings of Sections herein are included solely for
--------
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
16. Counterparts This Agreement may be executed in one or more counterparts,
------------
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
17. Definitions For purposes of this Agreement, the following terms shall
-----------
have the following meanings:
a. "Accrued Compensation" shall mean an amount which shall include all
amounts earned or accrued through the Termination Date but not paid as of the
Termination Date including (i) base salary, (ii) reimbursement for reasonable
and necessary expenses incurred by the Employee on behalf of the Company during
the period ending on the Termination Date, and (iii) bonuses and incentive
compensation (other than the Pro Rata Bonus).
b. "Act" shall mean the Securities Act of 1933, as amended.
c. "Adequate Justification" shall mean the occurrence within one year after a
change in control of any of the following events or conditions: (i) a material
failure of the Company to comply with the terms of this agreement; (ii) any
relocation of the Employee outside
8
<PAGE>
a 30-mile radius from the executive offices occupied by the Employee prior to
this change in control that is not approved by the members of the Incumbent
Board (as defined in Section 17(j)(ii)); or (iii) other than as provided for
herein, any substantial diminution in the Employee's authority or the Employee's
responsibilities that is not approved by members of the Incumbent Board.
d. "Base Amount" shall mean the greater of the Employee's annual base salary
(i) at the rate in effect on the Termination Date or (ii) at the highest rate in
effect at any time during the 90-day period prior to the Change in Control, and
shall include all amounts of his base salary that are deferred under the
qualified and non-qualified employee benefit plans of the Company or any other
agreement or arrangement.
e. "Bonus Amount" shall mean the most recent annual bonus paid or payable to
the Employee prior to the Termination Date or the annual bonus paid or payable
for the full fiscal year ended prior to the fiscal year during which a Change in
Control occurred (or, in each case, such lesser period for which annual bonuses
were paid or payable to the Employee).
f. "Business" shall mean the design, development, marketing and
implementation of electronic commerce products and services for community
financial institutions.
g. "Bylaws" shall mean the Amended and Restated Bylaws of the Company, as
amended, supplemented or otherwise modified from time to time.
h. The termination of the Employee's employment shall be for "Cause" if it is
the result of:
(i) the commission or omission of an act by the Employee of a
willful or negligent act which causes harm to the Company;
(ii) the conviction of the Employee for the commission or
perpetration by the Employee of any felony or any act of
fraud;
(iii) the failure of the Employee to devote his full time and
attention to the business as provided in Section 1; or
(iv) the failure of the Employee to perform his duties hereunder
in a manner satisfactory to the CEO and President, as
determined in their sole discretion; provided, however, that
-------- -------
the Employee shall have 30 days to cure such failure after
receiving notice from the Company. The Company shall be
obligated to provide only one notice to Employee pursuant to
this Section 17(h)(iv). Thereafter, the Company may
terminate the Employee, without the Employee having a right
to cure, if the Employee fails to perform his duties in a
manner satisfactory to the CEO and the President, as
determined in their sole discretion.
9
<PAGE>
i. "CEO" shall mean John W. Collins or such other person who is serving as the
Company's Chief Executive Officer.
j. A "Change in Control" shall mean the occurrence during the Term of any of
the following events after the Initial Public Offering:
(i) An acquisition (other than directly from the Company) of any
voting securities of the Company (the "Voting Securities")
by any "Person" (as the term person is used for purposes of
Section 13(d) or 14(d) of the Securities Exchange Act of
1934 (the "1934 Act")) immediately after which such Person
has "Beneficial Ownership" (within the meaning of Rule 13d-3
promulgated under the 1934 Act) of 40% or more of the
combined voting power of the Company's then outstanding
Voting Securities; provided, however, that in determining
-------- -------
whether a Change in Control has occurred, Voting Securities
which are acquired in a "Non-Control Acquisition" (as
hereinafter defined) shall not constitute an acquisition
which would cause a Change in Control. A "Non-Control
Acquisition" shall mean an acquisition by (1) an employee
benefit plan (or a trust forming a part thereof) maintained
by (x) the Company or (y) any corporation or other Person of
which a majority of its voting power or its equity
securities or equity interest is owned directly or
indirectly by the Company (a "Subsidiary"), (2) the Company
or any Subsidiary, or (3) any Person in connection with a
"Non-Control Transaction" (as hereinafter defined).
(ii) The individuals who, as of the date of the Initial Public
Offering, are members of the Board of Directors of the
Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors;
provided, however, that if the election, or nomination for
-------- -------
election by the Company's stockholders, of any new director
was approved by a vote of at least a majority of the
Incumbent Board, such new director shall, for purposes of
this Agreement, be considered as a member of the Incumbent
Board; provided, further, however, that no individual shall
-------- ------- -------
be considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an
actual or threatened "Election Contest" (as described in
Rule 14a-11 promulgated under the 1934 Act) or other actual
or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board of Directors (a
"Proxy Contest") including by reason of any agreement
intended to avoid or settle any Election Contest or Proxy
Contest; or
(iii) Approval by stockholders of the Company of:
10
<PAGE>
(A) A merger, consolidation or reorganization involving the
Company, unless
(1) the stockholders of the Company, immediately
before such merger, consolidation or
reorganization, own, directly or indirectly,
immediately following such merger, consolidation
or reorganization, at least a majority of the
combined voting power of the outstanding voting
securities of the corporation resulting from such
merger or consolidation or reorganization (the
"Surviving Corporation") in substantially the same
proportion as their ownership of the Voting
Securities immediately before such merger,
consolidation or reorganization, and
(2) the individuals who were members of the Incumbent
Board immediately prior to the execution of the
agreement providing for such merger, consolidation
or reorganization constitute at least a majority
of the members of the board of directors of the
Surviving Corporation.
(A transaction described in clauses (1) and (2) shall
herein be referred to as a "Non-Control Transaction").
(B) A complete liquidation or dissolution of the Company;
or
(C) An agreement for the sale or other disposition of all
or substantially all of the assets of the Company to
any Person (other than a transfer to a Subsidiary).
(iv) Notwithstanding anything contained in this Agreement to the
contrary, if the Employee's employment is terminated prior
to a Change in Control and the Employee reasonably
demonstrates that such termination (A) was at the request of
a third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control and who
effectuates a Change in Control (a "Third Party") or (B)
otherwise occurred in connection with, or in anticipation
of, a Change in Control which actually occurs, then for all
purposes of this Agreement, the date of a Change in Control
with respect to the Employee shall mean the date immediately
prior to the date of such termination of the Employee's
employment.
k. "Competing Business" shall mean any business that, in whole or in part, is
the same or substantially the same as the Business.
11
<PAGE>
l. "Confidential Business Information" shall have the meaning ascribed to it
in Section 5(b).
m. "Continuation Period" shall have the meaning ascribed to it in Section
4(e)(iii).
n. "Disability" shall mean the inability of the Employee to perform
substantially all of his current duties as required hereunder for a continuous
period of 90 days because of mental or physical condition, illness or injury.
o. "Effective Date" shall mean the date set forth in the recitals.
p. "Initial Public Offering" shall mean the closing of the first public
offering of the Company's common stock registered under the Act in which
aggregate proceeds to the Company, net of all underwriting discounts and
commissions and other expenses of issuance and distribution as stated in the
prospectus relating to such offering, are equal to at least twelve million
dollars ($12,000,000).
q. "Notice of Termination" shall mean a written notice of termination from
the Company or the Employee which specifies an effective date of termination,
indicates the specific termination provision in this Agreement relied upon, and
sets forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Employee's employment under the provision so
indicated.
r. "Plan" shall mean The InterCept Group, Inc. Amended and Restated 1996
Stock Option Plan effective as of November 12, 1996.
s. "President" shall mean Donny R. Jackson or such other person serving as the
President of the Company.
t. "Pro Rata Bonus" shall mean an amount equal to the Bonus Amount multiplied
by a fraction the numerator of which is the number of days in the fiscal year
through the Termination Date and the denominator of which is 365.
u. "Successors and Assigns" shall mean a corporation or other entity
acquiring all or substantially all the assets and business of the Company
(including this Agreement), whether by operation of law or otherwise.
v. "Termination Date" shall mean, in the case of the Employee's death, his
date of death, and in all other cases, the date specified in the Notice of
Termination.
w. "Territory" shall mean the United States.
x. "Trade Secrets" shall have the meaning ascribed to it in Section 5(a).
[End of page]
12
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed and
its seal to be affixed hereunto by its officers thereunto duly authorized, and
the Employee has signed and sealed this Agreement, effective as of the date
first above written.
THE INTERCEPT GROUP, INC.
ATTEST:
By: /s/ Marie Storey By: /s/ Donny R. Jackson
_______________________ ______________________
Name: Marie Storey Name: Donny R. Jackson
_______________________ ______________________
Title: Assistant Secretary Title: President
_______________________ ______________________
(CORPORATE SEAL)
EMPLOYEE
/s/ Scott R. Meyerhoff
__________________________________________
SCOTT R. MEYERHOFF
13
<PAGE>
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
BY AND BETWEEN
INTERCEPT HOLDINGS INC.
AND
VIR NANDA
DATED: JUNE 4, 1996
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT (this "Agreement") is made by and between
INTERCEPT HOLDINGS INC., a Georgia corporation (the "Company"), VIR NANDA, an
individual resident of Georgia (the "Employee"), and INTERCEPT SYSTEMS, INC., a
Georgia corporation (the "Guarantor"), as of this 4th day of June, 1996 (the
"Effective Date").
The Company intends to employ the Employee as its Director of Technology.
The Company recognizes that the Employee's contribution to the growth and
success of the Company and its wholly owned subsidiary, Intercept Systems, Inc.
("Intercept") has been crucial and is substantial.
The Company acknowledges that Employee designed the software system upon
which Guarantor's business is based and has developed a rapport and
relationships with a number of Guarantor's clients that are crucial to
Guarantor's business. The Company desires to provide for the employment of the
Employee, so as to continue to benefit from such relationships, support and
experience and to have Employee available as a resource in the future, and the
Employee is willing to serve the Company on the terms and conditions herein
provided.
In consideration of the foregoing, the mutual covenants contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto, intending to be legally bound,
hereby agree that on the Effective Date:
1. Employment. The Company shall employ the Employee, and the Employee
----------
shall serve as the Company's Director of Technology, upon the terms and
conditions set forth herein. The Employee shall have such authority and
responsibilities as are consistent with his prior position with Guarantor and
which may be set forth in this Agreement or assigned by the CEO of the Company
(the "CEO") from time to time. Promptly after the Effective Date, the Company
shall also increase the size of its board of directors and appoint the Employee
to fill the resulting vacancy in accordance with the Company's bylaws. The
Employee may devote reasonable periods of time to perform charitable and other
community activities and to manage his personal investments; provided, however,
-------- -------
that such activities do not materially interfere with the performance of his
duties hereunder and are not in conflict or competitive with, or adverse to, the
interests of the Company. This Agreement shall be timely submitted to the
shareholders of the Company for their approval.
2. Term. Unless earlier terminated as provided herein, the Employee's
----
employment under this Agreement shall be until his death (the "Term").
3. Compensation and Benefits.
-------------------------
a. Beginning on the Effective Date, the Company shall pay the Employee a
salary at a rate of not less than $200,000 per annum in accordance with the
salary payment practices of the Company. The CEO shall review the Employee's
salary at least annually and the Company may increase the Employee's base salary
to reflect a cost of living adjustment in an amount to be determined by the CEO,
or otherwise if he determines in his sole discretion that an increase is
appropriate.
<PAGE>
b. The Employee shall continue to participate in all retirement, welfare,
deferred compensation, life and health insurance, and other benefit plans or
programs of the Company now or hereafter applicable generally to employees of
the Company.
c. The Company shall continue to reimburse the Employee for travel and
other expenses related to the Employee's duties which are incurred and accounted
for in accordance with the Company's policies.
4. Termination.
-----------
a. The Employee's employment under this Agreement may be terminated prior
to the end of the Term only as follows:
(i) by the Company for Cause upon delivery of a Notice of
Termination to the Employee;
(ii) by the Company when Employee no longer directly owns any of
the Company's common stock held by him on the Effective Date,
or upon the earlier of: (a) the expiration of any lock-up
agreement to which Employee is a party in connection with an
underwritten public offering of the Company's common stock or
(b) completion of an underwritten public offering of the
Company's common stock; or
(iii) by the Employee upon 90 days written notice to Company.
b. If the Employee's employment with the Company shall be terminated (i)
by reason of the Employee's death or (ii) as provided in Section 4a.(i), (ii) or
(iii), the Company shall pay to the Employee (or in the case of his death, the
Employee's estate) within 15 days after the Termination Date, a lump sum cash
payment equal to the Accrued Compensation.
c. The severance pay and benefits provided for in this Section 4 shall be
in lieu of any other severance or termination pay to which the Employee may be
entitled under any Company severance or termination plan, program, practice or
arrangement. The Employee's entitlement to any other compensation or benefits
shall be determined in accordance with the Company's employee benefit plans and
other applicable programs, policies and practices then in effect.
d. In the event that the Employee is a director of the Company or any of
its affiliates and his employment hereunder is terminated by reason of his death
or pursuant to Section 4a.(i) or (ii) above, the Employee shall, and does
hereby, tender his resignation as a director of the Company and any of its
affiliates effective as of the Termination Date.
2
<PAGE>
5. Successors; Binding Agreement.
-----------------------------
a. This Agreement shall be binding upon and shall inure to the benefit of
the Company, its Successors and Assigns and the Company shall require any
Successors and Assigns to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would be required to
perform it if no such succession or assignment had taken place. The Company
shall have the right to assign this Agreement to Guarantor or any other
subsidiary of the Company by providing notice thereof to the Employee, and in
such event the Employee shall become an employee of such subsidiary and all
references herein to the Company shall refer to such subsidiary, and the
Employee hereby consents to any such assignment; provided, however that the
Company and the Guarantor shall remain liable to Employee under this Agreement.
b. Neither this Agreement nor any right or interest hereunder shall be
assignable or transferable by the Employee, his beneficiaries or legal
representatives, except by will or by the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Employee's
legal personal representative.
c. Guarantor acknowledges and covenants that Employee's services and
availability to the Company or Guarantor are of great value to Guarantor and in
consideration thereof, and to induce Employee to enter into this Agreement,
Guarantor hereby agrees to guarantee each and every promise and obligation of
the Company under this Agreement.
6. Notice. For the purposes of this Agreement, notices and all
------
other communications provided for in the Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given the
earlier of (i) when personally delivered or (iii) five days after it is received
by the U.S. Postal Service for delivery by certified mail, return receipt
requested, first-class postage prepaid, addressed to the respective addresses
last given by each party to the other; provided, however, that all notices to
-------- -------
the Company shall be directed to the attention of the CEO with a copy to the
Secretary of the Company. All notices and communications shall be deemed to
have been received on the date of delivery thereof.
7. Modification and Waiver. No provisions of this Agreement may be
-----------------------
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Employee and the Company. No waiver by
any party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
8. Governing Law. This Agreement shall be governed by and construed
-------------
and enforced in accordance with the laws of the State of Georgia without giving
effect to the conflict of laws principles thereof. Any action brought by any
party to this Agreement shall be brought and maintained in a court of competent
jurisdiction in State of Georgia.
3
<PAGE>
9. Severability. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
10. Entire Agreement. This Agreement constitutes the entire
----------------
agreement between the parties hereto and supersedes all prior agreements, if
any, understandings and arrangements, oral or written, between the parties
hereto with respect to the subject matter hereof.
11. Headings. The headings of Sections herein are included solely
--------
for convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement.
12. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
13. Definitions. For purposes of this Agreement, the following terms
-----------
shall have the following meanings:
a. "Accrued Compensation" shall mean an amount which shall include all
amounts earned or accrued through the Termination Date but not paid as of the
Termination Date including (i) base salary and (ii) reimbursement for reasonable
and necessary expenses incurred by the Employee on behalf of the Company during
the period ending on the Termination Date.
b. The termination of the Employee's employment shall be for "Cause" if
it is the result of:
(i) the commission of an act or omission to act by the Employee
in a willful or grossly negligent manner which causes
material harm to the Company; or
(ii) the conviction of the Employee for any felony or any act of
fraud.
c. "CEO" shall have the meaning set forth in Section 1.
d. "Notice of Termination" shall mean a written notice of termination
from the Company or the Employee which specifies an effective date of
termination, indicates the specific termination provision in this Agreement
relied upon, and sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Employee's employment under
the provision so indicated.
4
<PAGE>
e. "Successors and Assigns" shall mean a corporation or other entity (i)
the acquiring all or substantially all the assets and business of the Company
(including this Agreement), or (ii) which is the surviving legal person of a
merger to which the Company is a party, whether by operation of law or
otherwise.
f. "Termination Date" shall mean, in the case of the Employee's death,
his date of death, and in all other cases, the date specified in the Notice of
Termination, which in all other cases shall not in any event be earlier than
Employee's receipt of Notice of Termination.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
and its seal to be affixed hereunto by its officers thereunto duly authorized,
and the Employee has signed and sealed this Agreement, effective as of the date
first above written.
INTERCEPT HOLDINGS INC.
ATTEST:
By: /s/ Marie H. Storey By: /s/ John W. Collins
------------------- --------------------
Name: Marie H. Storey Name: John W. Collins
Title: Assistant Secretary Title: CEO
(CORPORATE SEAL)
EMPLOYEE
/s/ Vir Nanda
-----------------
VIR NANDA
INTERCEPT SYSTEMS, INC.
ATTEST:
By: /s/ Marie H. Storey By: /s/ John W. Collins
--------------------- ---------------------
Name: Marie H. Storey Name: John W. Collins
Title: Secretary Title: V.P.
(CORPORATE SEAL)
EMPLOYEE
/s/ Vir Nanda
-----------------
VIR NANDA
5
<PAGE>
EXHIBIT 10.12
INTERCEPT
GENERAL MARKETING AGENT AGREEMENT
INTERCEPT SYSTEMS, INC., a Georgia Corporation ("Servicer") and the undersigned
("Agent"), in consideration of their obligations in this Agreement and intending
to be legally bound, agree as follows:
1. Definitions: For purposes of this Agreement:
a. "End-User" shall mean, an end-user bank or savings bank that meets the
qualifications and criteria applicable to such offering establishment by
servicer for solicitation by Agent from time to time.
b. "Master Electronic Funds Transfer Services Agreement" shall mean the
contract in the form, and containing the terms and conditions (including
price and payment terms), established by Servicer from time to time for the
electronic funds transfer ("EFT") services provided to an End-User.
c. A Master Electronic Funds Transfer Services Agreement shall be "obtained
from an End-User" if, and only if, (1) the End-User is located within the
Territory; and (2) the Master Electronic Funds Transfer Services Agreement
has been executed by an authorized representative of the End-User.
d. "Territory" shall mean the states or locations identified on Exhibit "A"
hereto.
e. "Term" shall mean that period commencing on the date hereof and lasting for
a period of twelve complete months and any subsequent twelve month renewal
period.
2. Appointment: Subject to the terms of this Agreement, Servicer engages
Agent to solicit End-Users to enter into Master Electronic Funds Transfer
Services Agreements with Servicer for Its EFT services. Agent may solicit End-
Users only with respect to their proposed installation and use of the EFT
services in the Territory. Servicer reserves the right, to change the terms and
conditions of its Master Electronic Funds Transfer Services Agreement at any
time, and Servicer agrees to provide 30 days notice to Agent of any substantive
change. Agent acknowledges that this Agreement does not confer on Agent
exclusive rights in any other territory. Agent represents and warrants to
Servicer that it has the authority to enter into this Agreement and to perform
its terms fully.
3. Nature of Relationship: Agent shall be an independent contractor. Nothing
in this Agreement shall be construed to create any other relationship. Agent is
hereby advised that, as an independent contractor, it has certain
responsibilities under the federal and state tax laws.
4. Responsibilities of Agent: The duties of Agent shall be to:
a. Use its best efforts to solicit End-Users to enter into Master Electronic
Transfer Services Agreement;
b. Conduct its business so as to maintain and increase the goodwill and
reputation of Servicer;
c. Pay all expenses incurred by Agent in the performance of its duties under
this Agreement, including (1) dues and fees for membership in any local,
state, or national trade association or attendance at seminars or
conventions; (2) local and long distance transportation expenses; and (3)
expenses in connection with the solicitation of End-Users and the operation
of Agent's business, including telephone, delivery, entertainment, and
promotional expenses; and
d. Use only promotional material mutually agreed upon for purposes of
promotion of the Servicer's business.
5. Limits of Authority: Agent shall not, without prior written approval from
an authorized representative of Servicer, take any of the following actions:
a. Incur any expense or obligation in the name of the Servicer;
b. Disseminate any printed material regarding the Licensed Products or
Servicer's business; or
c. Use Servicer's advertising and promotional guidelines.
6. Payment of Commissions: Agent shall be compensated by Servicer for its EFT
services solely on the basis of commissions earned on any Master Electronic
Funds Transfer Services Agreements for End-Users located within the Territory.
Commissions shall be set forth in a Commission Schedule attached hereto as
Exhibit "B". The payment of any commissions to Agent shall be subject to all of
the terms and conditions of this Agreement.
<PAGE>
7. Statements: Servicer shall mail Agent a monthly statement showing
commissions earned. At no time shall Servicer be obligated to reimburse Agent
for any expenses unless it agrees to do so in writing.
8. Sales Support: Servicer shall provide sales support to agent including
promotional materials and sales representative in Territory as reasonably
required by agent.
9. Voluntary Termination: Prior to completion of the initial Term or any
renewal Term, either Servicer or Agent may terminate this agreement at any time
without cause by giving the other party one hundred twenty days prior written
notice. The payment of commissions shall continue through the term of any
Master Electronic Funds Transfer Service Agreement entered into pursuant to this
Agreement between Servicer and an End-User in the event of any termination other
than involuntary termination by either party.
10. Involuntary Termination: Either party may terminate this Agreement
immediately, without notice to either party for just cause. A termination shall
be deemed "for just cause" if the other party:
a. Breaches any provision of this Agreement;
b. Violates any law or regulation; or
c. Commits any willful or dishonest act that could injure the other party.
11. Confidentiality: Agent acknowledges that Servicer has a proprietary
interest in the association of its agents and personnel and the business of the
customers with whom such agents and personnel interact. Accordingly, Agent
shall provide Servicer with the full benefit of all work and contacts relevant
to the business of Servicer throughout the term of this Agreement. Agent shall
maintain in strict confidence, and shall not use or disclose except to its
regulatory authorities, as required by law or legal process, and as required to
perform its duties for Servicer, all Trade Secrets of Servicer. This obligation
shall apply during and after the term of this Agreement for so long as the
pertinent information or data remain Trade Secrets, and shall apply regardless
of whether the Trade Secrets are in written or tangible form. For purposes of
this Agreement, a Trade Secret is defined to consist of legally protected rights
in confidential information. Without limiting the generality of the foregoing,
Trade Secrets of Servicer include nonpublic information regarding the Servicer,
account invoices, training and educational manuals, administrative manuals, and
prospective customer leads developed by Servicer regardless of whether computer
or electronically accessible "on-line". However, Trade Secrets do not include
information Agent possesses or acquires independently of Agent's activities or
duties as an agent of Servicer. The foregoing obligation shall continue to
apply for two years after termination of this Agreement.
12. Return of Materials: Upon the request of Servicer and, in any event, upon
the termination of Agent's engagement, Agent shall deliver to Servicer all
memoranda, notes, records, drawings, manuals, disks, or other documents and
media pertaining to Servicer's business or Agent's activities or duties as a
Servicer agent, including all copies, extracts, summaries, and analyses thereof.
This obligation shall not apply to publicity distributed documentation, or
internal business or personal records of Agent's own creation that do not
contain Servicer Trade Secrets.
13. Remedies: In the event of any breach by either party identified in Section
10 of this Agreement, the resulting injuries to the other party would be
difficult or impossible to estimate accurately, but it is certain that injury or
damages will result to the business of the other party. Both parties agree
that, in the event of any such breach, the non-breaching party shall be
entitled, in addition to any available legal or equitable remedies or damages,
to an injunction to restrain the violation or anticipated violation thereof.
Should the non-breaching party have any basis to seek such legal or equitable
action, the breaching party shall pay any and all attorney fees and court costs
that the other party may incur. The non-breaching party's rights under this
section shall be in addition to every other remedy (equitable, statutory, legal
or contractual) to which the non-breaching party may be entitled.
14. Miscellaneous: No assignment by Agent or Servicer of this Agreement or any
commissions due hereunder shall be valid unless approved in advance by an
authorized officer of Servicer or Agent, as the case may be. No modification or
waiver of any provision of this Agreement shall be binding on Servicer unless
made in writing and signed by an authorized officer of Servicer. This Agreement
is governed by the laws of the State of Georgia as it
2
<PAGE>
applies to a contract executed, delivered, and performed in such state. This
Agreement supersedes and replaces any agreement previously entered into between
Agent and Servicer. Servicer's failure to enforce any provision of this
Agreement shall not constitute a waiver of any provision of this Agreement. The
provisions of this Agreement shall be deemed severable. In the event that any
provision of this Agreement is determined to be unenforceable or invalid, such
provision shall nonetheless be enforced to the fullest extent permitted by
applicable law, and such determination shall not affect the validity and
enforceability of any other remaining provisions of this Agreement. This
Agreement, together with all schedules attached hereto and all writings
incorporated herein by reference, constitutes the entire agreement between Agent
and Servicer with respect to the subject matter of this Agreement.
SERVICER: INTERCEPT AGENT:
By:_________________________________________ By:___________________________
Title: President and CEO Title:
Date: Date:
3
<PAGE>
EXHIBIT A
---------
[Territory]
EXHIBIT B
---------
[Commission Schedule]
4
<PAGE>
EXHIBIT 10.13
MASTER ELECTRONIC FUNDS TRANSFER SERVICES AGREEMENT
---------------------------------------------------
THIS AGREEMENT, is entered into this ____ day of ________________, 19___,
("Agreement") between INTERCEPT SYSTEMS, INC., a Georgia corporation,
("Servicer") whose address is 3150 Holcomb Bridge Road, Suite 200, Norcross,
Georgia 30071, and Institution Name ("Customer"), whose address is Institution
---------------- -----------
Address.
- -------
The purpose of this Agreement is to set forth the terms and conditions
under which Servicer will provide certain electronic transaction processing
products and services to the Customer.
Customer understands that INTERCEPT operates an electronic transaction
processing business in conformity with state and federal laws, rules and
regulations and processes transactions through regional and national networks.
Customer further understands that Servicer has entered into, and may in the
future enter into servicing agreements with financial or other institutions
providing the same or similar services to be provided to Customer.
NOW, THEREFORE, in consideration of the mutual covenants, promises and
agreements herein contained and of the payments hereinafter set forth, the
parties agree as follows:
I. TERM OF AGREEMENT
The term of this Agreement shall commence on ___________________, 19___,
and shall continue thereafter in accordance with the Addendum(s), unless earlier
terminated in accordance with this Agreement or any Addendum hereto.
II. SERVICES TO BE PROVIDED BY SERVICER
Servicer will perform the services as set forth in the Addendum(s).
Servicer may make changes in the services based upon, but not limited to,
technological developments, legislative or regulatory changes, or the
introduction of new services by Servicer or the networks through which it
provides services. Servicer will notify Customer of any such changes that will
materially affect Customer, and will use commercially reasonable efforts to do
so at least thirty (30) days prior to implementation date of such changes. The
parties agree that Servicer shall be the exclusive provider of the service
described in each Addendum to this Agreement.
III. LIMITATION OF LIABILITY
Customer agrees that:
1. SERVICER SHALL HAVE NO DUTY OR OBLIGATION TO PERFORM ANY DUTY NOT
SPECIFICALLY SET FORTH HEREIN AND EXPRESSLY REQUIRED HEREUNDER.
2. THE ENTIRE LIABILITY OF SERVICER ARISING OUT OF OR IN CONNECTION WITH
THIS AGREEMENT AT ANY TIME, AND FROM TIME TO TIME, SHALL NOT EXCEED THE SUM OF
THE AMOUNT OF THE SERVICE FEES DUE AND ACTUALLY PAID BY CUSTOMER TO SERVICER
PURSUANT TO THIS AGREEMENT FOR THE TWELVE (12) MONTH PERIOD IMMEDIATELY
PRECEDING THE DATE THE FIRST CLAIM, IF ANY, ARISES HEREUNDER; AND
3. IN NO EVENT SHALL SERVICER BE LIABLE FOR ANY DAMAGES OF ANY KIND
WHATSOEVER EXCEPT FOR CUSTOMER'S DIRECT COMPENSATORY DAMAGES RESULTING FROM A
MATERIAL BREACH OF THIS AGREEMENT BY SERVICER, IN AN AGGREGATE AMOUNT NOT TO
EXCEED THAT AMOUNT SET FORTH IN SUBPARAGRAPH 2 ABOVE; AND
4. IN NO EVENT SHALL SERVICER BE LIABLE FOR ANY LOSS, LOST PROFIT OR
OTHER INCIDENTAL OR CONSEQUENTIAL DAMAGES, EVEN IF SERVICER HAS BEEN ADVISED OF
THE
<PAGE>
POSSIBILITY OF SUCH DAMAGES. INTERCEPT WILL NOT BE HELD RESPONSIBLE FOR ANY
SETTLEMENT ISSUES OR DEFICIENCIES NOT REPORTED TO INTERCEPT WITHIN 48 HOURS OF
SETTLEMENT DATE.
IV. FEES AND PAYMENTS
Customer shall pay Servicer the charges described in the Addendum(s)
attached hereto and made a part of this Agreement. Servicer shall have the
right to revise the recurring prices and pricing structure from time to time
after the end of the first twelve (12) months of actual operation hereunder and
to increase or decrease such charges and/or modify the pricing structure then in
effect, not to exceed seven (7%) percent annually, regardless of whether such
charges are based on a flat fee or on a per item charge basis, effective ninety
(90) days after written notice of any such change by Servicer to the Customer.
Notwithstanding any provision herein to the contrary, Servicer specifically
reserves the right to adjust at any time pass through costs, telecommunications,
and other outside Servicer costs directly associated with providing the services
described in this Agreement, when incurred by Servicer. Servicer will send a
statement of the compensation due at the end of each month and Customer shall
make payment thereof within fifteen (15) days of the billing date. Any fee or
charges not paid within thirty (30) days from date of invoice shall bear
interest at one and one-half (1 1/2%) percent per month until paid.
V. SET OFF
Servicer shall have the right to set off against Customer's account(s) any
indebtedness which Customer owes Servicer, at any time before or after the
termination of this Agreement or extension(s) hereof, without further notice to
or demand on Customer and whether the indebtedness to Servicer is now existing
or hereafter arises.
VI. CONFIDENTIALITY
All computer programs, software and hardware packages, user documentation,
and written specifications, concepts, and technologies relating to the business
of Servicer will be kept in the strictest of confidence by Customer and its
employees.
VII. TRADE SECRETS
Customer acknowledges that the system operated by Servicer and all
technical and operational data, specifications, marketing materials and manuals
and any other information received from Servicer are proprietary to Servicer and
have been developed as trade secrets at Servicer's expense. Customer will hold
and use such property in strict confidence and as trade secrets and will not
copy, sell, transfer, sub-license, assign, distribute or disclose such property
or any part or parts of it in any form, to any individual, firm, corporation or
other entity, nor permit any of Customer's employees, agents or representatives
to do so without the prior written consent of Servicer. Internal dissemination
of proprietary information by Customer shall be limited to those agents or
employees of Customer whose duties justify the need to know such information and
then only on the basis of a clear understanding by such agents or employees of
their obligation to maintain the trade secret or confidential status of such
proprietary information solely to the use permitted to Customer under this
Agreement. Customer shall be responsible for the actions of its agents and
employees with respect to such proprietary information. If Customer or any of
its employees, agents or representatives shall attempt to use or dispose of any
such property in a manner other than as expressly permitted under this
Agreement, Customer agrees that Servicer shall have the right, in addition to
such other remedies which may be available to it, to injunctive relief enjoining
such use, disposition, attempted use or disposition, it being acknowledged that
legal remedies are inadequate to protect Servicer.
VIII. DEFAULT
In the event Servicer defaults in the performance of its obligations under
this Agreement, except as provided in Section III hereof, Customer may, as its
sole remedy, give Servicer forty-five (45) days written notice to cure such
default. If Servicer fails to cure the default described in the notice or make
substantial progress toward
2
<PAGE>
curing same within forty-five (45) days, Customer may terminate this Agreement
upon ninety (90) days written notice to Servicer. Notwithstanding any default
on the part of the Servicer, all fees and charges due from Customer shall be
made without set-off or deduction.
In the event Customer defaults in the performance of its obligations under
this Agreement, including, but not limited to, the payment of charges for
services specified in this Agreement, Servicer shall give Customer thirty (30)
days written notice to cure such default. If Customer fails to cure the default
described in the notice or make substantial progress toward curing same within
thirty (30) days, Service may, (1) terminate all service to Customer, and/or (2)
take such other action as may be permitted under this Agreement, by law or
equity.
IX. TERMINATION
a. In the event this Agreement is held to be illegal in any respect by
any final judicial or regulatory authority, this Agreement may be terminated by
either party hereto.
b. This Agreement may be terminated by either party at the expiration of
its term. The terminating party shall give the other party one hundred eighty
(180) days written notice prior to the expiration of this Agreement or any
extension thereof, of their intent not to extend the term hereof beyond such
term.
c. At the time of termination Servicer shall assist with the preparation
and transfer of Customer's data files related to such termination, and Customer
shall pay Servicer all reasonable costs associated with such activities.
d. Customer shall have the right to cease operating any, but not all,
devices it has placed into operation without prematurely terminating this
Agreement or paying liquidated damages herein, if Customer is prohibited from
operating the device(s) due to shared device network regulations, State, Federal
or International laws and/or regulations, and if Customer provides a minimum of
sixty (60) days written notice, specifying the cause for cessation of operation,
of Customer's intention to cease operation of a device.
e. Notwithstanding any provision herein to the contrary, if the Customer
terminates this Agreement prior to its expiration date, the parties hereto
acknowledge that Servicer will suffer a substantial loss and/or damages that are
difficult or impossible of accurate estimation. Accordingly, in an effort to
liquidate in advance the sum that should represent the loss or damages which
would be actually sustained by Servicer, as a result of any such early
termination by Customer of any services provided by this Agreement or any
Addendum made a part hereof, Customer shall give Servicer one hundred twenty
(120) days advance written notice and thereafter shall pay Servicer an amount
equal to eighty (80%) percent of the "Estimated Remaining Service Fees" for the
service(s) being discontinued. Such fees shall be calculated by multiplying the
average monthly service fees billed by Servicer for the three (3) months
immediately preceding notice of early termination by the number of months
remaining under the term of this Agreement. The parties agree that such amount
is a reasonable estimate of damages Servicer will incur in the case of such
early termination and is liquidated damages and not a penalty. Customer may
elect to pay the total amount in equal monthly installments over the remaining
term of this Agreement, or any extension(s) hereof.
X. AUDITS
Customer will, at its expense, be responsible for periodic examination and
audit of all Servicer related functions, at such frequency as Customer deems
appropriate, by independent auditors or other professionals satisfactory to
Servicer. The scope, timing and results of such examination and audit shall be
made available upon request to Servicer. Furthermore, if any general systems
audit is requested by any regulatory agency Customer shall pay its pro-rata
share of expenses incurred in such audit.
XI. LEGAL COMPLIANCE
Each party agrees to comply with all applicable laws, rules and regulations
now or hereafter in force and under the authority of any governmental official,
commission, board or agency having supervisory control over such party.
3
<PAGE>
XII. NETWORK SPONSORSHIP
Servicer's ability to provide the services under this Agreement may be
contingent upon the Customer's obtaining financial institution sponsorship into
the shared transaction network(s) in which Customer wishes to participate.
Servicer shall only render network related services concurrently with
network sponsorship, and each of Servicer and Customer agree to comply with the
by-laws and other operating regulations of the shared transaction network.
Customer and/or its agents shall provide proof of sponsorship to Servicer
by providing a copy of the executed Agreement between Customer and each network
sponsor.
Customer authorizes Servicer to provide an executed copy of this Agreement
upon request to Customer's network sponsor. Customer further authorizes Servicer
to have periodic contact with sponsor on its behalf.
In the event Servicer is notified in writing by the Customer's financial
institution sponsor of its intent to withdraw sponsorship of the Customer,
network related services specified under this Agreement shall be immediately
withheld by Servicer until such time as Customer obtains another network
sponsor.
Servicer shall not be made liable for any fines or penalties assessed by
the shared transaction network against Customer or its financial institution
sponsor in the event Customer has failed to comply with signage, notification,
terminal operating regulations, or any other requirement as specified by the
shared transaction network.
XIII. INDEMNIFICATION
Customer hereby agrees to indemnify Servicer and defend and hold Servicer
harmless from any and all losses, expenses, claims, damages or liability of any
kind (including, without limitation, reasonable attorney's fees), that may be
suffered or incurred by Servicer, or any network or any of their respective
agents or employees, as a result of, arising from, or in connection with, the
failure of Customer to abide by any requirements imposed by this Agreement or
any operating regulations of Servicer or any shared network to which Customer
has access or the actions or omissions of Customer, its agents or employees.
XIV. NONASSIGNABILITY
This agreement shall not be assigned by Customer without the prior written
consent of Servicer. This Agreement shall be binding upon and shall inure to the
benefit of Servicer and Customer and their respective successors and permitted
assigns. If Customer were to be sold, either as a stock acquisition or asset
purchase, this Agreement shall be binding on the person or entity acquiring
Customer. Customer hereby acknowledges that this agreement is a valuable asset
which would be transferred or Servicer would be paid the liquidated damages
provided herein.
XV. AMENDMENTS
No amendments to this Agreement, nor the agreement itself, shall be
effective or bind either party unless in writing and signed by duly authorized
representatives of both parties. No representation or statement not expressly
contained in this Agreement, its Exhibits, Addendums, or in any written, signed
amendment hereto, shall be binding upon either party as a warranty or otherwise.
XVI. NOTICES
All notices hereunder shall be in writing and shall be considered delivered
when actually received, or five (5) days after depositing such notice in the
United States Mail, First Class, postage prepaid, whichever is sooner.
4
<PAGE>
Notices shall be sent to the addresses set forth on the first page hereof, or to
such other address as the addressee may have specified to the other party by
notice given in accordance with the foregoing.
XVII. GOVERNING LAW
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Georgia.
XVIII. TAXES AND ASSESSMENTS
Any taxes or assessments which may be levied or assessed by any government
or other taxing authority on this Agreement or the service provided hereunder
shall be paid by the Customer, except the customary corporate income taxes in
existence, or as amended, at the time of the execution of this Agreement which
would be the responsibility of Servicer.
XIX. DISCLAIMER OF WARRANTIES
NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, ALL SERVICES AND
RELATED PRODUCTS PROVIDED HEREUNDER ARE OFFERED BY SERVICER WITHOUT ANY
REPRESENTATIONS OR WARRANTIES, AND SERVICER MAKES NO, AND EXPRESSLY DISCLAIMS
ANY, WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO,
ANY IMPLIED WARRANTY OF MERCHANTABILITY, WITH RESPECT TO THE SHARED TRANSACTION
NETWORK, THE SERVICES TO BE PROVIDED PURSUANT HERETO OR ANY OTHER MATTERS
COVERED HEREBY.
XX. WAIVER
The failure of any party to promptly enforce its rights herein shall not be
construed to be a waiver of such rights and shall not effect the validity of
this Agreement or any part hereof, or limit, impair or prevent the right of
either party subsequently to enforce or exercise such right(s).
XXI. FORCE MAJEURE
Servicer shall not be liable to Customer for its failure to perform the
services required by this Agreement to any extent such failure is due to strike,
right, epidemic, war, fire, acts of God, any statute or governmental regulation,
act or order, computer or associated equipment outages, failures or down time,
or shortages of or significant fluctuations in electrical power, light or air
conditioning, any shortage or fluctuation in telephone services as such
occurrences are not within the control of Servicer, provided, however, that the
foregoing shall not limit Servicer's authority or right of access to Customer's
facilities to re-instate such services.
XXII. SEVERABILITY
If any provision of this Agreement shall be held to be invalid, illegal or
unenforceable, the Agreement shall be construed to make all remaining provisions
valid to the fullest possible extent.
XXIII. LITIGATION AND RELATED COSTS
If any legal actions, arbitration, mediation or other proceeding is brought
concerning the validity, construction or enforcement of this Agreement or
because of any alleged dispute, breach, default or misrepresentation in
connection with any of the provisions of this Agreement, the successful or
prevailing party shall be entitled to recover reasonable attorney fees and other
costs incurred by it in that action or proceeding, in addition to any other
relief to which it may be entitled under the terms hereof.
5
<PAGE>
XXIV. HEADINGS
The titles and headings preceding the text of paragraphs in this Agreement
have been inserted solely for convenience or reference and are not a part of
this Agreement nor affect the meaning, interpretation, or effect of this
Agreement.
This agreement may be executed in one or more counterparts, each of which
shall be an original but all of which shall constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties hereby have caused the Agreement to be
executed by their duly authorized representatives as of the day and year written
below.
ACCEPTED BY ACCEPTED BY
INTERCEPT SYSTEMS, INC. INSTITUTION NAME (ALL CAPS)
LOCATED IN THE COUNTY OF ____
________________________ ____________________________
By By
Michael R. Boian ____________________________
- ------------------------- Name: (Please Print)
Name: (Please Print)
Vice President ____________________________
- ------------------------- Title
Title
_________________________ ____________________________
Date Date
6
<PAGE>
ADDENDUM A
MASTER ELECTRONIC FUNDS TRANSFER
SERVICES AGREEMENT
This Services Agreement, together with the exhibits attached, shall be an
Addendum to the Master Electronic Funds Transfer Services Agreement between
Institution Name ("Customer") and InterCept Systems, Inc. ("Servicer").
- ----------------
Servicer shall provide the Electronic Fund Transfer services and other services
set forth in this Addendum and in any attached exhibits which may be revised
from time to time.
TERM: The term of this Addendum shall commence on _______________, 19___,
and shall continue for a term of sixty (60) months from the first full
calendar month in which the services are first provided. Unless
either party gives written notice to the other party in accordance
with Section IX of the Agreement, the Agreement and this Addendum
shall be automatically extended for a period of sixty (60) months and
automatically in equal increments thereafter. Customer agrees
Servicer will be the sole provider of these services during the term
of this agreement and any and all subsequent terms.
ATM SET-UP AND TURNKEY INSTALLATION PROGRAM
- -------------------------------------------
EQUIPMENT INSTALLATION AND COORDINATION: Exclusive of construction, the
Servicer will assume a coordinating role of all vendors associated with
installation of the equipment.
ATM SCREEN AND RECEIPT SET-UP: Servicer agrees to create CRT screens and
receipt information for each of Customer's ATMs to meet Reg E requirements.
Servicer agrees to create and maintain a unique down-line load for Customer's
ATMs having access to the system. Servicer set-up includes review of down-line
load and performing of test transactions at the ATM site to assure proper
operation.
COMPLETION OF NETWORK DATABASE SET-UP FORMS: Servicer agrees to complete and
submit to shared transaction networks any terminal database set-up forms
required by the network.
MASS CARD ISSUE: Customer may contract with Servicer to provide for initial
mass issue of ATM cards. Customer agrees to define criteria in which cards are
to be issued to its customers. Customer agrees to define the design of the ATM
card and provide Servicer or its representative with camera ready artwork.
INSTALLATION OF TELEPHONE LINES: Servicer agrees to order and coordinate the
installation of all telephone lines between Customer's ATMs and/or terminal
equipment to Servicer's computer. Customer agrees to allow Servicer to order
and coordinate all appropriate telephone lines.
COMMUNICATIONS HARDWARE INSTALLATION: Servicer agrees to program and install
communication equipment as outlined herein on Customer's ATM and/or terminal
equipment to telephone lines connecting terminals to Servicer's computer. The
Customer shall at all reasonable times permit the authorized personnel of
Servicer and/or equipment manufacturers to have access to any Servicer owned or
leased equipment provided under this agreement, and shall permit removal of such
equipment upon termination of this Agreement. Any returned communications
equipment is to be coordinated by Servicer and is to be accomplished at Customer
expense.
BALANCING TRAINING: Servicer agrees to provide necessary training on the
balancing of system, ATM Audit Tape, and Shared Network Balancing Reports as
part of the set-up service. Servicer agrees to provide training to the
Customer's personnel on an ongoing basis after the completion of the
installation process at Servicer's then current hourly rates.
ATM PROGRAM MANAGER: Customer agrees to provide a representative of management
to work with Servicer to coordinate the installation of ATM(s) and/or conversion
of ATM(s) to Servicer's computer. It is understood that from time to time
during the installation process the Servicer will need certain decisions and
information from the Customer, and the ATM Program Manager will have the
authority to make these decisions.
<PAGE>
ATM SUPPORT AND ON-GOING SERVICES
- ---------------------------------
The Servicer will interface directly to the Customer's ATM(s) via telephone
lines and will route transactions received from ATM(s) that are the result of
consumers accessing Customer's ATM(s) with authorized ATM cards and PIN numbers.
Servicer agrees to provide the transaction processing interface to the ATM via
telephone circuits. Upon completion of the transaction authorization process,
the Servicer shall forward the authorization response to the ATM for the
completion of the transaction.
Servicer will connect the ATMs to shared transaction networks on behalf of the
Customer. Servicer will comply with all network operating system regulations
and maintain communications with the network for transaction authorization
purposes.
Servicer will forward all transaction requests from Customer's ATM(s) to the
appropriate shared network for authorization. Servicer will monitor and log all
transaction requests regardless of disposition for reporting and balancing
purposes.
Servicer will create a balancing report for each network. Network activity will
be maintained by terminal and in chronological order.
Reports created by the shared networks are received by Servicer and forwarded to
the Customer via data transmission.
SHARED NETWORK INTERFACE SERVICE: Shared network interface service provides for
the authorization of Customer's cardholders accessing ATMs in a network as well
as the authorization of non-customers accessing the ATM(s) of the Customer (if
any). Transaction authorization requests are received from the shared network
switch by the Servicer for authorization approval. The Servicer will authorize
transactions based on the authorization option selected below (a, b, c, or d).
Balancing reports will be provided by the Servicer daily to assist the Customer
in reconciling shared network transaction activity in conjunction with reports
provided by the shared network.
a. Positive Balance File Authorization Option [_]
Under this option, Servicer will maintain a record for each of the
Customer's cardholders. Each record will contain certain balance
information and authorization limits of the Customer's cardholder.
These records will comprise a positive balance authorization file.
This file will be updated on a frequency defined by the Customer
(normally daily) through computer to computer transmission. The
Servicer agrees to provide a data file of transactions authorized in
ACH format. This file is available to Customer daily.
b. Host Authorization Network Interface Option [_]
Servicer will maintain a host to host interface between Servicer's
system and Customer's system. This interface will provide for the
routing of foreign transaction requests at the Customer's ATM(s) to
the appropriate network for disposition as well as the routing of
Customer's cardholder requests at network ATMs to Customer's computer
for authorization. Servicer will monitor and maintain all data
communication circuits between Customer's computer and Servicer's
computer. Additionally, Servicer will provide appropriate network
reports to Customer.
c. Positive Parameter File Authorization Option [_]
Under this option, Servicer will maintain a cardholder file and
authorize transactions based on limit defined by the Customer for a
specified period of time. The Customer will use an administrative
terminal required by Servicer to establish cardholder parameters in
the Servicer's central system. The Servicer agrees to provide a data
file of transactions authorized in ACH format, and such file shall be
available daily for customer access.
d. Negative File Authorization Option [_]
<PAGE>
Under this option, Servicer will maintain a negative file and
authorize transactions based on institution limit defined by the
Customer for a specific period of time. The Customer will use an
administrative terminal provided by Servicer to update the negative
file in the Servicer's system. The Servicer agrees to provide a data
file of transactions authorized in ACH format, and such file shall be
available daily for customer access.
ATM AND COMMUNICATIONS MONITORING: Servicer will monitor all data
communications circuits between Customer's ATMs and Servicer's computer for
continuous operation. Upon detection of a telephone line failure, Servicer
agrees to notify the appropriate communications service provider and to maintain
such monitoring activity until restoration of service.
The Servicer will regularly monitor the operating condition of each of
Customer's ATMs. ATM malfunctions will be reported via an automatic
notification system as per the Customer's instructions.
BALANCING REPORTS: Servicer will provide reports necessary for Customer to
balance ATMs daily and provide other related management reports necessary to
provide an accurate and efficient ATM operation. Customer agrees to balance
reports to their General Ledger daily and to notify Servicer within 2 business
days of any out-of-balance situation.
ATM ACTIVITY DATABASE: Servicer will provide Customer information regarding
current ATM activity for use in determining timing of currency and supply
replenishment. Information is available via Customer's administrative terminal.
RETENTION OF BACK-UP RECORDS: Servicer agrees to retain historical files to
allow Customers to receive records in the event of an emergency. These files
will be backed-up weekly and stored at a location separate from Servicer.
ACCEPTED BY ACCEPTED BY
INTERCEPT SYSTEMS, INC. INSTITUTION NAME (ALL CAPS)
LOCATED IN THE COUNTY OF ____
________________________ ____________________________
By By
Michael R. Boian
- ------------------------ ____________________________
Name: (Please Print) Name: (Please Print)
Vice President
- ------------------------ ____________________________
Title Title
________________________ ____________________________
Date Date
<PAGE>
ADDENDUM B
AGREEMENT FOR SCRIP SERVICE
This Agreement shall be an Addendum to the Master Electronic Funds Transfer
Services Agreement between Institution Name ("Customer") and InterCept
----------------
Systems, Inc. ("Servicer").
Servicer shall provide the Electronic Fund Transfer services and other services
set forth in the Addendum which may be revised from time to time.
TERM: The term of this Addendum shall commence on ______________, 19___, and
shall continue for a term of thirty-sixty (36) months from the first
-----------------
calendar month in which the services are first provided. Unless
either party gives written notice to the other party in accordance
with Section VIII(b) of the Agreement, the Agreement and this Addendum
shall be automatically extended for a period of thirty-six (36) months
---------------
and automatically in equal increments thereafter. Customer agrees
that Servicer shall be the sole provider of all services covered in
this addendum.
SCRIP/POINT OF SALE (POS) SUPPORT SERVICES
- ------------------------------------------
SCRIP/POS TRANSACTION PROCESSING: The Servicer will interface to the Customer's
terminal(s) via telephone lines and route transactions received from Customer's
terminal(s) that are the result of consumers accessing Customer's Scrip/POS
devices with debit cards and PIN numbers.
Servicer will provide the transaction processing interface via appropriate
telephone circuits. Transaction processing software for debit Scrip/POS will be
provided to the Customer for loading to the Customer's terminal. After the
transaction has been selected and performed by the consumer, it will be
forwarded to Servicer for routing to the appropriate network. Upon completion
of the transaction authorization process, the Servicer will forward the
authorization response to the terminal for the completion of the transaction as
per the authorization response. The terminal will then complete the transaction
and provide a receipt/Scrip to the consumer.
All transactions received by Servicer, regardless of disposition, are logged by
the Servicer for reporting and balancing purposes.
SHARED NETWORK INTERFACE AND SUPPORT: Shared network service provides for the
authorization of eligible cardholders accessing Scrip/POS devices in a network.
Servicer will maintain an on-line interface between Servicer's computer(s) and
the appropriate shared network for authorization. This interface will provide
for the routing of transaction requests from the Customer's Scrip/POS devices to
the appropriate shared network for authorization and for the proper handling of
the response message. Servicer will monitor all data communication circuits
between the network(s) and Servicer's computer.
TRANSACTION AUTHORIZATION REQUESTS: Servicer will connect to shared network(s)
on behalf of the Customer. Servicer will comply with all network operating
system regulations and maintain appropriate communication with the network
and/or gateway provider for transaction authorization purposes.
NETWORK BALANCING REPORTS: Servicer will create and make available a balancing
report for each network. Network activity will be maintained by terminal and in
chronological order.
Reports by the shared networks are received by Servicer and forwarded to
Customer via data transmission.
COMMUNICATIONS: Servicer agrees to establish an operationally and economically
efficient telecommunications network for the transmission of data from Scrip/POS
terminals to the Servicer processing facility.
<PAGE>
BALANCING REPORTS/TRAINING: Servicer will provide for retrieval by Customer
reports which assist Customer in balancing terminals daily. Servicer will also
provide other related management reports necessary to maintain an accurate and
timely Scrip/POS terminal program. Transaction reports will be prepared for
each terminal listing all transactions received by Servicer and their
dispositions in chronological order. Customer agrees to balance reports to
their general ledger daily and to notify Servicer within two business days of
any out-of-balance condition.
Customer agrees to provide a representative to work with Servicer to coordinate
set-up and conversion to Servicer's system. Servicer agrees to provide training
to such representative on all operational aspects of the system, as part of the
set-up service. Servicer agrees to provide training to the Customer's personnel
on an ongoing basis after the completion of the initial training at the
Servicer's then current hourly rate.
HARDWARE SUPPORT: Servicer agrees to support only approved Scrip/POS terminal
vendors. Scrip/POS terminals may be made available for purchase from Servicer
or Customer may utilize an approved alternate source to acquire approved
terminals. Customer agrees to provide Servicer with terminal source and model,
and to obtain services agreement regarding support prior to live transaction
operations.
ADMINISTRATIVE TERMINAL: Customer agrees to make available an IBM compatible
personal computer to be used in an administrative terminal capacity, technical
specifications to be agreed upon at a time of contract execution and updated by
Customer as necessary. Customer agrees to purchase from Servicer terminal
emulation board and software to be used in administrative terminal.
AUTOMATED TRANSACTION, FEE SETTLEMENT AND STATEMENT PROCESSING VIA SERVICER:
Servicer will be responsible for daily settlement of transactions performed at
Customer's terminals. Customer agrees that Servicer shall be the settlement
agent for all transactions performed at Customer's terminals, and that such
settlement shall be based on one of these following options:
a. Automated Transaction Settlement via ACH
Servicer will accumulate the authorized transactions for each of the
Customer's retail customers throughout the day. At the end of the
day, the Servicer will make a consolidated entry to a settlement
account specified by the Customer's retail customer. This amount will
be credited to the account via an ACH entry each business day.
b. Automated Fee Assessment, Collection and Settlement
Servicer will assess transaction fees as instructed by the Customer
for transaction requests processed. The transaction fees will be
applied to Customer's retail customer transaction settlement total for
the day as applicable. Customer's fees will be calculated daily and
credited via ACHs to a customer specified account.
c. Monthly Activity Statement
Servicer will prepare a monthly activity statement listing a summary
of all activity each day. Activity to include fees assessed, fees
paid, activity counts, and net amount settled to the settlement
account. Statement to be prepared monthly as of the last day of the
month.
d. Monthly Merchant/Terminal Statement Processing
Servicer will maintain daily debit and credit ACH transaction activity
for each merchant terminal location for a one (1) month period. On
the first business day of the month, Servicer will prepare a statement
print file. Servicer will print the statement print files, statement
forms agreed to by the Servicer and Customer. Statements will be
printed, folded, inserted, metered and mailed by the Servicer.
Postage will be paid by Servicer. Servicer specifically reserves the
right to pass thru to Customer any and all costs of postage.
<PAGE>
Servicer will generate a monthly statement fee on behalf of the
Customer and will create an ACH debit to the account(s) specified by
the Customer. The Servicer will post this entry at time of statement
generation.
PRICING
- -------
I. ONE-TIME COSTS
A. Program Set-Up $________
Set-up of data base, network access programming,
testing, and timing on SCRIP balancing and
network settlement.
B. Per Terminal Set-Up $________
Set-up of terminal ID, terminal file, network
terminal form, load encryption keys into data base,
program address, perform test transactions.
II. PROCESSING FEES (MONTHLY)
A. Base Fee $________
B. Transaction Activity (each)
1 - 50,000 $________
50,001 - 150,000 $________
150,001 - 250,000 $________
250,000 - over $________
* Minimum transaction fee per terminal equal to $_________ per terminal,
based on aggregate volume of transactions
C. Rejected Transaction (each) $________
D. ACH Settlement (per transaction) $________
E. 1-800-phone call, per each $________
F. Network Connection (each) $________
<PAGE>
III. ADDITIONAL FEES
A. Statement preparation Fee - Per Terminal $________
B. Additional Network Access - Per Network $________
(New networks added after initial data base conversion)
NOTE: CUSTOMER IS RESPONSIBLE FOR ALL FEES NOT EXPRESSLY IDENTIFIED WHICH MAY
INCLUDE, BUT NOT BE LIMITED TO, SPONSORSHIP, NETWORK REGISTRATION FEES,
AND ANY AND ALL NETWORK ASSESSED TRANSACTION FEES. OUT OF POCKET
EXPENSES, INCLUDING TRAVEL, FOOD AND ACCOMMODATIONS ARE ADDITIONAL AND
WILL BE BILLED AS INCURRED BY SERVICER.
ACCEPTED BY ACCEPTED BY
INTERCEPT SYSTEMS, INC. INSTITUTION NAME (ALL CAPS)
LOCATED IN THE COUNTY OF ____
________________________ ____________________________
By By
Michael R. Boian
- ------------------------ ____________________________
Name: (Please Print) Name: (Please Print)
Vice President
- ------------------------ ____________________________
Title Title
________________________ ____________________________
Date Date
<PAGE>
ADDENDUM C
DEBIT SERVICE AGREEMENT
This Agreement, together with the exhibits attached, shall be an Addendum to the
Master Electronic Funds Transfer Services Agreement between Institution Name
-------------------
("Customer") and InterCept Systems, Inc., ("Servicer"). Customer desires to be
processed as a Principal ____ Affiliate ____ Member of MasterCard International.
Servicer shall provide the Electronic Fund Transfer services and other services
set forth in the Addendum which may be revised from time to time.
TERM: The term of this Addendum shall commence on ________________, 19___,
and shall continue for a term of sixty (60) months from the first
calendar month in which the services are first provided. Unless
either party gives written notice to the other party in accordance
with Section IX(b) of the Agreement, the Agreement and this Addendum
shall be automatically extended for a period of sixty (60) months and
automatically in equal increments thereafter. Customer agrees
Servicer shall be the sole provider of all services in this addendum.
MASTERMONEY(R) SUPPORT SERVICES _____ (Initial) MAESTRO(R) SUPPORT SERVICES
- ------------------------------- ---------------------------
_____ (Initial)
MASTERMONEY/MAESTRO TRANSACTION PROCESSING: The Servicer will provide the
interface for Customer's card base and provide for authorization as specified
for transactions received from MasterCard or other approved source which are the
result of Customer's cardholders accessing participating devices with authorized
debit cards. After the transaction has been selected and performed by the
consumer, it will be forwarded to Servicer for disposition. Upon completion of
the transaction authorization process, the Servicer will forward the
authorization response to the terminal for the completion of the transaction as
per the authorization response. Each transaction will be forwarded to
Customer's processing center for posting upon settlement to Servicer via
network. All transactions, regardless of disposition, are logged by the
Servicer for reporting and balancing purposes.
SHARED NETWORK INTERFACE AND SUPPORT: Shared network service provides for the
authorization of eligible cardholders accessing MasterCard authorized devices in
the network. Servicer will maintain a host to host interface between Servicer's
computer(s) and the appropriate shared network for authorization. This
interface will also provide for the routing of transaction requests by the
Customer's cardholders to the Servicer for authorization. Servicer will monitor
all data communication circuits between the network(s) and Servicer's computer.
COMPLETION OF NETWORK DATABASE SET-UP FORMS: Servicer agrees to complete and
submit any database set-up forms required by the network.
MASS CARD ISSUE: Customer may contract with Servicer to provide for initial
mass issue of debit cards. Customer agrees to define criteria under which cards
are to be issued to its customers. Customer agrees to define the design of the
debit card, within those parameters specified by MasterCard, and provide
Servicer or its representative with camera ready art work for submission to
MasterCard for approval.
CUSTOMER CARD ISSUE CRITERIA: Customer shall be solely responsible for
determining the creditworthiness of each of Customers' eligible cardholders and
shall be responsible for any subsequent losses and/or chargebacks and any
respective associated administrative costs, whether by cardholder or by other
fraudulent means, as specified in this addendum or under the appropriate
regulations governing the issuance of this instrument as applicable in either
Regulation E, Regulation Z, or other regulations as published by the Federal
Reserve System.
ERROR/DISPUTE RESOLUTION: The Customer will be responsible for the timely
resolution of errors/disputes and notification to cardholders as defined by
Regulation E. The Customer will handle monetary entries to customer accounts
and will establish and maintain a general ledger account for this purpose.
Dispute claims which meet MasterCard criteria for chargeback eligibility will be
the responsibility of the Customer for processing to include obtaining draft
copies, entering chargebacks and making the appropriate entries to the
institution's clearing accounts.
<PAGE>
TRANSACTION AUTHORIZATION REQUESTS: Servicer will connect to shared network(s)
on behalf of the Customer. Servicer will comply with all network operating
system regulations and maintain appropriate communications with the network
and/or gateway provider for transaction authorization purposes. Servicer will
forward all transaction authorization requests from Customer's cardholders to
the appropriate authorization source as specified by Customer. Servicer will
monitor and log all transaction requests for reporting and balancing purposes.
NETWORK BALANCING REPORTS: Servicer will create and make available a balancing
report for all network activity which will be maintained in chronological order
with ATM & POS transactions. Reports from the shared networks are received by
Servicer and provided to Customer, when requested, through data transmission.
MISCELLANEOUS SERVICES: Servicer will provide miscellaneous support services to
include lost and stolen card statusing and chargeback adjustment data entry to
Customer as required.
BALANCING REPORTS/TRAINING: Servicer will provide for retrieval by Customer
such reports as necessary for Customer to balance daily and other related
management reports. Transaction reports will be prepared which list all
transactions and their dispositions in chronological order with all ATM & POS
transactions. Customer agrees to balance reports to their General Ledger daily
and to notify Servicer within forty-eight (48) hours of any out-of-balance
situation. Customer agrees to provide a representative to work with Servicer to
coordinate set-up and conversion to Servicer's system. Servicer agrees to
provide training to such representative on understanding and balancing of system
and network reports, as part of the set-up service. Servicer agrees to provide
training to the Customer's personnel on an ongoing basis after the completion of
the initial training at the Servicer's then current hourly rate.
ADMINISTRATIVE TERMINAL: Customer agrees to make available an IBM compatible
personal computer to be used in an administrative terminal capacity, technical
specifications to be agreed upon at time of contract execution and updated by
Customer as necessary. Customer agrees to, if required, purchase from Servicer
terminal emulation board and software to be used in administrative terminal.
AUTOMATED TRANSACTION, FEE SETTLEMENT AND STATEMENT PROCESSING VIA SERVICER:
Servicer will be responsible for daily settlement of transactions performed by
Customer's cardholders. Customer agrees that Servicer shall be the settlement
agent for all transactions performed by Customer's cardholders processed by
Servicer.
SHARED NETWORK AUTHORIZATION SERVICE: Shared network authorization service
provides for the authorization by Servicer of transactions initiated by
Customers' MasterMoney(R) cardholders accessing any participating terminal. The
Servicer will authorize all transactions received from MasterCard or from the
shared network by Servicer based on the authorization option selected below (a
or b). Balancing reports will be provided by the Servicer daily to assist the
Customer in reconciling transaction activity in conjunction with reports
provided by the shared network.
a. Positive Balance File Authorization Option [_]
Under this option, Servicer will maintain a record of each of the
Customers' cardholders as defined by Customer. Each record will
contain certain balance information and authorization limits of the
respective cardholder. These records will comprise a positive balance
authorization file which is updated on a frequency defined by the
Customer through computer to computer transmission. The Servicer
agrees to provide a data file of transactions authorized in ACH format
which will be available to Customer through computer to computer
transmission.
b. Host Authorization Network Interface Option [_]
Servicer will maintain a host to host interface between Servicer's
computer(s) and Customer's computer. This interface will provide for
the routing of transaction requests by Customer's MasterMoney or
Maestro cardholders at participating MasterCard terminals from
Servicer to Customer's computer for authorization. Servicer will
order and monitor all data communication circuits between Customer's
computer and Servicer's computer. Additionally, Servicer will provide
appropriate network reports to Customer. Customer agrees to respond
to transaction requests within the defined time frame set forth by
Servicer and MasterCard.
<PAGE>
COMPENSATION: Customer shall receive revenue as a prorated share of interchange
income which shall equal thirty percent (30%) of interchange income generated by
Customer's cardholders. If Customer is also a credit card agent bank of The
Bankers Bank, the interchange revenue is increased to forty percent (40%).
FEES: Contingent upon Customer generating a minimum of monthly dollar volume of
______________ dollars ($_________) of MasterCard Debit activity, the monthly
minimum dollar volume will be waived. Dollar volume will be evaluated at the
end of each one year anniversary of program activity and fees will be assessed
accordingly as detailed in the pricing section of this agreement.
ACCEPTED BY ACCEPTED BY
INTERCEPT SYSTEMS, INC. INSTITUTION NAME (ALL CAPS)
LOCATED IN THE COUNTY OF ____
________________________ ____________________________
By By
Michael R. Boian
- ------------------------ ____________________________
Name: (Please Print) Name: (Please Print)
Vice President
- ------------------------ ____________________________
Title Title
________________________ ____________________________
Date Date
<PAGE>
EXHIBIT 10.14
PROVESA, INC.
DATA PROCESSING AGREEMENT
This DATA PROCESSING AGREEMENT is made and entered into as of the _____ day of
_______________, 19___, by and between
_______________________________________________________________________, located
at ______________________________________________________________, and its
successors (herein referred to as the "Participating Bank"), and Provesa, Inc.,
located at 3150 Holcomb Bridge Rd., Suite 200, Norcross, Georgia 30071 (herein
referred to as the "Computer Center").
In consideration of the mutual promises and covenants contained herein, the
parties hereto agree as follows:
1. DATA PROCESSING SERVICES. Computer Center agrees to render to
------------------------
Participating Bank the data processing services described on Exhibit "A"
(the "Services") for the term of this Agreement, and Participating Bank
agrees to purchase the Services. This Agreement describes the general
nature of the Services and the terms under which the Computer Center is to
provide or make the Services available to the Participating Bank. In the
event of any conflict between the language of this Agreement and any
brochures, verbal representations, or other materials describing the
Services, the language of this Agreement shall control.
2. CONVERSION OF PARTICIPATING BANK'S INFORMATION.
----------------------------------------------
a. Within a reasonable time following execution of this Agreement,
Computer Center will undertake the programming required to covert
Participating Bank's information files into a format compatible with
the Computer Center systems. Participating Bank agrees to cooperate
with Computer Center in this endeavor and to provide all information
and assistance required for Computer Center to successfully convert
Participating Bank's information files to a form compatible with
Computer Center's systems and equipment so that Computer Center can
provide the Services. Among other things, Participating Bank shall
deliver conversion input information, in its entirety, in a mutually
acceptable medium, as and when the parties agree.
b. Computer Center shall determine, in accordance with its normal
acceptance procedures, when Participating Bank's information files
have been successfully converted and when the Services to be provided
by Computer Center to Participating Bank are operational and available
for Participating Bank's use. Participating Bank agrees to review and
check the information converted by Computer Center within ten (10)
days after notice to Participating Bank of Computer Center's
completion of conversion. Computer Center reserves the right to
postpone conversion of Participating Bank's information files if
Participating Bank is late in delivering its conversion input
information or if any other circumstances arise that might jeopardize
the successful completion of Participating Bank's information
conversion or the processing of the Participating Bank's following
day's transactions for any other customers of Computer Center.
c. In the event the conversion process is stopped, cancelled, or
suspended by Participating Bank, Participating Bank agrees to pay
Computer Center all labor costs, expenses, and charges incurred by
Computer Center in preparing to perform under this Agreement.
Computer Center shall submit to Participating Bank an itemized
statement of all such charges and Participating Bank agrees to pay
said statement prior to the return to Participating Bank of any
conversion input information or data provided to Computer Center and,
in any event, within thirty (30) days after receipt.
1
<PAGE>
d. Computer Center shall provide to Participating Bank training for a
maximum of five (5) working days so that Participating Bank may fully
utilize the Services provided by Computer Center at the time of
conversion of Participating Bank's information.
3. INPUT AND OUTPUT DATA. Participating Bank shall be responsible for
---------------------
providing to Computer Center all input data and other information necessary
for Computer Center to perform the Services and to prepare those reports
described on attached Exhibit "C" (the "Reports"). The input data shall be
transmitted by Participating Bank to Computer Center in a format acceptable
to Computer Center via an approved telecommunication method and system.
Participating Bank is solely responsible for the accuracy and delivery of
all information to be provided to Computer Center for processing. Computer
Center agrees to provide Participating Bank with Reports at such times as
are described on Exhibit "C", provided, however, that in any event Computer
Center shall have a reasonable amount of time after receipt of the input
data from Participating Bank to process such data. All Reports shall be
delivered by Computer Center to Participating Bank by telecommunications to
a remote printer designated by Participating Bank. The design and format
of any Reports or forms to be prepared by Computer Center must be approved
by Computer Center.
4. TERM. This Agreement shall begin on the date hereof and shall remain in
----
effect for a period of three (3) years (the "Term") following the first
full calendar month in which any Services commonly known as processing
services are provided by Computer Center to Participating Bank, as
evidenced by the billing records of Computer Center. This Agreement shall
automatically renew for the same Term unless written notice of termination
is delivered by either party to the other at least one hundred eighty (180)
days prior to the original expiration date or subsequent renewal expiration
dates of the Agreement.
5. ASSISTANCE FROM PARTICIPATING BANK. In addition to the input data to be
----------------------------------
delivered by Participating Bank pursuant to paragraph 3 above, Computer
Center's performance of the Services may, from time to time, require data,
documents, descriptions or acts to be furnished by, or to be qualified or
processed in part by, the Participating Bank or its personnel. Computer
Center agrees to give prompt notice of such requirements to Participating
Bank, and Participating Bank agrees to furnish such data, documents,
descriptions or acts and to make such personnel, records and facilities
available within such time or times after its receipt of such notice and in
such manner as shall be reasonably necessary to enable the Computer Center
to perform the Services.
6. COMMUNICATIONS. Participating Bank shall bear all risk of loss or damage
--------------
to items, records, other input data, or Reports and other output data
during communication or delivery of such data between the Participating
Bank's office and the Computer Center. Participating Bank shall be
responsible for and shall pay all charges related to communications between
Participating Bank and Computer Center.
7. EQUIPMENT.
---------
a. Participating Bank agrees that it is responsible for all
communications between Participating Bank and Computer Center. When
communicating with, or transferring data to, or receiving data from,
Computer Center, Participating Bank shall, at its own cost and
expense, use and maintain only such terminals, modems and other
hardware, firmware and software (hereinafter collectively referred to
as the "Equipment") as may be compatible with the systems and
communications networks of Computer Center. The Participating Bank's
Equipment must be completely compatible with the systems and
communications networks of Computer Center and, if requested by
Computer Center, Participating Bank shall be responsible for providing
sufficient information about the Equipment to Computer Center and for
performing adequate tests to demonstrate that the Equipment is in good
working order and completely compatible with the systems and
communications networks of Computer Center. In the event Computer
Center believes it is in its and its clients' best interest to upgrade
Computer Center's systems to more efficient and capable equipment or
to keep Computer Center competitive, Participating
2
<PAGE>
Bank agrees to acquire any Equipment necessary to keep Participating
Bank and Computer Center fully compatible.
b. Unless otherwise agreed by the parties, Computer Center shall schedule
and arrange for the communications services, including communications
equipment installation, with the communication provider.
Participating Bank shall be responsible for paying all charges imposed
by the provider of the communications equipment, such as the telephone
company, for the Equipment installation, as well as for any charges
for additional connections or changes to locations or future services.
Computer Center shall not be responsible for the reliability or
continued availability of the telephone lines, communications
facilities, or electrical power used by Participating Bank in
utilizing the Services provided by Computer Center hereunder.
Computer Center will cooperate with communications vendors as
appropriate so that communications between Participating Bank and
Computer Center facilities function properly.
8. LIMITATION OF LIABILITY.
-----------------------
a. Computer Center shall not be responsible for any failure in providing
the Services, any delays in processing, or any failure or delay in the
delivery of any Reports that may be caused, in whole or in part, by
strikes, lockouts, riots, epidemics, governmental actions or
regulations, natural disaster, fire, inclement weather, acts of God,
computer breakdown or failure, communications failure, interruptions
in telephone or electrical service, courier's failure to timely
deliver, or any other causes beyond its reasonable control. In the
event such delays exist without interruption for a period of more than
thirty (30) days, Participating Bank or Computer Center may elect to
terminate this Agreement without breach. Participating Bank is under
no duty to make any payments to Computer Center for any period
exceeding five (5) consecutive business days in which the Services are
not performed by Computer Center as a result of a natural disaster or
other phenomenon mentioned above.
b. Computer Center's obligation to Participating Bank hereunder in
performing the Services is to exercise the same degree of care and
diligence used in processing information and compiling reports for its
own use. Computer Center's sole responsibility to Participating Bank
or any third party for any claims, notwithstanding the form of such
claims (e.g., contract, negligence or otherwise), arising out of
errors or omissions in the Services or Reports provided or to be
provided hereunder and caused by Computer Center (provided that
Participating Bank shall have promptly notified Computer Center of any
such errors or omissions), shall be to furnish at Computer Center's
costs the correct Services or Report and/or to correct the applicable
Participating Bank files.
c. Computer Center will make every reasonable effort to be available to
provide Services during the hours referred to in paragraph 20 below.
Accordingly, Computer Center's liability to Participating Bank or any
third party for claims, notwithstanding the form of such claims (e.g.,
contract, negligence or otherwise) arising out of the unavailability
or inaccessibility of Computer Center's system, or the interruption in
or delay of Services provided or to be provided by Computer Center
hereunder, shall be to use reasonable efforts to resume the Services
as promptly as practicable, provided, however, that Computer Center
shall not be responsible for communication failures caused, in whole
or in part, by the incompatibility or failure of Participating Bank's
Equipment or by third party telecommunication or electric lines or
equipment.
d. Computer Center shall not be liable to Participating Bank for errors
resulting from defects in, or malfunctions of, the mechanical or
electronic equipment used by Participating Bank or Computer Center in
performing the duties and obligations contemplated in and covered by
this Agreement.
3
<PAGE>
e. Computer Center shall not be liable for damages arising under this
Agreement, regardless of the claim, unless such damages result from
gross negligence or willful misconduct on the part of Computer
Center's officers or employees, in which case Computer Center's
liability will be limited to actual damages directly resulting from
such gross negligence or willful misconduct. In any event, any
damages for which Computer Center may be liable shall be limited to
the service charges received by Computer Center from Participating
Bank for Services during the twelve (12) months prior to the alleged
damage. If Participating Bank desires to obtain insurance protection
against any such losses, or to cover fidelity losses through an
endorsement to its own blanket bond coverage, Computer Center agrees
to cooperate with Participating Bank in obtaining such insurance. In
the event Participating Bank recovers insurance proceeds pursuant to
such insurance, such proceeds shall constitute a set off against
actual damages claimed by Participating Bank that directly result from
gross negligence or willful misconduct of Computer Center. It is
understood that all costs and expenses of such insurance shall be paid
by Participating Bank. Computer Center agrees to maintain, with
coverage amounts determined by Computer Center, fidelity bond coverage
with respect to any dishonest acts which may be committed by Computer
Center personnel, and insurance in policy amounts and types determined
by Computer Center, with respect to hazards, including losses by
Computer Center from fire, disaster, and other events which may
interrupt normal service.
f. IN NO EVENT WILL COMPUTER CENTER BE RESPONSIBLE FOR SPECIAL, RELIANCE,
INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES ARISING OUT OF ANY ACT
OR OMISSION BY COMPUTER CENTER IN CONNECTION WITH THIS AGREEMENT, EVEN
IF COMPUTER CENTER HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES, WHETHER SUCH DAMAGES ARISE IN AN ACTION AT LAW OR IN EQUITY,
FOR BREACH OF CONTRACT, BREACH OF WARRANTY, PRODUCT LIABILITY, BREACH
OF UCC PROVISIONS, NEGLIGENCE OR INTENTIONAL TORT. FURTHERMORE,
COMPUTER CENTER SHALL NOT BE LIABLE FOR PARTICIPATING BANK'S LOST
PROFITS, LOSS OF BUSINESS OPPORTUNITIES, OR FOR EXEMPLARY DAMAGES.
THE PROVISIONS HEREOF ARE IN LIEU OF ALL WARRANTIES, EXPRESS OR
IMPLIED, WHETHER OF MERCHANTABILITY, FITNESS OR OTHERWISE.
9. COMPLIANCE WITH FEDERAL REGULATIONS. Computer Center warrants that it
-----------------------------------
maintains a formal agreement with a suitable processing center to provide
backup facilities capable of processing Participating Bank's data and
satisfying all requirements of this Agreement. Further, Computer Center
shall comply with all federal rules and regulations applicable to it
relating to the conduct of its business.
10. REVIEW OF REPORTS. It will be the responsibility of Participating Bank to
-----------------
maintain audit controls and/or procedures which may be required by
supervisory authorities under regulations to which the Participating Bank
is subject. Balancing of input totals to computer generated output totals
will be the responsibility of Participating Bank, and Computer Center
accepts no responsibility for the correctness of these totals. Computer
Center will exercise reasonable care and diligence in maintaining controls
over the Services rendered pursuant to this Agreement.
11. THIRD PARTY AUDIT. Computer Center shall provide to Participating Bank a
-----------------
copy of the most recent third party service audit of the records of
Computer Center upon request by Participating Bank and payment by
Participating Bank of a reasonable and customary charge. If requested,
Computer Center shall also provide to Participating Bank annual audited
financial information regarding Computer Center at no charge.
12. FEES. In consideration of the Services provided by Computer Center,
----
Participating Bank shall pay to Computer Center each month, in advance
based upon the prior month's activity, those fees described on attached
Exhibit "B". The fees set forth on Exhibit "B" are exclusive of any
applicable taxes or
4
<PAGE>
assessments, however designated, which may be levied or assessed by any
government or other taxing authority having jurisdiction to levy such tax
upon the Services. Participating Bank agrees to pay Computer Center the
amount of such taxes or assessments, whenever requested by Computer Center.
The fees described on Exhibit "B" may be changed from time to time by
Computer Center upon thirty (30) days prior notice to Participating Bank,
provided, however, that the maximum annual increase in any fee described in
Exhibit "B" shall not exceed six percent (6%). In the event the
Participating Bank acquires another financial institution or branch of a
financial institution, the Computer Center reserves the right to review
volume growth (assets and account volume) and make necessary adjustments in
pricing as may more accurately reflect the Computer Center's standard
accounting pricing as described in Exhibit "B".
13. OTHER FEES. In the event Participating Bank requests that Computer Center
----------
procure forms that are to be supplied by Participating Bank pursuant to
Exhibit "C", Participating Bank shall pay to Computer Center the cost of
such forms plus Computer Center's reasonable and customary markup when
billed. If overtime and/or special handling is requested by Participating
Bank or is required because of delays not the fault of Computer Center,
Participating Bank agrees to pay Computer Center at the established rates
then in effect for overtime and/or special handling for production
operations and for any other out-of-pocket expense related thereto. If it
is necessary for Computer Center to return the finished products to
Participating Bank by special carrier or special messenger, Computer Center
shall notify Participating Bank by telephone and Participating Bank shall
be charged with out-of-pocket expenses incurred by Computer Center as a
result of such special handling, unless Participating Bank objects to such
special handling at the time it receives such notice. In the event
Computer Center agrees to develop any development costs plus a reasonable
markup. In addition, Participating Bank may be required to pay a license
fee as agreed by the parties for such special software.
14. CONFIDENTIALITY.
---------------
a. Computer Center agrees to hold in confidence all information relating
to the assets, liabilities or other business affairs of Participating
Bank, or any customers of Participating Bank, which are received by
Computer Center pursuant to this Agreement or in the course of
rendering the Services. It is expressly agreed and understood,
however, that performance of the Services will be subject to
examination by regulatory authorities, including, but not limited to,
(i) the Comptroller of Currency, (ii) the Board of Governors of the
Federal Reserve System, (iii) the Board of Directors of the Federal
Deposit Insurance Corporation, and (iv) the State Banking Department,
and that as part of the performance of Services hereunder, Computer
Center shall submit or furnish to the regulatory agencies reports,
information, assurances or other data as may be required under
applicable laws and regulations to which either party is subject.
b. Participating Bank acknowledges and agrees that all computer programs,
codes, and information regarding Computer Center's business
operations, pricing, the terms and conditions of this Agreement, the
Computer Center pricing manual and any other contract documents, the
Computer Center systems, and related matters (hereinafter collectively
referred to as "Proprietary Information"), are the exclusive and
confidential property of Computer Center, or the third parties from
whom Computer Center has secured the right to use computer programs.
Participating Bank understands that the harm that could be caused to
Computer Center should the Proprietary Information be disclosed to its
competitors and others having no need to know the Proprietary
Information. Therefore, Participating Bank agrees to hold all such
Proprietary Information in strictest confidence. Proprietary Bank
will instruct its employees who have access to or who use the
Proprietary Information to keep same confidential by using no less
than the same degree of care and discretion that Participating Bank
uses with respect to its own confidential and Proprietary Information.
On termination of this Agreement, Participating Bank shall return all
Proprietary Information to Computer Center and shall cease to use the
same for any purpose whatsoever. This paragraph shall not apply to
any information furnished by Computer Center which is already in the
public domain at the
5
<PAGE>
time of disclosure to Participating Bank or to any information
independently developed by Participating Bank outside this Agreement.
This provision shall survive termination of this Agreement, regardless
of cause, for a period of five (5) years from date of termination.
15. DECONVERSION.
------------
a. Upon termination of this Agreement, Computer Center will dispose of
all Participating Bank files still in the Computer Center's system in
such manner deemed appropriate by Computer Center unless Participating
Bank, prior to the date of termination, furnishes to Computer Center
written instructions for the disposal of Participating Bank's files,
which instructions Computer Center will, if reasonable and feasible,
comply with at Participating Bank's expense. Participating Bank's
master file data will be maintained by Computer Center for a period of
thirty (30) days subsequent to termination, after which time it may,
at the option of Computer Center, be destroyed.
b. Deconversion information or data shall not be made available to
Participating Bank until Participating Bank has first paid, in a form
acceptable to Computer Center, all sums due Computer Center, including
all monthly charges that might be due if deconversion occurs prior to
normal expiration of this Agreement, all accrued and unpaid
information processing and other charges, and all deconversion
charges. Participating Bank understands that it will be billed and
agrees to pay such bills for any additional services or reports
provided by Computer Center after deconversion at the request of
Participating Bank for audit verification or other purposes, at
Computer Center's normal rates for such services or reports.
Participating Bank agrees that Computer Center shall have a lien on
Participating Bank's information and data until all sums due are paid
in full. Release of said lien by surrender of possession by Computer
Center shall not affect any claim Computer Center might have for
payments due it from Participating Bank.
16. INSPECTION. Computer Center agrees that all records relating to
----------
Participating Bank at all times shall be subject to inspection and review
by Participating Bank or its auditors, designees, accountants and
appropriate examiners from the applicable state and federal bank regulatory
agencies, upon reasonable notice to Computer Center. Computer Center
further agrees to prepare such reports, grant computer usage and permit
programming examination as may be necessary to meet the audit requirements
of Participating Bank. Reasonable charges shall be made to and be payable
by Participating Bank for all special programming and other computer usage
in excess of any programming or usage to which Participating Bank may be
entitled pursuant to Exhibit "B".
17. TITLE TO SOFTWARE. All right, title and interest in and to any and all
-----------------
computer programs, and the source codes therefor, used by Computer Center
in the performance of Services, including any special programs written
specifically for Participating Bank, shall be and remain the property of
Computer Center.
18. PRIORITY. Computer Center shall advise Participating Bank by letter of any
--------
system changes that would affect procedures or Reports. Computer Center
also agrees that Participating Bank's data shall have priority for
processing over any data of entities, other than banks, savings and loans,
credit unions and other financial institutions.
19. BINDING EFFECT AND ASSIGNMENT. This Agreement and all the provisions
-----------------------------
hereof shall be binding upon, and inure to the benefit of, the parties
hereto and their respective successors and permitted assigns. Neither this
Agreement nor any of the rights or obligations of either party hereunder
shall be assigned or delegated by such party to any other person without
prior written consent of the other party hereto, except that Computer
Center (or any successor to Computer Center) may, at any time during the
Term hereof, assign its rights and delegate its obligations hereunder to
any subsidiary or division of
6
<PAGE>
Computer Center or any other entity which controls, is controlled by, or is
under common control with Computer Center.
20. AVAILABILITY OF SERVICES. Computer Center's system will be available for
------------------------
communication between Participating Bank and Computer Center from
_______________ to ________________ (_____ days per week). Participating
Bank's daily cut off time for items capture, file maintenance and data
transmissions will be no later than ____________ each day.
21. TERMINATION BY PARTICIPATING BANK. The parties further agree and
---------------------------------
acknowledge that there may be certain circumstances in which Participating
Bank desires to discontinue Computer Center's provision of one or more of
the Services prior to the expiration date of this Agreement. In such
event, Computer Center will suffer substantial loss or injury that is
difficult or impossible to accurately estimate. Accordingly, in an effort
to liquidate in advance the sum that should represent the loss or damages
which would be actually sustained by Computer Center as a result of such
early termination by Participating Bank of any Services provided hereunder,
the parties have agreed on the amount specified below as a reasonable pre-
estimate of Computer Center's probable loss. If Participating Bank desires
to discontinue any Services hereunder, Participating Bank shall give
Computer Center one hundred eighty (180) days advance written notice and
shall pay Computer Center an amount equal to 75% of the "estimated
remaining service fees" with respect to the Services being discontinued or
the monthly "minimum charge", whichever is greater, for the remainder of
the Term beginning on the effective date of termination. The "estimated
remaining service fees" for the Services being discontinued shall be
calculated by multiplying the average monthly service fees billed for the
Services being discontinued for the six (6) months immediately preceding
notice of early termination by the number of months remaining under the
Term of this Agreement. The "minimum charge" will be determined by Exhibit
"B" of this Agreement. This amount is due per the provisions of paragraph
15(b).
22. TERMINATION BY COMPUTER CENTER. In the event that Computer Center desires
------------------------------
to cancel this Agreement or discontinue Services hereunder, it shall give
Participating Bank one hundred eighty (180) days advance written notice and
this Agreement or any Service hereunder shall be cancelled in full.
23. ENTIRE AGREEMENT. This instrument, along with the appendices and schedules
----------------
incorporated herein by reference, constitutes the entire agreement and
understanding between the parties with respect to the subject matter
hereof. Representations and agreements not expressly contained or
incorporated by reference herein shall not be binding upon either party as
warranties or otherwise. Modifications of this Agreement must be in
writing and signed by duly authorized representative of the parties.
24. SEVERABILITY. In the event that one or more of the provisions of this
------------
Agreement is for any reason held to be invalid or unenforceable, such
holdings shall not affect the remaining provisions of this Agreement.
7
<PAGE>
25. APPLICABLE LAW. This Agreement is made and entered into in Norcross,
--------------
Georgia, and shall be governed by the laws of the State of Georgia.
COMPUTER CENTER: PARTICIPATING BANK:
PROVESA, INC. CLIENT'S NAME
By:____________________________ By:_______________________________
(Signature) (Signature)
Name:__________________________ Name:_____________________________
(Please Print or Type) (Please Print or Type)
Title:_________________________ Title:____________________________
Date:__________________________ Date:_____________________________
8
<PAGE>
EXHIBIT "A"
SERVICES PROVIDED:
Processes the following applications:
Central Information File
Demand Deposit Accounts
NOW Accounts
Money Market Accounts
Line of Credit
Savings Accounts
Certificates for Deposits
IRA Accounts
Loans
Add-On's
Add-On GILAs
Simple Interest
General Ledger
Proof and Transit
File Folder
Account Reconciliation
Automated Teller Machine
Card Management
PROVESA, INC., offers several other personal computer based financial
institution packages that can be purchased for additional charges. Please
contact your sales representative for additional pricing.
They include:
VISION Optical Disk Storage
PROVESA, INC., Platform Automation
BRIDGE-IT Financial Report Writer
InfoVoice - Voice Response System
PROVESA, INC., markets various hardware for use in financial institutions. Some
of these include personal computers, terminals, printers, modems, communication
equipment, personal computer software, and other various products. Please
contact your sales representative for additional pricing.
9
<PAGE>
EXHIBIT B
APPLICATION PROCESSING
- ----------------------
$___ Per Account
(DDA, Savings, Loans, CDs, General Ledger, etc.)
$___ Per Account
Central Information File (CIF)
OR
$___ Per Month Minimum
AUTOMATED TELLER MACHINE PROCESSING
- -----------------------------------
$___ Per Month Connect Fee
$___ Per Month for each ATM includes monitoring
DEBIT CARD MANAGEMENT PROCESSING
- --------------------------------
$___ Minimum Per Month OR $___ Per Card Per Month
$___ Per Transaction Processing
<TABLE>
<CAPTION>
MISCELLANEOUS DATA PROCESSING CHARGES
- -------------------------------------
<S> <C> <C>
Account Reconciliation $____ Minimum
Reconciliation Charge $____ Per Item
Audit Confirmation Generation $____ Minimum
Confirmation Charge $____ Each
Magnetic Tape Reporting $____ Each
(e.g., Credit Bureau, IRS, Insurance, Account Reconciliation)
Carriage Tape $____ Each
Amortization Schedules $____ Each
Preprinted Customer Labels $____ Each
<CAPTION>
ITEM PROCESSING
- ---------------
<S> <C> <C>
On-us Items $___ per month minimum or $____ Each Item
Transit Items $___ per month minimum or $____ Each Item
Electronic Inclearings $___ per month base fee and $____ Each Item
<CAPTION>
OTHER CHARGES
- -------------
<S> <C> <C>
"Caption" Installation and Training* $_____
S4600 Installation and Training* $_____
Programming Services* $_____ Per Hour
(Minimum two hours)
Customer Support Training*
Participating Bank's Location $_____ Per Day Per CSR
Provesa, Inc. Facility $_____ Per Day Per Person
Data Communications or Hardware Services*
Regular Service $_____ Per Hour
Emergency Service $_____ Per Hour
Data Processing Operation Services
Overtime/Special Handling $_____ Hour
On-Line Device Support $_____ Per Device
</TABLE>
* Plus all out-of-pocket expenses (e.g., meals, lodging, travel). Travel will
be billed at current IRS allowable rate from Provesa facility to customer
site and return.
10
<PAGE>
EXHIBIT "C"
REPORTS
-------
DESCRIPTION FREQUENCY
DDA
- ---
Daily Transaction Recap Summary Daily
Stop Pay/Hold File Maintenance Daily
Stop Pay/Hold Journal Daily
Stop Pay Suspects Report Daily
Transfer Journal Daily
Transfer Register Daily
Teller Cash Summary Daily
Teller Transaction Analysis Daily
Trial Balance and Transaction Journal Daily
NOW Trial Balance Daily
Money Market Trial Balance Daily
Daily Overdraft Report Daily
NSF Report Daily
Unposted Transactions Daily
Significant Balance Changes Daily
Branch Totals by Type Daily
DDA Totals by Type Daily
Drawing on Today's Deposits Daily
New Account Report Daily
Closed Account Report Daily
Purged Accounts Report Daily
Money Market Excessive Withdrawals Daily
Federal Withholding Report Daily
NSF Notices Daily
Overdraft Notices As App.
New Account and File Maintenance Cards Daily
Account Statements Monthly
Monthly New Accounts Report Monthly
Monthly Closed Accounts Report Monthly
Commercial Account Analysis Monthly
SAVINGS
- -------
Cumulative Trial Balance and Transaction Journal Daily
Full Trial Balance and Transaction Journal Weekly
Unposted Transactions Daily
Significant Balance Changes Daily
New Accounts Report Daily
Closed Accounts Report Daily
Purged Accounts Report Daily
Federal Withholding Report Daily
New Account and File Maintenance Cards Daily
Monthly New Accounts Report Monthly
Monthly Closed Accounts Report Monthly
Account Statement Quarterly
Trial Balance Weekly
CD Activity Summary Daily
11
<PAGE>
Reserve Requirement Report Daily
CD Maturity Schedule Daily
New CD Report Daily
Closed CD Report Daily
Matured CD Report Daily
Purged CD Report Daily
Matured CDs Pending Report Daily
Renewed CDs Report Daily
Transaction Posting Journal Daily
CD Rate Change Report Daily
Interest Payment Report Daily
New CD/File Maintenance Card Daily
Customer Notice of Deposit Daily
Final Maturity Notice Daily
Capitalization Notice Daily
Automatic Renewal Notice Daily
CD Checks Daily
CD Maturity Schedule Monthly
IRA Over Contribution Report Monthly
Customer Statements/Combined Annually
On-Line Call Reports As App.
CONSOLIDATED LOANS
- ------------------
New Loan Report Daily
Paid Out Loan Report Daily
On-Line Loan G/L Entries Daily
Automatic G/L Entry Report Daily
On-Line Control Totals Daily
Loan Trial Balance Weekly
Branch Totals Report Daily
Installment Balance Control Daily
Commercial Balance Control Daily
Loan Activity Report(s) Daily
Delinquent Loan Report Daily
New/Paid Out Loan Card Daily
Past Due Notices As App.
Billing Notices Daily
Collection Cards As App.
Automatic Debits and Credits Daily
Automatic Debits and Credits Report Daily
Delinquent Loan Cards Daily
Commitment Loan Trial Monthly
Delinquent Notices As App.
Rate Change Notices As App.
Rate Change Report Daily
Loan History Cards As Requested
Purged Loan Report Annually
Renewed Loan Report Daily
Platform Pending Loan Report Daily
Dealer Loan Report As Requested
Loan Coupon Report Weekly
On-Line Call Reports As App.
Maturity Forecast Report Weekly
Interest Rate Analysis Monthly
Loan Officer Analysis Monthly
12
<PAGE>
Loan Insurance Report Monthly
Loan FDIC Report Monthly
FASB-91 Fee Costs Reports Daily
Unposted Loan Report Daily
Loan Exception Report Daily
Loan Tickler Report Daily
GENERAL LEDGER
- --------------
Statement of Condition (Current Period) Daily
Statement of Condition (Prior Period) Daily
Income and Expense Journal Daily
Account Statements Monthly
CIF AND OTHER REPORTS
- ---------------------
On-Line Audit Report Daily
Employee Terminal Usage Report Daily
Consolidated 1099s Annually
Consolidated 1098s and Reports Annually
Consolidated IRS Mag Tape Annually
Purged CIF Accounts Annually
On-Line Teller Report
Line of Credit Trial Balance Daily
Line of Credit Statements Daily
Check Reconcilement Report
Error Check Reconcilement Report
Xmas Club Checks Annually
Xmas Club Report Annually
13
<PAGE>
EXHIBIT 10.15
SERVICE AGREEMENT
DEFINITIONS:
- -----------
"You", "Your", and "Customer" refers to the name of the company or entity on
whose behalf this Agreement is being executed. "ICT" refers to Intercept
Communications Technologies, LLC. "Effective Date" is the date this Agreement
is executed by both parties. "Communications Network" refers to the equipment
and connectivity choice utilized by ICT to provide service to the Customer per
the Agreement.
COMMITMENT:
- ----------
ICT is committed to provide a reliable network to the Customer. Should the
Customer be unable to use the Communications Network due to equipment or
datalines provided by ICT for a period greater than six (6) consecutive hours
then ICT, at the Customer's request, will credit the Customer's bill for each
hour the Customer is unable to use the Communications Network using the
following four guidelines: (i) The hourly credit amount will be 1/720th of the
monthly bill for the affected Communications Network segment(s); (ii) The total
credit does not exceed the monthly bill for the affected portion of
Communications Network; (iii) Shipping time for replacement equipment is
excluded from the calculation of the time that the Customer is unable to use the
Communications Network, (iv) These credits do not apply during any time that
repair of the Communications Network is hindered by lack of access to the
Customer's premise, or by any delay resulting from any cause or circumstance
beyond ICT's reasonable control.
MAINTENANCE:
- -----------
It is ICT's policy to maintain spare equipment for immediate replacement of the
equipment that ICT has installed at the Customer's premise for the
Communications Network. The maintenance of the communications equipment
provided by ICT is depot maintenance unless otherwise specified by an addendum
to the Agreement. Equipment which fails due to factory defect will be replaced
under depot maintenance and will be shipped to the Customer using standard
overnight delivery. It is the Customer's responsibility to maintain adequate
environmental conditions for the equipment ICT provides for the purpose of this
Agreement The depot maintenance does not cover equipment damaged due to abuse,
misuse, lightning, fire, flood, or Acts of God. It will be the Customer's
responsibility to swap the Communications Equipment at the Customer's location
then package and ship the failed equipment back to ICT at the Customer's
expense.
If the failed equipment is not returned to ICT within thirty (30) days of the
ship date of the replacement equipment then the Customer will be responsible for
the retail replacement cost of the failed equipment.
SERVICE UPGRADES:
- ----------------
It is ICT's policy to maintain service offerings utilizing the communications
technology that ICT believes best fits the Customer's needs. ICT will have the
right to change the equipment and communications technology as it sees fit so
long as at least equivalent service is provided to the Customer. Service
changes and upgrades requested by the Customer will be accommodated as long as
the following three conditions are met: (i) The service requested is one that
ICT currently supports at the time of the request, (ii) The service change does
not reduce the revenue amount to ICT that is generated by the existing
Agreement, (iii) If the Service change increases the network bandwidth
requirements, port count, device count, or supported protocol count, then the
current Agreement must be amended to include the requested Service change.
TERMINATION:
- -----------
The initial term of this Agreement is specified in the section entitled
"Agreement," below. Either Customer or ICT may terminate this agreement at the
end of the initial term by providing not less than thirty (30) days written
notice. Customer's notice must be sent to: ICT, LLC., 3150 Holcomb Bridge Road,
Suite 200, Norcross, Georgia, 30071, Attention: Billing Department. If no
written notification is submitted to ICT's Billing Department and ICT has not
given notice of termination to the Customer, this Agreement shall automatically
renew under the same terms as the Initial Agreement.
In the event that the Customer terminates this Agreement prior to the
establishment of the service, but after the Effective Date, the Customer is
required to reimburse ICT for all expenses incurred in handling the request
before the notice of cancellation is received.
In the event that the Customer terminates this Agreement prior to the expiration
of the service period, the Customer shall pay a Termination Liability Charge.
The Termination Liability Charge shall equal the sum of: (i) any installation
charges that were waived by ICT, (ii) any other costs that ICT incurs or pays,
following termination of this Agreement as a result of providing the services
outlined in this Agreement, (iii) the
Page 1
<PAGE>
monthly Agreement fee for the number of months remaining in the current
Agreement (up to a maximum of six).
If the Customer breaches this Agreement by failing to timely pay any charges or
other amount due to ICT, or otherwise is in breach of this Agreement, and the
breach continues uncured for ten days following ICT's delivery of written notice
to the Customer noting the breach and demanding its cure, ICT may discontinue
any or all of the Services to the Customer until the breach is cured. If such
breach continues for thirty days following delivery of such notice, ICT may
terminate the Agreement and the Customer shall pay the Termination Liability
Charge. In the event the Customer fails to pay for services according to the
terms referenced in this Agreement, ICT may, at its discretion, charge interest
on the unpaid and past due balance at the rate of 1.5% per month (18% annually).
The Customer further agrees to pay any and all of ICT's costs of collection,
including reasonable attorneys' fees, in the event that it becomes necessary for
ICT to pursue such remedies.
Unless specified within an addendum to this Agreement, all equipment used by ICT
to support the Customer for the purposes of this Agreement is solely owned by
ICT. The Customer shall not use any such equipment for any purposes other than
these set forth in this Agreement and shall not permit the equipment to be used
by or disclosed to any other person or entity. Because there would be no
adequate remedy at law for a breach of the foregoing, ICT shall have the right
to obtain an injunction to prevent such breach and shall have such further
rights as are available at law or in equity. Upon termination of this Agreement
by either the Customer or ICT, it becomes the Customer's responsibility to
return all equipment installed by ICT to: ICT, LLC., 3150 Holcomb Bridge Road,
Suite 200, Norcross, Georgia, 30071, Attention: Network Operations. This
equipment must be returned within thirty (30) days of the termination date of
this Agreement or the Customer will be responsible for the retail replacement
cost of this equipment.
WARRANTY AND LIMITATION OF LIABILITY:
- ------------------------------------
Services provided by ICT hereunder will be performed in a professional and
workman like manner and shall substantially conform with the description of
Services set forth on the attached Service Definition Worksheet. Should ICT
breach this warranty, the Customer shall so notify ICT in writing, and ICT shall
use reasonable diligence to remedy such breach within 15 days of receipt of
Customer's notice. Should ICT fail to remedy a breach within that time,
Customer shall be entitled to a reasonable abatement of fees hereunder. EXCEPT
AS PROVIDED IN THIS PARAGRAPH, ALL SERVICES ARE DELIVERED WITHOUT WARRANTY OF
ANY KIND, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF TITLE, MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE. CUSTOMER'S SOLE REMEDY FOR ICT'S BREACH OF
ALL WARRANTIES HEREUNDER IS AS SET FORTH IN THIS PARAGRAPH. IN NO EVENT SHALL
ICT BE LIABLE TO CUSTOMER FOR ANY AMOUNT IN EXCESS OF THE FEES ACTUALLY PAID BY
CUSTOMER TO ICT FOR SERVICES PROVIDED HEREUNDER. IN NO EVENT SHALL ICT BE LIABLE
FOR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT
LIMITATION LOSS OF PROFITS, OR DAMAGES FOR INTERRUPTION OF BUSINESS, WHETHER
SUCH DAMAGES ARE ALLEGED IN TORT, CONTRACT, INDEMNITY OR OTHERWISE, EVEN IF ICT
HAS BEEN APPRISED OF THE POSSIBILITY OF SUCH DAMAGES.
The waiver by either party of a breach or default in any of the provisions of
this Agreement by the other party shall not be construed as a waiver of any
succeeding breach of the same or other provisions; nor shall any delay or
omission on the part of either party to exercise or avail itself of any right,
power or privilege that it has or may have hereunder operate as a waiver of any
breach or default by the other party.
This Agreement constitutes the entire Agreement between the parties with respect
to the subject matter hereof and supersedes all prior agreements between the
parties, whether written or oral, relating to the same subject matter. No
modifications, amendments, or supplements to this Agreement shall be effective
for any purpose unless in writing signed by an officer of ICT and a duly
authorized representative of the Customer.
The prevailing party in any legal proceeding brought by one party against the
other party and arising out of or in connection with this Agreement shall be
entitled to recover its legal expenses, including court costs and attorneys'
fees.
The laws of the State of Georgia shall govern the validity, interpretation,
performance and enforcement of this Agreement.
MISCELLANEOUS:
- -------------
Customer may not assign this Agreement or any of its rights or obligations
hereunder without the prior written consent of ICT.
AGREEMENT:
- ---------
The undersigned Customer requests ICT to provide the Communications Network as
detailed on the attached Service Definition Worksheet. The service period for
this Agreement shall be _____ months commencing on the first full month in which
the services described herein are provided. The rates and charges for items
under this Agreement are detailed on the
Page 2
<PAGE>
attached Price Detail Worksheet. The installation and other nonrecurring costs
are _____________. The monthly recurring cost is ___________. Charges for
additional services requested by the Customer will be automatically applied to
the monthly recurring cost and such services will be coterminous this the
Agreement.
Customer
__________________________________
Authorized Signature
Date:_____________________________
__________________________________
Name (type or print)
__________________________________
Title
ICT ACCEPTED BY
__________________________________
Authorized Signature
Date:_____________________________
__________________________________
Name (type or print)
__________________________________
Title
Page 3
<PAGE>
SERVICE DEFINITION WORKSHEET
DIAGRAM:
- -------
SERVICE DESCRIPTION:
-------------------
ICT will provide 56K frame relay connectivity between the Data Center and all
your branches.
ICT will provide Motorola Vanguard FRADS (Frame Relay Access Devices) and
install all frame relay switching/routing hardware.
ICT will provide network monitoring of equipment and circuits to provide network
fault identification.
Page 4
<PAGE>
EXHIBIT 10.16
SOFTWARE LICENSE AGREEMENT
This Agreement is made and entered into this _____ day of ____________, 19__,
between Bank Services Corporation, a Colorado Corporation ("BSC") and
_______________ ("Client").
1. License. Subject to the terms of this Agreement, BSC hereby grants
-------
to Client a nonexclusive license to use the programs, documentation and
associated material enumerated in paragraph 16 and incorporated herein
(together "the System") for a period of 99 years from the date hereof.
Client shall pay BSC for use of the System as set forth in paragraph 17.
2. Taxes. All taxes and charges of any kind, imposed by Federal, State
-----
or local governments with respect to the services or items covered by this
Agreement, or the sale or use thereof, or measured by the gross receipts
applicable to this Agreement, shall be paid by Client, except that Client
shall not be responsible for income taxes payable by BSC. If taxes are paid
by BSC they shall be reimbursed by Client upon invoice from BSC.
3. Location. Client shall use the System only as specified in paragraph
--------
18. Client will notify BSC immediately upon any change in that location.
Failure to notify BSC of a change in location could result in revocation of
this Agreement. Revocation will be determined solely by BSC.
4. Training. Upon reasonable notice, BSC shall furnish the number of
--------
days of training as specified in paragraph 19. For any additional
installation assistance rendered by BSC, Client shall pay BSC at their
current per diem rate and shall reimburse BSC for all reasonable expenses
incurred by BSC in rendering such assistance. BSC will provide an itemized
list of expenses upon request.
5.a. Confidentiality. Client acknowledges that the System is proprietary
---------------
to BSC and constitutes a BSC trade secret. The System shall be kept
confidential by Client, and shall not be disclosed by Client to any person
or party without BSC's prior written consent, except those Client employees
who have a reasonably necessary need to know for operation of Client's
business.
b. If Client or any of its employees, agents, or representatives attempt
to use, duplicate, or dispose of the System, in whole or in part, in a
manner contrary to the terms of this Agreement, BSC shall have the right,
in addition to such other remedies as may be available to it, to injunctive
relief enjoining such acts or attempts, it being acknowledged that legal
remedies are inadequate.
6.a. Warranty. BSC warrants that, for six months after its installation,
--------
the System will conform to the specifications set forth in the system
documentation. In the event of deviation from said specifications, BSC's
sole obligation shall be to use its best
<PAGE>
efforts to correct all program errors and malfunctions that are
discrepancies between the functioning of the System and said
specifications.
b. BSC is not responsible for any System errors, defects malfunctions,
or other problems resulting from (1) Incorrect specifications having been
submitted to BSC by Client; (2) Client having approved incorrect
specifications; (3) Improper use of the System; (4) Any modifications
having been made to the System by Client; (5) Client negligence; (6)
Hardware equipment malfunctions; (7) The System not including all updates
furnished by BSC or (8) Any other circumstances not caused by BSC, and any
effort by BSC to diagnose or correct such problems shall be performed at
BSC's then current time and material rates, plus expenses.
6.c. BSC MAKES NO WARRANTIES, EXPRESSED OR IMPLIED, NOT SPECIFICALLY
STATED HEREIN, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
7.a. Limitation of Liability. BSC's entire liability to Client for all
-----------------------
damages incurred by Client regardless of the form of action for any and all
claims relating to the System or to any other software, services, systems,
programs, documentation or work products provided by BSC to Client, whether
provided under this Agreement or otherwise, shall in the aggregate be
limited to the lesser of (1) The cost of correction or replacement of, or
(2) BSC's charges for the specific software, services, system, programs,
documentation or work products which are the subject of the alleged claim.
IN NO EVENT SHALL BSC BE LIABLE FOR ANY DAMAGES CAUSED BY CLIENT OR FOR ANY
LOST PROFITS OR INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES NO MATTER HOW
ARISING, EVEN IF BSC HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
b. No action, regardless of form, arising under this Agreement may be
brought by either party more than one year after the earlier of (1) The
facts supporting the cause of action becoming known to the Claimant, or (2)
The date of termination of maintenance furnished pursuant to paragraph 15
hereof.
8. Notice. All notices which BSC or Client may have cause to give to the
------
other hereunder shall be considered given upon deposit of written notice in
the United States mails, postage prepaid, and addressed if to BSC, to 130
E. Kiowa Street, Colorado Springs, CO 80903 and, if to Client to the
address provided in paragraph 20, or to such other address as either party
may provide to the other in a notice complying with this paragraph.
9. Non-Disclosure. Client shall not disclose the terms and conditions
--------------
of this Agreement to (1) Any third party, or (2) Any person in Client's
organization other than those who require it in the performance of their
jobs. Client may disclose any such information requested by government
agencies that may require that information in the performance of
examinations and audits of the clients.
2
<PAGE>
10. Delays. Neither party shall be liable or deemed in default for any
------
delay or failure in performance of this Agreement resulting directly or
indirectly from any cause beyond the control of that party.
11. Waiver. The waiver of one breach or default thereunder shall not
------
constitute the waiver of any subsequent breach or default.
12. Assignment. This Agreement shall be binding upon and inure solely to
----------
the benefit of the parties hereto and their respective successors and (to
the extent specified in the assignment) assignees, and not for the benefit
of any other person or legal entity. Client shall not assign this
Agreement without the prior written consent of BSC, which consent shall not
be unreasonably withheld.
13. Default by BSC. In the event BSC shall breach any representation or
--------------
warranties made by them or by this Agreement, or shall default in the
performance of any obligation imposed upon them by this Agreement and shall
not, within sixty (60) days after the date on which breach or default shall
occur, either (1) Cure it; (2) Make, with Client's approval (approval shall
not be unreasonably withheld), steps to cure it, then in such event, Client
shall thereafter have no further duties or obligations whatsoever, except
that Client will be bound by the provisions concerning proprietary rights
and confidentiality.
14. Default by Client. In the event Client shall breach any
-----------------
representation or warranty made by them in this Agreement, or shall default
in the performance of any obligations imposed upon them by this Agreement,
and shall not with sixty (60) days after the date on which such breach or
default shall occur, either (1) Cure it; (2) Make, with BSC's approval
(approval shall not be unreasonably withheld), steps to cure it, then in
such event, (a) BSC shall have no further duties or obligations whatsoever
under this Agreement; (b) Client shall pay all past and current fees to
BSC; (c) Client must maintain all provisions of this Agreement pertaining
to confidentiality of BSC System described in paragraph 16 and BSC
proprietary rights to such System.
15.a. Maintenance. For a period of six months after the date of this
-----------
Agreement, BSC will provide, on a timely basis, telephone support, and
changes to correct proven errors in program logic and documentation of the
System to the Client. Maintenance is provided to the primary site only
unless otherwise provided for in paragraph 18.
a. Beginning six months from the date of the Software License Agreement
as specified above, BSC will provide telephone support, and maintenance and
improvements to the System for a twelve (12) month term. The term of this
agreement shall be automatically consecutively renewed for an additional
term of twelve (12) months unless either party gives written notice to the
other of its intention not to continue such maintenance and improvement
services thirty (30) days prior to
3
<PAGE>
renewal date. Payments that are made after the due date are subject to a
one and one-half (1 1/2%) late charge.
b. Maintenance and improvements will be sent to the primary site only
unless otherwise specified in paragraph 18. Client is responsible for
distribution of maintenance and improvements to any secondary sites that
are described in paragraph 18.
c. Client shall pay annually to BSC upon renewal, the then current
charge for maintenance and improvements which is described in paragraph 16,
except that such annual charge shall not increase by more than five percent
(5%) over the charge for the immediately preceding year for the first five
years. At the beginning of each successive term, BSC shall invoice Client
for the total charge applicable for such term. Client shall render payment
for all invoices to BSC within thirty (30) days after receipt thereof for
each location unless otherwise specified.
d. Upon installation and use of maintenance and improvements by Client,
such changes shall thereupon be deemed to be a part of the applicable
system.
16. Description of System: One Time
--------
Fee
---
PC BancPAC Application Modules $________
Customer Information File
Demand Deposit
Savings and club accounting
Certificate of Deposits
Individual Retirement accounting
Loans (all types)
Automatic funds transfer system
Account analysis
Safe deposit box accounting
Loan Collections
Overdraft protection
Home equity loans
Cash sweep accounts
Executive/reminder system
Audit confirmations
Static gap reporting
Annual maintenance and enhancement service:
4
<PAGE>
Year 1 $______
Year 2 $______
Year 3 $______
Year 4 $______
Year 5 $______
Conversion, Training $______
17. Payment Terms:
50% Contract Signing
25% Conversion Date
25% Thirty (30) days after conversion
18. Location of Computer Installation:
________________________
________________________
________________________
19. Installation Assistance and Training provided by BSC to Client
Automated conversion from present system.
Fifteen (15) man days on-site training.
20. Address for Notice to Customer:
________________________
________________________
________________________
21. Laws and Venue. This Agreement shall be interpreted under and
--------------
governed by the laws of the State of Colorado. In all matters arising
under the terms of this Agreement, exclusive venue and jurisdiction shall
be vested in a competent El Paso County, Colorado Court.
22. Entire Agreement. Client acknowledges that this Agreement has been
----------------
read and understood, including all exhibits and amendments, agrees to be
bound by its terms and agrees that it is the complete and exclusive
statement of agreement between the parties, superseding all other
communications or representations oral or written. This Agreement may be
modified only by written consent by the parties hereto.
5
<PAGE>
The foregoing is agreed to by:
Bank Services Corporation ________________________
130 E. Kiowa Street ________________________
Colorado Springs, CO 80903 ________________________
By:_____________________________ By:_____________________________
Print Name:_____________________ Print Name:_____________________
Title:__________________________ Title:__________________________
Date:___________________________ Date:___________________________
6
<PAGE>
EXHIBIT 10.17
LOAN AGREEMENT
THIS AGREEMENT made and entered into as of the 17th day of June, 1996, by and
between Georgia State Bank (hereinafter referred to as "Lender"), a banking
corporation organized under the laws of Georgia, and Intercept Holdings, Inc.
(hereinafter referred to as "Borrower"), a Georgia corporation and John W.
Collins, Guarantor, Data Services Corp., Guarantor and Intercept Systems, Inc.,
Guarantor.
RECITALS
Borrower wishes to obtain from Lender a loan in the principal amount of
$3,000,000.00 and Lender, on the terms and conditions hereinafter set forth, is
willing to lend such sum to Borrower.
NOW, THEREFORE, for and in consideration of the premises and the mutual
agreements, warranties, and representations herein made, Lender and Borrower
agree as follows:
ARTICLE I - DEFINITIONS
1.1 "Tangible Net Worth" means the total of Stockholder's Equity, minus loans
or advances to affiliated entities, minus intangible assets plus subordinated
debt.
1.2 "Capital" means all primary capital or all primary components of capital
as defined from time to time in accordance with generally accepted accounting
principles.
1.3 "Borrower's Stock" means all of the issued and outstanding capital stock
of Data Services Corp. and Intercept Systems, Inc. that is issued and
outstanding at the time of the closing.
1.4 "Collateral" means and includes all property assigned or pledged to Lender
or in which Lender has been granted security interest or to which Lender has
been granted security title under this Agreement or the other Financing
Documents and the proceeds thereof.
1.5 "Financing Documents" means and includes this Agreement, the Note, the
Pledge Agreements, Security Agreement, and any extensions, renewals,
modifications, or substitutions thereof or therefor, and all other associated
loan and collateral documents, including, without limitation, all guaranties,
suretyship agreements, exhibits, schedules, attachments, financing statements,
notices, consents, waivers, opinions, letters, reports, records, assignments,
documents, instruments, information and other writings related thereto, or
furnished by Borrower or Guarantors to Lender in connection therewith or in
connection with any of the Collateral.
<PAGE>
1.6 "Lender" shall include transferees, assignees, and successors of Lender,
and all rights of Lender under the Financing Documents shall inure to the
benefit of its transferees, successors, and assigns. All obligations of
Borrower under the Financing Documents shall bind its heirs, legal
representatives, successors, and permitted assigns.
1.7 "Liabilities" mean all indebtedness, liabilities, and obligations of
Borrower and Subsidiaries of any nature whatsoever which Lender may now or
hereafter have, own or hold, and which are now or hereafter owing to Lender
regardless of however and whenever created, arising or evidenced, whether now,
heretofore or hereafter incurred, whether now, heretofore or hereafter due and
payable, whether alone or together with another or others, whether direct or
indirect, primary or secondary, absolute or contingent, or joint or several, and
whether as principal, maker, endorser, guarantor, surety or otherwise, and also
regardless of whether such Liabilities are from time to time reduced and
thereafter increased or entirely extinguished and thereafter reincurred,
including without limitation the Note (as hereinafter defined), and any
extensions, renewals, modifications, or substitutions thereof or therefor.
1.8 "Guarantors" mean John W. Collins, Data Services Corp., and Intercept
Systems, Inc. (Personal Guarantor means John W. Collins). (Corporate Guarantors
mean Data Services Corp. and Intercept Systems, Inc.)
1.9 "Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
1.10 All accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with the generally accepted accounting principles
in effect from time to time.
1.11 Subsidiaries mean Data Services Corp. and Intercept Systems, Inc.
ARTICLE II - THE LOAN
2.1 Subject to the terms and conditions of this Agreement, Lender agrees to
lend the Borrower the principal sum of $3,000,000.00 (the "Loan").
2.2 The Loan shall be evidenced by a promissory note, in form and substance
satisfactory to Lender, duly executed and delivered by Borrower in favor of
Lender. Said promissory note or any extension(s), renewal(s), modifications(s),
or substitutions(s), thereof or therefor which is in effect at any particular
time is hereinafter called the "Note". The Note shall provide that:
-2-
<PAGE>
(a) The Loan shall bear interest at a rate per annum, calculated on
the basis of a 360-day year and actual days elapsed, equal to the
Prime Rate, plus 2.5% (adjusted daily).
(b) The Principal balance owing under the Note shall be payable at
the rate of $41,202.22 per month, commencing on July 20, 1996 and
continuing on the twentieth day of each successive month
thereafter until paid in full.
(c) All accrued, but unpaid interest shall be payable in full each
month commencing on July 20, 1996 and on the twentieth day of
every successive month thereafter.
(d) Prepayment: No penalty or premium shall be imposed for the
prepayment in whole or in part of the principal balance of the
Loan, but each such prepayment shall be applied in the manner
provided in the Note.
In the event of conflict between the terms of this Section 2.2
and those of the Note, the Note shall control.
(e) Hedge waived in lieu of 60 month call.
2.3 The proceeds of the Loan shall be used by Borrower as follows:
(a) Intercept Holdings, Inc. shall acquire all of the common stock of
Intercept Systems, Inc. and Data Services Corp.
(b) An outstanding indebtedness in the amount of $686,421.12 shall be
used to satisfy an existing indebtedness to Georgia Bankers Bank.
(c) Additional funds shall be used to restructure and improve the
corporate business.
2.4 To secure the repayment of the Loan:
(i) Borrower shall execute and deliver to Lender a stock pledge
agreement (the "Stock Pledge Agreement") in form and substance
satisfactory to Lender, and pursuant to which Borrower shall
grant to Lender a security interest in all Borrower's Stock.
On or before the day the loan is made, Borrower shall deliver
to the Lender the certificate(s) representing the Borrower's
Stock together with stock transfer powers for same in form and
substance satisfactory to Lender. If at
-3-
<PAGE>
any time prior to repayment in full of the Loan, should
Borrower acquire any additional shares of the stock, Borrower
shall promptly deliver certificates evidencing such shares of
stock to Lender and such additional shares shall be added to
the collateral already pledged to Lender under the Pledge
Agreement, and Lender shall have a security interest in such
additional shares.
(ii) Intercept Systems, Inc. shall execute and deliver to Lender a
security agreement pledging said Subsidiaries accounts
receivables, contracts, furniture, fixtures, inventory,
equipment, general intangibles, specifically including the
computer programs comprising the Intercept ATM/Network
Interface Software System" (also known as I.A.N.I.S.S.) and all
other intellectual properties.
(iii) Personal Guaranty of John W. Collins;
(iv) Corporate Guaranty of Intercept Systems, Inc.;
(v) Corporate Guaranty of Data Services Corp.; and
(vi) At the time of closing of this transaction, John W. Collins
shall deliver to Lender, Assignments of Life Insurance Policies
on his life in the face amount of $1,000,000.00 showing Lender
as beneficiary thereunder.
(vii) James R. Henderson shall subordinate his right to compensation
under his employment agreement and agreements to non-compete,
to Georgia State Bank, and its assigns, which shall result in
funds due under this loan being paid prior to any obligations
of Intercept Holdings, Inc. and/or Intercept Systems, Inc. to
James R. Henderson under said employment agreement, in the
event of default by Borrower under the terms of this Loan
Agreement, Note or other documents.
(viii) Such agreements and documents as may be reasonably required by
Lender or Lender's counsel in connection with the loan
hereunder.
2.5 In connection with the Loan, Borrower will also deliver to Lender the
resolutions and other agreements or instruments specified in Section 6.5 hereof
and such other documents as may be reasonably required by Lender.
2.6 Upon execution of the Loan Agreement, Security Agreement and Financing
Documents, Borrower shall reimburse Lender for the
-4-
<PAGE>
attorney's fees and closing costs as shown on the Closing and Disbursement
Agreement of even date herewith.
ARTICLE III - REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender that each of the following is true,
correct, complete and accurate in all respects:
3.1 Borrower is a corporation duly organized, validly existing and in good
standing under the laws of the State of Georgia, and is qualified to do business
in all jurisdictions where such qualification is necessary. Borrower has its
principal place of business located at 6611 Bay Circle, Suite 160, Norcross,
Gwinnett County, Georgia 30071.
3.2 Each financial statement of Borrower and Subsidiaries which has been
delivered to Lender presents fairly the financial condition of Borrower and
Subsidiaries as of the date indicated therein and the results of its operations
for the period(s) shown therein. There has been no material adverse change,
either existing or threatened, in the financial condition or operations of
Borrower and Subsidiaries since the date of said financial statement.
3.3 Borrower has full power and authority to make, execute and perform in
accordance with the respective terms thereof each of the Closing and Financing
Documents. The execution and performance by Borrower and Subsidiaries of each
and every one of the Financing Documents have been duly authorized by all
requisite action, and each and every one of them constitutes the legal, valid
and binding obligation of Borrower and Subsidiaries enforceable in accordance
with its respective terms.
3.4 Execution, delivery and performance by Borrower and Subsidiaries of each
and every one of the Financing Documents does not violate any provision of law
or regulations and will not result in a breach of or constitute a default under
any agreement, indenture or other instrument to which Borrower and Subsidiaries
are a party or by which Borrower and Subsidiaries are bound.
3.5 Except for the security interest created by the Stock Pledge Agreements,
Intercept Systems, Inc. and Data Services Corp.'s Stock pledged hereunder is
free and clear of all liens, charges and encumbrances. Intercept Systems, Inc.
and Data Services Corp.'s Stock is duly issued, fully paid and non-assessable,
and Borrower has the unencumbered right to pledge the Subsidiaries' Stock. John
W. Collins agrees not to pledge his Stock of Intercept Holdings, Inc. so long as
this Loan and the Note are in effect.
3.6 There is no claim, action, suit, arbitration, investigation, condemnation
or other proceeding at law or in equity, or by or before any federal, state,
local or other governmental agency, or by or before any other agency or
arbitrator, nor is there any judgment, order, writ, injunction or decree of any
court pending,
-5-
<PAGE>
anticipated, or threatened against Borrower or Subsidiaries or against any
properties or assets which might have a material adverse effect on Borrower,
Subsidiaries, or their respective properties or assets, or which might call into
question the validity or enforceability of any of the Financing Documents, or
which might involve the alleged violation by Borrower or the Subsidiaries of any
federal, state, local or other law, rule or regulation.
3.7 All of Borrower's and Subsidiaries' outstanding capital stock has been
validly issued, fully paid and is non-assessable. Borrower and Subsidiaries are
not in violation of any applicable federal, state, local, or other securities
law and regulations with respect to the issuance of any of its capital stock or
any other of its securities.
3.8 Borrower, Subsidiaries and Guarantor John W. Collins have filed or caused
to be filed all required federal, state, local or other tax returns and have
paid (except as otherwise permitted by Section 4.3 hereof) all governmental
taxes and other charges imposed upon it or on any of its properties or assets.
Borrower, Subsidiaries and Guarantors do not know of any proposed additional tax
assessments.
3.9 No consent, approval, order, authorization, designation, registration,
declaration, or filing with or of any federal, state, local, or other
governmental authority or public body on the part of the Borrower and
Subsidiaries is required in connection with Borrower's or Subsidiaries'
execution, delivery, or performance of any of the Financing Documents; or if
required, all such prerequisites have been, or as of the date the Loan is
advanced will be fully satisfied. Without limiting the generality of the
foregoing, Borrower has (or, as of the date the Loan is advanced, Borrower will
have) received all authorizations, consents, or approvals of all governmental
agencies, authorities or bodies required under applicable federal or state law
for its acquisition of the Henderson's Stock, and a true and correct copy of
each such authorization, consent and approval has been or will be delivered by
Borrower to Lender prior to the Loan's funding, and all required waiting periods
with respect thereto have (or, as of the date the Loan is advanced, will have)
expired. All conditions or requirements (if any) imposed by each governmental
agency, authority or body in connection with its approval have been (or, as of
the date the Loan is advanced, will have been) met.
3.10 Neither Borrower nor Subsidiaries have incurred any material accumulated
funding deficiency within the meaning of the Employee Retirement Income Security
Act of 1974, P. L. No. 93-406, as amended ("ERISA"), nor have they incurred any
material liability to the Pension Benefit Guaranty Corporation established under
ERISA (or any successor thereto under such Act) in connection with any employee
benefit plan established or maintained by Borrower or its Subsidiaries.
-6-
<PAGE>
3.11 None of the transactions contemplated in this Agreement (including without
limitation, the use of the proceeds of the Loan) will violate or result in a
violation of Section 7 of the Securities Exchange Act of 1934, as amended, or
any regulations issued pursuant thereto, including, without limitation,
Regulations U and X of the Board of Governors of The Federal Reserve System, 12
C.F.R., Chapter II. None of the proceeds of the loan hereunder will be used to
purchase or carry (or refinance any borrowing the proceeds of which were used to
purchase or carry) any "margin stock" within the meaning of said Regulation U.
ARTICLE IV - AFFIRMATIVE COVENANTS
For so long as this Agreement is in effect, and unless Lender expressly consents
in writing otherwise or to the contrary, Borrower hereby expressly covenants and
agrees as follows:
4.1 Upon request of Lender, Borrower and Subsidiaries shall make available its
officers and employees to Lender to discuss the financial affairs of Borrower
and Subsidiaries at such times and intervals as Lender may request, and Borrower
and Subsidiaries shall promptly confirm or furnish in reasonable detail whatever
information relative to Borrower and Subsidiaries as Lender's authorized
representative, auditor or counsel may reasonably request.
4.2 Borrower and Subsidiaries shall promptly furnish to Lender:
(a) Not later than April 30th of each year and as of the end of each
fiscal year, audited consolidated and consolidating financial
statements of Borrower and Subsidiaries, to include a balance
sheet and statement of income and stockholders' equity, all in
reasonable detail, prepared in accordance with generally accepted
accounting principles and certified by an independent accounting
firm acceptable to Lender;
(b) Not later than thirty (30) days after and as of the end of each
month thereafter, unaudited consolidated and consolidating
financial statements of Borrower and Subsidiaries to include a
balance sheet and statement of income and stockholders' equity,
all in reasonable detail, prepared in accordance with generally
accepted accounting principles (subject to changes resulting from
year-end adjustments), and certified by the chief financial
officer of Borrower and Subsidiaries;
(c) Immediately after the occurrence of a material adverse change in
the business properties, condition, management or prospects,
financial or otherwise, of Borrower and Subsidiaries, a statement
of Borrower's and Subsidiaries' chief
-7-
<PAGE>
executive officer or chief financial officer setting forth in
reasonable detail such change and the action which Borrower or
Subsidiaries proposes to take with respect thereto.
(d) Personal Guarantor shall furnish a current financial statement
upon request of the Lender (at least annually) and a copy of his
personal tax returns by August 15th of each year.
(e) From time to time upon request of Lender, such other information
relating to the operations, business, condition, management,
properties and prospects of Borrower and Subsidiaries as Lender
may reasonably request.
4.3 Borrower and Subsidiaries shall punctually pay and discharge all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or upon any of its property, as well as all claims of any kind which, if
unpaid, might by law become a lien or charge upon its property, except taxes,
assessments, charges, levies or claims which are in good faith being timely
litigated or otherwise properly contested by Borrower and Subsidiaries and as to
which the contestant has established an adequate reserve on its books.
4.4 Borrower and Subsidiaries will comply in all material respects with the
requirements of all provisions of constitutions, statutes, rules, regulations,
and orders of governmental bodies or regulatory agencies applicable to it, and
all orders and decrees of all courts and arbitrators in proceedings or actions
to which it is a party or by which it is bound.
4.5 Borrower will immediately report to Lender any change in the beneficial
ownership of Borrower's stock by any officer, director, or 5% or greater
stockholder of Borrower.
ARTICLE V - NEGATIVE COVENANTS
For so long as this Agreement is in effect, and unless Lender expressly consents
in writing otherwise or to the contrary, Borrower hereby expressly covenants and
agrees to the following negative covenants:
5.1 Intercept Systems, Inc.'s tangible net worth shall not be less than
$500,000.00 at all times.
5.2 Borrower shall neither declare nor pay any dividend nor make any
distribution to its shareholders (other than dividends or distributions payable
in shares of stock of Borrower) nor shall Borrower retire, redeem, purchase or
otherwise acquire for value, directly or indirectly, any shares of the capital
stock of Borrower, nor permit if such declaration, payment, distribution,
retirement, purchase, redemption or other acquisition would result
-8-
<PAGE>
in an Event of Default hereunder or an event which, with the giving of notice or
passage of time (or both), would constitute such an Event of Default.
5.3 Borrower shall not incur, create, assume, or permit to exist any
indebtedness or liability for borrowed money other than to Lender.
5.4 The Subsidiaries shall not incur, create, assume or permit to exist any
indebtedness or liability for borrowed money in excess of $200,000.00 each,
other than to Lender, without the prior written consent of Lender, which shall
not be unreasonably withheld.
5.5 Borrower and Intercept Systems, Inc. shall not without prior written
consent of Lender in any manner, directly or indirectly, become a guarantor of
any obligation of, or an endorser of, or otherwise assume or become liable upon
any notes, obligations, or other indebtedness of any other person except in
connection with the depositing of checks in the normal and ordinary course of
business.
5.6 Borrower and Subsidiaries shall not without prior written consent of
Lender transfer all or substantially all of its assets to, consolidate with or
merge with any other person to acquire all or substantially all of the
properties or capital stock of any other person or enter into any partnership or
joint venture, or change or amend its articles or certificates of incorporation
or its by-laws.
5.7 Borrower and Subsidiaries shall not issue, sell or otherwise dispose of
any shares of any class of its stock (other than directors' qualifying shares)
except to Borrower.
5.8 Borrower and Subsidiaries shall not incur or suffer to exist any material
accumulated funding deficiency within the meaning of ERISA or incur any material
liability to the Pension Benefit Guaranty Corporation established under ERISA
(or any successor thereto under ERISA).
5.9 Borrower and Subsidiaries shall not issue any additional stock of Borrower
or Subsidiaries, nor shall Borrower or Subsidiaries increase the compensation,
in any form whatsoever, more than fifteen (15%) percent annually including the
salary, paid to any officers or directors of Borrower or Subsidiaries from the
date hereof up through the date of full satisfaction of the Loan without the
written consent of Lender, which consent shall not be unreasonably withheld.
5.10 Borrower shall not voluntarily change its Chief Executive Officer without
Lender's prior written consent, which consent shall not be unreasonably
withheld.
5.11 Borrower and Intercept Systems, Inc. shall make no capital improvements in
the aggregate in excess of $350,000.00 per year,
-9-
<PAGE>
without the written consent of Lender, which consent shall not be unreasonably
withheld.
ARTICLE VI - CONDITIONS
All of the Lender's obligation under this Agreement, including without
limitation, any obligations to make the Loan to Borrower are subject to the
prior fulfillment of each of the following conditions and Borrower shall exert
its best efforts to cause each of the following conditions to be so fulfilled.
6.1 All representations and warranties of Borrower and Guarantors contained in
this Agreement and in each and every one of the other Financing Documents shall
be true, correct, complete and accurate in all respects on and as of the date
the Loan is advanced.
6.2 Borrower and Guarantors have duly and properly performed in all respects
all covenants, agreements, and obligations required by the terms of this
Agreement or any of the other Financing Documents to be performed by Borrower
and Guarantors.
6.3 Borrower and Guarantors have not taken nor permitted to be taken any
actions which would conflict with any of the provisions of Article V of this
Agreement.
6.4 Since the date of the Loan Application, no significant adverse changes
have occurred in Borrower's condition (financial or otherwise), or in the
business, properties, assets, liabilities, prospects, or management of Borrower
other than the effects of the transactions affected through this Closing.
6.5 Borrower has delivered to Lender the following described documents:
(a) This Agreement duly executed by Borrower;
(b) A Note dated the 17th day of June, 1996 in the original principal
amount of $3,000,000.00 executed and delivered to Lender by
Borrower;
(c) The Stock Pledge Agreements duly executed by Borrower hereunder;
(d) The Certificate(s) representing the Subsidiaries' Stock pledged
by the Borrower together with a stock power for each certificate
duly executed by Borrower or the appropriate stockholder;
(e) A Certificate of Borrower's and Subsidiaries' President or Vice
President and its Secretary or Assistant Secretary, in form and
substance satisfactory to Lender, with respect to the resolutions
of Borrower's and Subsidiaries' directors authorizing execution
of this Agreement
-10-
<PAGE>
and the other Financing Documents, and such other matters as
Lender may reasonably require;
(f) A certificate of the Secretary of State of the state of
Borrower's and Subsidiaries' incorpor-ations certifying that
Borrower and Subsidiaries are corporations duly organized and in
good standing under the laws of such state;
(g) A Security Agreement for each Subsidiary, pledging Subsidiaries'
accounts receivables, contracts, fur-niture, inventory, fixtures,
equipment and intellectual properties to Lender;
(h) Personal Guaranty of John W. Collins;
(i) Corporate Guaranty of Intercept Systems, Inc.;
(j) Corporate Guaranty of Data Services Corp.; and
(k) Such agreements as may be reasonably required by Lender or
Lender's counsel in connection with the Loan hereunder.
(l) A Subordination Agreement from James R. Henderson to Lender,
subordinating the indebtedness of Intercept Systems, Inc. to
James R. Henderson.
(m) A Subordination Agreement from Intercept Holdings, Inc. to
Lender, subordinating the indebtedness of Intercept Systems, Inc.
to Intercept Holdings, Inc.
6.6 Guarantor Collins shall deliver the Assignments of Life Insurance Policies
referenced in paragraph 2.4 (vi) prior to or at the time of closing.
6.7 No Event of Default or event which, with the giving of notice or passage
of time (or both), would constitute an Event of Default under the terms of this
Agreement, shall have occurred.
6.8 All other matters incidental to the Loan hereunder shall be satisfactory
to Lender.
ARTICLE VII - EVENTS OF DEFAULT
The occurrence of any one or more of the following events will constitute an
event of default (herein called an "Event of Default") by Borrower under this
Agreement:
7.1 Failure of Borrower punctually to make payment of any amount payable,
whether principal or interest, on any of the Liabilities within five (5) days
after the same becomes due and payable, whether at maturity, or at a date fixed
for any prepayment or partial prepayment, or by acceleration or otherwise.
-11-
<PAGE>
7.2 If any statement, representation, or warranty of Borrower, of
Subsidiaries, or of Guarantor made in this Agreement or in any of the other
Financing Documents at any time furnished by or on behalf of Borrower,
Subsidiaries, or Guarantor to Lender proves to have been untrue, incorrect,
misleading, or incomplete in any material respect as of the date made.
7.3 Failure of Borrower, Subsidiaries, or Guarantor punctually and fully to
perform, observe, discharge, or comply with any of the covenants set forth in
Article V of this Agreement.
7.4 Failure of Borrower or Guarantor punctually and fully to perform, observe,
discharge or comply with any of the other covenants set forth in this Agreement,
which failure is not cured within thirty (30) days after notice from Lender to
Borrower.
7.5 The occurrence of a default, an Event of Default, or an Event of Default
under any of the other Financing Documents or under any other agreement to which
Borrower, Guarantor and Lender are parties or under any other instrument
executed by Borrower in favor of Lender.
7.6 If Borrower, or any Guarantor becomes insolvent as defined in the Georgia
Uniform Commercial Code or makes an assignment for the benefit of creditors; or
if any action is brought by Borrower or any Guarantor seeking dissolution of
Borrower, or any Guarantor, or liquidation of its assets or seeking the
appointment of a trustee, interim trustee, receiver, or other custodian for any
of its property; or if Borrower or any Guarantor commences a voluntary case
under the Federal Bankruptcy Code; or if any reorganization or arrangement
proceeding is instituted by Borrower or any Guarantor for the settlement,
readjustment, composition or extension of any of its debts upon any terms; or if
any action or petition is otherwise brought by Borrower or any Guarantor seeking
similar relief or alleging that it is insolvent or unable to pay its debts as
they mature.
7.7 If any action is brought against Borrower or any Guarantor seeking
dissolution of Borrower or any Guarantor or liquidation of any of its assets or
seeking the appointment of a trustee, interim trustee, receiver or other
custodian for any of its property, and such action is consented to or acquiesced
in by Borrower or any Guarantor or is not dismissed within ninety (90) days of
the date upon which it was instituted; or if any proceeding under the Federal
Bankruptcy Code is instituted against Borrower or any Guarantor and (i) an order
for relief is entered in such proceeding or (ii) such proceeding is consented to
or acquiesced in by Borrower or any Guarantor or is not dismissed within ninety
(90) days of the date upon which it was instituted; or if any reorganization or
arrangement proceeding is instituted against Borrower or any Guarantor for the
settlement, readjustment, composition, or extension of any of its debts upon any
terms, and such proceeding is consented or acquiesced in by Borrower or any
Guarantor or is not dismissed within ninety (90) days of the date
-12-
<PAGE>
upon which it was instituted; or if any action or petition is otherwise brought
against Borrower or any Guarantor seeking similar relief or alleging that it is
insolvent, unable to pay its debts as they mature, or generally not paying its
debts as they become due, and such action or petition is consented to or
acquiesced in by Borrower or any Guarantor or is not dismissed within ninety
(90) days of the date upon which it was brought.
7.8 If Borrower or any Guarantor is in default on any indebtedness to another
person or an event has occurred which, with the giving of notice or passage of
time, or both, will cause Borrower or any Guarantor to be in default on any
indebtedness to another person, and the acceleration of the maturity of such
indebtedness would have a material adverse effect upon Borrower or any
Guarantor.
7.9 Any other material adverse change occurs in Borrower's or any Guarantor's
financial condition or means or ability to pay the Liabilities.
7.10 Sale, transfer or exchange either directly or indirectly, voluntarily or
involuntarily, of a twenty-five percent (25%) or greater stock interest of
Borrower or Guarantor.
7.11 Failure of Guarantor Collins to provide to Lender Assignments of Life
Insurance Policies on his life in the face amount of $1,000,000.00. Failure to
maintain said coverage shall also constitute a default.
ARTICLE VIII - REMEDIES UPON DEFAULT
8.1 Upon the occurrence of an Event of Default:
(a) Any of the liabilities may (notwithstanding any provisions
contained therein or herein to the contrary), at the option of
Lender and upon thirty (30) days written notice to Borrower at
the Borrower's address provided herein by regular mail, which if
said default is not cured within said thirty (30) days, the
liabilities shall be declared due and payable, whereupon they
immediately will become due and payable.
(b) Lender may also, at its option, and upon notice as set forth in
8.1 (a), exercise from time to time any and all rights and
remedies available to it under this Agreement or under any of the
other Financing Documents, as well as exercise from time to time
any and all rights and remedies available to a secured party when
a debtor is in default under a security agreement as provided in
the Uniform Commercial Code of Georgia, or available to Lender
under any other applicable law or in equity, including without
limitation the right to any
-13-
<PAGE>
deficiency remaining after disposition of the Collateral.
(c) Borrower shall pay all of the reasonable costs and expenses
incurred by Lender in enforcing its rights under this Agreement
and the other Financing Documents. In the event any claim under
this Agreement or under any of the other Financing Documents is
referred to an attorney for collection, or collected by or
through an attorney, Borrower will be liable to Lender for all
expenses incurred by it in seeking to collect the liabilities or
to enforce its rights hereunder, in the other Financing Documents
or in the Collateral, including without limitation, reasonable
attorney's fees.
8.2 Any proceeds from disposition of any of the Collateral may be applied by
Lender first to the payment of all expenses and costs incurred by the Lender in
collecting such liabilities, in enforcing the rights of Lender under each and
every one of the Financing Documents and in collecting, retaking, holding,
preparing the Collateral for and advertising the sale or other disposition of
and realizing upon the Collateral, including, without limitation, reasonable
attorneys' fees as well as all other legal expenses and court costs. The balance
of such proceeds remaining may be applied by Lender toward the payment of such
of the liabilities and in such order of application as the Lender may from time
to time elect. Lender shall pay the surplus, if any, to Borrower. Borrower or
Guarantors shall pay the deficiency, if any, to Lender.
ARTICLE IX - MISCELLANEOUS
9.1 Time is of the essence of this Agreement.
9.2 This Agreement, together with all of the other Financing Documents,
supersedes all prior discussions, understandings and agreements by and between
Borrower, Guarantors and Lender with respect to the Loan and the Collateral, and
together they constitute the sole and entire agreement between the parties.
9.3 This Agreement and the security interests and security title conveyed
under the Financing Documents shall remain in full force and effect until such
time as (i) the liabilities are repaid in full, (ii) Lender is under no
obligation to make loans or other financial accommodations to Borrower, and
(iii) either party in writing notifies the other that it is thereby terminating
this Agreement.
9.4 Lender will not be deemed as a consequence of any act, delay, failure,
omission, or forbearance (including without limitation failure to exercise its
rights of accelerating the maturity of any of the Liabilities or other
indulgences granted from time to time by Lender) for any other reason:
-14-
<PAGE>
(1) to have waived, or to be estopped from exercising, any of its
rights or remedies under this Agreement or under any of the other
Financing Documents, or
(2) to have modified, changed, amended, terminated, rescinded, or
superseded any of the terms of this Agreement or of any of the
other Financing Documents unless such waiver, modification,
amendment, change, termination, rescission, or supersession is
expressed, in writing and signed by a duly authorized officer of
Lender. No single or partial exercise by Lender of any right or
remedy will preclude other or further exercise thereof or
preclude the exercise of any right or remedy, and a waiver
expressly made in writing on one occasion will be effective only
in that specific instance and only for the precise purpose for
which given, and will not be construed as a consent to or a
waiver of any right or remedy on any future occasion.
9.5 Except as provided otherwise in this Agreement, all notices and other
communications under this Agreement are to be in writing and are to be deemed to
have been duly given and to be effective upon delivery to the party to whom they
are directed. If sent by U.S. mail, first class, certified, return receipt
requested, postage prepaid, and addressed to Lender or to Borrower at their
respective addresses set forth below, such notices, demands and other
communications are to be deemed to have been delivered on the second business
day after being so posted. Either Lender or Borrower may, by written notice to
the other, designate a different address for receiving notices under this
Agreement; provided, however, that no such change of address will be effective
until written notice thereof is actually received by the party to whom such
change of address is sent.
9.6 Borrower may not, without the consent of Lender, assign any of its rights
or duties hereunder or any of the other Financing Documents.
9.7 All statements, reports, certificates, opinions and other documents or
information furnished to Lender under the Financing Documents shall be supplied
by Borrower and Guarantor without cost to Lender. Further, Borrower shall
reimburse Lender on demand for all out-of-pocket costs and expenses (including
legal fees) incurred by the Lender in connection with the preparation,
establishment, operation, and enforcement of the Financing Documents or the
protection or preservation of any right or claim of the Lender with respect to
the Financing Documents.
9.8 Borrower will pay all taxes (if any) in connection with this Agreement,
any of the other Financing Documents, any loan made in connection with this
Agreement, or the issuance or ownership of any of the Financing Documents and in
connection with any modification
-15-
<PAGE>
of said loan, this Agreement, or any of the Financing Documents (excluding,
however, any taxes imposed upon or measured by the net income of the Lender) and
will save the Lender harmless without limitation as to time against any and all
liabilities with respect to all such taxes. The obligations of Borrower under
this section shall survive the payment of the liabilities and the termination of
this Agreement.
9.9 Upon the occurrence of an Event of Default hereunder, Lender, without
notice or demand of any kind, may hold and set off against such of the
liabilities (whether matured or unmatured) as Lender may elect, any balance or
amount to the credit of Borrower in any deposit, agency, reserve, holdback or
other account of any nature whatsoever maintained by or on behalf of Borrower or
Guarantors with Lender at any of its offices, regardless of whether such
accounts are general or special and regardless of whether such accounts are
individual or joint. Any person purchasing an interest in debt obligations under
this Agreement held by Lender may exercise all rights of offset with respect to
such interest as fully as if such person were a holder of debt obligations
hereunder in the amount of such interest.
9.10 This Agreement and all of the other Financing Documents have been made and
delivered in the State of Georgia, and the terms, provisions and performance
thereof are in all respects, including without limitation all matters of
construction, interpretation, validity, enforcement, and performance, to be
construed in accordance with and governed by the laws of that State, including
without limitation, the Uniform Commercial Code of Georgia, as amended and in
effect on the date of this Agreement. Wherever possible, each provision of this
Agreement and of each and every one of the other Financing Documents is to be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision thereof is prohibited or invalid under such law, such
provision is to be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement or of any of the other Financing
Documents.
9.11 "Herein", "hereof" and "hereunder" and other words of similar import refer
to this Agreement as a whole and not to any particular article, paragraph,
section or other subdivision.
9.12 The titles of the Articles appear as a matter of convenience only and
shall not affect the interpretation hereof.
9.13 Words importing the singular number shall include the plural number and
vice versa, and pronouns used shall be deemed to cover all genders.
9.14 Interpretation. No clause, term or provision of the parties hereto as a
--------------
result of such clause, term or provision having been drafted by such party, it
being the intention of the parties hereto
-16-
<PAGE>
that there be no presumptions made with respect to the drafting of said
Agreement.
IN WITNESS WHEREOF, Lender has executed this Agreement, and Borrower has
executed this Agreement and placed its seal hereon, all as of the day and year
first above written.
BORROWER:
INTERCEPT HOLDINGS, INC.
By:s/ John W. Collins
-----------------------------
JOHN W. COLLINS
Title: Chairman and C.E.O.
Address: 4209 Riverview Dr.
----------------------
Duluth, GA 30155
----------------------
(AFFIX CORPORATE SEAL)
Attest:s/ Marie H. Storey
-------------------------
Title: Secretary (Assistant)
LENDER:
GEORGIA STATE BANK
By:s/ Ken F. Thigpen
-----------------------------
KEN THIGPEN
Title: President
Address: 620 Fontaine Road
-------------------
Mableton, GA 30059
-------------------
GUARANTOR:
s/ John W. Collins
--------------------------------
JOHN C. COLLINS, Individually
Address: Same as above
-------------------
___________________
-17-
<PAGE>
GUARANTOR:
INTERCEPT SYSTEMS, INC.
By: s/ John W. Collins (SEAL)
----------------------------------
Title: CEO
Address: 6611 Bay Circle, Suite 160
--------------------------
Norcross, GA 30071
--------------------------
GUARANTOR:
DATA SERVICES CORP.
By: s/ John W. Collins (SEAL)
----------------------------------
Title: CFO/Treasurer
Address: 6611 Bay Circle, Suite 160
--------------------------
Norcross, GA 30071
--------------------------
Attest:s/ Marie H. Storey
-----------------------------------
Title: Secretary
-18-
<PAGE>
STATEMENT AND CONFIRMATION OF BUSINESS PURPOSE
----------------------------------------------
Commercial Promissory Note in
the original principal sum of
$3,000,000.00 dated the 17th
day of June, 1996.
Borrower: Intercept Holdings, Inc.
Lender: Georgia State Bank
The undersigned warrant, covenant, represent and confirm that the loan
referenced above and all loan proceeds disbursed in accordance with the loan
documentation of even date herewith are solely for business purposes.
No part of the loan or any proceeds resulting therefrom will be used for
personal, family or household purposes.
Signed, sealed and delivered INTERCEPT HOLDINGS, INC.
this 17th day of June, 1996.
s/ Ken Varz By:s/ John W. Collins
- --------------------------- -----------------------------
Witness
Title:CEO
--------------------------
s/ Jackie M. Golden
- ---------------------------
Notary Public
(AFFIX CORPORATE SEAL)
-19-
<PAGE>
EXHIBIT 10.18
LOAN AGREEMENT
--------------
THIS AGREEMENT made and entered into as of May 2, 1995 by and between
PROVESA, INC., a Georgia corporation (collectively, "Borrower"), and FIRST
NATIONAL BANK OF COMMERCE, a national banking association ("Lender").
W I T N E S S E T H:
-------------------
WHEREAS, the Lender made a $2,251,200 loan to the Borrower on or about
July 8, 1994 (the "Prior Loan"); and
WHEREAS, the Borrower has requested that the Lender refinance the
Prior Loan; and
WHEREAS, the Lender is willing to refinance the Prior Loan on the
terms and subject to the conditions and requirements set forth in this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties to this Agreement hereby agree as
follows:
ARTICLE I.
DEFINITIONS; CONSTRUCTION
-------------------------
Section 1.1. Definitions. For purposes of this Agreement, the
------------------------
following terms shall have the indicated meanings as set forth below:
"Adjusted Tangible Net Worth" shall mean, for any Person, the sum of
---------------------------
such Person's Tangible Net Worth plus such Person's Subordinated Debt, all as
determined on a consolidated basis.
"Affiliate" of any Person means any other Person directly or
---------
indirectly controlling, controlled by, or under common control with, such
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Agreement" shall mean this Loan Agreement, as amended, supplemented
---------
or modified from time to time.
"Bankruptcy Code" shall mean the Bankruptcy Code of 1978, as amended
---------------
(11 U.S.C .
-1-
<PAGE>
(S) 101 et seq.).
-- ---
"Borrower" shall have the meaning given such term in the preamble to
--------
this Agreement and shall include such person's successors and assigns.
"Business Day" shall mean any day excluding Saturday, Sunday and any
------------
other day on which banks are required or authorized to close in Atlanta,
Georgia.
"Capital Expenditures" shall mean, for any fiscal period of any
--------------------
Person, all expenditures made and liabilities incurred by such Person during
such period for the acquisition of items which are not, in accordance with GAAP,
treated as expense items for such Person in the period made or incurred or as a
prepaid expense applicable to a future period, and such term shall include that
portion of any Capitalized Lease Obligations of such Person originally incurred
during such period that is capitalized under GAAP, all as determined on a
consolidated basis.
"Capitalized Lease Obligations" shall mean, for any fiscal period of
-----------------------------
any Person, any Indebtedness of such Person represented by obligations under a
lease that is required to be capitalized for financial reporting purposes in
accordance with GAAP, and the amount of such Indebtedness for purposes hereof
shall be the capitalized amount of such obligations as determined on a
consolidated basis in accordance with GAAP.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
----
time to time.
"Collateral" shall mean (i) any and all of the property which is
----------
pledged or collaterally assigned to Lender or in which the Lender is otherwise
granted a Lien to secure the Obligations pursuant to any and all of the Security
Documents, and (ii) any and all cash and non-cash proceeds of the foregoing.
"Collins" shall mean John W. Collins, a Georgia resident, and his
-------
heirs, legal representatives, successors and assigns.
"Contractual Obligation" of any Person shall mean any provision of any
----------------------
written agreement, instrument, security, or undertaking to which such Person is
a party or by which it or any of the property owned by it is bound.
"Credit Documents" shall mean, collectively, this Agreement, the Note,
----------------
and any Security Documents.
"Credit Parties" shall mean, collectively, Borrower, DBS and any and
--------------
all other direct or indirect Subsidiaries of Borrower.
"Current Assets" shall mean, as of any date, the amount at which all
--------------
of the current assets of a Person should be shown on a balance sheet of such
Person at such date in accordance with GAAP, all as determined on a consolidated
basis.
"Current Liabilities" shall mean, as of any date, the amount at which
-------------------
all of the current
-2-
<PAGE>
liabilities of a Person should be shown on a balance sheet of such Person at
such date in accordance with GAAP, all as determined on a consolidated basis.
"Current Maturities of Long-Term Debt" shall mean, with respect to any
------------------------------------
particular period and Person, the sum of all principal payments scheduled to be
made during such period in respect of the long-term debt of such Person (which
for purposes hereof shall include the allocated principal portion of payments
due on Capitalized Lease Obligations, and also shall include the current portion
of any other long-term debt).
"Current Ratio" shall mean, for any particular Person, the ratio of
-------------
such Person's Current Assets to such Person's Current Liabilities, all as
determined on a consolidated basis.
"DBS" shall mean Data Bank Solutions, Inc., a Georgia corporation, and
---
its successors and assigns.
"Default" shall mean any condition or event which, with notice or
-------
lapse of time or both, would constitute an Event of Default.
"EBIT" shall mean, for any fiscal period of any Person, an amount
----
equal to the sum of such Person's Net Income (Loss) for such period plus, to the
----
extent subtracted in determining such Net Income (Loss), (i) such Person's taxes
based on income and (ii) such Person's Interest Expense, all as determined on a
consolidated basis.
"EBITDA" shall mean, for any fiscal period of any Person, an amount
------
equal to the sum of such Person's EBIT for such period plus, to the extent
----
subtracted in determining such EBIT, such Person's depreciation and amortization
expenses, all as determined on a consolidated basis.
"EBITDAR" shall mean, for any fiscal period of any Person, an amount
-------
equal to such Person's EBITDA for such period plus, to the extent deducted in
----
determining such EBITDA, such Person's Rental Expense, all as determined on a
consolidated basis.
"Environmental Laws" means all federal, state, local and foreign laws,
------------------
rules and regulations relating to pollution or protection of the environment,
including without limitation laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals, or industrial, toxic
or hazardous substances or wastes into the environment.
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as amended and in effect from time to time.
"Event of Default" shall have the meaning provided in Article VIII
----------------
hereof.
"Fixed Charge Coverage Ratio" shall mean, with respect to any
---------------------------
particular fiscal period
-3-
<PAGE>
and Person and based on the 4-quarter period ending therewith, the ratio of such
Person's EBITDAR for such 4-quarter period to the sum (without duplication) of
(i) such Person's Current Maturities of Long-Term Debt for such 4-quarter period
plus (ii) the sum of such Person's Interest Expense and Rental Expense for such
- ----
4-quarter period, all as determined on a consolidated basis.
"Funded Debt" shall mean, for any particular Person, all Indebtedness
-----------
for money borrowed, Indebtedness secured by Purchase Money Liens, Capitalized
Lease Obligations, conditional sales contracts and similar title retention debt
instruments, all as determined for such Person on a consolidated basis. The
calculation of Funded Debt for any particular Person shall include all Funded
Debt of such Person plus all Funded Debt of other Persons to the extent
guaranteed by such Person, to the extent secured by any assets of such Person,
or to the extent supported by a letter of credit issued for the account of such
Person.
"GAAP" shall mean, as in effect from time to time, United States
----
generally accepted accounting principles (which the parties acknowledge and
agree shall include the requirement that such principles be consistently
applied).
"Guarantors" shall mean DBS and, so long as the Guaranty Agreement
----------
executed by him is in effect, Collins.
"Guaranty Agreements" shall mean, collectively, the Guaranty
-------------------
Agreements, dated as of the date hereof, executed separately by the Guarantors
in favor of the Lender, and any modification or replacement thereof or therefor.
"Indebtedness" of any Person shall mean, without duplication: (i) all
------------
obligations of such Person which in accordance with GAAP would be shown on the
balance sheet of such Person as a liability (including, without limitation,
obligations for borrowed money and for the deferred purchase price of property
or services, and obligations evidenced by bonds, debentures, notes or other
similar instruments); (ii) all rental obligations under leases required to be
capitalized under GAAP; (iii) all guaranties of such Person (including
contingent reimbursement obligations under undrawn letters of credit); and (iv)
Indebtedness of others secured by any Lien upon property owned by such Person,
whether or not assumed.
"Interest Coverage Ratio" shall mean, for any particular fiscal period
-----------------------
and for any particular Person, the ratio of such Person's EBITDA to such
Person's Interest Expense for such period, all as determined on a consolidated
basis and calculated on the basis of the 4-quarter period ending with such
period.
"Interest Expense" shall mean, for any fiscal period of any Person,
----------------
the total interest expense of such Person, all as determined on a consolidated
basis in accordance with GAAP.
"Lender" shall have the meaning given such term in the preamble to
------
this Agreement and
-4-
<PAGE>
shall include such Person's successors and assigns.
"Leverage Ratio" shall mean, for any particular Person, the ratio of
--------------
such Person's total liabilities to such Person's Adjusted Tangible Net Worth,
all as determined on a consolidated basis.
"Lien" shall mean any mortgage, pledge, security interest, security
----
deposit, encumbrance, lien or charge of any kind (including any agreement to
give any of the foregoing, any conditional sale or other title retention
agreement, any lease in the nature thereof, and the filing of or agreement to
give any financing statement under the Uniform Commercial Code of any
jurisdiction).
"Life Insurance Assignment" shall mean the Collateral Assignment of
-------------------------
Life Insurance Policy as Collateral, dated the date hereof, executed by Borrower
in favor of the Lender with respect to a $1,000,000 face value life insurance
policy on the life of Collins, and any modification or replacement thereof or
therefor.
"Loan" shall mean the Prior Loan as refinanced pursuant to Section
----
2.01 hereof.
"Margin Regulations" shall mean Regulation G, Regulation T, Regulation
------------------
U or Regulation X of the Board of Governors of the Federal Reserve System, as
the same may be in effect from time to time.
"Material Adverse Effect" shall mean a material adverse effect upon,
-----------------------
or a material adverse change in, any of the (i) business, results of operations,
properties, prospects or financial condition of Borrower and its direct or
indirect Subsidiaries taken as a whole, (ii) legality, validity, binding effect
or enforceability of any Credit Document, or (iii) ability of the Borrower to
perform its payment obligations under the Credit Documents.
"Net Income (Loss)" shall mean, for any fiscal period of any Person,
-----------------
the net income (or loss) of such Person on a consolidated basis for such period
(taken as a single accounting period) determined in conformity with GAAP, but
excluding therefrom (to the extent otherwise included therein and without
duplication) (i) any gains or losses, together with any related provisions for
taxes, realized by such Person upon any sale of its assets other than in the
ordinary course of business, (ii) any other non-recurring gains or losses, and
(iii) any income or loss of any other Person acquired prior to the date such
other Person becomes a Subsidiary of the Person whose Net Income (Loss) is being
measured or is merged into or consolidated with the Person whose Net Income
(Loss) is being measured or all or substantially all of such other Person's
assets are acquired by the Person whose Net Income (Loss) is being measured.
"Net Worth" shall mean, as of any date and with respect to any Person,
---------
such Person's total shareholders' equity (including capital stock, additional
paid-in capital and retained earnings, after deducting treasury stock) which
would appear as such on a balance sheet of such
-5-
<PAGE>
Person as of such date prepared on a consolidated basis.
"Note" shall mean the Promissory Note, dated as of the date hereof,
----
executed by the Borrower and payable to the order of the Lender as evidence of
the Loan and any extension, renewal, modification or replacement thereof or
therefor.
"Obligations" shall mean, collectively, all amounts now or hereafter
-----------
owing to the Lender by the Borrower pursuant to the terms of or as a result of
this Agreement, the Note, or any other Credit Document, including without
limitation, the unpaid principal balance of the Loan and all interest, fees,
expenses and other charges relating thereto or accruing thereon, as well as any
and all other indebtedness, liabilities, and obligations of the Borrower,
whether direct or indirect, absolute or contingent, or liquidated or
unliquidated, which may be now existing or may hereafter arise under or as a
result of any of the Credit Documents, and together with any and all renewals,
extensions, modifications or refinancings of any of the foregoing.
"Officer's Certificate" shall mean a certificate signed in the name of
---------------------
the Borrower by its president, chief executive officer or chief financial
officer.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
----
successor thereto.
"Permitted Lien" shall mean any Lien of a kind which is not prohibited
--------------
under Section 7.01 hereof.
"Person" shall mean any individual, partnership, firm, corporation,
------
association, joint venture, trust or other entity, or any government or
political subdivision or agency, department or instrumentality thereof.
"Plan" shall mean any "employee pension benefit plan" (as defined in
----
Section 3 of ERISA) which is or has been established or maintained, or to which
contributions are or have been made, by Borrower or any other Credit Party or by
any trade or business, whether or not incorporated, which, together with
Borrower or any other Credit Party, is under common control.
"Prior Loan" shall have the meaning given such term in the
----------
introductory paragraphs to this Agreement.
"Purchase Money Indebtedness" shall mean (i) any Indebtedness incurred
---------------------------
for the sole purpose of paying all or any part of the purchase price of any
fixed assets, (ii) any other Indebtedness incurred for the sole purpose of
financing or refinancing all or any part of the purchase price of any fixed
assets, (iii) any Capitalized Lease Obligations, and (iv) any renewals,
extensions or refinancings thereof (but not any increases in the principal
amounts thereof outstanding at that time).
-6-
<PAGE>
"Purchase Money Lien" shall mean a Lien upon fixed assets which
-------------------
secures the Purchase Money Indebtedness relating thereto but only if such Lien
shall at all times be confined solely to the fixed assets the purchase price of
which was financed or refinanced through the incurrence of the Purchase Money
Indebtedness secured by such Lien and only if such Lien secures solely such
Purchase Money Indebtedness.
"Rental Expense" shall mean, for any particular period and for any
--------------
particular Person, the total rental expense of such Person for such period, all
as determined on a consolidated basis, and which shall include without
limitation rental expense under operating leases.
"Reportable Event" shall mean any of the events set forth in Section
----------------
4043(b) of ERISA.
"Requirement of Law" for any person shall mean the articles or
------------------
certificate of incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation, or
determination of any arbitrator or a court or other governmental authority, in
each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"SEC" shall mean the Securities and Exchange Commission, or any
---
successor thereto.
"Security Agreements" shall mean, collectively, the Security
-------------------
Agreements, dated as of the date hereof, executed separately by the Borrower and
DBS in favor of the Lender, and any modification or replacement thereof or
therefor.
"Security Documents" shall mean, collectively, the Guaranty
------------------
Agreements, the Life Insurance Assignment, the Security Agreements and each
other guaranty, security, mortgage or other collateral document, whether now
existing or hereafter executed and delivered, guaranteeing or securing any or
all of the Obligations.
"Subordinated Debt" shall mean, with respect to Borrower or any of its
-----------------
Subsidiaries, any and all Funded Debt of such Person which is subordinated in
right of payment to all Obligations on written subordination terms and
conditions which are satisfactory in all respects to the Lender.
"Subsidiary" means, as applied to Borrower, (i) DBS, (ii) any other
----------
corporation of which 50 % or more of the outstanding stock (other than
directors' qualifying shares) having ordinary voting power to elect a majority
of its board of directors (or other governing body), regardless of the existence
at the time of a right of the holders of any class or classes (however
designated) of securities of such corporation to exercise such voting power by
reason of the happening of any contingency, or any partnership of which 50% or
more of the outstanding partnership interests is, at the time, directly or
indirectly owned by Borrower or by one or more Subsidiaries of Borrower, and
(iii) any other entity which is directly or indirectly controlled or capable of
being controlled by Borrower or by one or more Subsidiaries of Borrower.
-7-
<PAGE>
"Tangible Net Worth" shall mean, as of any particular date and with
------------------
respect to any particular Person, the Net Worth of such Person as of such date
less the sum of (i) all assets of such Person as of such date which should be
- ----
classified as intangible assets under GAAP (including, without limitation,
goodwill) and (ii) all accounts receivable and other debts due to such Person at
such time from any of its officers, directors, shareholders, or other
Affiliates, all as determined on a consolidated basis.
Section 1.2. Accounting Terms and Determinations. Unless otherwise
-----------------------------------
defined or specified herein, all accounting terms shall be construed herein, all
accounting determinations hereunder shall be made, all financial statements
required to be delivered hereunder shall be prepared, and all financial records
shall be maintained in accordance with GAAP; provided, however, that compliance
-------- -------
with any and all financial covenants and calculations provided for herein, and
in the definitions used in such covenants and calculations, shall be calculated,
made and applied on a consolidated basis in accordance with GAAP as in effect on
the date of this Agreement applied on a basis consistent with the preparation of
the financial statements referred to in Section 6.01 hereof unless and until the
parties hereto enter into a written amendment agreement with respect thereto.
Section 1.3. Other Definitional Terms. The words "hereof", "herein"
------------------------
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement. Any pronoun used herein shall be deemed to cover all genders and all
singular terms used herein shall include the plural and vice versa. Unless
otherwise expressly indicated herein, all references herein to a period of time
which runs "from" or "through" a particular date shall be deemed to include such
date, and all references herein to a period of time which runs "to" or "until" a
particular date shall be deemed to exclude such date. Unless otherwise defined
or specified herein, all other terms used herein shall have the meanings, if
any, given such terms in the Uniform Commercial Code as in effect on this date
in the State of Georgia as the same may be hereafter amended or supplemented
from time to time.
ARTICLE II.
LOAN
----
Section 2.1. Refinancing of Prior Loan. Subject to the terms and
-------------------------
conditions of this Agreement, the Lender hereby agrees to permit the Borrower to
refinance, extend and renew the Prior Loan in accordance with the terms and
conditions of the Note (the Prior Loan as so refinanced, extended and renewed
being herein referred to as the "Loan").
Section 2.2. Note; Repayment of Principal and Interest. The
-----------------------------------------
Borrower's obligation to pay to the Lender the principal of and interest on the
Loan shall be evidenced by the records of the Lender and by the Note. The Loan
shall bear interest at the rate or rates per annum
-8-
<PAGE>
specified in the Note and such interest shall be calculated in the manner
specified in the Note. The principal of and accrued interest on the Loan shall
be payable as provided in the Note.
ARTICLE III.
GENERAL CREDIT TERMS
--------------------
Section 3.1. Payments, Prepayments and Computations. Except as may
--------------------------------------
be otherwise specifically provided herein, all payments by the Borrower with
respect to the Loan or any other Obligations under this Agreement or any of the
other Credit Documents shall be made without defense, set-off or counterclaim to
the Lender not later than 2:00 p.m. (Eastern Time) on the date when due and
shall be made in lawful money of the United States of America in immediately
available funds. Any payment received by Lender on a non-Business Day or after
2:00 p.m. (Eastern Time) on any Business Day shall be deemed received by Lender
at the opening of its business on the next Business Day. Whenever any payment to
be made hereunder or under the Note or any of the other Credit Documents shall
be stated to be due on a day which is not a Business Day, the due date thereof
shall be extended to the next succeeding Business Day and, with respect to
payments of principal, interest thereon shall be payable at the applicable rate
during such extension. All computation of interest or fees due hereunder or
under any of the other Credit Documents shall be made on the basis of a year of
360 days and the actual number of days elapsed. The Loan may be prepaid in whole
or in part in accordance with the terms and conditions of the Note.
Section 3.2. Collateral and Guaranties. The Obligations shall be
-------------------------
secured pursuant to the Security Agreements and the Life Insurance Assignment.
The Obligations also shall be guaranteed by the Guarantors pursuant to (and, in
the case of Collins, subject to any limitations expressly provided in) the
Guaranty Agreements. The Borrower also shall execute or deliver (or cause to be
executed and delivered by DBS) any and all financing statements and such other
documents as the Lender may reasonably request from time to time in order to
perfect or maintain the perfection of the Lender's Liens under such Security
Documents.
Section 3.3. Loan Account. The Lender shall open and maintain on its
------------
books a loan account in the name of the Borrower and such loan account shall
show as debits thereto all advances under the Loan made to the Borrower under
this Agreement and as credits thereto all payments received by the Lender and
applied thereto so that the balance of the loan account of the Borrower with the
Lender at all times shall reflect the principal amount of the Loan then
outstanding from the Lender to the Borrower. The entries made in the aforesaid
loan account shall be prima facie evidence, in the absence of manifest error, of
----- -----
the existence and amounts of the Obligations of the Borrower therein recorded
and any payments thereon. The Lender will account to the Borrower from time to
time with periodic statements of borrowings, charges and payments made pursuant
to this Agreement and the other Credit Documents, and each such account rendered
by the Lender shall be deemed final, binding and conclusive unless the Lender
-9-
<PAGE>
is notified by the Borrower in writing within thirty (30) days after the date
such account is so rendered that the Borrower disputes any item thereof (but any
such notice by the Borrower shall be deemed an objection only to those items
specifically set forth in such notice). Failure by the Lender to render any such
account shall in no way affect Lender's rights hereunder or under any of the
other Credit Documents.
Section 3.4. Agreements Regarding Interest and Other Charges.
-----------------------------------------------
Borrower and the Lender hereby agree that the only charges imposed or to be
imposed by the Lender upon Borrower for the use of money in connection with the
Loan is and will be the interest required to be paid under the provisions of
this Agreement as well as the related provisions of the Note. In no event shall
the amount of interest due and payable under this Agreement, the Note or any of
the other Credit Documents exceed the maximum rate of interest allowed by
applicable law and, in the event any such payment is made by any Borrower or any
other Credit Party or received by the Lender, such excess sum shall be credited
as a payment of principal. It is the express intent hereof that the Borrower
not pay and the Lender not receive, directly or indirectly or in any manner,
interest in excess of that which may be lawfully paid under applicable law. All
interest and other charges, fees or other amounts deemed to be interest which
are paid or agreed to be paid to the Lender under this Agreement, the Note or
any of the other Credit Documents shall, to the maximum extent permitted by
applicable law, be amortized, allocated and spread on a pro rata basis
--- ----
throughout the entire actual term of the Loan (including any extension or
renewal period). Any and all fees payable hereunder are not intended, and shall
not be deemed, to be interest or a charge for the use of money, but rather shall
constitute an "other charge" within the meaning of O.C.G.A. (S) 7-4-2(a)(1).
ARTICLE IV.
CONDITIONS PRECEDENT TO LOAN
----------------------------
Section 4.1. Conditions Precedent. The obligation of the Lender to
--------------------
refinance the Prior Loan hereunder shall be subject to the conditions precedent
that (i) Borrower shall have paid all interest accrued on the Prior Loan through
the date of such refinancing and shall have reduced the outstanding principal
balance of the Prior Loan to $1,700,000 and (ii) the Lender shall have received
the following documents (all such documents to be in form and substance
satisfactory to the Lender):
(a) this Agreement and the Note duly executed;
(b) the duly executed and completed Guaranty Agreements, Life
Insurance Assignment and Security Agreements;
(c) closing certificates of the Borrower and DBS, duly executed
and appropriately completed;
-10-
<PAGE>
(d) if requested by Lender, an opinion of counsel for the Credit
Parties and Collins addressed to Lender and covering such matters as Lender
may deem appropriate;
(e) a copy of the Certificate or Articles of Incorporation (or other
comparable charter instrument) of each of the Borrower and DBS (certified
as of a recent date by the Secretary of State or other appropriate official
of the state of such Credit Party's incorporation), together with current
good standing certificates or certificates of existence for each of such
Credit Parties issued as of a recent date by the Secretary of State or
other appropriate official of such Credit Party's jurisdiction of
incorporation and of such other jurisdictions where such Credit Party
presently is qualified to do business as a foreign corporation (subject to
such exceptions as may be acceptable to the Lender);
(f) copies of all documents and instruments, including all consents,
authorizations and filings, required under any Requirement of Law or by any
Contractual Obligation of any of the Credit Parties, in connection with the
execution, delivery, performance, validity and enforceability of the Credit
Documents and the other documents to be executed and delivered hereunder,
and such consents, authorizations, filings and orders shall be reasonably
satisfactory in form and substance to the Lender and shall be in full force
and effect and all applicable waiting periods shall have expired;
(g) all corporate proceedings and all other legal matters in
connection with the authorization, legality, validity and enforceability of
the Credit Documents shall be reasonably satisfactory in form and substance
to Lender; and
(h) such other documents, certificates, approvals or filings as the
Lender may reasonably request.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower (as to itself and as to all of its Subsidiaries) hereby represents
and warrants to the Lender as follows:
Section 5.1. Organization; Subsidiaries; Authorization; Valid and Binding
------------------------------------------------------------
Obligations.
- -----------
(a) Each of the Borrower and DBS is a corporation duly organized and
validly existing in good standing under the laws of the jurisdiction of its
incorporation shown herein. Each of the Borrower and DBS is duly qualified
as a foreign corporation and in good standing in each jurisdiction where
the ownership of property or the nature of the business transacted by it
makes such qualification necessary, except where the failure to be so
qualified would not have a Material Adverse Effect. Each of the Borrower
and
-11-
<PAGE>
DBS has all requisite power and authority to execute and deliver the Credit
Documents to which it is a party, to perform its obligations under such
Credit Documents and to own its respective property and carry on its
respective business. As of this date Borrower has no Subsidiaries other
than DBS.
(b) The Credit Documents to which each of the Borrower and DBS is a
party have been duly authorized by all requisite corporate or other action
on the part of such Credit Party and duly executed and delivered by
authorized officers of such Credit Party.
(c) Each of the Credit Documents to which each of the Borrower, DBS
or Collins is a party constitutes a valid obligation of such Person,
legally binding upon and enforceable against such Person in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally or by general
principles of equity.
Section 5.2. Financial Statements. All of the financial statements for
--------------------
any or all of the Credit Parties provided to the Lender fairly present the
financial condition of such Credit Parties as at the dates thereof and the
results of their operations for the periods covered thereby in conformity with
GAAP (subject, in the case of interim financial statements, to normal year-end
adjustments). Since the date of the most recent annual financial statements for
Borrower presented to the Lender, there has been no Material Adverse Effect.
Section 5.3. Actions Pending. There is no action, suit, investigation or
---------------
proceeding pending or, to the knowledge of any Borrower, threatened against any
of the Credit Parties, or any properties or rights of any of the Credit Parties,
by or before any court, arbitrator or administrative or governmental body which
has had or could reasonably be expected to result in any Material Adverse
Effect.
Section 5.4. Title to Properties. Each of the Credit Parties has good and
-------------------
marketable title to all of its respective properties and assets (other than
properties and assets disposed of in the ordinary course of business), subject
to no Lien of any kind except Liens granted under the Security Documents or
Permitted Liens.
Section 5.5. Taxes. Each of the Credit Parties has filed all federal,
-----
state and other income tax returns which, to the knowledge of any Borrower, are
required to be filed, and each has paid all taxes as shown on such returns and
on all assessments received by it to the extent that such taxes have become due,
except such taxes as are not due or which are being contested in good faith by
appropriate proceedings for which adequate reserves have been established in
accordance with GAAP as required below.
Section 5.6. Conflicting Agreements and Other Matters. Neither the
----------------------------------------
execution nor delivery of this Agreement, nor fulfillment of or compliance with
the terms and provisions of
-12-
<PAGE>
this Agreement, will conflict with, or result in a breach of the terms,
conditions or provisions of, or constitute a default under, or result in any
violation of, or result in the creation of any Lien (other than any Lien arising
under any Credit Document) upon any of the properties or assets of any Credit
Party pursuant to, the charter or by-laws of any Credit Party, any award of any
arbitrator or any agreement, instrument, order, judgment, decree, statute, law,
rule or regulation to which any Credit Party or any of its property is subject.
Section 5.7. Governmental Consent. Except for any recording or filing
--------------------
which may be required by applicable law to perfect or maintain the perfection of
the Lender's Liens in the Collateral, no consent, approval or authorization of,
or declaration or filing with, any governmental authority is required for the
valid execution, delivery and performance by any Credit Party of the Credit
Documents executed by such Person or the consummation of any of the transactions
contemplated by the Credit Documents.
Section 5.8. Compliance with Laws and Regulations. Each of the Credit
------------------------------------
Parties complies with all federal, state, local, and other laws, ordinances and
other governmental rules or regulations to which any of them is subject,
including without limitation, Environmental Laws and laws and regulations
relating to equal employment opportunity and employee safety and each Credit
Party will promptly comply with all such laws and regulations which may be
legally imposed on such Credit Party in the future, except where the failure to
so comply has not had or could not reasonably be expected to have a Material
Adverse Effect.
Section 5.9. Possession of Licenses, Leases, Franchises, Etc. Each
------------------------------------------------
Credit Party possesses any and all licenses, leases, franchises, certificates,
permits and other authorizations from any governmental or regulatory authorities
or from any other Person that are necessary in any material respect for the
ownership, maintenance and operation of their respective properties and assets
and none of the Credit Parties is in violation of any thereof in any material
respect.
Section 5.10. Margin Regulations and Investment Company Act, Etc. No part
---------------------------------------------------
of the proceeds of the Prior Loan were used for any purpose which violated, or
which was inconsistent or not in compliance with, the provisions of the
applicable Margin Regulations. No Credit Party is an "investment company" or a
company "controlled" by an "investment company" (as each of the quoted terms is
defined or used in the Investment Company Act of 1940, as amended). No Credit
Party is subject to regulation under the Public Utility Holding Company Act of
1935, the Federal Power Act, or any foreign, federal or local statute or
regulation limiting its ability to incur Indebtedness for money borrowed, to
guarantee such Indebtedness or to grant Liens on any of its assets to secure
such indebtedness, as contemplated by this Agreement or by any other Credit
Document.
Section 5.11. Disclosure. Neither this Agreement nor any other document,
----------
certificate or statement furnished to the Lender by or on behalf of Borrower,
any other Credit Party or Collins in connection herewith contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein and therein not
-13-
<PAGE>
materially misleading. There is no fact peculiar to Borrower, any of the other
Credit Parties or Collins which could reasonably be expected to have a Material
Adverse Effect and which has not been set forth in this Agreement or in the
other documents, certificates and statements furnished to the Lender by or on
behalf of Borrower prior to the date hereof in connection with the transactions
contemplated hereby.
Section 5.12. Insurance. Each of the Credit Parties maintains insurance
---------
with respect to its respective properties and businesses, with financially sound
and reputable insurers, having coverages against losses or damages of the kinds
customarily insured against by reputable companies engaged in the same or
similar businesses, such insurance being in amounts no less than those amounts
which are customary for such companies under similar circumstances. Each of the
Credit Parties has paid all insurance premiums due and owing with respect to
such insurance policies and coverages and such policies and coverages are in
full force and effect.
ARTICLE VI.
AFFIRMATIVE COVENANTS
---------------------
For so long as this Agreement is in effect, and unless the Lender expressly
consents in writing to the contrary, the Borrower covenants and agrees to comply
(and cause each of the other Credit Parties to comply) with the following
covenants:
Section 6.1. Financial Statements and Notices. Borrower shall promptly
--------------------------------
deliver to the Lender: (a) within forty-five (45) days after the end of each
fiscal quarter of Borrower, a consolidated balance sheet of Borrower and its
consolidated Subsidiaries as at the end of such period, setting forth in the
case of each quarterly statement in comparative form figures for the
corresponding period in the preceding fiscal year, all in reasonable detail,
prepared in accordance with GAAP (subject to changes resulting from normal year-
end adjustments), but not audited, and, if requested by Lender, accompanied by a
duly completed and executed Officer's Certificate certifying Borrower's
compliance with the financial and other covenants in this Agreement as of the
date of the delivery of such financial statements; (b) within ninety (90) days
after the end of each fiscal year of Borrower, consolidated and consolidating
statements of income and cash flows of Borrower and its consolidated
Subsidiaries for such year, and consolidated and consolidating balance sheets of
Borrower and its consolidated Subsidiaries as at the end of such year, setting
forth in each case in comparative form corresponding figures from the preceding
annual audit, all in reasonable detail, prepared in accordance with GAAP and
reasonably satisfactory in scope to the Lender and audited in accordance with
generally accepted auditing standards and certified to Borrower by independent
public accountants of recognized standing selected by Borrower and reasonably
acceptable to the Lender whose certificate shall be unqualified, which financial
statements shall be accompanied by a duly completed and executed Officer's
Certificate certifying Borrower's compliance with the financial and other
covenants in this Agreement as of the date of the delivery of such financial
statements; (c)
-14-
<PAGE>
promptly upon receipt thereof, a copy of each other report submitted to Borrower
or any of its consolidated Subsidiaries by its independent public accountants in
connection with any annual, interim or special audit made by them of the books
of Borrower or any such Subsidiary (including, without limitation, any
management report prepared in connection with such accountants' annual audit of
Borrower and its consolidated Subsidiaries); (d) promptly upon transmission
thereof, copies of all such financial statements, proxy statements, notices and
reports as Borrower shall send to its public stockholders, if any, and copies of
all registration statements and all reports which Borrower files with the SEC
(or any governmental body or agency succeeding to the functions of the SEC); (e)
promptly upon obtaining knowledge of an Event of Default, an Officer's
Certificate specifying the nature and period of existence thereof and what
action the Borrower propose to take with respect thereto; (f) immediately upon
becoming aware that the holder of any evidence of indebtedness or any security
of any Credit Party has given notice or taken any other action with respect to a
claimed default or event of default with respect to such indebtedness or
security or event which, with the giving of notice or passage of time, or both,
would constitute a default with respect to such indebtedness or security, an
Officer's Certificate specifying the notice given or action taken by such holder
and the nature of the claimed default or event and what action such Credit Party
is taking or proposes to take with respect thereto, provided that in each and
--------
every case noted above the aggregate outstanding principal balance of the
indebtedness or security involved (or all such indebtedness or securities
combined) must equal or exceed $50,000; (g) promptly after (i) the occurrence
thereof, notice of the institution by any Person of any action, suit or
proceeding or any governmental investigation or any arbitration, before any
court or arbitrator or any governmental or administrative body, agency, or
official, against any Credit Party, or any material property of any Credit
Party, in which the amount in controversy is stated to be more than $50,000
individually or in the aggregate or, where no amount in controversy is stated,
which might, if adversely determined, have a Material Adverse Effect or (ii) the
receipt of actual knowledge thereof, notice of the threat of any such action,
suit, proceeding, investigation or arbitration, each such notice under this
subsection to specify, if known, the amount of damages being claimed or other
relief being sought, the nature of the claim, the Person instituting the action,
suit, proceeding, investigation or arbitration, and any other significant
features of the claim; and (h) with reasonable promptness, such other
information relating to the operations, management, business, properties or
financial condition of any Credit Party, Collins (but only so long as he is a
Guarantor), or any Plan as the Lender may reasonably request in writing from
time to time.
Section 6.2. Inspection of Property. Each of Borrower and the other
----------------------
Credit Parties will permit any Person designated by the Lender in writing to
visit and inspect any of the properties of such Credit Party, to examine the
corporate books and records of such Credit Party and such other documents as the
Lender may reasonably request and make copies thereof or extracts therefrom, and
to discuss the affairs, finances and accounts of any of such corporations with
the officers of such Credit Party and with such Credit Party's independent
public accountants, all at such reasonable times and as often as the Lender may
reasonably request.
-15-
<PAGE>
Section 6.3. Books and Records. Each of Borrower and the other Credit
-----------------
Parties shall keep its books, records and accounts in accordance with GAAP and
practices applied on a basis consistent with preceding years.
Section 6.4. Maintenance of Insurance. Each of Borrower and the other
------------------------
Credit Parties shall maintain with financially sound and responsible insurers
reasonably acceptable to the Lender, insurance with respect to its properties
and business against such casualties and contingencies (including worker's
compensation and public liability, larceny, embezzlement or other criminal
misappropriation) and in such amounts as is customary in the case of similarly
situated corporations engaged in the same or similar businesses.
Section 6.5. Maintenance of Corporate Existence, Properties, Licenses,
---------------------------------------------------------
Etc. Except to the extent otherwise permitted hereby, each of Borrower and the
- ----
other Credit Parties will do or cause or cause to be done all things reasonably
necessary to preserve, renew and keep in full force and effect the corporate,
partnership or other legal existence of such Credit Party and the patents,
trademarks, service marks, trade names, service names, copyrights, licenses,
leases, permits, franchises and other rights, that continue to be useful in some
material respect to the business of such Credit Party, and at all times
maintain, preserve and protect all licenses, leases, permits, franchises and
other rights that continue to be useful in some material respect to the business
of such Credit Party, and preserve all the remainder of its property useful in
the conduct of its business and keep the same in good repair, working order and
condition (ordinary wear and tear excepted), and from time to time, make, or
cause to be made, all needful and proper repairs, renewals, replacements,
betterments and improvements thereto so that the business carried on in
connection therewith may be properly and advantageously conducted at all times.
Section 6.6. Payment of Taxes and Claims. Each of Borrower and the other
---------------------------
Credit Parties will pay and discharge or cause to be paid and discharged all
taxes, assessments and governmental charges or levies imposed upon it or upon
its respective income and profits or upon any of its property, real, personal or
mixed or upon any part thereof, before the same shall become in default as well
as all lawful claims for labor, materials and supplies or otherwise, which, if
unpaid, might become a Lien or charge upon such properties or any part thereof,
provided that no Credit Party shall be required to pay and discharge or cause to
- --------
be paid and discharged any such tax, assessment, charge, levy or claim so long
as the validity thereof shall be timely contested in good faith by appropriate
proceedings and it shall have set aside on its books adequate reserves with
respect to any such tax, assessment, charge, levy or claim, so contested; and
provided, further, that payment with respect to any such tax, assessment,
- --------
charge, levy or claim shall be made before any property of such Credit Party
shall be seized or sold in satisfaction thereof.
Section 6.7. Type of Business. Borrower will remain, and will cause each
----------------
direct or indirect Subsidiary of Borrower to be and remain, substantially in the
same businesses in which Borrower or such Subsidiary is engaged as of the date
of this Agreement or in such other types
-16-
<PAGE>
of business which are reasonably related or incidental thereto.
Section 6.8. Compliance with Laws, Contracts, Etc. Each of Borrower and
-------------------------------------
the other Credit Parties shall comply in all material respects, with all
Requirements of Law and Contractual Obligations applicable to or binding on any
of them, except where the failure to so comply has not had or could not be
reasonably expected to have a Material Adverse Effect.
Section 6.9. Capital Expenditures. Borrower's Capital Expenditures shall
--------------------
not exceed $75,000 for any fiscal year of Borrower ending on or after June 30,
1997 without the prior written consent of Lender (up to $75,000 of Borrower's
unused Capital Expenditure capacity in any one fiscal year may be carried
forward to and used by Borrower in the immediately succeeding fiscal year).
ARTICLE VII.
NEGATIVE COVENANTS
------------------
For so long as this Agreement is in effect, and unless the Lender expressly
consents in writing to the contrary, the Borrower covenants and agrees to comply
(and cause each of the other Credit Parties to comply) with the following
covenants:
Section 7.1. Liens. Borrower will not, and Borrower will not permit any
-----
of its Subsidiaries to create, assume or suffer to exist any Lien upon any of
its property or assets, whether now owned or hereafter acquired, except: (a)
liens for taxes (including ad valorem taxes), assessments or other governmental
charges or levies not yet due or which are being actively contested in good
faith by appropriate proceedings, if adequate reserves with respect thereto are
maintained on the books of such Credit Party in accordance with GAAP; (b)
statutory Liens of landlords and Liens of carriers, warehousemen, mechanics,
materialmen and other Liens imposed by law created in the ordinary course of
business for amounts not yet due or which are being contested in good faith by
appropriate proceedings, if adequate reserves with respect thereto are
maintained on the books of such Credit Party in accordance with GAAP; (c) liens
incurred or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social security
benefits or obligations or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations, provided
--------
that such Liens were not incurred in connection with the borrowing of money or
the obtaining of advances; (d) Purchase Money Liens securing Purchase Money
Indebtedness; (e) zoning ordinances, easements, licenses, restrictions on the
use of real property and minor irregularities in title thereto which do not
materially impair the use of such property in the operation of the business of
such Credit Party or the value of such property; (f) inchoate liens arising
under ERISA to secure current service pension liabilities as they are incurred
under the provisions of Plans from time to time in effect; (g) rights reserved
to or vested in any
-17-
<PAGE>
municipality or governmental, statutory or public authority to control or
regulate any property of such Credit Party, or to use such property in a manner
which does not materially impair the use of such property for the purposes for
which it is held by such Credit Party; and (h) Liens created under the Security
Documents.
Section 7.2. Sales, Merger, Consolidation, Etc. Neither Borrower nor any
----------------------------------
of its Subsidiaries will merge, consolidate or exchange shares with any other
Person, or sell, lease or transfer or otherwise dispose of any of its assets to
any Person, except: (a) Borrower or any Subsidiary may sell, lease, transfer or
otherwise dispose of inventory or obsolete or unnecessary equipment in the
ordinary course of business; (b) any Subsidiary of Borrower may merge or
consolidate with Borrower (provided that Borrower shall be the surviving
corporation therefrom) or with any other wholly-owned Subsidiary of Borrower;
(c) any Subsidiary of Borrower may sell, lease, transfer or otherwise dispose of
all or any substantial part of its assets to Borrower or another wholly-owned
Subsidiary of Borrower; and (d) any other Person (other than a Subsidiary of
Borrower) may merge or consolidate with Borrower or any other Subsidiary of
Borrower if no other Default or Event of Default shall be caused thereby, and in
the case of any merger or consolidation involving Borrower, Borrower shall be
the surviving corporation therefrom.
Section 7.3. ERISA Matters. Neither Borrower nor any of the other Credit
-------------
Parties shall incur or suffer to exist any material accumulated funding
deficiency within the meaning of ERISA or incur any material liability to the
PBGC established under ERISA (or any successor thereto under ERISA) or otherwise
take or fail to take any action with respect to any Plan where such action or
failure has had or could reasonably be expected to result in a Material Adverse
Effect.
Section 7.4. Dividends, Etc. Borrower shall not declare or pay any
---------------
dividend on its common stock (other than stock dividends) or make any payment to
purchase, redeem, retire or acquire any of its capital stock or any option,
warranty or other rights to acquire such capital stock unless and until (i) the
Borrower has a positive Tangible Net Worth and (ii) the Borrower has positive
Net Income for two (2) consecutive fiscal years (after giving effect to any
dividend or other payment) and so long as no Default or Event of Default has
occurred and is then continuing or would be caused thereby.
ARTICLE VIII.
EVENTS OF DEFAULT
-----------------
Section 8.1. Events of Default. Each of the following events shall
-----------------
constitute an Event of Default under this Agreement:
-18-
<PAGE>
(i) failure by Borrower to pay any of the Obligations (whether
principal, interest, fees or other amounts) when and as the same become due
and payable (whether at maturity, on demand, or otherwise), and, in the
case of any failure to pay any interest or fees due hereunder, the
continuation of such failure for five (5) days after the due date of such
payment; or
(ii) any Credit Party or Collins (but, in the case of Collins, only
so long as he is a Guarantor) shall (1) apply for or consent to the
appointment of or the taking of possession by a receiver, custodian,
trustee or liquidator of such Person or of all or a substantial part of the
property of such Person, (2) admit in writing the inability of such Person,
or be generally unable, to pay the debts of such Person as such debts
become due, (3) make a general assignment for the benefit of the creditors
of such Person, (4) commence a voluntary case under the Bankruptcy Code (as
now or hereafter in effect), (5) file a petition seeking to take advantage
of any other law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or adjustment of debts, (6) fail to controvert
in a timely or appropriate manner, or acquiesce in writing to, any petition
filed against such Person in an involuntary case under the Bankruptcy Code,
or (7) take any action for the purpose of effecting any of the foregoing;
or
(iii) a proceeding or case shall be commenced against any Credit
Party or Collins (but, in the case of Collins, only so long as he is a
Guarantor), in any court of competent jurisdiction, seeking (1) the
liquidation, reorganization, dissolution, winding-up or composition or
readjustment of debts of such Person, (2) the appointment of a trustee,
receiver, custodian, liquidator or the like of such Person or of all or any
substantial part of the assets of such Person, or (3) similar relief in
respect of such Person under any law relating to bankruptcy, insolvency,
reorganization, winding-up or composition and adjustment of debts, and such
proceeding or case shall continue undismissed, or an order, judgment or
decree approving or ordering any of the foregoing shall be entered and
continue in effect, for a period of thirty (30) days from commencement of
such proceeding or case or the date of such order, judgment or decree, or
any order for relief against such Person shall be entered in an involuntary
case or proceeding under the Bankruptcy Code; or
(iv) any representation or warranty made by Borrower herein or by
any Credit Party or Collins in any of the other Credit Documents shall be
false or misleading in any material respect on the date as of which made
(or deemed made); or
(v) any default shall occur in the performance or observance of any
term, condition or provision contained in Section 6.09 or Article VII of
this Agreement; or
(vi) any default shall occur in the performance or observance of any
term, condition or provision contained in this Agreement and not referred
to in clauses (i) through (v) above, which default shall continue for ten
(10) days after the earlier of the
-19-
<PAGE>
date Borrower acquires knowledge thereof or the Lender gives Borrower
written notice thereof; or
(vii) any material provision of this Agreement or any other Credit
Document shall at any time for any reason cease to be valid and binding in
accordance with its terms on Borrower, Collins or any other Credit Party
which executed it, or the validity, enforceability, or priority thereof
shall be contested by Borrower, Collins or any other Credit Party, or
Borrower, Collins or any other Credit Party shall terminate or repudiate
(or attempt to terminate or repudiate) any Credit Document executed by such
Person; provided, however, that this paragraph (vii) shall not apply to any
--------
termination of the Guaranty executed by Collins in accordance with Section
l(b) thereof; or
(viii) the occurrence of an Event of Default under (and after giving
effect to any notice and/or cure rights expressly provided in) any of the
other Credit Documents; or
(ix) default in the payment of principal of or interest on any other
obligation of any Credit Party for money borrowed (or any obligation under
conditional sale or other title retention agreement or any obligation
secured by purchase money mortgage or deed to secure debt or any obligation
under notes payable or drafts accepted representing extensions of credit or
on any Capitalized Lease Obligation), or default in the performance of any
other agreement, term or condition contained in any indenture or agreement
under which any such obligation is created, guaranteed or secured if the
effect of such default is to cause such obligation to become due prior to
its stated maturity; provided that in each and every case noted above the
--------
aggregate then outstanding principal balance of the obligation involved (or
all such obligations combined) must equal or exceed $50,000; or
(x) default in the payment of principal of or interest on any
obligation of any Credit Party for money borrowed or equipment leased from
the Lender or any Affiliate of the Lender (other than an Obligation) or
default in the performance of any other agreement, term, or condition
contained in any agreement under which any such obligation is created,
guaranteed or secured if the effect of such default is to entitle the
Lender to then cause such obligation to become due prior to its stated
maturity [the parties intend that a default may constitute an Event of
Default under this paragraph (x) even if such default would not constitute
an Event of Default under paragraph (ix) immediately above]; or
(xi) a judgment or order for the payment of money in excess of
$50,000 or otherwise having a Material Adverse Effect shall be rendered
against any Credit Party and such judgment or order shall not be released,
vacated, stayed or fully bonded-off within thirty (30) days after the date
of its issue or entry; or
-20-
<PAGE>
(xii) any material change in the executive management or the
control of Borrower; or
(xiii) Collins shall die at a time when the Guaranty Agreement
executed by him is still in effect; or
(xiv) a Reportable Event shall occur which the Lender determines in
good faith constitutes grounds for the termination by the PBGC of any Plan
or for the appointment by the appropriate United States district court of a
trustee for any Plan, or if any Plan shall be so terminated or any such
trustee shall be so requested or appointed, or if the Borrower or any of
the other Credit Parties is in "default" (as defined in Section 4219(c)(5)
of ERISA) with respect to payments to a Multiemployer Plan resulting from
such Credit Party's complete or partial withdrawal from such Plan.
Section 8.2. Remedies. Upon the occurrence of an Event of Default, the
--------
Lender may, in its discretion, exercise one or more of the following remedies:
(i) by written notice to the Borrower, declare the principal of
and any accrued interest on the Note and all other Obligations, to be, and
whereupon the same shall become, immediately due and payable, and the same
shall thereupon become due and payable without any further demand,
presentment, protest or notice of any kind, all of which are hereby
expressly waived by the Borrower; and
(ii) exercise all or any of its rights and remedies as it may
otherwise have under any of the other Credit Documents or any applicable
law;
provided, however, that upon the occurrence of an Event of Default specified in
- --------
Section 8.01(ii) or Section 8.01(iii) above, the result which would occur upon
the giving of notice pursuant to Section 8.02(i) shall occur automatically
without the giving of any such notice. No failure or delay on the part of the
Lender to exercise any right or remedy hereunder or under the Credit Documents
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right or remedy hereunder preclude any further exercise thereof or the
exercise of any further right or remedy hereunder or under the Credit Documents.
No exercise by the Lender of any remedy under the other Credit Documents shall
operate as a limitation on any rights or remedies of the Lender under this
Agreement, except to the extent of moneys actually received by the Lender under
the other Credit Documents.
ARTICLE IX.
MISCELLANEOUS
-------------
Section 9.1. Notices. All notices, requests and other communications
-------
hereunder or
-21-
<PAGE>
under any of the other Credit Documents shall be in electronic, telephonic
(confirmed in writing) or written (including telecopier or similar writing) form
and shall be given to the party to whom sent, addressed to it at its address set
forth beneath its signature below. Each such notice, request or communication
shall be effective (i) if given by telecopy, when such communication is
transmitted to the telecopy number herein specified (any such notice, request or
communication sent by telecopy shall be confirmed promptly thereafter by
personal delivery or mailing in accordance with the other provisions of this
Section, but such confirmation requirement shall not affect the date on which
such telecopy shall be deemed to be effective for purposes hereof), (ii) if
given by mail, two (2) Business Days after such communication is deposited in
the United States mail with first class postage prepaid, return receipt
requested, addressed as aforesaid, (iii) if sent for overnight delivery by
Federal Express or other reputable national overnight delivery service, one (1)
Business Day after such communication is entrusted to such service for overnight
delivery and with recipient signature required, addressed as aforesaid, or (iv)
if given by any other means, when delivered at the address of the party to whom
such notice is being delivered.
Section 9.2. No Waiver: Remedies Cumulative. No failure or delay on the
------------------------------
part of the Lender in exercising any right or remedy hereunder and no course of
dealing between any Credit Party and the Lender shall operate as a waiver
thereof, nor shall any single or partial exercise of any right or remedy
hereunder or under the Note preclude any other or further exercise thereof or
the exercise of any other right or remedy hereunder. The rights and remedies
herein expressly provided are cumulative and not exclusive of any rights or
remedies which the Lender would otherwise have. No notice to or demand on any
Credit Party not required hereunder or under any other Credit Document in any
case shall entitle any Credit Party to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of the
Lender to any other or further action in any circumstances without notice or
demand.
Section 9.3. Payment of Expenses; Indemnity. (a) Borrower agrees to: (i)
------------------------------
pay all reasonable out-of-pocket costs and expenses of the Lender incurred in
connection with its negotiation, structuring, documenting, closing,
administration or modification of, or in connection with the preservation of
Lender's rights under, enforcement of, or any refinancing, renegotiation,
restructuring or termination of, this Agreement or any other Credit Document or
any instruments referred to therein or any amendment, waiver or consent relating
thereto, including, without limitation, the reasonable fees and disbursements of
counsel for the Lender, and (ii) pay and hold the Lender harmless from and
against any and all present and future stamp, documentary, property, ad valorem
-- -------
or other similar non-income taxes with respect to this Agreement, the Note or
any other Credit Documents, any Collateral described therein, or any payments
due thereunder, and save the Lender harmless from and against any and all
liabilities with respect to or resulting from any delay or omission to pay such
taxes.
(b) In addition to the other amounts payable by the Borrower under this
Agreement (including, without limitation, subsection (a) above), the Borrower
hereby agrees to pay and indemnify the Lender from and against all claims,
liabilities, losses, costs and expenses
-22-
<PAGE>
(including, without limitation, reasonable attorneys' fees and expenses) which
the Lender may (other than as a result of the gross negligence or willful
misconduct of such Person) incur or be subjected to as a consequence, directly
or indirectly, of (i) any actual or proposed use of any proceeds of the Loan or
any Credit Party's entering into or performing under any Credit Document, (ii)
any breach by any Credit Party of any representation, warranty, covenant or
condition in, or the occurrence of any other default under, this Agreement or
any of the other Credit Documents, including without limitation all reasonable
attorney's fees or expenses resulting from the settlement or defense of any
claims or liabilities arising as a result of any such breach or default, (iii)
allegations of participation or interference by the Lender in the management,
contractual relations or other affairs of any Credit Party, (iv) the Lender's
holding any Lien on or administering any of the Collateral, (v) allegations that
the Lender has joint liability with any Credit Party to any third party for any
reason, or (vi) any suit, investigation or proceeding as to which the Lender is
involved as a consequence, directly or indirectly, of its execution of this
Agreement or any of the other Credit Documents, the making of the Loan, the
holding of any Lien on any of the Collateral or any other event or transaction
contemplated by this Agreement or any of the Credit Documents.
Section 9.4. Further Assurances. Upon notice from the Lender, Borrower
------------------
will, at any and all times, execute and deliver all such further documents,
assignments, recordings, filings, transfers and assurances as may be reasonably
necessary for the better assuring and confirming of all of the rights, revenues
and other funds pledged or assigned to or mortgaged for the payment of its
obligations hereunder, or intended so to be. If Borrower fails to do so after
demand by Lender, Borrower hereby authorizes and empowers the Lender to file any
financing statement or any amendments thereto with respect to any of the
Collateral and the Lender's Liens therein or in accordance with the Uniform
Commercial Code as in effect in the State or any other applicable jurisdiction
without the signature of Borrower.
Section 9.5. Successors and Assigns, Sale of Interest. This Agreement
----------------------------------------
shall be binding upon and inure to the benefit of and be enforceable by the
respective successors and permitted assigns of the parties hereto; provided that
Borrower may not assign or transfer any of its rights or obligations hereunder
without the prior written consent of the Lender. Lender may sell, assign or
grant participations in all or any part of Lender's rights, titles or interests
hereunder and under the other Credit Documents without the prior written consent
of the Borrower.
Section 9.6. Amendments. No amendment or waiver of any provision of this
----------
Agreement or the other Credit Documents, nor consent to any departure by any
party hereto, or any other Credit Party therefrom, shall in any event be
enforceable against any party to this Agreement unless the same shall be in
writing and signed by such party, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
Section 9.7. Time of Essence. Time is of the essence of this Agreement
---------------
and each of the other Credit Documents.
-23-
<PAGE>
Section 9.8. Governing Law. This Agreement is intended to be performed
-------------
in the State of Georgia, and shall be construed and enforced in accordance with,
and the rights of the parties shall be governed by, the laws of the State of
Georgia without regard to principles of conflicts of laws thereof.
Section 9.9. Counterparts. This Agreement may be executed in any number
------------
of counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all
of.which shall together constitute one and the same instrument.
Section 9.10. Effectiveness: Survival. (a) This Agreement shall become
-----------------------
effective on the date on which all of the parties hereto shall have signed a
copy hereof (whether the same or different copies) and the Under shall have
received the same.
(b) All representations and warranties made herein and in the
certificates, reports, notices, and other documents delivered pursuant to this
Agreement, shall survive the execution and delivery of this Agreement, the other
Credit Documents, and such other agreements and documents, the making of the
Loan hereunder and the execution and delivery of the Note.
Section 9.11. Severability. In case any provision in or Obligation under
------------
this Agreement or the other Credit Documents shall be invalid, illegal or
unenforceable, in whole or in part, in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
Section 9.12. Independence of Covenants. All covenants hereunder shall be
-------------------------
given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitation of, another covenant, shall
not avoid the occurrence of a Default or an Event of Default if such action is
taken or condition exists.
Section 9.13. Headings Descriptive. The headings of the several sections
--------------------
and subsections of this Agreement are inserted for convenience only and shall
not in any way affect the meaning or construction of any provision of this
Agreement.
Section 9.14. Termination of Agreement. At such time as (i) Lender is no
------------------------
longer obligated under this Agreement (whether by the terms hereof or as a
result of a release of such obligations by the Borrower) to refinance the Prior
Loan, and (ii) all Obligations have been paid and satisfied in full, this
Agreement shall terminate; provided, however, that any and all indemnity
--------
obligations of any Credit Party to the Lender arising hereunder or under any of
the other Credit Documents shall survive the termination of this Agreement or
such other Credit Documents.
-24-
<PAGE>
Section 9.15. Entire Agreement. This Agreement and the other Credit
----------------
Documents constitute the entire agreement among the Credit Parties, Collins and
the Lender with respect to the Loan, the other Obligations and the Collateral
and supersede all prior agreements, representations and understandings related
to such subject matters.
Section 9.16. Jury Trial Waiver; Consent to Forum. (a) THE BORROWER AND
-----------------------------------
THE LENDER IRREVOCABLY WAIVE ALL RIGHT OF TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT
OR ANY OF THE OTHER CREDIT DOCUMENTS OR ANY MATTER ARISING HEREUNDER OR
THEREUNDER.
(b) THE BORROWER AND THE LENDER ALSO AGREE THAT ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS
OR TO ENFORCE ANY JUDGMENT OBTAINED AGAINST ANY BORROWER OR ANY OTHER CREDIT
PARTY IN CONNECTION WITH THIS AGREEMENT OR SUCH OTHER CREDIT DOCUMENT, MAY BE
BROUGHT BY THE LENDER, BORROWER OR SUCH OTHER CREDIT PARTY IN ANY STATE OR
FEDERAL COURT SITTING IN THE COUNTY OF THE STATE IN WHICH LENDER'S ADDRESS SHOWN
BELOW IS LOCATED, OR IN ANY OTHER COURT TO THE JURISDICTION OF WHICH SUCH
BORROWER OR SUCH OTHER CREDIT PARTY OR ANY OF ITS PROPERTY IS OR MAY BE SUBJECT.
EACH OF THE BORROWER AND THE LENDER IRREVOCABLY SUBMITS TO THE JURISDICTION OF
THE AFORESAID STATE AND FEDERAL COURTS, AND IRREVOCABLY WAIVES ANY PRESENT OR
FUTURE OBJECTION TO VENUE IN ANY SUCH COURT, AND ANY PRESENT OR FUTURE CLAIM
THAT ANY SUCH COURT IS AN INCONVENIENT FORUM, IN CONNECTION WITH ANY ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS.
-25-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered on their behalf and each of the Borrower has caused
its corporate seal to be hereunto affixed, all as of the date first above
stated.
BORROWER:
(CORPORATE SEAL) PROVESA, INC.
Attest:
By:s/ Donny R. Jackson
--------------------
President
s/ John W. Collins
- -------------------------
Secretary
Address for Notices:
5730 Oakbrook Parkway, Suite 130
Norcross, Georgia 30093
Attn: President
Telecopy:(404) 246-3755
LENDER:
FIRST NATIONAL BANK OF
COMMERCE
By:s/ C.W. Blair, Jr.
--------------------
President
Address for Notices:
1731 North Elm Street
Commerce, Georgia 30521
Attn: President
Telecopy:(706) 335-8249
-26-
<PAGE>
EXHIBIT 10.19
CHANNEL SERVICES PAYMENT PLAN AGREEMENT
The undersigned customer (hereinafter "customer") requests BellSouth
---------
Communications, Inc. d/b/a Southern Bell Telephone and Telegraph Company
- ------------------------------------------------------------------------
(hereinafter "Telephone Company") to provide service as described below.
1. Service is provided pursuant to and in accordance with the BellSouth
Companies Tariff No. 1, including the Channel Services Payment Plan (CSPP).
2. The service type desired is (check one):
_________ LightGate
x Tl-hicap
---------
_________ Lowspeed DDAS 1
_________ Highspeed DDAS 2
3. The CSPP payment plan and service period for this service is:
Plan A for ______ months.
Plan B for 60 months.
------
Plan C for ______ months.
4. The earliest date on which this service can reasonably be made available to
the customer is January 10, 1994 (to be completed by the Telephone Company).
----------------
5. The service date requested by the customer is January 10, 1994.
----------------
6. The service period shall commence on the actual service date, i.e. the date
the service is actually made available to the customer.
7. The application date is the date the Telephone Company receives a signed
original of this Agreement and all correct information needed to start the
ordering process, which shall evidence the customer's firm commitment for the
service.
8. Rates and charges applicable to this Agreement are those in effect in
accordance with the tariff on the:
X Application Date (if the service date requested by the
-----
customer is earlier than or the same as the date in
paragraph 5 above).
Actual service date (if the service date requested by
_____
the customer is later than the date in paragraph 5 above).
9. The foregoing service is provided in accordance with the Telephone
Company's lawfully filed tariffs, including any changes therein as may be made
from time to time, except that the applicable rates and charges for the service
described herein shall not be subject to any Telephone Company initiated rate
changes.
<PAGE>
BY: s/ John W. Collins TITLE: Vice President
------------------- ----------------
SUBSCRIBER: Intercept Systems, Inc.
-----------------------
ADDRESS: 6611 Bay Circle, Norcross, Georgia 30071
----------------------------------------
BELLSOUTH COMMUNICATIONS, INC.
BY: s/ Stephen C. Irwing
----------------------------------
TITLE: Regional Sales Manager
----------------------------------
DATE ACCEPTED: December 22, 1993
----------------------------------
<PAGE>
AGREEMENT
The Undersigned Subscriber requests Southern Bell Telephone and Telegraph
Company to provide FCC 1 tariffed High Capacity DS1 Service. This arrangement
----- -------------------------
is a 60 month contract period and includes the following:
--
High Capacity DS1 Service from Intercept Systems at 6611 Bay Circle to the
Norcross Central Office at 5866 Buford Highway
This agreement is subject to and controlled by the provisions of the company's
lawfully filed FCC Number 1 tariff and any subsequent revisions thereto.
------------
Address: 6611 Bay Circle
---------------
Atlanta, GA 30071
-----------------
Authorized Representative of Subscriber: ___________________________
BY: s/ J.W. Collins Title: Vice President
-------------------------- --------------------
Print Name: J.W. Collins
-------------------
BELLSOUTH COMMUNICATIONS, INC.
D/B/A SOUTHERN BELL TELEPHONE AND TELEGRAPH COMPANY
Accepted: December 22, 1993 By: s/ Stephen C. Irwing
------------------ ---------------------------
Title: Regional Sales Manager
-----------------------
<PAGE>
EXHIBIT 10.20
SPECIAL SERVICE
ARRANGEMENT AGREEMENT
---------------------
This Special Service Arrangement Agreement ("Agreement") is by and between
BellSouth Telecommunications, Inc., a Georgia corporation, d/b/a BellSouth,
("Company") and INTERCEPT COMMUNICATIONS TECHNOLOGIES ("Customer or
Subscriber"), and is entered into pursuant to Tariff Section A5 of the General
Subscriber Services Tariff. This agreement is based upon the following terms and
conditions as well as any Attachment(s) affixed and the appropriate lawfully
filed and approved tariffs which are by this reference incorporated herein.
1. Subscriber requests and Company agrees, subject to the terms and
conditions herein, to provide the service described in the Attachment(s) at the
monthly and nonrecurring rates, charges, and conditions as described in the
Attachment(s) ("Service"). The rates, charges, and conditions described in the
Attachment(s) are binding upon Company and Subscriber for the duration of this
Agreement. For the purposes of the effectiveness of the terms and conditions
contained herein, this Agreement shall become effective upon execution by both
parties. For purposes of the determination of any service period stated herein,
said service period shall commence the date upon which installation of the
service is completed.
2. Subscriber agrees to subscribe to and Company agrees to provide any
additional tariffed services required for the installation of the Service.
Subscriber agrees to be responsible for all rates, charges, and conditions for
such tariffed services.
3. This agreement is subject to and controlled by the provisions of
Company's or any of its affiliated companies' lawfully filed tariffs, including
but not limited to Section A2 of the General Subscriber Services Tariff and No.
2 of the Federal Communications Commission Tariff and shall include all changes
to said tariffs as may be made from time to time. All appropriate tariff rates
and charges shall be included in the provision of this service. The tariff shall
supersede any conflicting provisions of this Agreement, with the exception of
the rates and charges herein, in the event any part of this Agreement conflicts
with terms and conditions of Company's or any of its affiliated companies'
lawfully filed tariffs.
4. This Agreement may be subject to the appropriate regulatory approval
prior to commencement of installation. Should such regulatory approval be
denied, after a proper request by Company, this Agreement shall be null, void,
and of no effect.
5. If Subscriber cancels this Agreement prior to the completed
installation of the Service, but after the execution of this Agreement by
Subscriber and Company, Subscriber shall pay all reasonable costs incurred in
the implementation of this Agreement prior to receipt of written notice of
cancellation by Company. Notwithstanding the foregoing, such reasonable costs
shall not exceed all costs which would apply if the work in the implementation
of this Agreement had been completed by Company.
6. The rates, charges, and conditions described in the Attachment(s) may
be based upon information supplied to Company by the Subscriber, including but
not limited to forecasts of growth. If so, Subscriber agrees to be bound by the
information provided to Company. Should Subscriber fail to meet its forecasted
level of service requirements at any time during the term of this Agreement,
Subscriber shall pay all reasonable costs associated with its failure to meet
its projected service requirements.
7. If Subscriber cancels this Agreement at any time prior to the
expiration of the service period set forth in this Agreement, Subscriber shall
be responsible for all termination charges. Unless otherwise specified by
tariff, termination charges are defined as all reasonable charges due or
remaining as a result of the minimum service period agreed to by Company and
Subscriber and set forth in the Attachment(s).
8. This Agreement shall be construed in accordance with the laws of the
State of _________.
<PAGE>
9. Except as otherwise provided in this Agreement, notices required to be
given pursuant to this Agreement shall be effective when received, and shall be
sufficient if given in writing, hand delivered, or United States mail, postage
prepaid, addressed to the appropriate party at the address set forth below.
Either party hereto may change the name and address to whom all notices or other
documents required under this Agreement must be sent at any time by giving
written notice to the other party.
Company
- -------
BellSouth Telecommunications, Inc.
Assistant Vice President
1800 Century Blvd., Suite 300
Atlanta, GA 30345
Subscriber
- ----------
INTERCEPT COMMUNICATION TECHNOLOGIES
6611 BAY CIRCLE, SUITE 160
NORCROSS, GA 30071
10. Subscriber may not assign its rights or obligations under this
Agreement without the express written consent of Company and only pursuant to
the conditions contained in the appropriate tariff.
11. In the event that one or more of the provisions contained in this
Agreement or incorporated within by reference shall be invalid, illegal, or
unenforceable in any respect under any applicable statute, regulatory
requirement or rule of law, then such provisions shall be considered inoperative
to the extent of such invalidity, illegality, or unenforceability and the
remainder of this Agreement shall continue in full force and effect.
This contract is subject to the approval of the Kentucky Public Service
Commission. In the event the Commission should modify any rate or provision of
this agreement, the Customer will have the option of accepting the
modification(s) or of canceling the contract. If accepted, billing will be
rendered from the installation date.
This rate is valid through: _________.
Estimated service interval following acceptance date: Negotiable weeks.
Service description:
This Contract Service Arrangement provides for intraLATA Frame Relay
service and Broadband
Exchange Line-Fast Packet Option (FPO) service.
This contract is on a thirty-seven to sixty month basis with a thirty-seven
month minimum service period. The service period for this agreement shall be
_______ months.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives on the dates set forth below.
Accepted by:
Subscriber: BellSouth Communications, Inc.
INTERCEPT COMMUNICATION TECHNOLOGIES
By: _____________________________ By: _________________________
Authorized Signature Authorized Signature
Title: _____________________________ Title: _________________________
Date: _____________________________ Date: _________________________
<PAGE>
Attachment: Rates and Charges for Customer Connection to Frame Relay, Broadband
Exchange Line, Broadband Exchange Line Extension, and Committed
Information Rate
<PAGE>
Schedule to Special Service Arrangement Agreement
for Frame Relay Services between BellSouth Telecommunications, Inc.
and Intercept Communications Technologies
Intercept Communications Technologies has entered into identical agreements with
BellSouth Telecommunications for frame relay services in the States of Alabama,
Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South
Carolina and Tennessee
<PAGE>
EXHIBIT 10.21
SYNCHRONET(R) SERVICE
AGREEMENT
The undersigned Subscriber requests (Southern/South Central Bell) Telephone
Company ("Company") to provide SynchroNet(R) service ("SynchroNet") to InterCept
Systems, Inc. ("Subscriber") as described in the attachment of this Service
Agreement.
Important tariff provisions relating to SynchroNet are set forth herein:
1. The Company will furnish, install, maintain and provide Private Line
services provided via SynchroNet service in accordance with the Company's
lawfully filed tariffs. The tariffs provide the basis for this Agreement
with the Subscriber. The Agreement period shall begin the day the
SynchroNet service is installed or this Agreement is executed.
2. The Subscriber agrees to pay the Company for the provision of the
SynchroNet ("Service"). The Service is offered for periods of 24 to 42
months, or 43 to 60 months. This monthly rate will continue for the elected
service period and will not be subject to Company initiated change during
such period.
The monthly rates for SynchroNet service covered under this Agreement in
effect at the time the Service is installed or the Agreement executed will
be in effect until the expiration of the service period chosen by the
Subscriber. Other rates applicable to other services provided by the
Company, that are connected to the SynchroNet service, may be increased
during this period as governed by their respective tariffs.
3. The service period for this Agreement shall be ___ months. The rates
and charges for items under this Agreement are identified in Attachment A
of this agreement.
4. In the event that any item of Service is terminated prior to the
expiration of the service period, the Subscriber shall pay a Termination
Liability Charge as specified in the tariff.
The following conditions shall also be treated as a termination of service:
(a) Transfer (i.e. T&F) of SynchroNet to a new location when the criteria
for "Moves of Service" in the tariff for Termination Liability are not met.
(b) Removal of SynchroNet service when change or substitution is requested
by the Subscriber.
5. Additions may be added to an existing service at the customer's option;
however, tariff rates, charges, terms and conditions then currently
effective for such services will
(R) Registered Service Mark of BellSouth Corporation
<PAGE>
be applied.
6. At the expiration of the service period, the Subscriber may select a
new payment period according to renewal options provided under the tariff.
If the Subscriber does not elect an additional service period, or does not
request discontinuance of the service, then the above service will be
continued at the monthly rate then currently in effect for month to month
rates. Service periods may also be renewed prior to expiration in
accordance with regulations and rates then in effect.
7. Suspension of service is not permitted for SynchroNet.
8. The Subscriber agrees to pay any added costs incurred by the Company
due to a Subscriber initiated change in the location of the SynchroNet
service prior to the time it is placed in Service.
9. In the event the Service requested by the Subscriber is canceled prior
to the establishment of Service, but after the date of ordering reflected
herein, the Subscriber is required to reimburse the Company for all
expenses incurred in handling the request before the notice of cancellation
is received. Such charge however, is not to exceed the sum of all charges
which would apply if the work involved in complying with the request had
been completed.
10. Subject to the current provisions of applicable tariffs, the
Subscriber may arrange to have existing Service under this Agreement moved
within the same premises. The Subscriber agrees to pay a nonrecurring
charge based upon the estimated cost or tariff rate of such move without
interruption or change in the monthly rates.
11. Service may be transferred to another Subscriber at the same location
upon prior written concurrence of the Company. The new Subscriber to whom
the Service is transferred will be subject to all tariff provisions and
configurations currently in effect for the present Subscriber.
(R) Registered Service Mark of BellSouth Corporation
<PAGE>
The Agreement is effective when executed by the Subscriber and accepted by
the Company, and is subject to and controlled by the provisions of the Company's
lawfully filed tariffs, including any changes therein as may be made from time
to time.
ADDRESS: 6611 Bay Circle
Suite 160
Atlanta, Georgia 30371
SUBSCRIBER: InterCept Systems
BY:____________________
TITLE:_________________
Southern Bell Telephone and Telegraph Company
ACCEPTED: ___________________
BY: ___________________
TITLE: ___________________
Attachments: Quantities and Rates per channel for SynchroNet Services
SynchroNet Locations
(R) Registered Service Mark of BellSouth Corporation
<PAGE>
Schedule to SynchroNet(R) Service Agreement
between Southern Bell Telephone and Telegraph Company
and Intercept Systems, Inc.
Intercept Systems, Inc. has entered into identical agreements with Southern Bell
for SynchroNet services in the States of Alabama, Florida, Georgia, Kentucky,
Louisiana, Mississippi, North Carolina, South Carolina and Tennessee
(R) Registered Service Mark of BellSouth Corporation
<PAGE>
EXHIBIT 10.22
SERVICE AGREEMENT
AGREEMENT NUMBER 1620
When authorized signatories of both GE Capital Spacenet Services, Inc. ("GE")
and Intercept Communications Technologies, L.L.C. ("Customer") have signed
below, this offer becomes a binding Services Agreement (Agreement") between
them. Then GE will be bound to provide those services described, under the
terms and conditions printed on this and subsequent pages of this Agreement, and
Customer will be bound to take and pay for those services under those terms and
conditions.
<TABLE>
<CAPTION>
AGREED TO BY: ACCEPTED BY:
<S> <C> <C>
Intercept Communications GE Capital Spacenet Services,
Technologies, L.L.C. Inc.
SIGNATURE: /s/ Mike Sulpy /s/ Mark P. Bresnahan
--------------------------- ------------------------------
PRINTED NAME: Mike Sulpy Mark P. Bresnahan
TITLE: Vice President Vice President and General
Counsel
DATE: February 25, 1998 February 25, 1998
ADDRESS: 3150 Holcomb Bridge Rd, Ste 200 1750 Old Meadow Road
Norcross, Georgia 30071 McLean, Virginia 22102
</TABLE>
Terms and Conditions
--------------------
1. BACKGROUND AND OVERVIEW - Under the terms of this Agreement, GE will provide
the necessary personnel, materials, and services as required to render data
transmission services. The network communications services are as described in
this document, including appendices. This service will utilize GE-Provided
Equipment ("Equipment"), software, and services provided by GE. Certain
Equipment shall be subject to environmental limitations as prescribed by GE.
Interface to the Equipment shall be via RS-232 interface at the remote location
connecting a Customer-provided terrestrial circuit (Backhaul) to Customer's data
center. Customer's use of the Equipment will provide Customer with a
transmission system capable of carrying data traffic between Customer's host
computers and remote locations specified by Customer.
2. TERM - The Term of this Agreement (Agreement Term") shall commence on
signature of this document ("Effective Date"). Each installed Site (a "Site"
being a VSAT location) hereunder shall have a Minimum Site Service Term
("Minimum Site Service Term) of sixty (60) months. Each Site shall
automatically continue after the Minimum Site Service Term to the End Date of
the Agreement (Agreement End Date), which shall be the last day of service
provided at the last Site. Any Site having completed its Minimum Site Service
Term may be terminated by either party by providing at least sixty (60) days
advance notification of termination.
3. TRANSMISSION SERVICE
A. GE warrants that the transmission services provided hereunder for the entire
network will be operational for 99.8% of the scheduled service time averaged
over the most recent twelve (12) months of the Agreement Term. Should a service
interruption occur, the duration of the service interruption will be as follows:
It will be deemed to commence at the time that a malfunction is reported to the
Network Management Center by a Customer representative and will be deemed to
have ended when communications services have been restored and the Customer's
data center has been contacted. If the Customer's data center is not open at
<PAGE>
the time of restoration of service, the service interruption shall be deemed
complete at the time of restoration of service.
B. In the event GE fails to provide service to Customer for more than twelve
(12) consecutive hours, consistent with the selected maintenance plan, after
notification to GE of any failure or suspected failure, GE shall, upon the
request of the Customer, credit Customer's account by an amount equal to two
percent (2%) of the monthly service fee at each affected Site for each
additional 12 hour period during which the service interruption continues. Said
credit shall be the sole and exclusive remedy of Customer with respect to
interruption of service. GE shall not be liable for any service interruption
and credit shall not be given for any failure or interruption of service due to
the failure or nonperformance of any Customer-provided terrestrial equipment,
action or inaction by Customer, its employees, invitees, third parties,
Customer-scheduled down-time (maintenance, upgrades, etc.) or a breach of this
Agreement by Customer or a third party or any other cause beyond GE's control,
to include but not be limited to those actions set forth under the Force Majeure
provision of this Agreement. If GE is precluded from restoring service due to
Site inaccessibility or lack of an authorized representative to grant access or
provide escort, as appropriate, GE shall not be liable for the service
interruption for the time associated with such Site inaccessibility or lack of
escort.
4. INSTALLATION OF EQUIPMENT - Customer shall provide adequate electrical
outlets and power for installation and operation of all Equipment to be provided
by GE as part of this Agreement. Customer shall pay GE for the installation of,
removal, or replacement of any additional equipment requested by Customer
outside of the scope of a standard installation, as prescribed by GE. Customer
shall grant access to GE for installation of the Equipment during normal
business hours, including appropriate security escort when required. Late
cancellation of an installation or failure to grant access for a scheduled
installation will result in a Canceled Site Installation charge.
5. MAINTENANCE AND SERVICE
A. Subject to the terms and conditions hereof, GE shall provide maintenance
support for all Equipment provided as part of this Agreement. Such maintenance
shall consist of: (1) Equipment maintenance which includes travel to and from
the Site and technical trouble shooting to isolate any problems; (2) labor for
on-Site repair and replacement, as required, of malfunctioning Equipment; (3)
diagnostic support of malfunctioning Equipment; (4) software maintenance for one
protocol; (5) for Sites located within 50 miles of a GE field service office, GE
will use commercially reasonable efforts to ensure that the field service
technician will arrive at the Site ninety percent (90%) of the time within four
hours of dispatch, and (6) coverage during GE's normal business hours, Monday
through Friday, 9AM - 5PM, excluding holidays; provided, however, that if the
24-hour maintenance option in Appendix A is selected, the maintenance hours
shall be as set forth in Appendix A. GE's maintenance obligations under this
Agreement do not include provision of consumable supplies, repair or replacement
of Equipment failures or malfunctions caused by improper operations, maintenance
by other than GE authorized representatives, relocation or modification by
Customer or others not under GE's control, failure or interruption of Customer-
provided terrestrial communications or electrical power, accident, fire,
lightning, snow, snow removal, or other hazards beyond normal range of use,
trouble calls where no problem is found and the reported problem does not repeat
within five calendar days, or failures or malfunctions resulting from exposure
of the Equipment to conditions beyond its operating conditions; such failures
and malfunctions will be repaired on a commercially reasonable effort basis and
billed to Customer on a time and materials basis at GE's then-effective prices.
Customer shall grant or have granted access as required for maintenance of the
Equipment during maintenance hours, including appropriate security escort when
required. Failure to grant or have granted access during a maintenance call
will result in an Aborted Site Visit charge.
B. Customer may give GE notice of any Equipment or network failure or suspected
defect by calling GE's 24-hour Network Management Center at 1-800-325-9202.
2
<PAGE>
6. CHARGES AND PAYMENT
A. All payments made under this Agreement shall be in U.S. Dollars. The fees
or prices for Services are as set forth in Appendix A. GE will bill Customer for
monthly charges one (1) month in advance of the month's service due and payable
the last day of the billing calendar month (e.g. September 1 billing for
October's service is due and payable September 30.) Monthly charges for partial
months of Services will be prorated on a thirty (30) day month basis. Invoicing
for each Site shall commence once the Site is available for transmission
service.
B. Customer shall be required to supply as payment security a deposit of
$25,000 within ten days of signature of this Agreement. Upon the completion of
twelve months of rendering of prompt payment in accordance with the terms of
this Agreement, such deposit shall be returned to Customer.
C. In the event that any fees or charges are not paid in full by Customer when
due and such non-payment continues for a subsequent thirty (30) day period, then
GE shall provide Customer with written notice of such non-payment. If Customer
fails to cure such non-payment within ten (10) days after the date of such
notice, then GE, in addition to and not in lieu of its rights under Section 16
(Termination and Suspension) below, reserves the right to charge Customer a late
payment charge calculated on the past due balance at the rate of one and one-
half percent (1.5%) interest per month for each month or part thereof. This
late payment charge will not be imposed on the portion of an invoice which may
reasonably be under dispute by Customer, provided that Customer has paid the
undisputed portion in full and has notified GE of the disputed amount within 15
days of receipt of GE's invoice along with a written explanation of the dispute
based on the terms of this Agreement.
7. TAXES AND FEES - The Service Fee and other charges under this Agreement are
as set forth in Appendix A. These charges exclude all present and future taxes,
duties, or fees of any nature, including, but not limited to federal, state, or
local sales or use taxes, fees, excises, property or gross receipts taxes or
fees, telecommunication taxes, license or access fees, or other taxes or duties
which may now or hereafter be levied on the services provided or on payments
made under this Agreement. Any such taxes, fees, or duties, however
denominated, which may now or hereafter be levied on the services provided, the
Equipment installed, or payments made under this Agreement, excluding taxes
based on GE's net income, shall be paid by Customer. If GE is required to pay
or pays any of these, Customer shall promptly reimburse GE for such payments
including applicable penalties and interest, if any. Taxes, late payment
charges, and other charges (other than those imposed due to GE's negligence)
will be invoiced following their accrual. GE agrees to provide reasonable
documentation supporting any such charges.
8. CLOSURE OF BUSINESS LOCATION - In the event Customer ceases to do business
at one of its Sites, Customer may request that GE transfer the service to some
other business location (it being understood that GE shall reasonably comply
with such request provided that Customer shall pay GE, at the price set forth in
Appendix A, for the removal of the Equipment and reinstallation at such other
premises, as well as storage or shipping fees or charges, on a mutually
agreeable schedule). To the extent that the Minimum Site Service Term has not
expired at the Site, ceasing to do business at such Site by Customer shall not
relieve Customer of its obligation pertaining to the Minimum Site Service Term.
Payment by Customer of the Standard Service charge during the time of transfer
shall continue without interruption. Subscriber shall give GE at least 30 days
written notice of such transfer or closure of its business or business location.
9. ASSIGNMENT - Either party may, on written notice to the other, assign its
rights and obligations hereunder to: (i) its parent corporation or an
affiliated corporation owned by a common parent in connection with any corporate
restructuring, and (ii) a third party entity in connection with the transfer of
all or substantially all of the assigning party's assets to such entity. Except
as provided above in this Section, either party may assign its rights and
obligations under this Agreement to a third party only upon receiving the prior
written consent of the other party, which consent may be reasonably conditioned
3
<PAGE>
but will not be unreasonably withheld. The parties agree that no assignments
will be made unless the assignee agrees to accept in full the responsibilities
and obligations of the assigning party.
10. GE PROVIDED EQUIPMENT
A. Title - Title to the Equipment installed or provided by GE under this
-----
Agreement shall remain with GE. Customer shall not move the Equipment, nor
permit the Equipment to be moved, modify the Equipment nor permit the Equipment
to be modified, and Customer shall not permit any liens or encumbrances to be
placed upon the Equipment. GE shall have the right and authority acting in its
own name or the name of Customer to complete and file such documents as it deems
necessary to protect its security interest in or ownership of the Equipment or
other equipment and Customer shall fully cooperate with and support all such
filings by GE.
B. Risk of Loss - Risk of loss or damage for Equipment shall pass to Customer
------------
upon installation of the Equipment at a Customer designated Site. Customer
shall insure all Equipment installed and all GE-owned equipment on Customer's
premises against risk of loss or damage due to any cause other than normal wear
and tear, and shall name GE as a loss payee to the extent of its losses. Proof
of such insurance by a carrier acceptable to GE shall be made available to GE by
Customer upon request by GE. Customer shall notify GE of any material change in
such insurance coverage or insurance carrier.
11. REMOVAL OF EQUIPMENT - Upon expiration or termination of this Agreement, GE
shall have the right to abandon equipment in place if it so elects, after
written notice has been provided to Customer. If GE elects to remove equipment,
Customer shall facilitate GE's entry into all applicable premises to permit GE
to remove any Equipment and any Software owned by GE and used to provide
Services.
12. GOVERNING LAW - This Agreement shall be construed and enforced in
accordance with and shall be governed by, the laws of the United States and of
the Commonwealth of Virginia. The parties agree to submit to the jurisdiction
of the state and federal courts sitting in the Commonwealth of Virginia. Venue
for any claims hereunder shall be a court of competent jurisdiction in or near
Fairfax County, Virginia.
13. RESPONSIBILITIES OF CUSTOMER AND GE
A. Compliance and Approvals - Each party shall comply with all applicable
------------------------
governmental laws, rules and regulations. Customer is responsible for obtaining
any local permits, landlord consents or other waivers or consents that may be
necessary for GE to install the Equipment and for Customer to make use of the
communications services. The Customer is advised to obtain any such required
permits or approvals well in advance of installation. If on-Site installation
is prevented due to any of the above, the Aborted Site Visit charge shall apply.
The obligations of Customer under this Agreement are not conditioned upon
Customer's receipt of such authorizations or approvals.
B. Backhaul - Customer shall be responsible for all charges, non-recurring and
--------
recurring, and communications hardware, associated with the terrestrial
communications link between Customer's data center and GE's designated
communications hub. GE shall have no warranty obligations in connection with
any terrestrial communications link, other than to pass through to Customer any
warranties by the vendor or provider thereof.
C. Insurance - Each party, at its own expense, will obtain and/or maintain
---------
insurance to cover risks associated with their respective business activities
detailed herein.
D. Standard Site Installation Lead Time. GE shall use commercially reasonable
------------------------------------
efforts to schedule and complete a standard installation of Equipment at
Customer-designated Sites for utilization of this service from 30 to 45 days of
receipt of notification and Site information from Customer, though nonstandard
4
<PAGE>
installations may take longer. Installations will be subject to mutually
acceptable scheduling, taking into consideration the number of Sites to be
installed. Expedited installation service is available as set forth in Appendix
A. Necessary information to be supplied by Customer includes Site address, point
of contact at Site including telephone number, desired installation date, and
any special installation requirements. Customer shall have obtained all
necessary permits and approvals adequately in advance of the installation.
Installations canceled by Customer less than four (4) business days prior to the
mutually scheduled installation shall be subject to the canceled installation
fee.
E. Minimum Order Quantity. Within twenty-four (24) months of the signature of
----------------------
this Agreement, the minimum quantity of Sites for network communications
services set forth in Appendix B shall have been ordered for installation within
ninety (90) days. In the event the minimum quantity have not been ordered
within such twenty-four (24) month period, invoicing for Unordered Minimum
Quantity Sites shall commence in accordance with Item 16 of Appendix A.
14. LIABILITY OF GE AND CUSTOMER
A. Customer shall defend, indemnify and save GE harmless from and against
injuries, loss or damage to GE's employees or property or to the person or
property of third parties to the extent they are caused by the willful or
negligent acts or omissions of Customer (and all risk of loss and damage to the
property caused by anyone other than GE and its subcontractors while the
property is in Customer's control or custody), and from and against any and all
claims, expenses, or losses (including reasonable attorneys' fees and expenses)
arising out of or in connection with the application or content of Customer's
transmissions through the provided transmission services.
B. Each party shall defend, indemnify and save the other harmless from and
against injuries, loss or damage to the other's employees or property or to the
person or property of third parties to the extent they are caused by the willful
or negligent acts or omissions of the perpetrating party or that of its
subcontractors, agents, or representatives while performing their duties at
Customer's or End-User's Sites.
C. Except for the obligation to defend, indemnify and hold harmless provided in
Section 14.B, GE's total liability under this Agreement shall in no case exceed
the Service Fees paid to it by Customer during the six months immediately
preceding the cause of action. Customer has accepted this limitation of
liability for Services provided hereunder and understands that the price of the
Services would be higher if GE were requested to bear additional liability for
damages.
D. UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR TO
ANY THIRD PARTIES FOR INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OF
ANY KIND, INCLUDING LOST PROFITS, LOSS OF USE OF EQUIPMENT OR SERVICES, OR
DAMAGES TO BUSINESS OR REPUTATION ARISING FROM THE PERFORMANCE OR NON-
PERFORMANCE OF ANY ASPECT OF THIS AGREEMENT WHETHER IN CONTRACT OR TORT OR
OTHERWISE, AND WHETHER ADVISORY HAS BEEN MADE OF THE POSSIBILITY OF SUCH
DAMAGES.
E. EXCEPT AS STATED HEREIN, GE PROVIDES NO WARRANTIES, EXPRESS, IMPLIED OR
STATUTORY, INCLUDING BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE RESPECTING SERVICES
PERFORMED, LICENSED SOFTWARE, OR EQUIPMENT FURNISHED UNDER THIS AGREEMENT.
15. FORCE MAJEURE - Neither party shall be liable for failure to perform its
obligations under this Agreement to the extent such failure is due to causes
beyond its commercially reasonable control, including but not limited to
externally caused transmission interference, Acts of God, the public enemy,
embargo, power failures, governmental act, fire, accident, strike, war, riot,
inclement weather, irreparable facility or key equipment failure or destruction,
or such other cause that is beyond the control of the parties. In the event of
a force majeure, the party invoking this Section shall notify the other party in
5
<PAGE>
writing of the events creating the force majeure. An interruption of service
due to a Force Majeure action shall not be deemed to be part of the measured
period for system availability. If any such delay exceeds forty-five (45) days,
then following such forty-five day period either party hereto may terminate the
unperformed portions of this Agreement on ten (10) days' prior written notice to
the other party.
16. TERMINATION AND SUSPENSION OF SERVICE
A. Either party may terminate this Agreement only for default in the event of
material breach by the other party if such breach continues for a period of
sixty (60) days after written notice of intention to terminate describing the
default is given by the non-breaching party and such event of breach is not
remedied within the stated period. Notwithstanding the foregoing, GE may, on
thirty (30) days' written notice, suspend or terminate the Service to be
provided under this Agreement, due to Customer's non-payment of charges due.
Upon termination for material default by either party, Customer shall cease
utilizing the Service and shall remit to GE upon receipt of a final invoice all
amounts accrued or due to GE up to and including the termination date. Customer
hereby consents to the jurisdiction of any court or administrative agency having
subject matter jurisdiction in which GE may elect to bring an injunctive action
to require Customer to cease using service at any or all Sites, as applicable,
if Customer fails or refuses to do so after receipt of notice pursuant to this
Article.
B. If default is due to the Customer, then Customer shall pay all applicable
amounts due for the remaining term in accordance with this Agreement, plus
deinstallation charges. Either party may pursue any other remedies existing at
law or in equity to the extent consistent with this Agreement and its governing
law. GE and Customer agree that damages to GE resulting from a termination
hereunder are not readily determinable either at the time of signing of this
Agreement or at the time of its termination and that the amount of the
liquidated damages is both necessary and reasonable. Either party may bring
legal action for the violation or breach of this Agreement, and shall be
entitled to recover reasonable attorneys' fees incurred in enforcing obligations
as stated herein.
C. Sites which have completed their Minimum Site Service Term may be terminated
without penalty, though Customer shall be liable to GE for all obligations then
accrued to GE as of the effective date of termination. With sixty (60) days
notice and if a) at least one year of service has been rendered, and b) if more
than six months remains under the term of the Agreement, Customer may terminate
its network by paying 75% of the total outstanding monthly Standard Service
charges for all Sites not having completed the Minimum Site Service Term.
D. Notwithstanding the above, either party may terminate this Agreement without
penalty within thirty (30) days of signature should the provision of
transmission services be determined to be unfeasible as a result of any testing
or certification efforts during this 30 day period.
17. CONFIDENTIALITY
A. Neither party shall, without the other's written consent, disclose to any
third party any manuals, technical data, software, pricing, terms, proprietary
information, or trade secrets, nor permit any third party to have access thereto
or to any of the other party's Equipment or software.
B. The content of this Agreement shall be treated as confidential and shall not
be disclosed by Customer or GE to third parties without the prior written
consent of the other party. The existence of this Agreement may be disclosed in
advertising or publicity by either party, provided that such disclosure is
approved in writing by the non-disclosing party prior to release for
publication; provided, however, that either party may include the name of the
other party in a serial list of Customers or vendors (as applicable) of each
others' products and services. Neither party may use the trademarks, trade
names, or logos of the other party without prior written permission of the other
party.
6
<PAGE>
18. SEVERABILITY - In the event any one or more of the provisions of this
Agreement shall for any reason be held to be invalid or unenforceable, the
remaining provisions of this Agreement shall be unimpaired, and upon mutual
agreement of the parties the invalid or unenforceable provision shall be
replaced by a provision which, being valid and enforceable, comes as close as
lawfully possible to the intention of the parties underlying the invalid or
unenforceable provisions.
19. NON-WAIVER - The failure of either party to insist upon strict adherence to
any material term or condition of this Agreement on any occasion shall not be
considered a waiver of any right thereafter to insist upon strict adherence to
that term or condition or any other material term or condition of this
Agreement.
20. RELATIONSHIP OF PARTIES - This Agreement is not intended by the parties to
constitute or create a joint venture, pooling arrangement, partnership, agency
or formal business organization of any kind. GE and Customer shall be
independent contractors with each other for all purposes at all times and
neither party shall act as or hold itself out as agent for the other unless so
designated in a separate writing signed by the principal, nor shall either party
create or attempt to create liabilities for the other party. All obligations
under this Agreement shall be performed by and between GE and Customer. This
Agreement does not create any rights in any end-users or in any other third
party not a signatory hereto.
21. NOTICES AND POINTS OF CONTACT - Except as otherwise provided, all
important notices or other communications required or desired to be given or
sent in connection with this Agreement shall be in writing and transmitted to
the applicable party by hand delivery or U.S. certified mail, return receipt
requested, postage prepaid. Invoices and other non-emergency communications may
be transmitted via regular US mail or facsimile.
22. ENTIRE AGREEMENT - This Agreement, together with the appendices listed
herein, comprises the entire and exclusive agreement of the parties with respect
to the subject matter hereof and supersedes any and all prior and
contemporaneous agreements, understandings, arrangements, proposals or
representations whether written or oral, heretofore made between the parties
hereto and relating to this subject matter. It does not, however, revoke or
rescind any prior agreements for other services which may have been executed by
the parties. This Agreement may be modified, changed or amended only by an
express written agreement signed by duly authorized representatives of both
parties stating that it is an amendment. Waivers, or purported waivers, of any
provision of this Agreement shall be in writing and signed by an authorized
officer of both parties.
23. LICENSE OF SOFTWARE
A. "Licensed Software" means any computer program, including any modifications,
-----------------
updates, or additions which may be included by GE in any or with provided
Equipment as object code or executable form in any medium, and related materials
such as diagrams, manuals and other documentation which are for use in the
Equipment provided to Customer under this Agreement.
B. By signature of this document, GE grants to Customer a non-exclusive license
to use or have used the Licensed Software as it resides in GE's Equipment, but
only for the purpose of causing such Equipment to operate for the provision of
transmission services and not otherwise. Customer shall not permit any third
party to gain access to the Licensed Software or transfer the Licensed Software
to any third party, copy or permit to have copied the Licensed Software, reverse
engineer, disassemble, de-compile, or transmit the Licensed Software in any form
or by any means. Violation of these restrictions shall entitle GE to terminate
this License of Software without liability, take possession of the Equipment,
software, and terminate this Agreement for default. Licensed Software is and
shall remain the exclusive property of GE or GE's vendors. No license other
than that specifically stated herein is granted to Customer, and Customer shall
have no right under patent, trademark, copyright, trade secret or other
intellectual property of GE or GE's vendors other than that granted herein.
7
<PAGE>
C. Customer agrees to include this provision, though suitably amended to
reflect the parties, in any sub-contract to provide data transmission services
utilizing the services provided herein.
24. APPENDICES - The following Appendices are incorporated as part of this
Agreement:
APPENDIX A Listing of Provided Services and Prices
APPENDIX B Order Summary
8
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE INTERCEPT GROUP, INC.
ProVesa Inc., a Georgia corporation ("ProVesa"), doing business under the name
"ProVesa."
ProVesa Services, Inc., a Georgia corporation and wholly owned
subsidiary of ProVesa, doing business under the name "ProVesa."
ProImage, Inc., a Georgia corporation one-third owned by ProVesa, doing
business under the name "ProVesa."
InterCept Switch, Inc., a Georgia corporation doing business under the name
"InterCept Switch."
<PAGE>
EXHIBIT 23.1
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of this S-1
Registration Statement.
/s/ ARTHUR ANDERSEN LLP
Atlanta, GA
February 27, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,871,896
<SECURITIES> 0
<RECEIVABLES> 2,793,218
<ALLOWANCES> 156,616
<INVENTORY> 221,124
<CURRENT-ASSETS> 4,729,622
<PP&E> 4,765,461
<DEPRECIATION> 2,268,680
<TOTAL-ASSETS> 9,438,678
<CURRENT-LIABILITIES> 3,992,253
<BONDS> 0
0
400,000
<COMMON> 2,528,691
<OTHER-SE> (3,998,777)
<TOTAL-LIABILITY-AND-EQUITY> 9,438,678
<SALES> 0
<TOTAL-REVENUES> 19,999,038
<CGS> 0
<TOTAL-COSTS> 7,681,712
<OTHER-EXPENSES> 7,067,176
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 770,175
<INCOME-PRETAX> (88,153)
<INCOME-TAX> 468,413
<INCOME-CONTINUING> (518,004)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (518,002)
<EPS-PRIMARY> (0.14)
<EPS-DILUTED> (0.14)
</TABLE>
