<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 27, 1998
REGISTRATION NO. 333-48399
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
--------------------------
CARREKER-ANTINORI, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7379 75-1622836
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) No.)
</TABLE>
14001 N. DALLAS PARKWAY, SUITE 1100
DALLAS, TEXAS 75240
(972) 458-1981
(Address, including zip code, telephone number,
including area code, of registrant's principal executive office)
JOHN D. CARREKER, JR.
CARREKER-ANTINORI, INC.
14001 N. DALLAS PARKWAY, SUITE 1100
DALLAS, TEXAS 75240
(972) 458-1981
(Name, address, including zip code, telephone number,
including area code, of agent for service)
--------------------------
COPIES TO:
MAURICE E. PURNELL, JR. S. MICHAEL DUNN, P.C.
JOHN B. MCKNIGHT Brobeck, Phleger & Harrison LLP
Locke Purnell Rain Harrell 301 Congress Avenue, Suite 1200
(A Professional Corporation) Austin, Texas 78701
2200 Ross Avenue, Suite 2200 (512) 477-5495
Dallas, Texas 75201
(214) 740-8000
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
--------------------------
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 an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If 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. / /
--------------------------
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.
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<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 27, 1998
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
[LOGO]
5,100,000 SHARES
COMMON STOCK
Of the 5,100,000 shares of Common Stock offered hereby, 3,650,000 shares are
being sold by Carreker-Antinori, Inc. (the "Company" or "Carreker-Antinori") and
1,450,000 shares are being sold by the Selling Stockholders. The Company will
not receive any of the proceeds from the sale of shares by the Selling
Stockholders. See "Principal and Selling Stockholders." Prior to this offering,
there has been no public market for the Common Stock of the Company. It is
currently estimated that the initial public offering price will be between
$10.00 and $12.00 per share. See "Underwriting" for a discussion of the factors
to be considered in determining the initial public offering price. The Common
Stock has been approved for quotation on the Nasdaq National Market under the
symbol "CANI," subject to official notice of issuance.
-------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS (1) COMPANY (2) STOCKHOLDERS
<S> <C> <C> <C> <C>
Per Share.......... $ $ $ $
Total (3).......... $ $ $ $
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting offering expenses payable by the Company estimated at
$ .
(3) The Company and a Selling Stockholder have granted an option to the
Underwriters, exercisable within 30 days of the date hereof, to purchase up
to 765,000 additional shares of Common Stock, solely to cover over-
allotments, if any. If such option is exercised in full, the total Price to
Public, Underwriting Discounts and Commissions, Proceeds to Company and
Proceeds to Selling Stockholders will be $ , $ , $ and $ ,
respectively. See "Underwriting."
-------------------
The Common Stock is offered by the Underwriters as stated herein, subject to
receipt and acceptance by them and subject to their right to reject any order in
whole or in part. It is expected that delivery of such shares will be made
through the offices of BancAmerica Robertson Stephens, San Francisco, California
on or about , 1998.
BANCAMERICA ROBERTSON STEPHENS
HAMBRECHT & QUIST
LEHMAN BROTHERS
The date of this Prospectus is , 1998
<PAGE>
INSIDE FRONT COVER:
Graphic displaying three bubbles labeled "Consulting Services," "Software
Applications," and "Industry Expertise." Each of these three bubbles points to a
larger bubble labeled "Value-Added Banking Solutions." From this larger bubble
are three arrows labeled "Increase Revenues," "Reduce Costs," and "Enhance
Delivery of Customer Services." These arrows point to a large bubble labelled
"Maximize Bank Values."
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING STABILIZING BIDS, SYNDICATE COVERING TRANSACTIONS OR THE IMPOSITION OF
PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
GATEFOLD GRAPHICS:
Graphic in middle of page stating "Carreker-Antinori -- Move Money with
Greater Intelligence-TM-" (the "Carreker-Antinori Logo"). The graphic includes
the statement "Value Added Banking Solutions" and bullet points stating
"Industry-Specific Consulting Expertise," "Advanced Technology," "Integrated
Approach," "Reduced Customer Risk" and "Broad Array of Services & Technology."
Graphic in upper left part of page with the heading "Yield
Management--Helping banks increase their revenues" and bullet points stating
"Revenue Enhancement," "Liquidity Management," and "Cash Management." Also
included in the graphic are images of financial tables, checks, U.S. currency
and a personal computer.
Graphic at the bottom left of the page with a heading "Payment
Electronification--Enabling banks to capture the benefits from the conversion of
paper checks to electronic items." Also included in the graphic are images of
paper checks, the initials "ECP," U.S. currency and a facade of a columned,
institutional building.
Graphic at top right of the page with a heading "Payment Systems--Helping
banks to reduce check-processing and other costs" and bullet points stating
"Consolidation and Best Practices," "Float Management" and "Risk Management."
Also included in the graphic are images of paper checks, currency, map of U.S.,
facades of institutional buildings and a statue of woman holding scales.
Graphic at lower right of the page with a heading "Enabling
Technologies--Converting leading-edge technologies and ideas into practical
banking solutions," and bullet points stating "Electronic Commerce," "Year
2000," "Image systems" and "Integration Services." Also included in the graphic
are images of people working on personal computers, personal computer screen
displays and typographical characters, number strings and "www.bank.com."
<PAGE>
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES
OR AN OFFER TO, OR A SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH
AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................................................................................... 4
Risk Factors..................................................................................................... 6
Use of Proceeds.................................................................................................. 16
Dividend Policy.................................................................................................. 16
Capitalization................................................................................................... 17
Dilution......................................................................................................... 18
Selected Consolidated Financial Data............................................................................. 19
Management's Discussion and Analysis of Financial Condition and Results of Operations............................ 20
Business......................................................................................................... 29
Management....................................................................................................... 43
Certain Transactions............................................................................................. 53
Principal and Selling Stockholders............................................................................... 55
Description of Capital Stock..................................................................................... 57
Shares Eligible for Future Sale.................................................................................. 59
Underwriting..................................................................................................... 61
Legal Matters.................................................................................................... 63
Experts.......................................................................................................... 63
Additional Information........................................................................................... 63
Index to Consolidated Financial Statements....................................................................... F-1
</TABLE>
------------------------
The Company intends to furnish to its stockholders annual reports containing
audited consolidated financial statements examined by an independent accounting
firm and quarterly reports for the first three quarters of each fiscal year
containing interim, unaudited financial information.
CheckLINK-Registered Trademark-, ATM CashFORECASTER-TM-, Branch Item
Truncation-TM-, CashFORECASTER-TM-, CashTRACKER-TM-, CNOTEs-TM-,
DepositMANAGER-TM-, Float Analysis System-TM-, Float Pricing System-TM-,
Innovasion-TM-, On-Us Fraud-TM-, ReserveLINK-TM-, ReserveLINK PLUS-TM-,
SmartNOTEs-TM-, Synapse-TM-, The Analysis Advantage-TM-, TNOTEs-TM- and Transit
Fraud-TM- are trademarks, trade names and service marks of the Company and are
denoted herein using italics. This Prospectus also includes trademarks, trade
names and service marks of companies other than the Company, which are the
property of their respective owners.
The terms "Company" and "Carreker-Antinori" when used in this Prospectus
refer to Carreker-Antinori, Inc. and, unless the context requires otherwise, its
predecessors and subsidiaries. Concurrently with the offering, the Company will
change its state of incorporation from Texas to Delaware. See "Certain
Transactions--The Reincorporation." The Company's principal executive office is
located at 14001 N. Dallas Parkway, Suite 1100, Dallas, Texas 75240, and its
telephone number at that office is (972) 458-1981. The Company's World Wide Web
home page is located at http:\\www.carreker.com. Information contained in the
Company's Web site does not constitute, and shall not be deemed to constitute,
part of this Prospectus.
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, AND
SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS
PROSPECTUS. THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE DISCUSSED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF
CERTAIN FACTORS INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN
THIS PROSPECTUS. THE INFORMATION CONTAINED IN THIS PROSPECTUS ASSUMES: (I) THE
COMPLETION OF THE REINCORPORATION OF THE COMPANY AS A DELAWARE CORPORATION (THE
"REINCORPORATION") AND CERTAIN OTHER MATTERS (SEE "CERTAIN TRANSACTIONS") AND
(II) NO EXERCISE OF THE OVER-ALLOTMENT OPTION GRANTED TO THE UNDERWRITERS.
THE COMPANY
Carreker-Antinori is a leading provider of integrated consulting and
software solutions that enable banks to increase their revenues, reduce their
costs and enhance their delivery of customer services. The Company's offerings
include yield management, payment systems, payment electronification and
enabling technologies solutions. Carreker-Antinori's solutions assist banks in
re-engineering their operational systems and implementing new software
applications to increase earning assets, develop new revenue sources, improve
operating efficiencies and reduce check fraud losses. The Company believes that
its 20 years of experience in the banking industry, combined with its advanced
technological expertise, positions it to effectively address and anticipate the
challenges and opportunities faced by banks in today's increasingly competitive
environment. The Company's customers include approximately two-thirds of the
largest 100 bank holding companies in the United States, including Fleet
Financial Group, Inc., NationsBank Corporation, Norwest Corporation and SunTrust
Banks, Inc.
The banking industry is one of the nation's largest industries, with
aggregate annual revenues of nearly $250 billion. In recent years, the industry
has undergone significant change, and today's banking environment is
characterized by intense competition, continuing consolidation, changing
regulations and rapid technological innovation. In addition to increased
competition within the banking industry, banks are encountering significant
competition from insurance companies, brokerage houses and other financial
institutions, all of which are expanding to provide services that were once
within the exclusive domain of banks. While banks historically have focused on
reducing their operating expenses to remain competitive, they are today
increasingly focusing on developing new sources of revenue growth, automating
operations to increase efficiencies and outsourcing commodity-like banking
functions to sustain market value growth. To this end, banks are expending
significant resources, both internally and through outsourcing arrangements.
Information technology expenditures by the industry in 1997 on paper-based
payment systems and financial and risk management systems alone are estimated to
have been approximately $1.0 billion and $2.3 billion, respectively, of which
approximately 59% and 51% were paid to third parties.
The Company's offerings include yield management, payment systems, payment
electronification and enabling technologies solutions. The Company's yield
management solutions are designed to quickly increase a bank's revenues through
improved operational workflows, pricing structures and liquidity and cash
management. The Company's payment systems and payment electronification
solutions are designed to reduce check-processing costs through procedural and
technological improvements and reduced check fraud and other risks of loss.
Carreker-Antinori's enabling technologies convert leading-edge technologies and
ideas into practical banking solutions. The Company's solutions are
differentiated by virtue of Carreker-Antinori's industry-specific consulting
expertise, advanced technology and broad array of integrated, value-added
solutions. The Company's objective is to be the leading provider of yield
management, payment systems, payment electronification and enabling technologies
solutions that enhance the competitiveness of banks. Carreker-Antinori plans to
accomplish this objective by: (i) advancing its position as a leading industry
innovator; (ii) pursuing strategic alliances and acquisitions; (iii) leveraging
its market position to expand its customer base; and (iv) building long-term
customer relationships.
The Company believes that it derives a significant competitive advantage by
providing leadership to the banking industry through its association with two
high-profile interbank organizations: the Electronic Check Clearing House
Organization ("ECCHO"), which is focused on developing the rules and standards
for transitioning the check payment system from paper to electronic formats, and
Payment Solutions Network, Inc. ("PSN"), which provides database and
information-based products and services critical to the realization of the
benefits associated with the electronification of the check payment system. The
Company's role in these interbank organizations enables it to be an
infrastructure development partner to the banking industry, enhancing the
Company's ability to provide value-added benefits to banks today and uniquely
positioning it to take advantage of the electronification of payment systems in
the future. In addition, the Company has recently partnered with UPS Worldwide
Logistics, National Processing Company, Fiserv, Inc. and Brink's Incorporated to
form INFITEQ, LLC ("INFITEQ"), a single-source provider of specialized
outsourcing services to the banking industry for transaction processing,
information management, electronic commerce and image technology.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company...................... 3,650,000 shares
Common Stock offered by the Selling Stockholders......... 1,450,000 shares
Common Stock to be outstanding after the Offering (1).... 16,348,685 shares
Use of Proceeds.......................................... The Company intends to use the net proceeds for
working capital and other general corporate
purposes, as well as possible strategic
alliances and acquisitions. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol................... CANI
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(In thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
-----------------------------------------------------
1994 1995 1996 1997 1998
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues..................................................... $ 9,606 $ 13,084 $ 18,549 $ 29,072 $ 40,501
Income (loss) from operations...................................... (1,284) 593 2,723 2,884 5,009
Net income (loss) (2).............................................. (922) 697 1,862 1,376 3,055
Basic earnings (loss) per share (3)................................ (.08) .06 .16 .13 .27
Diluted earnings per share (3)..................................... -- .06 .15 .12 .23
Shares used in computing basic earnings per share (3).............. 11,547 11,548 11,543 10,914 11,477
Shares used in computing diluted earnings per share (3)............ -- 11,878 12,092 11,878 13,244
</TABLE>
<TABLE>
<CAPTION>
JANUARY 31, 1998
--------------------------
ACTUAL AS ADJUSTED (4)
--------- ---------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................................................................. $ 1,975 $ 38,515
Working capital............................................................................ 7,434 43,974
Total assets............................................................................... 20,319 56,859
Long-term debt, net of current portion..................................................... -- --
Total stockholders' equity................................................................. 8,624 47,164
</TABLE>
- ------------------------------
(1) Assumes the issuance of 77,000 shares of Common Stock concurrently with the
offering upon the exercise by a Selling Stockholder of options under the
Company's Long Term Incentive Plan (the "Long Term Incentive Plan") to
purchase shares of Common Stock, as well as the issuance of 1,152,174 shares
upon the exercise of options outstanding under the Long Term Incentive Plan
that terminate if unexercised contemporaneously with the offering.
BancAmerica Robertson Stephens has established a loan program to facilitate
the exercise of such options. See "Principal and Selling Stockholders" and
"Underwriting." Excludes: (i) 4,178,418 shares of Common Stock reserved for
issuance under the Long Term Incentive Plan of which options to purchase
2,823,783 shares are outstanding at a weighted average exercise price of
$5.14 per share; (ii) 100,000 shares of Common Stock reserved for issuance
under the Company's Director Stock Option Plan (the "Director Plan"), none
of which are outstanding; and (iii) 276,315 options issued to the Company's
non-employee directors at a weighted average exercise price of $0.58 per
share. See "Management--Long Term Incentive Plan" and "--Director Stock
Option Plan."
(2) Prior to the Company's acquisition of Antinori Software, Inc., a Georgia
corporation ("ASI"), on January 31, 1997, ASI had elected to be treated as
an S corporation for federal and state income tax purposes. The provision
for income tax included as a component of net income for the fiscal years
prior to fiscal 1997 reflects a pro forma tax provision which includes
estimated federal and state income taxes (by applying statutory income tax
rates) that would have been incurred if ASI had been subject to taxation as
a C corporation.
(3) See Notes 2 and 10 of Notes to Consolidated Financial Statements for
information concerning the calculation of basic and diluted net earnings per
share.
(4) Adjusted to give effect to the sale of 3,650,000 shares of Common Stock
offered by the Company hereby at an assumed initial public offering price of
$11.00 per share (the mid-point of the range set forth on the cover of this
Prospectus), after deducting the estimated underwriting discounts and
estimated offering expenses payable by the Company. See "Use of Proceeds"
and "Capitalization."
------------------------------
THE COMPANY'S FISCAL YEAR ENDS JANUARY 31. REFERENCES CONTAINED IN THIS
PROSPECTUS TO A GIVEN FISCAL YEAR REFER TO THE TWELVE-MONTH PERIOD ENDED JANUARY
31 OF THE SUCCEEDING YEAR. FOR EXAMPLE, THE FISCAL YEAR ENDED JANUARY 31, 1998
IS REFERRED TO HEREIN AS "FISCAL 1997."
5
<PAGE>
RISK FACTORS
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. THE FACTORS SET
FORTH BELOW, ALONG WITH THE OTHER INFORMATION CONTAINED HEREIN, SHOULD BE
CONSIDERED CAREFULLY IN EVALUATING AN INVESTMENT IN THE SHARES OF COMMON STOCK
OFFERED HEREBY. FURTHER, THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES, SUCH AS STATEMENTS OF THE
COMPANY'S PLANS, GOALS, OBJECTIVES, EXPECTATIONS AND INTENTIONS. THE CAUTIONARY
STATEMENTS MADE IN THIS PROSPECTUS APPLY TO ALL RELATED FORWARD-LOOKING
STATEMENTS WHEREVER THEY APPEAR IN THIS PROSPECTUS. PROSPECTIVE INVESTORS IN THE
SHARES OF COMMON STOCK OFFERED HEREBY ARE CAUTIONED THAT, WHILE THE
FORWARD-LOOKING STATEMENTS REFLECT THE COMPANY'S GOOD FAITH BELIEFS, THEY ARE
NOT GUARANTEES OF FUTURE PERFORMANCE, AND INVOLVE KNOWN AND UNKNOWN RISKS AND
UNCERTAINTIES. IN ADDITION, THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE DISCUSSED HEREIN. SOME OF THE FACTORS THAT COULD CAUSE OR CONTRIBUTE
TO SUCH DIFFERENCES INCLUDE THOSE DISCUSSED BELOW, AS WELL AS THOSE DISCUSSED
ELSEWHERE IN THIS PROSPECTUS.
DEPENDENCE ON BANKING INDUSTRY
The Company derives substantially all of its revenues from solutions
provided to banks and other participants in the banking industry. Accordingly,
the Company's future success significantly depends upon the continued demand for
its solutions within this industry. The Company believes that an important
factor in its growth has been the substantial change in the banking industry, as
manifested by continuing consolidation, regulatory change, technological
innovation and other trends. If this environment of change were to slow, the
Company could experience reduced demand for its solutions. In addition, the
banking industry is sensitive to changes in economic conditions and is highly
susceptible to unforeseen events, such as political instability, recession,
inflation or other adverse occurrences that may result in a significant decline
in the utilization of bank services. Any event that results in decreased
consumer or corporate use of bank services, or increased pressures on banks
towards the in-house development and implementation of revenue enhancement or
cost reduction measures, could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business--Industry
Background."
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company has experienced in the past, and expects to experience in the
future, significant fluctuations in quarterly operating results. Such
fluctuations may be caused by many factors, including but not limited to the
extent and timing of revenues recognized, and costs incurred, under
value-pricing contracts, the degree of customer acceptance of new solutions, the
introduction of new or enhanced solutions by the Company or its competitors,
budget concerns of customers, competitive conditions in the industry, seasonal
factors, bank purchasing cycles, timing of consolidation decisions by banks, the
extent of their international expansion and general economic conditions. See
"--Customer Project Risks." In addition, the volume and timing of contract
signings during a quarter are difficult to forecast, particularly in light of
the Company's historical tendency to have a disproportionately large portion of
contract signings in the final weeks of a quarter. Due to the foregoing factors,
many of which are beyond the Company's control, quarterly revenues and operating
results are difficult to forecast. It is possible that the Company's future
quarterly results of operations from time to time will not meet the expectations
of securities analysts or investors, which could have a material adverse effect
on the market price of the Company's Common Stock. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations-- Selected
Quarterly Results of Operations."
LIMITED OPERATING HISTORY AS A COMBINED COMPANY
In January 1997, the Company acquired ASI. Accordingly, the Company has only
a limited operating history as a combined company upon which an evaluation of
the Company and its prospects can be based, and is subject to the risks
generally inherent in the establishment and growth of a new business enterprise.
The Company is still in the process of integrating ASI's business, management
information systems,
6
<PAGE>
software products and other operations with the Company's operations. There can
be no assurance that the Company will be able to integrate successfully ASI's
operations or institute integrated Company-wide systems and procedures to manage
successfully the combined enterprise on a profitable basis. The inability of the
Company to integrate successfully ASI's operations could have a material adverse
effect on the Company's business, financial condition and results of operations.
In addition, because the Company's consolidated financial results of operations
reflect only one fiscal year of actual integration of the operations of the
Company and ASI, these results of operations should not be relied upon as any
indication of future performance. See "Certain Transactions--Merger with
Antinori Software, Inc."
CUSTOMER CONCENTRATION
The Company's five largest customers accounted for approximately 49%, 38%
and 46% of total revenues during fiscal 1995, 1996 and 1997, respectively. While
the Company's significant customers have changed from period to period, Norwest
Corporation has consistently ranked as one of the Company's top customers, and
accounted for approximately 16%, 16% and 14% of total revenues in fiscal 1995,
1996 and 1997, respectively. The Company's largest customer in fiscal 1997 was
Fleet Financial Group, Inc., which accounted for approximately 15% of total
revenues in that period. Further, inasmuch as approximately 74% and 85% of the
Company's total revenues in fiscal 1997 were derived from companies who were
customers of the Company in fiscal 1995 and fiscal 1996, respectively, the
Company is dependent to a significant degree on its ability to maintain its
existing relationships with these customers. There can be no assurance that the
Company will be successful in maintaining its existing customer relationships or
in securing additional major customers, and there can be no assurance that the
Company can retain or increase the volume of business that it does with such
customers. In particular, continuing consolidation within the banking industry
may result in the loss of one or more significant customers. Any failure by the
Company to retain one or more of its large customers, maintain or increase the
volume of business done for such customers or establish profitable relationships
with additional customers would have a material adverse effect on the Company's
business, financial condition and results of operations.
CUSTOMER PROJECT RISKS
The Company prices its solutions on a time-and-materials, fixed-price and
value-pricing basis. In connection with fixed-price projects, the Company
occasionally incurs expenses in excess of its projected costs, and, as a result,
achieves lower margins than expected or may incur losses with respect to
projects. In connection with value-priced projects, the Company is paid based on
an agreed percentage of either projected or actual increased revenues or
decreased costs derived by the bank over a period of up to twelve months
following the implementation of the Company's solution. The Company typically
must first commit time and resources to develop such projections before a bank
will commit to purchase the Company's solutions, and therefore assumes the risk
of making these commitments and incurring related expenses with no assurance
that the bank will purchase the solutions. In addition, from time to time, a
customer will not achieve projected revenues or savings because it belatedly
decides not to implement the Company's solutions or the solutions do not produce
the projected results, in which case the Company may not be able to collect any
or all of the fees provided for in the customer's contract. The nature of the
Company's fixed-price and value-pricing arrangements can result in decreased
operating margins or losses and could 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--Overview," "Business--The Carreker-Antinori Solution--Reduced
Customer Risk" and "--Strategy--Increase Use of High-Margin Pricing
Arrangements."
ABILITY TO MANAGE GROWTH
The Company has experienced significant growth in recent years, and
anticipates that additional expansion may be required in order to address
potential market opportunities. Any expansion of the
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Company's business would place further demands on the Company's management,
operational capacity and financial resources. The Company anticipates that it
will need to recruit large numbers of qualified personnel in all areas of its
operations, including management, sales, marketing, delivery and software
development. There can be no assurance that the Company will be effective in
attracting and retaining additional qualified personnel, expanding its
operational capacity or otherwise managing growth. In addition, there can be no
assurance that the Company's systems, procedures or controls will be adequate to
support any expansion of the Company's operations. The Company is currently in
the process of updating its management information system (the "MIS system"),
which could require the Company to provide additional training to existing
personnel or hire additional personnel. If the Company cannot implement the new
MIS system in a timely manner, the Company's ability to manage growth
effectively or generate timely quarterly reports could be materially and
adversely affected. The failure to manage growth effectively could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Strategy--Pursue Strategic Alliances and
Acquisitions."
MARKET ACCEPTANCE OF THE COMPANY'S SOLUTIONS
The Company's success depends upon continued demand for its solutions.
Market acceptance of the Company's existing and future solutions depends on
several factors including: (i) the ease with which such solutions can be
implemented and used; (ii) the performance and reliability of such solutions;
(iii) the degree to which customers achieve expected revenue gains, cost savings
and performance enhancements; and (iv) the extent to which the Company's
customers and prospective customers are able to implement alternative approaches
to meet their business development and cost-saving needs. Some of the foregoing
factors are beyond the Company's control. There can be no assurance that the
Company's customers will realize the intended benefits of the Company's
solutions or that the Company's solutions will achieve continued or increased
market acceptance. Any significant or ongoing failure to achieve such benefits
or to maintain or increase market acceptance would restrict substantially the
future growth of the Company and could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Products and Services."
ABSENCE OF LONG-TERM AGREEMENTS
The Company typically provides services to customers on a project-by-project
basis without long-term agreements. When a customer defers, modifies or cancels
a project, the Company must be able to rapidly redeploy its personnel to other
projects in order to minimize the underutilization of its personnel and the
resulting adverse impact on operating results. In addition, the Company's
operating expenses are relatively fixed and cannot be reduced on short notice to
compensate for unanticipated variations in the number or size of projects in
progress. As a result, any termination, significant reduction or modification of
its business relationships with any of its significant customers or with a
number of smaller customers could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview" and "Business--Sales and Marketing."
POTENTIAL FOR SOFTWARE AND/OR SOLUTIONS DEFECTS
The Company's solutions at times in the past have been, and in the future
may be, incompatible with the operating environments of its customers or
inappropriate to address their needs, resulting in additional costs being
incurred by the Company in rendering services to its customers. Further, like
other software products, the Company's software occasionally has contained
undetected errors, or "bugs," which become apparent through use of the software.
Because the Company's new or enhanced software initially is installed at a
limited number of sites and operated by a limited number of users, such errors
and/or incompatibilities may not be detected for a number of months after
delivery of the software. The foregoing errors in the past have resulted in the
deployment of Company personnel and funds to cure errors,
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resulting in cost overruns and delays in solutions development and enhancement.
Moreover, solutions with substantial errors could be rejected by or result in
damages to customers, which could have a material adverse effect on the
Company's business, financial condition and results of operations. There can be
no assurance that errors or defects will not be discovered in the future,
potentially causing delays in solution implementation or requiring design
modifications that could adversely affect the Company's business, financial
condition and results of operations. It is also possible that errors or defects
in the Company's solutions could give rise to liability claims against the
Company. See "Business--Technology."
COMPETITION
The Company competes with third-party providers of services and software
products to the banking industry, including firms providing consulting services,
such as Andersen Consulting, Electronic Data Systems Corporation and KMPG Peat
Marwick LLP, and software companies, such as Earnings Performance Group, Inc.,
Pegasystems Inc., Sterling Software, Inc. and Transoft International, Inc. Many
of these competitors have significantly greater financial, technical, marketing
and other resources than the Company. The Company's competitors may be able to
respond more quickly to new or emerging technologies and changes in customer
requirements or to devote greater resources to the development, promotion and
sale of their products than can the Company. Also, several of the Company's
current and potential competitors have greater name recognition and larger
customer bases that such competitors could leverage to increase market share at
the Company's expense. The Company expects to face increased competition as
other established and emerging companies enter the banking services market.
Increased competition could result in price reductions, fewer customer orders
and loss of market share, any of which could materially and adversely affect the
Company's business, financial condition and results of operations. There can be
no assurance that the Company will be able to compete successfully against
current or future competitors, and the failure to do so would have a material
adverse effect upon the Company's business, financial condition and results of
operations. See "Business--Competition."
In addition to competing with a variety of third parties, the Company
experiences competition from its customers and potential customers. From time to
time, these potential customers develop, implement and maintain their own
services and applications for revenue enhancements, cost reductions and/or
enhanced customer services, rather than purchasing services and related products
from third parties. As a result, the Company must continuously educate existing
and prospective customers about the advantages of purchasing its solutions.
There can be no assurance that these customers or other potential customers will
perceive sufficient value in the Company's solutions to justify investing in
them. In addition, customers or potential customers could enter into strategic
relationships with one or more of the Company's competitors to develop, market
and sell competing services or products.
USE OF INDEPENDENT CONTRACTORS
The Company often provides solutions through independent contractors. As the
Company does not treat these individuals as its employees, it does not pay
federal or state employment taxes or withhold federal or state employment or
income taxes from compensation paid to such persons. The Company also does not
consider these persons to qualify as eligible for coverage or benefits provided
under its employee benefit plans or include these persons when evaluating the
compliance of its employee benefit plans with the requirements of the Internal
Revenue Code. Additionally, the Company does not treat such persons as employees
for purposes of worker's compensation, labor and employment, or other legal
purposes. From time to time, the Company may face legal challenges to the
appropriateness of the characterization of such persons as independent
contractors from governmental agencies, the independent contractors themselves
or some other person or entity. The determination of such a legal challenge
generally will be determined on a case-by-case basis in view of the particular
facts of each case. The fact-specific nature of such a determination raises the
risk that from time to time an individual that the Company has characterized as
an independent contractor will be reclassified as an employee for these or other
legal purposes. In the event persons engaged by the Company as independent
contractors are determined to be employees by the
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Internal Revenue Service (the "IRS") or any applicable taxing authority, the
Company would be required to pay applicable federal and state employment taxes
and withhold income taxes with respect to such persons and could become liable
for amounts required to be paid or withheld in prior periods and for costs,
penalties and interest thereon. In addition, the Company could be required to
include such persons in its employee benefit plans on a retroactive, as well as
a current, basis. Furthermore, depending on the party that makes the legal
challenge and the remedy sought, the Company could be subject to other
liabilities sought by governmental authorities or private persons. At January
31, 1998, 60 consultants were engaged by the Company as independent contractors.
Any challenge by the IRS, state authorities or private litigants resulting in a
determination that such persons are employees would have a material adverse
effect on the Company's business, financial condition and results of operations.
In October 1997, a bill was introduced in the United States House of
Representatives that would amend the Internal Revenue Code to establish more
stringent requirements for the engagement of independent contractors. The
Company is unable to assess the likelihood that this bill or similar legislation
will be enacted. Further, the Company's ability to retain independent
contractors could in the future deteriorate, due in part to the lower commitment
level that such contractors have to the Company. See "Business--Independent
Contractors."
DEPENDENCE ON KEY PERSONNEL
The Company's future success depends, in significant part, upon the
continued services of John D. Carreker, Jr., its Chairman of the Board and Chief
Executive Officer, as well as other executive officers and key personnel. The
loss of services of Mr. Carreker or one or more of the Company's other executive
officers or key employees could have a material adverse effect on the Company's
business, financial condition and results of operations, and there can be no
assurance that the Company will be able to retain its executive officers or key
personnel. The Company does not maintain key-man life insurance covering any of
its executive officers or other key personnel. See "Management."
ABILITY TO ATTRACT AND RETAIN QUALIFIED PERSONNEL
The Company's future success depends upon its continuing ability to attract
and retain highly qualified banking, technical and managerial personnel.
Competition for such personnel is intense, and the Company at times has
experienced difficulties in attracting the desired number of such individuals.
Further, the Company's employees frequently have left the Company to work
in-house with the Company's customers. There can be no assurance that the
Company will be able to attract or retain a sufficient number of highly
qualified employees or independent contractors in the future. If the Company is
unable to attract personnel in key positions, the Company's business, financial
condition and results of operations could be materially and adversely affected.
IMPACT OF TECHNOLOGICAL ADVANCES
The Company's future success will depend, in part, upon its ability to
enhance its existing solutions, develop and introduce new solutions that address
the increasingly sophisticated and varied needs of its current and prospective
customers, develop leading technology and respond to technological advances and
emerging industry standards on a timely and cost-effective basis. There can be
no assurance that future advances in technology will be beneficial to, or
compatible with, the Company's business or that the Company will be able to
incorporate such advances into its business. In addition, keeping abreast of
technological advances in the Company's business may require substantial
expenditures and lead time. There can be no assurance that the Company will be
successful in using new technologies, adapting its solutions to emerging
industry standards or developing, introducing and marketing solution
enhancements or new solutions, or that the Company will not experience
difficulties that could delay or prevent the successful development,
introduction or marketing of these solutions. If the Company incurs increased
costs or is unable, for technical or other reasons, to develop and introduce new
solutions or enhancements
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of existing solutions in a timely manner in response to changing market
conditions or customer requirements, the Company's business, financial condition
and results of operations could be materially and adversely affected. See
"Business--Solutions Development."
DEPENDENCE ON PROPRIETARY TECHNOLOGY; RISK OF INFRINGEMENT
The Company's success significantly depends upon its proprietary technology
and information. The Company relies upon a combination of patent, copyright,
trademark and trade secret laws and confidentiality procedures to protect its
proprietary technology and information. The Company generally has relied on
common law rights to protect the use of its name, technology and brands. The
Company has a number of issued patents and one registered trademark. There can
be no assurance that the steps taken by the Company to protect its services and
products are adequate to prevent misappropriation of its technology or that the
Company's competitors independently will not develop technologies that are
substantially equivalent or superior to the Company's technology. Further, it is
very difficult to police unauthorized use of the Company's software due to the
nature of software. Any such misappropriation of the Company's proprietary
technology or information or the development of competitive technologies could
have a material adverse effect on the Company's business, financial condition
and results of operations. In addition, the laws of certain countries in which
the Company's software is distributed do not protect the Company's intellectual
property rights to the same extent as the laws of the United States. For
example, the laws of a number of foreign jurisdictions in which the Company
licenses its software protect trademarks solely on the basis of the first to
register. The Company currently does not possess any trademark registrations in
foreign jurisdictions, although it does have copyright protection of its
software under the provisions of various international conventions. Accordingly,
intellectual property protection of its services and products may be ineffective
in many foreign countries. In summary, there can be no assurance that the
protection provided by the laws of the United States or such foreign
jurisdictions will be sufficient to protect the Company's proprietary technology
or information.
The Company could incur substantial costs in protecting and enforcing its
intellectual property rights. Although presently there are no pending or
threatened intellectual property claims against the Company, third parties may,
in the future, assert patent, trademark, copyright and other intellectual
property right claims to technologies which are incorporated into the Company's
solutions. In such event, the Company may be required to incur significant costs
in reaching a resolution to the asserted claims. There can be no assurance that
such a resolution would not require that the Company pay damages or obtain a
license to the third party's intellectual property rights in order to continue
licensing the Company's software as currently offered or, if such a third-party
license is required, that it would be available on terms acceptable to the
Company.
Certain technology used in the Company's current software and software in
development includes technology licensed from third parties. These licenses
generally require the Company to pay royalties and to fulfill confidentiality
obligations. The termination of any such licenses, or the failure of the
third-party licensors to adequately maintain or update their products, could
result in delays in the Company's ability to implement solutions or in delays in
the introduction of the Company's new or enhanced solutions while it searches
for similar technology from alternative sources, if any, which would prove
costly. Any need to implement alternative technology could prove to be very
expensive for the Company and any delay in solution implementation could result
in a material adverse effect on the business, financial condition and results of
operations of the Company. It may also be necessary or desirable in the future
to obtain additional licenses for use of third-party products in the Company's
solutions and there can be no assurance that the Company will be able to do so
on commercially reasonable terms, if at all. See "Business--Proprietary Rights."
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YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field. Beginning in the year
2000, these date code fields will need to accept four-digit entries to
distinguish 21st century dates from 20th century dates. As a result, computer
systems and/or software used by many companies, including those used by
Carreker-Antinori, may need to be upgraded to comply with such "Year 2000"
requirements. In addition, if banks dedicate a significant portion of their
information budgets to the resolution of Year 2000 issues, their ability to
purchase the Company's solutions may be adversely affected, which could have a
material adverse effect on the Company's business, financial condition and
results of operations. Although most of the software currently offered by the
Company is either designed to be Year 2000 compliant or has been upgraded to be
Year 2000 compliant, the Company still offers some software which is not Year
2000 compliant. The Company is in the process of correcting this situation for a
number of its customers. There can be no assurance that the Company's Year 2000
compliant software or related upgrades contain all necessary date code changes
or that such software or upgrades will interface with its customers' other
software programs. Further, liability claims could arise out of the Company's
delivery of solutions that address Year 2000 issues to the extent that such
solutions do not effectively address such issues, and the failure of such
solutions to effectively address Year 2000 issues could have a material adverse
effect on the Company's business, financial condition and results of operations.
In addition, although the Company believes that each of the software programs
used in its MIS system and other internal programs is Year 2000 compliant, there
can be no assurance that such software will be Year 2000 compliant, and any
failure to be so compliant may require additional expenditures by the Company to
rectify the noncompliance.
POTENTIAL LIABILITY CLAIMS
As a result of the Company's provision of solutions that address critical
functions of bank operations, the Company is exposed to possible liability
claims from banks and their customers. Although the Company has not experienced
any material liability claims to date, there can be no assurance that the
Company will not become subject to such claims in the future. A liability claim
against the Company could have a material adverse effect on its business,
financial condition and results of operations.
RISKS ASSOCIATED WITH POTENTIAL STRATEGIC ALLIANCES OR ACQUISITIONS
Except as described immediately below, the Company has no current agreements
or negotiations underway with respect to any potential strategic alliances or
acquisitions. The Company does, however, regularly evaluate such opportunities
and may enter into strategic alliances or make acquisitions of other companies
or technologies in the future. Risks inherent in alliances include, among
others: (i) substantial investment of the Company's resources in the alliance;
(ii) inability to realize the intended benefits of an alliance; (iii) increased
reliance on third parties; (iv) increased payment of third-party licensing fees
or royalties for the incorporation of third-party technology into the Company's
solutions; and (v) inadvertent transfer of the Company's proprietary technology
to strategic "partners." Acquisitions involve numerous risks, including
difficulties in assimilating acquired operations and products, diversion of
management's attention from other business concerns, amortization of acquired
intangible assets and potential loss of key employees of acquired companies.
There can be no assurance that the Company will be successful in identifying and
entering into strategic alliances, if at all, and any inability to do so could
have a material adverse effect on the Company's business, financial condition
and results of operations. In addition, there can be no assurance that the
Company will be able to integrate successfully any operations, personnel or
services that might be acquired in the future, and a failure by the Company to
do so could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business-- Strategy."
The Company is currently providing management services to ECCHO and PSN,
which enables it to be an infrastructure development partner to the banking
industry. These relationships, and the Company's
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participation in INFITEQ, are forms of strategic alliances. In order to support
the formation and growth of PSN, the Company invested time and technological
resources in PSN (for which it received an equity interest that was later sold
for a gain) and has loaned to PSN an aggregate of $578,000 ($500,000 of which
has been reserved due to the Company's belief that collection is doubtful). The
Company has also invested time and technological resources in the formation and
growth of ECCHO and INFITEQ, although it has not invested any funds directly in
those entities. In addition, the Company has experienced, and may continue to
experience, delays in collections of management fees from these respective
strategic alliances. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources" and
"Business--Strategic Banking Initiatives" and Note 8 of Notes to Consolidated
Financial Statements.
GOVERNMENT REGULATION
The Company's primary customers are banks. Although the solutions currently
offered by the Company have not been subject to any material, specific
government regulation, the banking industry is regulated heavily, and the
Company expects that such regulation will affect the relative demand for the
Company's solutions. There can be no assurance that federal, state or foreign
governmental authorities will not adopt new regulations, and any adoption of new
regulations could require the Company to modify its current or future solutions.
The adoption of laws or regulations affecting the Company's or its customers'
business could reduce the Company's growth rate or could otherwise have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Government Regulation."
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
The Company recently has begun to provide solutions to banks outside the
United States, and a key component of the Company's growth strategy is to
broaden its international operations. The Company's international operations are
subject to risks inherent in the conduct of international business, including
unexpected changes in regulatory requirements, exchange rates, export license
requirements, tariffs and other economic barriers to free trade, political and
economic instability, limited intellectual property protection, difficulties in
collecting payments and potentially adverse tax and labor consequences. Certain
of the Company's international sales are denominated in local currencies, and
the impact of future exchange rate fluctuations on the Company's financial
condition and results of operations cannot be accurately predicted. There can be
no assurance that fluctuations in currency exchange rates in the future will not
have a material adverse effect on revenue from international sales and thus the
Company's business, financial condition and results of operations. See
"Business--Strategy."
MANAGEMENT'S DISCRETION AS TO USE OF UNALLOCATED NET PROCEEDS
The Company has designated only limited specific use for the net proceeds to
the Company from the sale of Common Stock in the offering. The Company expects
to use the net proceeds for working capital and other general corporate
purposes, as well as possible strategic alliances and acquisitions.
Consequently, the Board of Directors and management of the Company will have
broad discretion in allocating a significant portion of the net proceeds to the
Company from the offering. The failure of management to apply such funds
effectively could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Use of Proceeds."
BENEFITS OF OFFERING TO CURRENT STOCKHOLDERS
The current stockholders of the Company will benefit from the offering in
that (a) a public market will be created for shares of the Company's Common
Stock, (b) a substantial portion of the proceeds to be received by the Selling
Stockholders from the sale of their shares in the offering will constitute gain
and (c) the current stockholders will have substantial unrealized gain with
respect to shares of the Company's Common Stock owned by them following the
offering. The aggregate acquisition cost to the Selling
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Stockholders with respect to the shares to be sold by them in the offering is
approximately $293,726, and they will therefore realize an aggregate gain of
approximately $14.5 million with respect to the shares sold by them in the
offering; in addition, the current stockholders of the Company will have
unrealized gains on shares of the Company's Common Stock beneficially held by
them following the offering of approximately $113.0 million (in each case
assuming an initial public offering price of $11.00 per share and after taking
into account estimated underwriting discounts). See "Principal and Selling
Stockholders."
CONTROL BY OFFICERS AND DIRECTORS
Upon completion of the offering, the Company's executive officers and
directors will beneficially own, in the aggregate, 63.0% of the Company's
outstanding Common Stock (58.8% if the Underwriters' over-allotment option is
exercised). Accordingly, these persons, if acting together, will have
substantial control over matters requiring approval by the stockholders of the
Company, including the election of directors. See "--Anti-Takeover Matters,"
"Management" and "Principal and Selling Stockholders."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, the Company will have an aggregate of
16,348,685 shares of Common Stock outstanding. Of these shares, all of the
shares sold in the offering will be freely transferable without restriction or
limitation under the Securities Act of 1933, as amended (the "Securities Act"),
except for any shares purchased by "affiliates" of the Company, as such term is
defined in Rule 144 under the Securities Act. The remaining 11,248,685 shares
constitute "restricted securities" within the meaning of Rule 144. Of these
"restricted securities," 9,813,086 shares have been held for the required
one-year period and will be freely tradeable upon completion of the offering,
subject to the 180-day lock-up period described below. With respect to the
remaining 1,435,599 "restricted securities," the Company intends to file a
registration statement on Form S-8 after the offering providing for the resale
of approximately 1,152,174 shares of Common Stock, with the balance of such
shares remaining subject to the requisite Rule 144 one-year holding period and
other limitations (provided, that the sale of all such shares will in any event
be subject to the 180-day lock up period described below). In addition, the
holders of 8,443,448 shares have certain rights to have shares registered in the
future under the Securities Act pursuant to the terms of agreements between such
holders and the Company. The Company, its executive officers, directors and
principal and other stockholders who will hold, collectively, 10,783,330 shares
of Common Stock after the offering, have agreed not to offer or sell any shares
of Common Stock for a period of 180 days following the date of this Prospectus
without the prior written consent of BancAmerica Robertson Stephens, except that
the Company may issue shares of Common Stock in connection with acquisitions and
pursuant to the exercise of stock options described in this Prospectus. On the
date of this Prospectus, the Company had outstanding options to purchase
2,823,783 shares of Common Stock granted pursuant to the Long Term Incentive
Plan, of which 1,131,015 shares may be eligible for resale beginning 90 days
following the date of this Prospectus. The Company intends to register all of
the shares of Common Stock reserved for issuance pursuant to the Long Term
Incentive Plan and the Director Plan under the Securities Act for public resale.
Sales of substantial amounts of shares of Common Stock in the public market
after the offering, or the perception that such sales could occur, may adversely
affect the market price of the Common Stock. See "Shares Eligible for Future
Sale."
IMMEDIATE AND SUBSTANTIAL DILUTION
Purchasers of Common Stock in the offering will incur immediate and
substantial dilution in the amount of $8.13 per share, at an assumed initial
public offering price of $11.00 per share. To the extent that outstanding
options to purchase the Common Stock are exercised, there will be further
dilution. See "Dilution."
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ANTI-TAKEOVER MATTERS
The Company's Certificate of Incorporation (the "Certificate") and Bylaws
("Bylaws") contain provisions that may have the effect of delaying, deterring or
preventing a potential takeover of the Company that stockholders purchasing
shares in the offering may consider to be in their best interests. The
Certificate and Bylaws provide for a classified Board of Directors serving
staggered terms of three years, prevent stockholders from calling a special
meeting of stockholders and prohibit stockholder action by written consent. The
Certificate also authorizes only the Board of Directors to fill vacancies,
including newly-created directorships, and states that directors of the Company
may be removed only for cause and only by the affirmative vote of holders of at
least two-thirds of the outstanding shares of the voting stock, voting together
as a single class. Section 203 of the Delaware General Corporation Law, which is
applicable to the Company, contains provisions that restrict certain business
combinations with interested stockholders, which may have the effect of
inhibiting a non-negotiated merger or other business combination involving the
Company. See "Description of Capital Stock--Delaware Anti-Takeover Law and
Certain Charter Provisions."
ABSENCE OF A PRIOR PUBLIC MARKET
Prior to the offering, there has been no public market for the Common Stock,
and there can be no assurance that an active trading market will develop or be
sustained. The initial public offering price of the Common Stock will be
determined through negotiations among the Company, the Selling Stockholders and
the Underwriters and may not be indicative of the market price for the Common
Stock after the offering. See "Underwriting" for a discussion of the factors to
be considered in determining the initial public offering price.
POTENTIAL VOLATILITY OF STOCK PRICE
The market price for the Common Stock following the offering will be
affected by a number of factors, including the announcement of new products,
product enhancements or services by the Company or its competitors, quarterly
variations in the Company's results of operations or results of operations of
the Company's competitors, changes in earnings estimates or recommendations by
securities analysts, developments in the Company's industry and in the banking
industry, general market and economic conditions and other factors, including
factors unrelated to the operating performance of the Company or its
competitors. In addition, stock prices for many companies in the technology and
emerging growth sectors have experienced wide fluctuations which have often been
unrelated to the operating performance of such companies. Such factors and
fluctuations may adversely affect the market price of the Company's Common
Stock.
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USE OF PROCEEDS
The net proceeds to the Company from its sale of 3,650,000 shares of Common
Stock offered hereby at an assumed initial public offering price of $11.00 per
share are estimated to be $36.5 million ($37.2 million if the Underwriters'
over-allotment option is exercised in full), after deducting the estimated
underwriting discounts and estimated offering expenses payable by the Company.
The Company will not receive any of the proceeds from the sale of shares of
Common Stock by the Selling Stockholders.
The principal purposes of the offering are to increase the Company's equity
capital, to create a public market for the Common Stock, to facilitate the
future access by the Company to public equity markets, to provide liquidity for
certain of the Company's existing stockholders and to provide increased
visibility of the Company in a marketplace where many of its competitors are
publicly-held companies.
The Company intends to use the proceeds of the offering for working capital
and other general corporate purposes, including expenses related to the
recruitment and retention of additional personnel associated with the Company's
anticipated growth. The Company may also use a portion of the net proceeds for
possible strategic alliances and acquisitions of businesses, products and
technologies that are complementary to those of the Company. Pending such uses,
the Company plans to invest the net proceeds in short-term, interest-bearing,
investment-grade securities.
The Company continues to evaluate potential strategic alliances and
acquisitions, and to identify and have preliminary discussions with potential
strategic alliance and/or acquisition candidates, although there are, as of the
date of this Prospectus, no agreements, arrangements or understandings between
the Company and any party relating thereto.
DIVIDEND POLICY
The Company has not paid a cash dividend on shares of its Common Stock since
its incorporation (although prior to its acquisition by the Company, ASI did
make cash dividend payments principally to enable its shareholders to pay income
taxes arising out of ASI's status as an S corporation). The Company currently
intends to retain its earnings in the future to support operations and finance
its growth and, therefore, does not intend to pay cash dividends on the Common
Stock in the foreseeable future. Any payment of cash dividends in the future
will be at the discretion of the Board of Directors and subject to certain
limitations under the Delaware General Corporation Law and will depend upon
factors such as the Company's earnings levels, capital requirements, financial
condition and other factors deemed relevant by the Board of Directors. The
Company is prohibited from paying cash dividends under the terms of its current
line of credit agreement. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
16
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
January 31, 1998: (i) on an actual basis and (ii) as adjusted to give effect to
the sale by the Company of 3,650,000 shares of Common Stock offered hereby at an
assumed initial public offering price of $11.00 per share and the application of
the estimated net proceeds therefrom as set forth in "Use of Proceeds." This
table should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Consolidated Financial
Statements and Notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JANUARY 31, 1998
--------------------
AS
ACTUAL ADJUSTED
--------- ---------
(In thousands)
<S> <C> <C>
Common Stock subject to put (1)................................................... $ 2,000 $ --
Stockholders' equity:
Preferred Stock, $.01 par value, 2,000,000 shares authorized; no shares
outstanding................................................................... -- --
Common Stock, $.01 par value, 100,000,000 shares authorized; 12,007,611 shares
outstanding, actual; 15,657,611 shares outstanding, as adjusted (2)........... 120 157
Additional paid-in capital...................................................... 2,078 40,581
Retained earnings............................................................... 7,690 7,690
Treasury Stock, at cost......................................................... (510) (510)
Deferred compensation (3)....................................................... (754) (754)
--------- ---------
Total stockholders' equity.................................................. 8,624 47,164
--------- ---------
Total capitalization...................................................... $ 10,624 $ 47,164
--------- ---------
--------- ---------
</TABLE>
- ------------------------
(1) Relates to shares of Common Stock redeemable at the option of Science
Applications International Corporation ("SAIC"). SAIC's right to require the
Company to repurchase its shares of Common Stock terminates upon the
consummation of the offering. See "Certain Transactions--Sale of Shares to
SAIC" and Note 6 of Notes to Consolidated Financial Statements.
(2) Does not give effect to the contemplated issuance of 77,000 shares of Common
Stock to a Selling Stockholder upon the exercise of options under the Long
Term Incentive Plan, and the issuance of 1,152,174 shares of Common Stock
anticipated to be issued upon the exercise of certain other options under
the Long Term Incentive Plan concurrently with the offering. See "Principal
and Selling Stockholders" and "Underwriting." Also, excludes: (i) 4,178,418
shares of Common Stock reserved for issuance under the Company's Long Term
Incentive Plan, of which options to purchase 2,823,783 shares of Common
Stock are outstanding at a weighted average exercise price of $5.14 per
share; (ii) 100,000 shares of Common Stock reserved for issuance under the
Company's Director Plan, none of which are outstanding; and (iii) 276,315
options issued to the Company's non-employee directors at a weighted average
exercise of price of $0.58 per share. See "Management--Long Term Incentive
Plan" and "--Director Stock Option Plan."
(3) Relates to shares of restricted stock granted to certain employees under the
Long Term Incentive Plan. See Note 7 of Notes to Consolidated Financial
Statements.
17
<PAGE>
DILUTION
The net tangible book value of the Company as of January 31, 1998 was $6.4
million, or $0.53 per share of Common Stock. Net tangible book value per share
is equal to the Company's total tangible assets less total liabilities, divided
by the total number of shares of Common Stock outstanding. After giving effect
to the sale of 3,650,000 shares of Common Stock offered by the Company hereby
(at an assumed initial public offering price of $11.00 per share) and after
deduction of the estimated underwriting discounts and estimated offering
expenses payable by the Company and the application of the estimated net
proceeds therefrom, the adjusted net tangible book value of the Company as of
January 31, 1998 would have been approximately $44.9 million or $2.87 per share.
This represents an immediate increase in net tangible book value of $2.34 per
share to existing stockholders and an immediate dilution of $8.13 per share to
new investors purchasing shares of Common Stock in the offering. The following
table illustrates this dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share..................... $ 11.00
Net tangible book value per share at January 31, 1998............. $ 0.53
Increase per share attributable to new investors.................. 2.34
---------
Pro forma net tangible book value per share after offering.......... 2.87
---------
Dilution per share to new investors................................. $ 8.13
---------
---------
</TABLE>
The following table summarizes the number of shares of Common Stock
purchased from the Company, the total consideration paid to the Company and the
average price per share paid by existing stockholders and by the investors
purchasing shares of Common Stock offered hereby, before deducting estimated
underwriting discounts and commissions and estimated offering expenses payable
by the Company:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------- -------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders (1)....................... 12,698,685 77.7% $ 5,976,200 13.0% $ 0.47
New investors (1)............................... 3,650,000 22.3 40,150,000 87.0 11.00
------------ ----- ------------- -----
Total......................................... 16,348,685 100.0% $ 46,126,200 100.0%
------------ ----- ------------- -----
------------ ----- ------------- -----
</TABLE>
- ------------------------
(1) Sales by the Selling Stockholders in the offering will reduce the number of
shares held by existing stockholders to 11,248,685 shares, or 68.8% of the
total shares of Common Stock outstanding after the offering, and will
increase the number of shares held by new investors to 5,100,000 shares, or
31.2% of the total shares of Common Stock outstanding after the offering. If
the Underwriters' over-allotment option is exercised in full, the number of
shares held by new investors will increase to 5,865,000 shares, or 35.9% of
the total shares of Common Stock outstanding after the offering. See
"Principal and Selling Stockholders."
The foregoing computations assume no exercise of outstanding stock options,
other than the assumed exercise of 77,000 options by a Selling Stockholder
contemporaneously with the offering and the assumed exercise of 1,152,174
options that will otherwise terminate if unexercised contemporaneously with the
completion of the offering. See "Principal and Selling Stockholders" and
"Underwriting." Options to purchase 2,823,783 shares of Common Stock are
outstanding under the Company's Long Term Incentive Plan at a weighted average
exercise price of $5.14 per share and options to purchase 276,315 shares of
Common Stock are outstanding at a weighted average exercise price of $0.58 per
share and are held by the Company's non-employee directors. To the extent these
options are exercised, there will be further dilution to new investors in the
offering. See "Management--Long Term Incentive Plan" and "--Director Stock
Option Plan."
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following consolidated statements of operations data for each of the
three years in the period ended January 31, 1998 and the consolidated balance
sheet data as of January 31, 1997 and 1998 have been derived from the
consolidated financial statements of the Company that have been audited by Ernst
& Young LLP, independent auditors, and are included elsewhere in this
Prospectus. The consolidated balance sheet data as of January 31, 1996 has been
derived from the Company's consolidated financial statements which have also
been audited by Ernst & Young LLP, independent auditors. The consolidated
financial data as of and for the years ended January 31, 1994 and 1995 are
derived from the unaudited consolidated financial statements of the Company. The
selected financial data set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
(In thousands, except per share
data)
STATEMENT OF OPERATIONS DATA:
Revenues:
Consulting and management service fees................................................... $ 4,996 $ 6,090 $ 9,635
Software license fees.................................................................... 2,159 2,793 3,660
Software maintenance and implementation fees............................................. 1,927 3,192 4,184
Hardware sales........................................................................... 524 1,009 1,070
--------- --------- ---------
Total revenues......................................................................... 9,606 13,084 18,549
--------- --------- ---------
Cost of revenues:
Consulting and management service fees................................................... 3,042 3,828 5,303
Software license fees.................................................................... 829 803 700
Software maintenance and implementation fees............................................. 1,349 2,030 2,408
Hardware sales........................................................................... 497 784 753
--------- --------- ---------
Total cost of revenues................................................................. 5,717 7,445 9,164
--------- --------- ---------
Gross profit............................................................................... 3,889 5,639 9,385
--------- --------- ---------
Operating costs and expenses:
Selling, general and administrative...................................................... 4,563 4,370 5,702
Research and development................................................................. 610 676 906
Merger related costs..................................................................... -- -- 54
--------- --------- ---------
Total operating costs and expenses..................................................... 5,173 5,046 6,662
--------- --------- ---------
Income (loss) from operations.............................................................. (1,284) 593 2,723
Other income (expense)..................................................................... (47) 568 304
--------- --------- ---------
Income (loss) before provision for income taxes............................................ (1,331) 1,161 3,027
Provision for income taxes (1)............................................................. (409) 464 1,165
--------- --------- ---------
Net income (loss).......................................................................... $ (922) $ 697 $ 1,862
--------- --------- ---------
--------- --------- ---------
Basic earnings (loss) per share (2)........................................................ (.08) .06 .16
Diluted earnings per share (2)............................................................. -- .06 .15
Shares used in computing basic earnings per share (2)...................................... 11,547 11,548 11,543
Shares used in computing diluted earnings per share (2).................................... -- 11,878 12,092
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Consulting and management service fees................................................... $ 14,407 $ 21,314
Software license fees.................................................................... 6,398 10,200
Software maintenance and implementation fees............................................. 5,799 7,429
Hardware sales........................................................................... 2,468 1,558
--------- ---------
Total revenues......................................................................... 29,072 40,501
--------- ---------
Cost of revenues:
Consulting and management service fees................................................... 8,794 12,394
Software license fees.................................................................... 1,307 1,412
Software maintenance and implementation fees............................................. 3,108 5,369
Hardware sales........................................................................... 1,746 1,340
--------- ---------
Total cost of revenues................................................................. 14,955 20,515
--------- ---------
Gross profit............................................................................... 14,117 19,986
--------- ---------
Operating costs and expenses:
Selling, general and administrative...................................................... 8,649 11,529
Research and development................................................................. 1,161 3,448
Merger related costs..................................................................... 1,423 --
--------- ---------
Total operating costs and expenses..................................................... 11,233 14,977
--------- ---------
Income (loss) from operations.............................................................. 2,884 5,009
Other income (expense)..................................................................... (386) 99
--------- ---------
Income (loss) before provision for income taxes............................................ 2,498 5,108
Provision for income taxes (1)............................................................. 1,122 2,053
--------- ---------
Net income (loss).......................................................................... $ 1,376 $ 3,055
--------- ---------
--------- ---------
Basic earnings (loss) per share (2)........................................................ .13 .27
Diluted earnings per share (2)............................................................. .12 .23
Shares used in computing basic earnings per share (2)...................................... 10,914 11,477
Shares used in computing diluted earnings per share (2).................................... 11,878 13,244
</TABLE>
<TABLE>
<CAPTION>
JANUARY 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................................................ $ 461 $ 1,220 $ 3,072
Working capital.......................................................................... 1,071 2,813 4,324
Total assets............................................................................. 6,208 8,747 10,892
Common Stock subject to put (3).......................................................... -- -- --
Long-term debt, net of current portion................................................... 163 63 --
Total stockholders' equity............................................................... 2,723 3,665 5,443
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................................................ $ 3,443 $ 1,975
Working capital.......................................................................... 5,682 7,434
Total assets............................................................................. 16,900 20,319
Common Stock subject to put (3).......................................................... 2,000 2,000
Long-term debt, net of current portion................................................... -- --
Total stockholders' equity............................................................... 5,342 8,624
</TABLE>
- ------------------------
(1) Prior to the Company's acquisition of ASI on January 31, 1997, ASI had
elected to be treated as an S corporation for federal and state income tax
purposes. The provision for income tax included as a component of net income
for the fiscal years prior to fiscal 1997 reflects a pro forma tax provision
which includes estimated federal and state income taxes (by applying
statutory income tax rates) that would have been incurred if ASI had been
subject to taxation as a C corporation.
(2) See Notes 2 and 10 of Notes to Consolidated Financial Statements for
information concerning the calculation of basic and diluted net earnings per
share.
(3) Relates to Common Stock redeemable at the option of SAIC. SAIC's right to
require the Company to repurchase its Common Stock terminates upon
completion of the offering. See "Certain Transactions--Sale of Shares to
SAIC" and Note 6 of Notes to Consolidated Financial Statements.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE DISCUSSED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS
PROSPECTUS. THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION
WITH "SELECTED CONSOLIDATED FINANCIAL DATA" AND THE CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
Carreker-Antinori is a leading provider of integrated consulting and
software solutions that enable banks to increase their revenues, reduce their
costs and enhance their delivery of customer services. The Company was founded
in 1978 to provide consulting services to banks, and subsequently integrated
software products into its banking solutions. With its acquisition of Antinori
Software, Inc., a Georgia corporation ("ASI"), the Company was able to
significantly enhance its portfolio of software products. The acquisition of ASI
was accounted for as a pooling of interests and, accordingly, the Company's
Consolidated Financial Statements and Notes thereto, as well as all other
financial and statistical data presented in this Prospectus, have been restated
to include ASI's financial position and results of operations for all periods
prior to and including the period ended January 31, 1997.
The Company derives its revenues from consulting and management service
fees, software license fees, software maintenance and implementation fees and
hardware sales. While many customer contracts provide for both the performance
of consulting services and the license of related software, some customer
contracts require only the performance of consulting services or only a software
license (and, at the election of the customer, related implementation services
and/or annual software maintenance services). The Company enters into these
contracts with its customers on a project-by-project basis. The Company also
derives management service fees from the performance of comprehensive management
services for ECCHO, PSN and INFITEQ.
A substantial majority of the Company's revenues are generated from
contracts with bank holding companies with assets over $50 billion ("Tier I
Banks") and bank holding companies and independent banks with assets of between
$5 billion and $50 billion ("Tier II Banks"). The Company seeks to establish
long-term relationships with its customers that will lead to on-going projects
utilizing the Company's solutions. The Company is typically retained to perform
one or more discrete projects for a customer, and uses these opportunities to
extend its solutions into additional areas of the customer's operations. To this
end, approximately 74% and 85% of the Company's total revenues in fiscal 1997
were derived from companies who were customers of the Company in fiscal 1995 and
fiscal 1996, respectively. See "Business--Customers and Markets."
CONSULTING AND MANAGEMENT SERVICE FEES. The Company employs three primary
pricing methods in connection with its delivery of consulting and management
services. First, the Company may price its delivery of consulting and management
services on the basis of time and materials, in which case the customer is
charged agreed daily rates for services performed and out-of-pocket expenses. In
such a case, fees and related amounts are generally payable on a monthly basis,
and revenue is recognized as the services are performed. Second, consulting and
management services may be delivered on a fixed-price basis. In this case,
payments are made to the Company on a monthly basis or pursuant to an agreed
upon payment schedule, and revenue is recognized on a percentage-of-completion
basis. Any anticipated losses on a fixed-price contract are recognized when
estimable. Third, the Company may deliver consulting and management services
pursuant to a value-pricing contract with the customer. In this case, the
Company is paid, on an agreed upon basis with the customer, either a specified
percentage of (i) the projected increased revenues or decreased costs that are
expected to be derived by the customer over a period of up to twelve months
following implementation of the Company's solution or (ii) the actual increased
revenues and/or decreased
20
<PAGE>
costs experienced by the customer over a period of up to twelve months following
implementation of the Company's solution, subject in either case to a ceiling,
if any is agreed to, on the total amount of payments to be made to the Company.
Such contracts typically provide for the Company to receive from 10% to 30% of
the projected or actual increased revenues or decreased costs, with payments to
be made to the Company pursuant to an agreed upon schedule ranging from one to
twelve months in length. Revenues generated from rendering consulting and
management services in connection with value-priced contracts based upon
projected results are recognized only upon completion of all services and
agreement upon the actual fee to be paid (even though billings for such services
may be delayed by mutual agreement for periods generally not to exceed six
months). When fees are to be paid based on a percentage of actual revenues or
savings, the Company recognizes revenue only upon completion of all services and
as the amounts of actual revenues or savings are confirmed by the customer. The
Company typically must first commit time and resources to develop projections
associated with value-pricing contracts before a bank will commit to purchase
the Company's solutions, and therefore assumes the risk of making these
commitments with no assurance that the bank will purchase the solutions. The
Company expects that value-pricing contracts will account for an increasing
percentage of its revenues in the future. In addition, as a consequence of the
shift toward the use of more value-pricing contracts and due to the revenue
recognition policy associated with those contracts, the Company's results of
operations will likely fluctuate significantly from period to period. See
"--Selected Quarterly Results of Operations." Regardless of the pricing method
employed by the Company in a given contract, the Company is reimbursed on a
monthly basis for out-of-pocket expenses incurred on behalf of its customers,
which expenses are netted against reimbursements for financial statement
reporting purposes.
SOFTWARE LICENSE FEES. In the event that a software license is granted
together with consulting and management services or on a stand-alone basis,
software license fees are payable to the Company in one or more installments, as
provided in the customer's contract. Software license fees are recognized upon
delivery, provided that: (i) the Company has no significant remaining
obligations under the contract; (ii) the fees are collectible; and (iii) the
fees for other components of the solution can be separately identified. Software
licenses continue for an indefinite period and there is no provision for any
renewal fees. The Company also enters into value-pricing contracts in connection
with its grant of software licenses, in which case payments are made and revenue
is recognized in a fashion similar to that for such contracts in the consulting
and management services context. Although substantially all of the Company's
current software licenses provide for a set license fee, whether pursuant to a
fixed-price or value-pricing contract, some of the Company's payment
electronification licenses instead provide for per-transaction license fees (in
which case fees are recognized and due on a monthly basis). The Company expects
to increase its practice of charging license fees on a per-transaction basis in
the future as part of its strategy to increase recurring revenues and smooth its
period-to-period revenues. See "Business--Strategy--Increase Use of High-Margin
Pricing Arrangements."
SOFTWARE MAINTENANCE AND IMPLEMENTATION FEES. In connection with the
Company's sale of a software license, a customer may elect to purchase software
implementation services or software maintenance services, including software
enhancements, patches and other software support services. Most of the customers
that purchase software licenses from the Company also purchase both software
implementation services and software maintenance services (the latter of which
typically are renewed annually). The Company prices its implementation services
on a time-and-materials or on a fixed-price basis, and the related revenues are
recognized on a basis consistent with that applied to consulting and management
services. The Company charges an annual maintenance fee typically ranging from
15% to 20% of the initial software license fee, which generally is payable to
the Company at the beginning of the maintenance period and is recognized ratably
over the term of the related contract.
HARDWARE SALES. The Company's computer hardware sales are made in tandem
with the delivery of related services or software, and are sold on the basis of
the Company's cost plus a specified percentage. Revenues are recognized upon
shipment of the hardware to the customer. The Company sells hardware at the
request of its customers, but does not consider hardware sales to be a
meaningful part of its business.
21
<PAGE>
In accordance with generally accepted accounting principles, the Company
capitalizes software development costs incurred in developing a product once
technological feasibility of the product has been determined. These capitalized
software development costs also include amounts paid for software that is
purchased and that has reached technological feasibility. Capitalized software
development costs are amortized on the basis of each product's projected revenue
or on a straight-line basis over the remaining economic life of the product
(generally three to five years). At January 31, 1998, the Company's capitalized
software development costs, net of accumulated amortization, were $2.3 million,
which will be amortized over the next 12 to 20 quarterly periods. See Note 2 of
Notes to Consolidated Financial Statements.
RESULTS OF OPERATIONS
The following discussion of the Company's results of operations for the
fiscal years ended January 31, 1996, 1997 and 1998 is based upon data derived
from the statements of operations contained in the Company's audited
Consolidated Financial Statements appearing elsewhere in this Prospectus. The
following table sets forth this data as a percentage of total revenues.
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
-------------------------------------
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Consulting and management service fees.......................................... 51.9% 49.6% 52.6%
Software license fees........................................................... 19.7 22.0 25.2
Software maintenance and implementation fees.................................... 22.6 19.9 18.4
Hardware sales.................................................................. 5.8 8.5 3.8
----- ----- -----
Total revenues................................................................ 100.0 100.0 100.0
----- ----- -----
Cost of revenues:
Consulting and management service fees.......................................... 28.5 30.2 30.6
Software license fees........................................................... 3.8 4.5 3.5
Software maintenance and implementation fees.................................... 13.0 10.7 13.3
Hardware sales.................................................................. 4.1 6.0 3.3
----- ----- -----
Total cost of revenues........................................................ 49.4 51.4 50.7
----- ----- -----
Gross profit...................................................................... 50.6 48.6 49.3
----- ----- -----
Operating costs and expenses:
Selling, general and administrative............................................. 30.7 29.8 28.4
Research and development........................................................ 4.9 4.0 8.5
Merger related costs............................................................ 0.3 4.9 --
----- ----- -----
Total operating costs and expenses............................................ 35.9 38.7 36.9
----- ----- -----
Income from operations............................................................ 14.7 9.9 12.4
Other income (expense)............................................................ 1.6 (1.3) 0.2
----- ----- -----
Income before provision for income taxes.......................................... 16.3 8.6 12.6
Provision for income taxes........................................................ 6.3 3.9 5.1
----- ----- -----
Net income........................................................................ 10.0% 4.7% 7.5%
----- ----- -----
----- ----- -----
</TABLE>
YEAR ENDED JANUARY 31, 1997 (FISCAL 1996) COMPARED TO YEAR ENDED JANUARY 31,
1998 (FISCAL 1997)
REVENUES. The Company's total revenues increased by 39.2% from $29.1
million in fiscal 1996 to $40.5 million in fiscal 1997. The increase was
primarily attributable to growth in revenues from consulting and management
services and software licenses. Revenues from consulting and management services
increased by 47.9% from $14.4 million in fiscal 1996 to $21.3 million in fiscal
1997. This increase reflected
22
<PAGE>
both continued demand for the Company's services, as well as increased demand
for the Company's higher-priced services. Software license revenues increased
59.4% from $6.4 million in fiscal 1996 to $10.2 million in fiscal 1997. Software
license revenue growth stemmed primarily from increased sales in fiscal 1997
over fiscal 1996 of the Company's RESERVELINK product, certain risk management
products and certain consolidation and best practices products of $1.5 million,
$650,000 and $1.0 million, respectively. Total RESERVELINK license fees
accounted for 28.1% and 32.7% of software license revenue in fiscal 1996 and
fiscal 1997, respectively. Software maintenance and implementation revenues
increased by 27.6% from $5.8 million in fiscal 1996 to $7.4 million in fiscal
1997. This increase in software maintenance and implementation revenues was
primarily generated by increased software product sales, which resulted in
increased implementation services and the increased provision of maintenance
services to new customers. Increased RESERVELINK product sales alone accounted
for increased software implementation fees of $860,000 and increased software
maintenance fees of $340,000 in fiscal 1997. Hardware sales decreased 36.0% from
$2.5 million in fiscal 1996 to $1.6 million in fiscal 1997. This decrease was
primarily due to reduced requests by customers for bundled hardware and license
deliveries.
COST OF REVENUES. Cost of revenues consists generally of personnel costs,
amortization of capitalized software development costs, third-party royalties
and cost of hardware delivered. Total cost of revenues increased by 36.7% from
$15.0 million in fiscal 1996 to $20.5 million in fiscal 1997. This increase
resulted primarily from an increase in the cost of revenues in consulting and
management services and software maintenance and implementation. Cost of
revenues for consulting and management services increased by 40.9% from $8.8
million in fiscal 1996 to $12.4 million in fiscal 1997, which was a result
primarily of increases in personnel and, to a lesser extent, services related to
INFITEQ. Cost of revenues of software licenses increased by 7.7% from $1.3
million in fiscal 1996 to $1.4 million in fiscal 1997. Cost of revenues of
software maintenance and implementation increased by 74.2% from $3.1 million in
fiscal 1996 to $5.4 million in fiscal 1997, which was primarily due to increases
in personnel costs associated with the Company's growth. Cost of revenues for
hardware sales decreased 23.5% from $1.7 million in fiscal 1996 to $1.3 million
in fiscal 1997 due to reduced hardware sales levels, but increased as a
percentage of hardware sales from 70.7% in fiscal 1996 to 86.0% in fiscal 1997
due to pricing pressures. Total cost of revenues as a percentage of total
revenues decreased from 51.4% in fiscal 1996 to 50.7% in fiscal 1997. While cost
of revenues decreased as a percentage of total revenues, certain elements of
cost increased. These costs increased due, in part, to delays in the development
of certain software applications. In addition, the Company incurred increased
costs as a result of higher levels of professional and technical staff necessary
to support anticipated future growth.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses generally consist of personnel costs associated with selling,
marketing, general management and software management, as well as fees for
professional services and other related costs. Selling, general and
administrative expenses increased by 33.7% from $8.6 million in fiscal 1996 to
$11.5 million in fiscal 1997. The increase in these expenses reflected the
addition of management and marketing staff during late fiscal 1996 and fiscal
1997 associated with the Company's growth. As a percentage of revenues, selling,
general and administrative expenses decreased from 29.8% in fiscal 1996 to 28.5%
in fiscal 1997.
RESEARCH AND DEVELOPMENT. Research and development expenses generally
consist of personnel and related costs of developing solutions. Research and
development expenses increased by 183.3% from $1.2 million in fiscal 1996 to
$3.4 million in fiscal 1997. Research and development expenses as a percentage
of revenues increased from 4.0% in fiscal 1996 to 8.5% in fiscal 1997. Growth in
research and development expenses resulted largely from an increase in the
number of development efforts during fiscal 1997. Furthermore, in addition to
planned research and development efforts during fiscal 1997, the Company
incurred approximately $580,000 to redevelop certain components of one of its
software applications. As a consequence of this undertaking, as well as other
software development projects, research and development expenses in the third
and fourth quarters of fiscal 1997 were higher than historical levels.
23
<PAGE>
MERGER RELATED COSTS. Merger related costs consisted of one-time
compensation expense of $589,000 attributable to the accelerated vesting during
fiscal 1996 of an option granted to an executive of ASI during fiscal 1995, as
well as one-time transaction costs of $834,000 related to the acquisition of ASI
by the Company.
OTHER INCOME (EXPENSE), NET. Other income (expense) increased from
($386,000) in fiscal 1996 to $99,000 in fiscal 1997. Other income (expense)
consists of interest income (net) and non-recurring income (expense) relating to
PSN. During fiscal 1996, the Company recorded a reserve of $500,000 to reflect
the potential uncollectibility of a loan made to PSN.
PROVISION FOR INCOME TAXES. Income tax provision increased from $1.1
million in fiscal 1996 to $2.1 million in fiscal 1997, reflecting an effective
tax rate of 44.9% for fiscal 1996 compared with 40.2% for fiscal 1997. Fiscal
1996 included a pro forma tax on earnings of ASI, as ASI was not subject to tax
as an S corporation (see Note 5 of Notes to Consolidated Financial Statements).
The effective tax rate in fiscal 1996 was larger compared to fiscal 1997
primarily due to the merger with ASI. The Company incurred $500,000 of
nondeductible merger costs which increased the fiscal 1996 effective tax rate.
Without the impact of merger related costs, the fiscal 1996 effective tax rate
would have been 37%.
YEAR ENDED JANUARY 31, 1996 (FISCAL 1995) COMPARED TO YEAR ENDED JANUARY 31,
1997 (FISCAL 1996)
REVENUES. The Company's total revenues increased by 57.3% from $18.5
million in fiscal 1995 to $29.1 million in fiscal 1996. The increase was the
result of growth in each of the Company's business lines. Revenues from
consulting and management services increased by 50.0% from $9.6 million in
fiscal 1995 to $14.4 million in fiscal 1996 as a result of an increase in
engagements, as well as an increase in demand for the Company's higher-priced
services. Software license revenues increased 73.0% from $3.7 million in fiscal
1995 to $6.4 million in fiscal 1996. Growth in software license revenues
primarily resulted from the successful rollout of the RESERVELINK product, which
accounted for approximately $2.2 million of the growth. Software maintenance and
implementation revenues increased by 38.1% from $4.2 million in fiscal 1995 to
$5.8 million in fiscal 1996. Software maintenance and implementation revenues
increased by over $1.6 million, approximately $580,000 of which was due to
increased RESERVELINK sales. Hardware sales increased 127.3% from $1.1 million
in fiscal 1995 to $2.5 million in fiscal 1996. Increased requests by customers
for bundled hardware and license deliveries generated the increase.
COST OF REVENUES. Total cost of revenues increased by 63.0% from $9.2
million in fiscal 1995 to $15.0 million in fiscal 1996. This increase resulted
primarily from an increase in the cost of revenues related to consulting and
management services and software licenses. Cost of revenues in consulting and
management services increased by 66.0% from $5.3 million in fiscal 1995 to $8.8
million in fiscal 1996, which primarily resulted from increases in personnel.
Cost of revenues of software licenses increased by 85.7% from $700,000 in fiscal
1995 to $1.3 million in fiscal 1996, which was caused primarily by increases in
royalty costs of approximately $500,000 driven by growth in software license
sales. Cost of revenues of software maintenance and implementation increased by
29.2% from $2.4 million in fiscal 1995 to $3.1 million in fiscal 1996. This
increase was attributable predominantly to increased personnel. Cost of revenues
for hardware sales increased 125.8% from $753,000 in fiscal 1995 to $1.7 million
in fiscal 1996. This increase resulted from increased hardware sales during
fiscal 1996.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased 50.9% from $5.7 million in fiscal 1995 to $8.6 million in
fiscal 1996. This increase resulted from increases in management, marketing and
sales staff, combined with larger bonus payments and fees for professional
services. Selling, general and administrative expenses as a percentage of
revenues decreased from 30.7% in fiscal 1995 to 29.8% in fiscal 1996.
24
<PAGE>
RESEARCH AND DEVELOPMENT. Research and development expenses increased 32.5%
from $906,000 in fiscal 1995 to $1.2 million in fiscal 1996. This increase
reflected the Company's continued efforts to develop additional software
applications and enhancements to certain of its existing applications.
OTHER INCOME (EXPENSE), NET. Other income (expense) decreased 227.0% from
$304,000 in fiscal 1995 to ($386,000) in fiscal 1996. Interest income (net)
increased 111.1% from $54,000 during fiscal 1995 to $114,000 during fiscal 1996.
The Company recognized investment income of $250,000 in fiscal 1995 and
investment expense of $500,000 in fiscal 1996. Investment income during fiscal
1995 represented cash collected from PSN resulting from the sale of the
Company's interest in PSN during fiscal 1995. The investment expense during
fiscal 1996 represents the establishment of an allowance for the potential that
amounts loaned to PSN during fiscal 1996 may not be collectible.
PROVISION FOR INCOME TAXES. Income tax provision decreased from $1.2
million in fiscal 1995 to $1.1 million in fiscal 1996, reflecting an effective
tax rate of 38.5% for fiscal 1995 compared with 44.9% for fiscal 1996. Both
fiscal years included a pro forma tax on the earnings of ASI, as ASI was not
subject to tax as an S corporation (see Note 5 of Notes to Consolidated
Financial Statements). The increase in the effective tax rate from fiscal 1995
to fiscal 1996 primarily resulted from the impact that nondeductible merger
costs had on the fiscal 1996 provision.
25
<PAGE>
SELECTED QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain unaudited quarterly data for each of
the Company's last eight quarters ended January 31, 1998. Such data also are
expressed as a percentage of the Company's total revenues for the periods
indicated. The data have been derived from the Company's unaudited consolidated
financial statements that, in management's opinion, include all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of such information when read in conjunction with the Consolidated
Financial Statements and Notes thereto appearing elsewhere in this Prospectus.
The Company believes that quarter-to-quarter comparisons of its financial
results are not necessarily meaningful and should not be relied upon as any
indication of future performance. See "Risk Factors--Fluctuations in Quarterly
Operating Results."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------
APRIL 30, JULY 31, OCT. 31, JAN. 31, APRIL 30,
1996 1996 1996 1997 1997
----------- ----------- ----------- ----------- -----------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Revenues:
Consulting and management service fees................. $ 2,315 $ 3,628 $ 4,390 $ 4,074 $ 4,139
Software license fees.................................. 877 1,004 2,765 1,752 1,261
Software maintenance and implementation fees........... 1,160 1,120 1,773 1,746 1,793
Hardware sales......................................... 787 385 568 728 321
----------- ----------- ----------- ----------- -----------
Total revenues....................................... 5,139 6,137 9,496 8,300 7,514
----------- ----------- ----------- ----------- -----------
Costs of revenues:
Consulting and management service fees................. 1,607 2,175 2,464 2,548 2,777
Software license fees.................................. 214 422 416 255 227
Software maintenance and implementation fees........... 551 541 919 1,097 1,051
Hardware sales......................................... 420 239 435 652 249
----------- ----------- ----------- ----------- -----------
Total cost of revenues............................... 2,792 3,377 4,234 4,552 4,304
----------- ----------- ----------- ----------- -----------
Gross profit............................................. 2,347 2,760 5,262 3,748 3,210
----------- ----------- ----------- ----------- -----------
Operating costs and expenses:
Selling, general and administrative.................... 1,718 1,806 2,613 2,512 2,442
Research and development............................... 255 313 380 213 573
Merger related costs................................... 80 80 80 1,183 --
----------- ----------- ----------- ----------- -----------
Total operating cost and expenses.................... 2,053 2,199 3,073 3,908 3,015
----------- ----------- ----------- ----------- -----------
Income (loss) from operations............................ 294 561 2,189 (160) 195
Other income (expense)................................... 36 12 6 (440) 49
----------- ----------- ----------- ----------- -----------
Income before provision for income taxes................. 330 573 2,195 (600) 244
Provision for income taxes............................... 122 212 813 (25) 98
----------- ----------- ----------- ----------- -----------
Net income (loss)........................................ $ 208 $ 361 $ 1,382 $ (575) $ 146
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Basic earnings (loss) per share.......................... $ .02 $ .03 $ .13 $ (.05) $ .01
Diluted earnings (loss) per share........................ $ .02 $ .03 $ .12 $ (.05) $ .01
AS A PERCENTAGE OF TOTAL REVENUES
---------------------------------------------------------------
Revenues:
Consulting and management service fees................. 45.0% 59.1% 46.2% 49.1% 55.0%
Software license fees.................................. 17.1 16.4 29.1 21.1 16.8
Software maintenance and implementation fees........... 22.6 18.2 18.7 21.0 23.9
Hardware sales......................................... 15.3 6.3 6.0 8.8 4.3
----------- ----------- ----------- ----------- -----------
Total revenues....................................... 100.0 100.0 100.0 100.0 100.0
----------- ----------- ----------- ----------- -----------
Cost of revenues:
Consulting and management service fees................. 31.3 35.4 25.9 30.6 37.0
Software license fees.................................. 4.2 6.9 4.4 3.1 3.0
Software maintenance and implementation fees........... 10.7 8.8 9.7 13.2 14.0
Hardware sales......................................... 8.1 3.9 4.6 7.9 3.3
----------- ----------- ----------- ----------- -----------
Total cost of revenues............................... 54.3 55.0 44.6 54.8 57.3
----------- ----------- ----------- ----------- -----------
Gross profit............................................. 45.7 45.0 55.4 45.2 42.7
----------- ----------- ----------- ----------- -----------
Operating cost and expenses:
Selling, general and administrative.................... 33.4 29.4 27.4 30.3 32.5
Research and development............................... 5.0 5.1 4.0 2.5 7.6
Merger related costs................................... 1.6 1.3 0.8 14.3 --
----------- ----------- ----------- ----------- -----------
Total operating cost and expenses.................... 40.0 35.8 32.4 47.1 40.1
----------- ----------- ----------- ----------- -----------
Income (loss) from operations............................ 5.7 9.2 23.0 (1.9) 2.6
Other income (expense)................................... 0.7 0.2 0.1 (5.3) 0.7
----------- ----------- ----------- ----------- -----------
Income before provision for income taxes................. 6.4 9.4 23.1 (7.2) 3.3
Provision for income taxes............................... 2.4 3.5 8.6 (0.3) 1.3
----------- ----------- ----------- ----------- -----------
Net income (loss)........................................ 4.0% 5.9% 14.5% (6.9)% 2.0%
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
<CAPTION>
JULY 31, OCT. 31, JAN. 31,
1997 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Consulting and management service fees................. $ 6,777 $ 5,724 $ 4,674
Software license fees.................................. 1,163 2,979 4,797
Software maintenance and implementation fees........... 2,034 1,856 1,746
Hardware sales......................................... 906 289 42
----------- ----------- -----------
Total revenues....................................... 10,880 10,848 11,259
----------- ----------- -----------
Costs of revenues:
Consulting and management service fees................. 3,116 3,298 3,203
Software license fees.................................. 258 564 363
Software maintenance and implementation fees........... 1,371 1,602 1,345
Hardware sales......................................... 810 250 31
----------- ----------- -----------
Total cost of revenues............................... 5,555 5,714 4,942
----------- ----------- -----------
Gross profit............................................. 5,325 5,134 6,317
----------- ----------- -----------
Operating costs and expenses:
Selling, general and administrative.................... 2,809 2,761 3,517
Research and development............................... 497 1,035 1,343
Merger related costs................................... -- -- --
----------- ----------- -----------
Total operating cost and expenses.................... 3,306 3,796 4,860
----------- ----------- -----------
Income (loss) from operations............................ 2,019 1,338 1,457
Other income (expense)................................... 13 14 23
----------- ----------- -----------
Income before provision for income taxes................. 2,032 1,352 1,480
Provision for income taxes............................... 817 543 595
----------- ----------- -----------
Net income (loss)........................................ $ 1,215 $ 809 $ 885
----------- ----------- -----------
----------- ----------- -----------
Basic earnings (loss) per share.......................... $ .11 $ .07 $ .08
Diluted earnings (loss) per share........................ $ .10 $ .06 $ .06
Revenues:
Consulting and management service fees................. 62.3% 52.8% 41.5%
Software license fees.................................. 10.7 27.4 42.6
Software maintenance and implementation fees........... 18.7 17.1 15.5
Hardware sales......................................... 8.3 2.7 0.4
----------- ----------- -----------
Total revenues....................................... 100.0 100.0 100.0
----------- ----------- -----------
Cost of revenues:
Consulting and management service fees................. 28.6 30.4 28.5
Software license fees.................................. 2.4 5.2 3.2
Software maintenance and implementation fees........... 12.7 14.8 11.9
Hardware sales......................................... 7.4 2.3 0.3
----------- ----------- -----------
Total cost of revenues............................... 51.1 52.7 43.9
----------- ----------- -----------
Gross profit............................................. 48.9 47.3 56.1
----------- ----------- -----------
Operating cost and expenses:
Selling, general and administrative.................... 25.8 25.5 31.2
Research and development............................... 4.6 9.5 11.9
Merger related costs................................... -- -- --
----------- ----------- -----------
Total operating cost and expenses.................... 30.4 35.0 43.1
----------- ----------- -----------
Income (loss) from operations............................ 18.5 12.3 12.9
Other income (expense)................................... 0.1 0.1 0.2
----------- ----------- -----------
Income before provision for income taxes................. 18.6 12.4 13.1
Provision for income taxes............................... 7.5 5.0 5.3
----------- ----------- -----------
Net income (loss)........................................ 11.1% 7.4% 7.8%
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
26
<PAGE>
In the quarter ended October 31, 1996, total revenues increased $3.4 million
over the prior quarter due to a substantial delivery of software during the
period combined with corresponding implementation services. As a result, net
income for the quarter increased by nearly $1.0 million. During the following
quarter, revenues returned to more normal levels, while net income declined to a
loss of $575,000 due primarily to one-time merger related costs.
In the quarter ended July 31, 1997, consulting and management service fees
increased $2.6 million over the prior quarter due to the completion and closing
of two large projects. From time to time, the Company has experienced, and will
likely experience in the future, fluctuations in revenues due to the timing of
revenue recognition. See "--Overview" and "Risk Factors--Fluctuations in
Quarterly Operating Results."
In the quarters ended October 31, 1997 and January 31, 1998, research and
development costs increased due to growth in personnel in order to accelerate
the delivery of solutions to meet contract commitments. Research and development
staffing levels continued to increase through the quarter ended January 31, 1998
to meet internal schedules for the completion of multiple development efforts.
LIQUIDITY AND CAPITAL RESOURCES
During fiscal 1996 and 1997, the Company funded its activities through cash
provided by operations. Cash provided by operating activities during fiscal 1996
and 1997 was $2.4 million and $1.6 million, respectively. At January 31, 1997
and 1998, the Company had working capital of $5.7 million and $7.4 million,
respectively.
Cash used in investing activities during fiscal 1996 was $1.9 million, and
was primarily related to working capital loans made to PSN, purchases of
property and equipment and development of capitalized software. Cash used in
investing activities during fiscal 1997 was $3.3 million, and was primarily
related to purchases of property and equipment, purchases of software and
development of software. The Company established a reserve of $500,000 in fiscal
1996 to address the potential uncollectibility of working capital loans made to
PSN. In addition, the Company has experienced in the past, and may experience in
the future, delays in collecting trade receivables due to it from PSN.
Cash generated through financing activities for fiscal 1996 resulted
primarily from the sale of treasury stock to the Crow Family Partnership, L.P.
for $834,050. Additionally, during fiscal 1996 ASI made distributions to its
shareholders totaling $1.0 million for the payment of their personal income
taxes resulting from ASI's status as an S corporation. Cash generated through
financing activities for fiscal 1997 resulted primarily from the exercise of
stock options for $159,000 and the net sale of treasury stock for $68,000.
The Company has a $3.0 million revolving credit facility (the "Facility").
As of January 31, 1998, the Company had no amounts outstanding under the
Facility (although $1,750,000 was outstanding at April 20, 1998). Principal
amounts outstanding under the Facility bear interest at national prime (8.5% at
January 31, 1998). Availability under the Facility is calculated based on 70% of
qualified accounts receivable. All indebtedness under the Facility matures on
July 1, 1998. The Company has pledged its inventory, accounts receivables and
certain intangible rights to secure indebtedness under the Facility. Under the
Facility, the Company is subject to certain covenants regarding its operations
and corporate actions, such as restrictions relating to creation of liens,
borrowing of funds, changes in control, liquidation and dividends.
The Company believes that the net proceeds from the offering, existing cash
resources and cash flows from operations will be sufficient to fund the
Company's operations for at least the next twelve months. See "Use of Proceeds"
for more information regarding possible future capital requirements.
The Company has taken actions to address the nature and extent of the work
required to make its products and systems Year 2000 compliant. The majority of
the Company's products are currently
27
<PAGE>
Year 2000 compliant and the remainder of the products developed by the Company
are targeted to be Year 2000 compliant by April 1998 (the Company will
thereafter continue its efforts with respect to Year 2000 compliance for certain
embedded software provided by third parties). The Company's Year 2000 compliance
activities are being performed as part of the Company's normal development
activity. The Company is evaluating the software employed in its internal
operations and does not believe it will incur any significant Year 2000 costs
associated with its internal systems. As a consequence, Year 2000 compliance
costs are not expected to result in any material incremental costs to the
Company. See "Risk Factors--Year 2000 Compliance."
RECENTLY ISSUED ACCOUNTING STANDARDS
The Accounting Standards Executive Committee of the American Institute of
Certified Public Accountants has issued Statement of Position No. 97-2 "Software
Revenue Recognition" ("SOP 97-2"), which supersedes Statement of Position No.
91-1. The new SOP 97-2 will be effective for all transactions entered into by
the Company in fiscal 1998. SOP 97-2 requires, among other things, that revenue
should be recognized when there is persuasive evidence of an existing
arrangement, delivery has occurred, the fees charged are fixed or determinable
and collectibility is probable. Additionally, SOP 97-2 provides that for those
arrangements which consist of multiple elements such as services, software,
software upgrades, enhancements and post-contract support, the fees charged must
be allocated to each element of the arrangement based upon vendor-specific
objective evidence of fair value, which is to be determined based upon the price
charged when the element is sold separately or the price for the element
established by management with relevant authority. The Company currently is
continuing to evaluate the impact that SOP 97-2 will have on license revenue
transactions entered into subsequent to January 31, 1998. Based on the Company's
reading and interpretation of SOP 97-2, the Company believes that SOP 97-2 will
not have a material impact on future operating results. However, detailed
implementation guidelines for this standard have not been issued. Once issued,
such detailed implementation guidelines could result in changes in the Company's
current revenue recognition practices, and such changes could be material to the
Company's revenues and earnings.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("FASB 131"), which supersedes existing
accounting standards related to disclosure of operating segment information
beginning in fiscal 1998. Although the Company currently operates in only one
industry segment, the Company is in the process of evaluating the impact this
new standard will have on the Company's financial statement disclosures in
fiscal 1998. The adoption of FASB 131 will have no impact on the Company's
consolidated results of operations, financial position or cash flows and any
effect will be limited to the presentation of its Consolidated Financial
Statements.
28
<PAGE>
BUSINESS
THE COMPANY
Carreker-Antinori is a leading provider of integrated consulting and
software solutions that enable banks to increase their revenues, reduce their
costs and enhance their delivery of customer services. The Company's offerings
include yield management, payment systems, payment electronification and
enabling technologies solutions. Carreker-Antinori's solutions assist banks in
re-engineering their operational systems and implementing new software
applications to increase earning assets, develop new revenue sources, improve
operating efficiencies and reduce check fraud losses. The Company believes that
its 20 years of experience in the banking industry, combined with its advanced
technological expertise, positions it to effectively address and anticipate the
challenges and opportunities faced by banks in today's increasingly competitive
environment. The Company's customers include approximately two-thirds of the
largest 100 bank holding companies in the United States, including Fleet
Financial Group, Inc., NationsBank Corporation, Norwest Corporation and SunTrust
Banks, Inc.
The Company's offerings include yield management, payment systems, payment
electronification and enabling technologies solutions. The Company's yield
management solutions are designed to quickly increase a bank's revenues through
improved operational workflows, pricing structures and liquidity and cash
management. The Company's payment systems and payment electronification
solutions are designed to reduce check-processing costs through procedural and
technological improvements and reduced check fraud and other risks of loss.
Carreker-Antinori's enabling technologies convert leading-edge technologies and
ideas into practical banking solutions.
INDUSTRY BACKGROUND
The banking industry is one of the nation's largest industries, with
aggregate annual revenues of nearly $250 billion. In recent years, the industry
has undergone significant change, and today's banking environment is
characterized by intense competition, continuing consolidation, changing
regulations and rapid technological innovation. In addition to increased
competition within the banking industry, banks are encountering significant
competition from insurance companies, brokerage houses and other financial
institutions, all of which are expanding to provide services that were once
within the exclusive domain of banks. While banks historically have focused on
reducing their operating expenses to remain competitive, they are today
increasingly focusing on developing new sources of revenue growth, automating
operations to increase efficiencies and outsourcing commodity-like banking
functions to sustain market value growth. To this end, banks are expending
significant resources, both internally and through outsourcing arrangements.
Information technology expenditures by the industry in 1997 on paper-based
payment systems and financial and risk management systems alone are estimated to
have been approximately $1.0 billion and $2.3 billion, respectively, of which
approximately 59% and 51% were paid to third parties.
CONSOLIDATION
Over the past several years, the banking industry has experienced
substantial consolidation as banks have sought to gain a competitive advantage
by acquiring other banks. This consolidation is driven by a continuing effort to
increase revenues through a larger customer base, achieve efficiencies of scale
associated with increased operating size and enhance customer service through a
nationwide presence and consequent broader geographic reach. This trend has
resulted in a decrease in the number of banks, but an increase in the number of
banks with assets of $5 billion or more. As they grow by acquisition, these
banks require improved operational processes and technological applications that
increase efficiencies in order to recapture acquisition premiums paid. In the
face of this consolidation trend, banks are under considerable pressure to
maximize their public market valuations to enhance the attractiveness of their
acquisition currency, provide a credible defense to unsolicited offers and
increase returns to shareholders.
29
<PAGE>
REGULATORY CHANGE
Currently, the banking industry is characterized by continuing regulatory
changes. Regulations in certain areas, such as interstate banking operations,
have been relaxed while regulations in other areas, such as payment systems,
have become more restrictive. These changes have presented banks with both
challenges and opportunities to improve their operations and achieve competitive
advantages. For instance, over the past several years changes in regulations
have required banks to provide their depositors with accelerated credit on
deposited checks, which has increased the risk of bank loss if the deposited
checks are returned unpaid after the depositor has withdrawn the funds. A 1995
study estimated that banks absorbed $850 million of losses due to check fraud.
Banks have responded by implementing expedited check processing, presentment and
return item processing systems not only to reduce such losses, but also to gain
added revenue and generate further efficiencies. Revisions to regulations also
have permitted interstate banking, which allows bank holding companies to own
banks in multiple states under a single charter and, consequently, to capture
the operating and structural efficiencies that such expanded operations make
possible. In addition, deregulation in certain sectors of the banking industry
has led to increased competition for banks from insurance companies, brokerage
houses and other financial institutions in areas of business which were
previously the exclusive domain of banks.
TECHNOLOGICAL INNOVATION
Rapid technological innovation is creating new means for participants in the
banking industry to gain competitive advantages, and this development has
increased customers' expectations. Increasingly, customers are requiring that
their banks provide a broader scope of banking services quickly and easily
through automated teller machines ("ATMs"), by telephone or over the Internet.
The banking industry has witnessed an exponential growth in distributed banking,
including Internet banking, with more than 2,000 banks having launched Web sites
and more than 16% of United States households estimated to be banking via the
Internet by the year 2000. Additionally, technological development has provided
banks with the potential for numerous operational enhancements. For instance,
technology currently allows for the electronic storage of images of documents
and instruments, including checks, and the ability to recall the data quickly
and to utilize the data at multiple locations simultaneously. Technology also
currently enables banks to optimize their earning assets by reducing their
reserve requirements. Furthermore, technological developments are fueling
industry-wide advancements, such as the electronification of the check payment
process. According to industry sources, in 1996, over 60 billion paper checks
were used, of which electronic check payment presentment ("ECP") accounted for
approximately 3%. However, electronification of the check payment system has
been gaining increasing acceptance as an efficient and viable solution for
eliminating the time-consuming and expensive paper shuffle.
INDUSTRY CHALLENGES
In order to compete effectively in this dynamic environment, banks often
must identify effective and innovative solutions to address their unique
requirements and re-design, and in some cases completely replace, their
operational systems. Effective development and implementation of these solutions
is technically challenging, time-consuming and expensive, and banks often are
faced with a choice between building internal, custom solutions or purchasing
third-party offerings. The development of internal solutions necessarily
involves either re-deploying already stretched resources or acquiring new
resources that increase fixed costs, while typically resulting in isolated,
departmental solutions. Traditional third-party solutions often have their own
shortcomings. Some third-party providers only offer analysis and consultation
regarding a bank's operations, while others only provide specific software
applications resulting in a piecemeal approach to solutions development. By
using multiple providers, banks face increased costs, more complex
implementation and delayed realization of benefits. In addition, traditional
third-party solutions typically are not designed to the banking industry's
unique requirements and are often inflexible, requiring banks to conform their
work processes to available systems. The situation is exacerbated by the fact
that effective solutions cannot be developed in isolation, given the
increasingly interdependent nature of bank-to-bank operations. Consequently,
banks are in need of a third party, familiar with the banking industry, to
provide integrated consulting services and technological applications.
30
<PAGE>
THE CARREKER-ANTINORI SOLUTION
Designed to address the unique requirements of the banking industry,
Carreker-Antinori's solutions enable banks to increase revenues, reduce costs
and enhance delivery of customer services. These solutions combine consulting
services and technological applications in such areas as liquidity management,
payment processing, deposit taking, fraud prevention, customer service and cash
management services. In delivering its solutions, Carreker-Antinori: (i) gathers
and analyzes information about a customer's operations, markets and external
environments; (ii) identifies opportunities for revenue enhancement, cost
minimization and other efficiency generating solutions; (iii) develops and
proposes tailored solutions, which typically include one or more of the
Company's software applications; (iv) designs a business case to justify
investment in the solutions; (v) builds project consensus among senior
management; and (vi) provides implementation and maintenance services.
Carreker-Antinori's solutions are differentiated by the following
characteristics:
INDUSTRY-SPECIFIC CONSULTING EXPERTISE. The Company's consultants, managers
and employees, many of whom are former bankers, include experts in complex bank
operations. Carreker-Antinori provides services to approximately two-thirds of
the largest 100 bank holding companies. The Company believes that its expertise
and its in-depth experience have allowed it to develop the most advanced
consulting services and technological applications for the banking industry.
ADVANCED TECHNOLOGY. Carreker-Antinori incorporates the latest
technological developments in client/server systems and protocols to produce
software applications that are scaleable, functional and able to interface with
a bank's legacy systems. In addition, the Company's participation in various
interbank organizations enables the Company to stay at the forefront of
technological innovations in the industry.
INTEGRATED APPROACH. Carreker-Antinori combines its consulting expertise
and proprietary technology to serve as a single-source provider of
fully-integrated, end-to-end solutions that address the critical needs of banks.
This approach sets the Company apart from providers of partial solutions that
require banks to seek costly additional expertise or implementation services to
attain a complete solution. By offering integrated solutions, the Company
achieves more rapid identification and implementation of solutions than would a
piecemeal approach.
REDUCED CUSTOMER RISK. The Company's solutions reduce investment risk by
increasing revenues or reducing costs in a relatively short period of time. In
addition, in appropriate circumstances, the Company value-prices certain of its
solutions, whereby it receives a percentage of the amount of additional revenues
or reduced costs achieved by the customer. These arrangements allow banks to
fund their investments in the Company's solutions with the benefits derived from
their implementation.
BROAD ARRAY OF SERVICES AND TECHNOLOGY. The Company believes that its
offerings of yield management, payment systems and related bank operations
solutions are the broadest in the banking industry. By offering a broad set of
complementary solutions, the Company is able to provide a bank with an expert
solution targeted to a narrow area of a bank's operations or to address a broad
range of a bank's operational requirements. The Company believes that by
offering a wide variety of solutions, it enhances the value that is offered to
its customers.
31
<PAGE>
STRATEGY
The Company's objective is to be the leading provider of yield management,
payment systems, payment electronification and enabling technologies solutions
to the banking industry, and to continue to serve in a leadership role in
transitioning the check payment system from paper to electronic formats. Key
elements of the Company's strategy include the following:
ADVANCE POSITION AS INDUSTRY INNOVATOR. Carreker-Antinori intends to
maintain its consulting and technology leadership position in the banking
industry by anticipating and responding to evolving industry needs and creating
consulting services and technological applications that address these needs.
Through its industry contacts and customer interaction, the Company plans to
identify new methods for converting leading-edge technologies and ideas into
practical banking solutions. The Company's leadership position is enhanced by
the role it plays in ECCHO and PSN, which enables it to be an infrastructure
development partner to the banking industry as it transitions the check payment
system from paper to electronic formats.
PURSUE STRATEGIC ALLIANCES AND ACQUISITIONS. The Company seeks to form
alliances with large service providers or acquire smaller companies whose
solutions, when combined with those of the Company, provide incremental
value-added benefits to banks. The Company has implemented this strategy through
its acquisition of ASI, its strategic alliance with Visa and IBM Global Services
in forming PSN and its recent alliance with Fiserv, Inc., UPS Worldwide
Logistics and National Processing Company in forming INFITEQ. The Company
believes that strategic alliances and acquisitions will further enable the
Company to combine its own solutions with those of complementary businesses,
provide it with strong opportunities to expand its line of banking solutions,
increase its customer base and pursue new growth platforms.
LEVERAGE MARKET POSITION TO EXPAND CUSTOMER BASE. The Company seeks to
increase its customer base by leveraging its strong relationships with Tier I
and Tier II Banks to market its solutions to other Tier II Banks and selected
smaller banks and other financial institutions. The Company also intends to
leverage its existing technological applications by marketing them to smaller
banks that do not require significant customization or implementation services.
Additionally, the Company plans to leverage its leadership position in the
United States market to pursue international customers, particularly banks
elsewhere in North America and in Europe. To this end, the Company recently has
provided solutions internationally to Barclays Bank and National Westminster
Bank, as well as to four of the largest Canadian banks through several service
companies owned by these banks. Furthermore, as non-bank financial institutions
aggressively continue to expand their markets to include related financial
services, the Company is identifying new opportunities to market its solutions
to these institutions.
BUILD LONG-TERM RELATIONSHIPS. By focusing on long-term customer
relationships where the Company can identify and offer a continual stream of
value-added solutions, the Company intends to increase its repeat business with
existing customers. Through its long-term customer relationships, the Company
plans to continue focusing on the generation of significant year-to-year
revenues, which typically produce higher gross profit margins as the Company is
able to deliver value-added solutions to existing customers without incurring
many of the start-up costs associated with the development of new relationships.
INCREASE USE OF HIGH-MARGIN PRICING ARRANGEMENTS. Carreker-Antinori will
continue to share in the value that its solutions create for customers by
expanding the use of pricing methods and negotiated arrangements to generate
recurring and high-margin revenues. The Company will seek to increase the use of
value pricing for solutions in appropriate circumstances where increased
revenues or reduced costs resulting from such solutions can be readily projected
or measured. In addition, the Company intends to expand its practice of
structuring license fees for software-based solutions according to the number of
transactions processed with the solutions, which will increase its recurring
revenues and smooth period-to-period revenues.
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PRODUCTS AND SERVICES
The Company offers a wide range of consulting services and state-of-the-art,
proprietary technology applications designed to address the unique requirements
of the banking industry. The Company's services and technology applications fall
into five categories: Yield Management, Payment Systems, Payment
Electronification, Enabling Technologies and Management Services, with most of
these categories consisting of a number of practices. The Company's solutions
are sold individually, or complementary solutions may be sold together
(similarly, software products may be sold individually or as part of a product
suite). The following table summarizes the Company's solutions, together with
each of their respective practices:
<TABLE>
<CAPTION>
SOLUTIONS DESCRIPTION
- ------------------------------- ---------------------------------------------------------------------------------
<S> <C>
YIELD MANAGEMENT
REVENUE ENHANCEMENT Improves operational workflows and processes and pricing structures employed by a
bank.
LIQUIDITY MANAGEMENT Reduces the amount of non-earning assets that a bank maintains in reserve
accounts or in cash on hand. The solutions incorporate reserve management and
cash management software, including RESERVELINK, RESERVELINK PLUS, THE ANALYSIS
ADVANTAGE, CASHFORECASTER and CASHTRACKER.
CASH MANAGEMENT Improves efficiency and effectiveness of a bank's cash management business lines
and related practices.
PAYMENT SYSTEMS
CONSOLIDATION AND BEST Consolidates check processing operations, streamlines payment process flows and
PRACTICES enables potential reductions of full-time personnel. The solutions incorporate
software applications, including INNOVASION and SYNAPSE, that enable a bank to
obtain customer or internally requested information electronically.
FLOAT MANAGEMENT Enhances bank float management through improved check collection, workflow and
float allocation and pricing. The solutions incorporate software applications,
including DEPOSITMANAGER, BRANCH ITEM TRUNCATION, FLOAT PRICING SYSTEM and FLOAT
ANALYSIS SYSTEM, that simplify the processing of certain customer deposits,
facilitate float processing and enable a bank to increase its competitiveness by
extending teller window hours.
RISK MANAGEMENT Reduces risk of loss from the check payment process as a result of operational
failures, check fraud and litigation. The solutions incorporate software
applications, including ON-US FRAUD and TRANSIT FRAUD, that identify potentially
fraudulent checks.
PAYMENT ELECTRONIFICATION Facilitates the capture of the benefits from the electronification of the check
payment process. The solutions incorporate software applications, including
SMARTNOTES, TNOTES and CNOTES, that reduce the risk of loss at a number of points
in the check payment process.
ENABLING TECHNOLOGIES
ELECTRONIC COMMERCE Develops and implements a bank's electronic commerce strategy.
YEAR 2000 Assesses a bank's ability to process data during the transition from the year
1999 to the year 2000 without functional or data abnormality.
IMAGE SYSTEMS Applies check imaging technologies to improve the efficiency of a bank's
"back-office" customer service operations.
INTEGRATION SERVICES Aligns work processes, information needs, business infrastructure and long-term
strategic goals with operational practices and technology applications.
MANAGEMENT SERVICES Provides management services to ECCHO, PSN and INFITEQ.
</TABLE>
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YIELD MANAGEMENT
The Company's Yield Management solutions utilize Carreker-Antinori's
in-depth banking expertise and history of innovation to produce increased
revenues for banks in a compressed time frame through improved operational
workflows, pricing structures and liquidity and cash management. The Yield
Management solutions generally consist of three practices: revenue enhancement,
liquidity management and cash management.
REVENUE ENHANCEMENT
The revenue enhancement practice identifies opportunities to increase a
bank's revenues quickly and recommends operational practices to capitalize on
these opportunities. In this practice, the Company analyzes a bank's records and
interviews bank representatives to obtain information regarding a bank's retail
and commercial business, markets, products, pricing policies, workflow practices
and operating procedures. This analysis typically focuses on several functional
areas, including check, loan, deposit and trust operations, deposit and loan
product management, finance and accounting. With this information, the Company
is able to recommend changes in fee structures, operational processes and other
procedures to increase a bank's revenues.
LIQUIDITY MANAGEMENT
The liquidity management practice enables a bank to increase its revenues by
minimizing the amount of non-earning assets that, under applicable regulations,
the bank is obligated to maintain as a reserve against deposit balances. Banks
typically satisfy their reserve requirement by maintaining interest-free
balances at the Federal Reserve Bank and as cash in vaults, branches and ATMs.
By minimizing the level of reserves the bank is required to maintain, the
liquidity management practice enables the bank to re-deploy funds maintained in
interest free balances at the Federal Reserve Bank to more productive uses.
Additionally, this practice assists banks in identifying cash-on-hand that is
surplus to normal operating requirements and reserve requirements so that such
surplus may be re-deployed in earning assets. The Company's RESERVELINK and
RESERVELINK PLUS applications minimize a bank's required reserves by
automatically sweeping daily balances in consumer and commercial accounts from
transaction accounts, which are subject to a 10% reserve requirement, to
non-transaction accounts, which have no reserve requirement. THE ANALYSIS
ADVANTAGE application allows a bank, if it so desires, to share the benefits
from reduced reserves with its commercial customers. In addition, the Company's
CASHFORECASTER, ATM CASHFORECASTER and CASHTRACKER software applications are
designed to identify surplus cash in a bank's branches and ATMs, which
information can then be used to reduce a bank's cash inventory.
CASH MANAGEMENT
The cash management practice enhances the revenues that certain large banks
derive from providing their institutional customers with cash management
services, such as check clearing, lockbox and money transfer services. In this
practice, the Company reviews the profitability, quality of delivery and overall
business strategy of a bank's cash management lines of business and benchmarks
the bank's performance against other industry participants. Following such a
review, the Company proposes and implements specific adjustments relating to
business strategies, market segmentation, product offerings and pricing policies
to improve the financial performance of the bank's cash management business
line.
PAYMENT SYSTEMS
The Payment Systems solutions assist banks in reducing check-processing
costs through procedural and technological improvements that support internal
growth and acquisitions, standardize transactional processing and reduce risk of
loss. The Company's Payment Systems solutions enable banks to manage their check
processing operations to function more efficiently and effectively at reduced
costs without compromising customer service. The Payment Systems solutions
generally consist of three practices: consolidation and best practices, float
management and risk management.
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CONSOLIDATION AND BEST PRACTICES
The consolidation and best practices practice reduces bank operating costs
in the area of check processing by consolidating check-processing centers,
streamlining check-process flows and reducing personnel to achieve economies of
scale, better management control, more standardized operations and improved
customer service. This practice also uses industry benchmarks to assure that a
bank's check-processing operations are utilizing the industry's most advanced
procedures. The consolidation and best practices practice has been used in a
variety of contexts that require streamlined check-processing operations,
including reconfiguring multi-state operations into a single operation,
collapsing multi-state banking charters into a single state charter, and
re-engineering "back-office" operations through the application of technology.
The consolidation and best practices practice offers technology applications
that focus on different areas of check processing, including customer service
and research and adjustments. The Company's technology applications that focus
on customer service, INNOVASION and SYNAPSE, enable a bank to obtain
electronically information needed internally by the bank or for customer
requests that require a copy of a check or other documentation, such as a
statement of account. Technology applications focused on adjustments and
research allow banks to respond to inquiries about checks that are stored in the
bank's archives.
FLOAT MANAGEMENT
The Company's float management practice focuses on a bank's check-processing
procedures and increases a bank's investable funds by optimizing bank float
profitability through improved check collection, efficient check-processing
workflow and float allocation and pricing. As a result of the implementation of
float management practices, a bank can reduce the float and related costs that
the bank incurs, increase the float allocated to the bank's customers, decrease
the bank's non-earning assets, improve the bank's check-processing workflow,
increase the bank's profitability and improve the bank's management reporting.
The float management practice consists generally of conducting float audits and
performing reviews and analyses of check-processing workflow, float management
organization, structure and reporting, check clearing and market segmentation.
The float management practice offers software applications that focus on
different approaches to optimizing a bank's float. The Company's technology
applications, such as FLOAT PRICING SYSTEM and FLOAT ANALYSIS SYSTEM, assist
banks in taking maximum advantage of float by selectively pricing the
availability of funds for deposited checks, measuring float profitability by
customer and generating detailed check clearing end-point data. The Company also
offers technology applications, such as BRANCH ITEM TRUNCATION and DEPOSIT
MANAGER, that simplify the processing of customer deposits containing five items
or less and enable banks to become more competitive by extending teller window
hours while still meeting "back-office" processing deadlines.
RISK MANAGEMENT
The risk management practice assists banks in identifying and reducing the
risk of loss from the check payment process as a result of operational failures,
check fraud and litigation. The Company provides risk management reviews and
training and offers implementation and support of its risk management technology
applications. The Company also offers "expert opinion" services for litigation
support. The Company's risk management technology applications consist of an
application for deposited checks drawn by the bank's customer and an application
for deposited checks drawn on other banks. The application for checks drawn by
the bank's customer, ON-US FRAUD, detects potential fraud both at the teller
station and in the bank's "back-office" using a set of bank-defined detection
rules, such as duplicate check numbers, out-of-range check numbers, out-of-range
amount and inconsistent account activity. The technology application for checks
drawn on other banks and deposited with the customer bank, TRANSIT FRAUD,
detects deposit fraud by evaluating each deposited item and account against a
series of bank-defined detection rules to identify those items that have a high
probability of being fraudulent. This technology application also lists
"suspects" in a report so that bank personnel can exercise their judgment on
whether to allow a depositor to withdraw funds against the deposited item or
account.
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PAYMENT ELECTRONIFICATION
The Company's Payment Electronification solutions enable banks to capture
the benefits from the conversion of paper checks to electronic items. These
benefits, estimated by ECCHO to be between $2 billion and $3 billion for the
banking industry as a whole, arise in the near term from the earlier electronic
presentment and collection of checks deposited at one bank and drawn on another,
the reduced risk of loss from earlier electronic identification of checks that
have been or are likely to be returned unpaid, new sources of fee revenue from a
bank's institutional customers who stand to benefit from additional services
made possible by the electronification of checks, and in the longer term, from
the reduced costs associated with the truncation of paper checks at the bank of
first deposit. The Company's Payment Electronification solutions incorporate a
number of technology applications, such as CHECKLINK, that allow banks to
electronically present checks drawn on other banks and receiving banks to post
these checks to their books from the electronic transmission in advance of
receipt of the paper item, which increases the receiving bank's investable funds
as customers replenish the balances in their accounts earlier than they
otherwise would. Additionally, the Company offers a suite of technology
applications, such as SMARTNOTES, TNOTES and CNOTES, that reduce the risk of
loss from returned checks and fraudulent checks by enabling early electronic
communication with respect to these items between banks, between banks and their
customers, and between banks and third parties that furnish such information to
the retailing industry.
ENABLING TECHNOLOGIES
The Enabling Technologies solutions provide services and products that
assist in the deployment of advanced technologies, while enabling the rapid
realization of benefits from these technologies, such as higher revenues,
reduced costs and heightened customer service. The current Enabling Technologies
solutions consist generally of four practices: electronic commerce, Year 2000,
image systems and integration services.
ELECTRONIC COMMERCE
The electronic commerce practice provides electronic commerce solutions to
banks that lack current on-line transactional capabilities. The Company's
electronic commerce solutions are designed to enable banks to attract and retain
larger numbers of customers, expand their geographic reach and create a lower
cost transaction processing platform. In the electronic commerce practice, the
Company assists in the development and execution of the bank's electronic
commerce strategy, the design of the electronic commerce transaction processing
platform and the procurement of appropriate technologies.
YEAR 2000
The Company's Year 2000 practice assists banks in determining whether their
systems will be able to manage and manipulate data in the context of the
transition of the dates from 1999 to 2000 without functional or data abnormality
and without inaccurate results related to such dates. In this practice, the
Company tests a bank's computer-dependent systems and infrastructure to assure
that they are able to make the transfer to the year 2000 both independently and
in concert with other interrelated systems. The Company also partners with third
parties that provide additional resources to address the Year 2000 problem. By
combining the Company's expertise with the resources of these partners,
Carreker-Antinori is able to provide banks with a comprehensive solution to
their Year 2000 problems.
IMAGE SYSTEMS
The image system deployment practice assists banks in increasing
"back-office" productivity through the use of image technologies. In many of a
bank's areas of operation, the use of an electronically stored image that can be
recalled quickly from a database and used in several places simultaneously
greatly streamlines a bank's operational processes. In its image system
deployment practice, the Company capitalizes on its industry leadership and
technological expertise to identify potential changes that image system
deployment can make to a bank's current workflow.
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INTEGRATION SERVICES
The integration services practice assists banks in aligning their technology
and systems with their work processes, information needs, business
infrastructure and long-term strategic goals. In the integration services
practice, the Company provides banks with business process modeling, as well as
process simulation that incorporates the solutions proposed by the Company. The
Company also combines prototype client/server systems with mainframe legacy
systems and assists with architecture design and systems development.
Additionally, the Company implements operational processes and assists in
training bank personnel to realize the benefits of the Company's proposals.
MANAGEMENT SERVICES
The Company provides management services to three banking organizations:
ECCHO, PSN and INFITEQ. The Company provides all of ECCHO's and PSN's non-legal
management services, which include administration, research and development,
industry representation and public relations. For INFITEQ, the Company is
responsible for customer service, quality assurance, recruiting additional
service providers, billing, marketing, sales, integrating products and
technology and acting as the organization's general manager (subject to the
supervision, direction and approval of the board of managers of INFITEQ). See
"--Strategic Banking Initiatives."
CUSTOMERS AND MARKETS
A substantial majority of the Company's revenues are generated from
contracts with Tier I Banks (bank holding companies with assets over $50
billion) and Tier II Banks (bank holding companies and independent banks with
assets of between $5 billion and $50 billion). The Company's customers include
95% of Tier I Banks, including Fleet Financial Group, Inc., NationsBank
Corporation, Norwest Corporation and SunTrust Banks, Inc. In fiscal 1997, Fleet
Financial Group, Inc. and Norwest Corporation accounted for approximately 15%
and 14% of the Company's revenues, respectively. See "Risk Factors-- Customer
Concentration." The Company's customers include approximately 60% of Tier II
Banks, including Comerica Incorporated, Firstar Corporation, Huntington
Bancshares and Summit Service Corporation. The Company also targets smaller bank
holding companies and independent banks with assets of between $550 million and
$5 billion. Smaller bank customers include California Federal Savings Bank,
Mechanics Bank and U.S. Trust Company. The Company believes that the smaller
bank market affords it an opportunity for growth. See "--Strategy--Leverage
Market Position to Expand Customer Base" and "Risk Factors--Dependence on
Banking Industry."
The Company enters into numerous types of engagements with customers. The
needs of each customer are unique, and Carreker-Antinori seeks to provide those
specific solutions that most effectively address a customer's needs. A model
engagement is set forth below.
MODEL ENGAGEMENT
In a model engagement, the Company would conduct its due diligence review of
a bank's operations within a short time span of six-to-eight weeks to identify
opportunities that would enhance the bank's revenues and reduce the bank's
expenses. Upon identification of these opportunities and agreement by the bank,
Carreker-Antinori would implement certain of its yield management solutions
(revenue enhancement and liquidity management), and certain of its payment
systems solutions (float management and risk management), to rapidly generate
enhanced revenues and cost reductions for the bank. These solutions often
incorporate technology applications, such as RESERVELINK, FLOAT PRICING SYSTEM,
FLOAT ANALYSIS SYSTEM, ON-US FRAUD and TRANSIT FRAUD, and are designed to enable
the bank to recover its investment in a shorter time frame than would be the
case with competing alternatives.
Upon the bank realizing the near-term benefits of the solutions that
previously were implemented, the Company would work with the bank to install
additional solutions that may require a longer period of time
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to implement. These solutions include services from the liquidity management
practice and consolidation and best practices practice, as well as
implementation of software applications, such as RESERVELINK PLUS, CASHTRACKER,
CASHFORECASTER, INNOVASION and SYNAPSE, to improve the bank's "back-office"
operations.
As the bank realizes further revenue enhancements, cost reductions and
customer service improvements from these solutions, the Company would work with
the bank to provide additional services and technology applications that further
improve the operational efficiency of the bank and generate new sources of
revenue. These solutions would include consulting services and technology
applications from the payment electronification practice and from certain of its
enabling technologies practices (electronic commerce, Year 2000, image systems
and integration services).
SALES AND MARKETING
The Company has developed strong relationships with many senior bank
executives as a result of its delivery of effective solutions to Tier I and Tier
II Banks for 20 years. In addition, Carreker-Antinori's leadership position
within the industry enables it to develop relationships with senior banking
executives of its prospective customers. The Company has found that an important
element of its success has been its ability to maintain relationships with
banking executives as they are elevated to senior positions in a consolidating
banking industry. The Company believes that the strength of its customer
relationships contributes significantly to sales and marketing efforts. The
Company has seven Account Relationship Managers ("ARMs") who are responsible for
managing the Company's day-to-day relationships with its customers. Their
responsibilities include identifying customers' needs and assisting the
Company's practice managers in presenting their solutions and concluding sales.
The Company's ARMs work closely with the Company's executive officers who serve
as Executive Relationship Managers ("ERMs") to the Company's customers. The
Company also employs Software Account Managers ("SAMs") who are familiar with
the Company's technology and who participate in opportunities to sell
technology-based solutions.
The Company derives a significant portion of its business through customer
referrals and repeat business. In addition, the Company markets its services
through a variety of media, including: the Company's Web site, direct mail,
"user" conferences conducted by Carreker-Antinori exclusively for its customers,
speaking engagements, participation in industry conferences and trade shows,
publication of "white papers" related to specific aspects of the Company's
services, customer newsletters, and informational listings in trade journals.
The Company employs a marketing staff of seven persons, including graphics
designers, writers, administrative coordinators and a Web master.
STRATEGIC BANKING INITIATIVES
The Company provides management services to ECCHO and PSN, each of which is
playing an instrumental role in the electronification of the check payment
process. In addition, the Company is a co-founder of INFITEQ, which provides
outsourcing services to the banking industry.
ECCHO
ECCHO, Electronic Check Clearing House Organization, is a not-for-profit
rules and standards organization whose bank members hold approximately 80% of
the deposits held by the top 100 banks in the United States. This organization
is committed to promoting the transition of payment systems from paper to
electronic formats. ECCHO intends to accomplish these goals by aligning the
relationships among various participants in the banking industry to promote the
rapid acceptance and implementation of electronic check applications.
PSN
PSN, Payment Systems Network, Inc., is a corporation owned by VISA USA and
19 bank holding companies representing more than 180 banks in all 50 states,
which collectively hold over 40% of bank
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deposits in the United States. VISA USA and a subsidiary of International
Business Machines (IBM) are strategic suppliers to PSN. PSN strives to support
the initiatives of ECCHO by creating products that will generate new revenue
streams and reduce fraud losses and processing expenses for banks and provide
incentives to banks to take incremental steps towards the utilization of
electronic check processing. PSN's products incorporate a number of applications
developed by the Company, such as SMARTNOTES, TNOTES and CNOTES. See "--Products
and Services--Payment Electronification."
INFITEQ
INFITEQ, a joint venture among the Company, UPS Worldwide Logistics,
National Processing Company, Fiserv, Inc. and Brink's Incorporated, is a
single-source provider of specialized outsourcing services to the banking
industry for transaction processing, information management, electronic commerce
and image technology. INFITEQ integrates leading providers of specific services
into a broad cafeteria of service offerings, which allows banks to economically
expand the number of services offered to customers by outsourcing these
additional services. INFITEQ offers to banks the expertise of UPS Worldwide
Logistics in package delivery and ground/air logistics, National Processing
Company in the retail lockbox business and image-enabled remote capture, Fiserv,
Inc. in its compute/capture centers and its deposit processing system, and the
Company in payment systems, cash management, system integration, data
warehousing, Year 2000 solutions and electronic commerce. INFITEQ markets its
broad array of services as a complement to the services that the bank performs
itself.
SOLUTIONS DEVELOPMENT
The Company seeks to maintain its position as a leading innovator in the
banking industry by converting leading-edge technologies and ideas into
practical banking solutions. The Company's relationships with its customers
provide it with opportunities to identify additional bank needs. The Company's
solutions development activities focus on prototyping promising applications,
test marketing new products, developing sales strategies and coordinating
distribution and on-going maintenance for each of the Company's solutions.
The Company frequently receives customer requests for new services and/or
software, develops solutions in response to these requests and historically has
been able to recoup some or all of its development costs from these customers.
In addition to customer-funded solutions development, the Company has invested
significant amounts in solutions development, including expenditures of
$906,000, $1.2 million and $3.4 million for software development in fiscal 1995,
1996 and 1997, respectively. Further, some of the Company's key product
introductions have resulted from the adaptation for a wider market of customized
solutions that were originally developed by customers for their internal use. In
exchange for either a one-time payment and/or on-going royalties, the Company is
often able to obtain the right to develop, enhance and market such products.
The Company believes that its leadership role in and interaction with the
banking industry through ECCHO, PSN and INFITEQ uniquely position it to identify
and develop interbank solutions that have bilateral or multilateral banking
industry applications. The Company believes that its management of these
organizations provides further opportunities to recognize and respond to the
changing needs of the banking industry.
TECHNOLOGY
The Company designs its software products to incorporate the latest
developments in open systems architecture and protocols to provide maximum
scaleability and functionality and to interface with a bank's legacy systems.
The Company's core proprietary technologies, for both its client/server software
products and mainframe software products, are primarily directed at using a
standard set of components, drivers
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and application interfaces so that the Company's software products are
constructed from reusable components which are linked together in a tool-set
fashion.
Most of the Company's client/server software products are based upon the
Company's proprietary SYNAPSE architecture. The SYNAPSE architecture is a
component framework that provides reusable building blocks or object-oriented
components for developing multi-tiered, highly distributed software
applications. The SYNAPSE architecture is intended to provide a straightforward
framework for defining and implementing the core, or low level, components used
in constructing software products. The current core components of the SYNAPSE
architecture include DAS persistent object, trace/audit component and viewer,
messaging infrastructure, network management functionality, work flow engine,
folder manager, distribution manager, DAS client and data archive server.
The Company has adopted the IBM System Application Architecture for
developing its interactive screen designs for its mainframe products and for
interactions with other systems, such as client/server products. The Company's
mainframe software products have been evolving toward a standard set of core
processing components, drivers and exit points and are more fully leveraging
published standard application programming interfaces. As a result, the Company
can employ reusable components to create new utility modules and link them
together in a tool-set fashion, much like objects in object-oriented
programming.
The Company has a number of software products that either fall within the
client/server or the batch-oriented file sharing categories. Many of the newer
software products are developed to operate with an OS/2 and/or Windows NT
operating system. Most of the Company's mainframe software products are written
in COBOL. The Company has several software products that operate on two or more
of these operating systems. For example, the Company's INNOVASION software
application operates with the OS/2 operating system, while the Company's DAS
software application, a substantially similar product programmed in C++,
operates with the Windows NT operating system.
The Company develops its technology both internally and, in certain
strategically beneficial situations, with third-party preferred developers that
can offer an expertise within a core competency. For example, currently
Carreker-Antinori is working on features of its CASHFORECASTER software
application with a third party that has a core competency in developing advanced
forecasting engines based on synthetic algorithms, including neural net
technology and annealing techniques.
COMPETITION
The Company competes with third-party providers of services and software
products to the banking industry, including firms providing consulting services,
such as Andersen Consulting, Electronic Data Systems Corporation and KPMG Peat
Marwick LLP, and software companies, such as Earnings Performance Group, Inc.,
Pegasystems Inc., Sterling Software, Inc. and Transoft International, Inc. Many
of these competitors have significantly greater financial, technical, marketing
and other resources than the Company; however, the Company believes that its
market position with respect to these competitors is enhanced by virtue of its
unique ability to deliver fully integrated consulting services and software
solutions focused on enabling banks to increase their revenues, reduce their
costs and enhance their delivery of customer services. The Company believes that
it competes based on a number of factors, including: (i) scope of solutions
provided; (ii) industry expertise; (iii) access to decision makers within banks;
(iv) ease and speed of solutions implementation; (v) quality of solutions; and
(vi) price. While many of the Company's competitors are better equipped to
compete with the Company in certain of these areas, the Company believes that it
is uniquely qualified to compete effectively in all of these areas.
In addition to competing with a variety of third parties, the Company
experiences competition from its customers and potential customers. From time to
time, such customers develop, implement and maintain their own services and
applications for revenue enhancement, cost reductions or enhanced customer
service, rather than purchasing services and related software products from
third parties. As a result, the
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Company must continually educate existing and prospective customers about the
advantages of purchasing its services and products. In addition, customers or
potential customers could enter into strategic relationships with one or more of
the Company's competitors to develop, market and sell competing services or
products. See "Risk Factors--Competition."
GOVERNMENT REGULATION
The Company's primary customers are banks. Although the services currently
offered by the Company have not been subject to any material industry-specific
government regulation, the banking industry is heavily regulated. The Company's
services and products must allow banking customers to comply with all applicable
regulations, and, as a result, the Company must understand the intricacies and
application of many government regulations. The regulations most applicable to
the Company's provision of solutions to banks include requirements establishing
minimum reserve requirements, governing funds availability and the collection
and return of checks, and establishing rights, liabilities and responsibilities
of parties in electronic funds transfers. For example, the Company's RESERVELINK
and RESERVELINK PLUS software and related consulting services assist banks with
minimizing their reserves while complying with federal reserve requirements. In
addition, the expedited availability and check return requirements imposed by
funds availability regulations have increased fraud opportunities dramatically,
and the Company's risk management and float management services address this
concern while complying with such regulations. See "Risk Factors--Governmental
Regulation."
PROPRIETARY RIGHTS
The Company relies upon a combination of patent, copyright, trademark and
trade secret laws, including the use of confidentiality agreements with
employees, independent contractors and third parties and physical security
devices to protect its proprietary technology and information. The Company
primarily has relied on common law rights to protect the use of its name,
technology and brands. The Company has a number of issued patents and one
registered trademark and has filed applications for additional patents and
trademarks in the United States. The Company vigorously defends its proprietary
rights.
The Company presently enters into invention assignment and confidentiality
agreements with its employees and independent contractors and confidentiality
agreements with certain customers. The Company also limits access to the source
codes for its software and other proprietary information. Further, the Company's
software will not operate with computers which have not been synchronized with
the Company's equipment. The Company believes that due to the rapid pace of
innovation within the software industry, factors such as the technological and
creative expertise of its personnel, the quality of its solutions, the quality
of its technical support and training services, and the frequency of release of
technology enhancements are more important to establishing and maintaining a
technology leadership position than the various legal protections available for
the Company's technology.
The Company is not aware that it is infringing any proprietary rights of
third parties. The Company relies upon certain software that it licenses from
third parties, including software that is integrated with the Company's
internally developed software and used in its solutions to perform key
functions. See "Risk Factors--Dependence on Proprietary Technology; Risk of
Infringement."
EMPLOYEES
The Company had 208 employees as of January 31, 1998, with 66 persons
providing consulting services, 79 persons in the technical group, 23 persons
performing sales and marketing, customer relations and business development
functions and 40 persons performing corporate, finance and administrative
functions. The Company has no unionized employees. The Company believes that its
employee relations are good.
41
<PAGE>
INDEPENDENT CONTRACTORS
The Company provides consulting services and develops software in part
through the use of independent contractors who are not employees of the Company.
As of January 31, 1998, the Company used 28 independent contractors to provide
consulting services, 26 of whom work from their homes using self-owned
equipment. Many of these contractors are former bank executives, and the Company
believes that their experience in the banking industry uniquely enables them to
provide consulting services to the Company's customers. In addition, as of
January 31, 1998, the Company had 32 independent contractors who assisted in the
development of technology. These technology contractors spend a majority of
their time performing software development in the Company's offices; however,
from time to time these contractors travel with Company personnel and work
directly with the Company's customers. See "Risk Factors--Use of Independent
Contractors."
FACILITIES
The Company's principal executive office is a leased facility with
approximately 32,000 square feet of space in Dallas, Texas. The lease agreement
for this space expires in May 1999. The Company also leases approximately 21,000
square feet in Atlanta, Georgia pursuant to a lease agreement which expires in
August 2002. The Company believes that its existing facilities are well
maintained and in good operating condition and are adequate for its present and
anticipated levels of operations.
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceeding.
42
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information concerning the executive
officers and directors of the Company as of April 20, 1998:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------- --- ---------------------------------------------------------------
<S> <C> <C>
John D. Carreker, Jr....................... 55 Chairman of the Board and Chief Executive Officer
Ronald R. Antinori......................... 55 Vice Chairman of the Board and Chief Technology Officer
Richard L. Linting......................... 52 President, Chief Operating Officer and Director
Royce D. Brown............................. 49 Executive Vice President and Managing Director of Payment
Systems
John S. Davis, Jr.......................... 40 Executive Vice President and Managing Director of Technology
Richard C. Ercole.......................... 55 Executive Vice President, Sales, Marketing and Management
Services
H. Douglas Eubanks......................... 41 Executive Vice President and Managing Director of Enabling
Technologies
Terry L. Gage.............................. 40 Executive Vice President, Treasurer and Chief Financial Officer
Wyn P. Lewis............................... 48 Executive Vice President and Managing Director of Yield
Management
James D. Carreker (1)...................... 50 Director
James L. Fischer (2)....................... 70 Director
Donald L. House (1)........................ 56 Director
Richard R. Lee, Jr. (2).................... 51 Director
Larry J. Peck (1).......................... 50 Director
David K. Sias (1).......................... 60 Director
</TABLE>
- ------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
JOHN D. CARREKER, JR. has served as Chairman of the Board and Chief
Executive Officer of the Company since the Company's formation in 1978, and
served as the Company's President from 1978 until July 1997, at which time
Richard L. Linting became President of the Company. John D. Carreker, Jr. and
James D. Carreker are brothers.
RONALD R. ANTINORI has served as Chief Technology Officer of the Company
since the Company's merger with ASI in January 1997. Mr. Antinori has served as
Vice Chairman of the Board of the Company since January 1997. Prior to the
Company's merger with ASI, Mr. Antinori served as Chairman of the Board of ASI
since its formation in 1988 and Chief Executive Officer of ASI from 1988 through
December 1995. See "Certain Transactions--Merger with Antinori Software, Inc."
for further information regarding the Company's merger with ASI.
RICHARD L. LINTING has served as President and Chief Operating Officer of
the Company since August 1997, and served as President of the Consulting Group
from December 1996 to August 1997. He has served as a director of the Company
since December 1996. From February 1996 to October 1996,
43
<PAGE>
Mr. Linting served as Executive Vice President of Manufacturers' Services Ltd.,
a manufacturer of computers and telecommunications equipment for the computer
industry. From February 1995 to February 1996, he served as President of Linting
Brown Limited, a consulting firm. From 1993 to February 1995, Mr. Linting served
as Vice President, Integrations Services (1993-1994) and Vice President,
Americas (1994-1995) for Digital Consulting, a professional services division of
Digital Equipment Corporation, a computer manufacturer. Prior to 1993, Mr.
Linting served for 23 years in various positions with Andersen Consulting,
including Managing Director, Partner and member of the Worldwide Operations
Committee.
ROYCE D. BROWN has served as Executive Vice President and Managing Director
of the Company's Payment Systems Group since February 1996. From March 1994 to
January 1996, Mr. Brown served as Vice President and Managing Director of the
Company's Software Group. From March 1993 to March 1994, Mr. Brown served as
Vice President and Managing Director of the Company's PSN Group. In addition,
Mr. Brown served in various other capacities with the Company from November 1978
to March 1993.
JOHN S. DAVIS, JR. has served as Executive Vice President and Managing
Director of Technology of the Company since April 1997. From February 1996 to
April 1997, Mr. Davis served as Senior Vice President and Managing Director of
the Company's Software Group. From February 1993 to January 1996, Mr. Davis
served as Director of Sales and Marketing for the Company's Software Group. From
July 1992 to February 1993, Mr. Davis served as a Regional Sales Manager for the
Company.
RICHARD C. ERCOLE has served as Executive Vice President, Sales, Marketing
and Management Services of the Company since October 1997. From October 1992 to
October 1997, Mr. Ercole served as President of Huntington Treasury Management,
a division of Huntington National Bank.
H. DOUGLAS EUBANKS has served as Executive Vice President and Managing
Director of Enabling Technologies of the Company since July 1995. From January
1992 to July 1995, Mr. Eubanks served as Vice President of Systems Integration
of Cap Gemini America, a systems integration firm.
TERRY L. GAGE has served as Senior Vice President, Treasurer and Chief
Financial Officer of the Company since October 1995 and has served as Executive
Vice President since April 1997. From October 1986 to April 1995, Mr. Gage
served as Treasurer and Chief Financial Officer of FAAC Incorporated, a company
specializing in technology engineering and consulting services.
WYN P. LEWIS has served as Executive Vice President and Managing Director of
Yield Management of the Company since March 1996. From March 1993 to March 1996,
Mr. Lewis served as Vice President and Managing Director for Yield Management.
From September 1990 to March 1993, Mr. Lewis served as the Company's West Coast
Regional Practice Manager.
JAMES D. CARREKER has served as a director of the Company since 1984. Since
January 1998, Mr. Carreker has served as Chairman of the Board of Directors and
Chief Executive Officer of Wyndham International, Inc., a hotel management and
leasing company that is affiliated with Patriot American Hospitality, Inc.
("Patriot"), a hotel real estate investment trust for which Mr. Carreker is a
director. Mr. Carreker served as President and Chief Executive Officer of
Wyndham Hotel Corporation ("Wyndham"), a national hotel company, from May 1988,
and as a director of Wyndham from February 1996, until the merger of Wyndham
with and into Patriot in January 1998. Mr. Carreker also served as Chief
Executive Officer of Trammell Crow Company, a national real estate company, from
August 1994 to December 1995 and currently serves as a director of Trammell Crow
Company. John D. Carreker, Jr. and James D. Carreker are brothers.
JAMES L. FISCHER has served as a director of the Company since 1984. Mr.
Fischer retired in 1984 from Texas Instruments, Inc. ("TI"), an electronics
manufacturer, where he served in a variety of positions over 29 years. At the
time of his retirement, Mr. Fischer served as Executive Vice President and
Principal Financial Officer of TI. Mr. Fischer also serves as a director of DSC
Communications Corporation, a global provider of advanced telecommunications
products.
44
<PAGE>
DONALD L. HOUSE has served as a director of the Company since March 30,
1998. From January 1993 until December 1997, Mr. House served as Chairman of the
Board of Directors of SQL Financials International, Inc., a developer of
financial and human resource application software; Mr. House continues to serve
as a director of SQL Financials International, Inc. From September 1991 until
December 1992, Mr. House served as President of Prentice Hall Professional
Software, a subsidiary of Simon & Schuster, Inc. From 1968 through 1987, he
served in a number of senior executive positions with Management Science
America, Inc., a provider of mainframe application software. Mr. House is a
director of Melita International Corporation, a developer of call center
management software, where he serves as chairman of its audit committee and a
member of its compensation committee, and is a director of XcelleNet, Inc., a
provider of systems management software for remote applications, where he serves
as chairman of its audit and nominating committees. Mr. House also serves as a
member of the Boards of Directors of BT Squared Technologies, Intellimedia
Commerce, Inc., Systems Techniques, Inc., and Telinet Technologies, LLC, all of
which are privately-held companies.
RICHARD R. LEE, JR. has served as a director of the Company since 1984. Mr.
Lee has served as President of Lee Financial Corporation, a financial advisory
firm, since 1975.
LARRY J. PECK has served as a director of the Company since October 1996.
Mr. Peck has served as Sector Vice President and Manager, Technology Solutions
Sector, of SAIC, a diversified technology research and development services
company, since January 1994. From January 1990 to January 1994, Mr. Peck served
as Group Senior Vice President and Manager, Informations Technology Group, of
SAIC.
DAVID K. SIAS has served as a director of the Company since October 1993 and
has served as a consultant to the Company since November 1993. Mr. Sias also
serves as a consultant to other companies. Mr. Sias retired in 1993 from Bankers
Trust Company, where he served in a variety of positions over 30 years. See
"Certain Transactions--Consulting Services."
The Company's Certificate of Incorporation and Bylaws provide for a
classified Board of Directors. Messrs. John D. Carreker, Jr., House and Peck are
appointed to Class I and will serve until the annual meeting of stockholders to
be held in 1999; Messrs. Antinori, Fischer and Lee are appointed to Class II and
will serve until the annual meeting of stockholders to be held in 2000; and
Messrs. James D. Carreker, Linting and Sias are appointed to Class III and will
serve until the annual meeting of stockholders to be held in 2001. At each
annual meeting of stockholders beginning with the 1999 annual meeting, the
successors to directors whose terms then expire will be elected to serve from
the time of their election and qualification until the third annual meeting
following election and until their successors have been duly elected and
qualified, or until their earlier resignation or removal. The officers of the
Company are appointed by and serve at the discretion of the Board of Directors.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has a Compensation Committee, which consists of
Messrs. Fischer and Lee, and an Audit Committee, which consists of Messrs. James
D. Carreker, House, Peck and Sias. The Compensation Committee makes
recommendations to the Board of Directors concerning salaries and incentive
compensation for the Company's officers and employees and administers the
Company's Long Term Incentive Plan. Mr. Fischer serves as Chairman of the
Compensation Committee. The Audit Committee makes recommendations to the Board
of Directors regarding the selection of independent auditors, reviews the
results and scope of audits and other accounting-related services and reviews
and evaluates the Company's internal control functions. Mr. Sias serves as
Chairman of the Audit Committee.
DIRECTORS' COMPENSATION
Prior to the offering, James D. Carreker, James L. Fischer and Richard R.
Lee, Jr. each received an annual retainer of $5,000 and a fee of $1,250 per
meeting attended. The Company paid a fee of $43,887 to Lee Financial
Corporation, a company owned by Mr. Lee, in fiscal 1997 for investment
management
45
<PAGE>
services and corporate advice rendered by Mr. Lee in his capacity as trustee of
the Company's employee stock ownership plan (the "ESOP"). Larry J. Peck has
served on the Board of Directors as the representative of SAIC pursuant to a
Shareholders Agreement among the Company, John D. Carreker, Jr. and SAIC (see
"Certain Transactions--Sale of Shares to SAIC"), and has not received a
director's fee. David K. Sias has received a monthly consulting fee of $4,167,
which includes fees for service as a director. Directors have been reimbursed
for travel and other out-of-pocket expenses in attending meetings of the Board
of Directors. Employee directors have not received compensation for their
services as directors.
Following the offering, the non-employee directors of the Company will
receive an annual retainer of $5,000, a fee of $1,250 per meeting attended and a
fee of $625 per committee meeting attended; provided, that the Company and each
of Messrs. Sias and House expect to enter into new arrangements that will
provide for compensation to be paid to following the offering that reflects both
their services as directors of and consultants to the Company. Employee
directors will not receive compensation for their services as directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Fischer and Lee. Neither of
these individuals was at any time during fiscal 1997, or any other time, an
officer or employee of the Company. No member of the Compensation Committee
serves as a member of the board of directors or compensation committee of any
entity that has one or more executive officers serving as a member of the
Company's Board of Directors or Compensation Committee.
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and the five other most highly compensated executive
officers (collectively, the "Named Executive Officers") whose salary and bonus
for the fiscal year ended January 31, 1998 ("1997 Annual Compensation") were in
excess of $100,000 for services rendered in all capacities to the Company for
that year:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM AWARDS
ANNUAL COMPENSATION ------------------------
------------------------------------------ SECURITIES
NAME AND OTHER ANNUAL RESTRICTED UNDERLYING ALL OTHER
PRINCIPAL POSITION SALARY BONUS COMPENSATION (1)(2) STOCK OPTIONS COMPENSATION (3)
- ------------------------------------ ---------- --------- ------------------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
John D. Carreker, Jr. .............. $ 475,248 -- -- -- -- $ 9,125
Chairman of the Board
and Chief Executive Officer
Ronald R. Antinori ................. 350,008 -- -- -- -- 16,000
Vice Chairman of the Board Nominee
and Chief Technology Officer
Richard L. Linting ................. 350,016 -- $ 49,345 205,650 495,757 10,521
President, Chief Operating Officer
and Director Nominee
Wyn P. Lewis ....................... 300,000 -- -- 342,750 582,952 8,875
Executive Vice President and
Managing Director of Yield
Management
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
LONG-TERM AWARDS
ANNUAL COMPENSATION ------------------------
------------------------------------------ SECURITIES
NAME AND OTHER ANNUAL RESTRICTED UNDERLYING ALL OTHER
PRINCIPAL POSITION SALARY BONUS COMPENSATION (1)(2) STOCK OPTIONS COMPENSATION (3)
- ------------------------------------ ---------- --------- ------------------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Royce D. Brown ..................... 218,750 -- -- -- 120,890 9,125
Executive Vice President and
Managing Director of Payment
Systems Group
John S. Davis, Jr. ................. 215,000 $ 44,158 -- -- 185,570 9,125
Executive Vice President and
Managing Director of Technology
</TABLE>
- ------------------------------
(1) In accordance with the rules of the Securities and Exchange Commission (the
"Commission"), the compensation described in this table does not include
medical, group life insurance or other benefits received by each Named
Executive Officer that were available generally to all salaried employees of
the Company, and certain perquisites and other personal benefits received by
a Named Executive Officer that did not exceed the lesser of $50,000 or 10%
of such officer's salary and bonus as disclosed in the table.
(2) Consists of relocation, rent and local expenses for Mr. Linting.
(3) Includes Company contributions to the Long Term Incentive Plan on behalf of
Messrs. Carreker, Linting, Lewis and Davis; and includes profit sharing paid
to Mr. Antinori under an ASI employee benefit plan.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options made during the
fiscal year ended January 31, 1998 to each of the Named Executive Officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS (1)
--------------------------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF AT ASSUMED ANNUAL RATES OF
SECURITIES STOCK PRICE APPRECIATION
UNDERLYING % OF TOTAL OPTIONS FOR OPTION TERM (3)
OPTIONS GRANTED TO EMPLOYEES EXERCISE PRICE EXPIRATION --------------------------
NAME GRANTED (2) IN FISCAL YEAR PER SHARE DATE 5% 10%
- --------------------------- ----------- -------------------- --------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Richard L. Linting (4)..... 154,000 8.0% $ 3.67 8/1/07 $ 2,109,522 $ 3,572,962
33,757 1.7 8.90 1/31/08 297,849 642,727
Wyn P. Lewis (5)........... 6,930 * 3.45 3/31/07 94,040 155,046
75,522 3.9 8.90 1/31/08 666,354 1,437,923
Royce D. Brown (5)......... 5,390 * 3.45 3/31/07 73,142 120,591
77,000 4.0 8.90 1/31/08 679,354 1,466,064
John S. Davis, Jr. (5)..... 770 * 3.45 3/31/07 10,449 17,227
52,614 2.7 8.90 1/31/08 141,829 1,001,759
</TABLE>
- ------------------------------
* Less than 1%.
(1) Messrs. Carreker and Antinori did not receive grants of options during
fiscal 1997.
(2) The options shown were granted under the Long Term Incentive Plan.
(3) The potential realizable values for such options shown in the table are
based on an estimated initial public offering price of the Company's Common
Stock of $11.00 per share (the midpoint of the price range set forth on the
cover page of this Prospectus) and a subsequent appreciation of such price
at assumed rates of 5% and 10%, compounded annually from April 24, 1998 to
their expiration date. These assumed rates of appreciation do not represent
the Company's estimate or projection of the appreciation of Common Stock of
the Company. The Company valued options that expire prior to January 2008
based upon the per share valuation of Common Stock under the Company's ESOP.
The Company valued options that expire in January 2008 using the per share
valuations of comparable public companies, and then applied a discount to
reflect the Company's privately-held status at the time of grant.
(4) The 154,000 options granted to Mr. Linting vest one-third per year on August
1, 1997, 1998 and 1999, and the 33,757 options granted vest one-quarter per
year on January 31, 1999, 2000, 2001 and 2002.
(5) The 6,930 options granted to Mr. Lewis, the 5,390 options granted to Mr.
Brown and the 770 options granted to Mr. Davis vest on March 31, 2000. The
75,522 options granted to Mr. Lewis, the 77,000 options granted to Mr. Brown
and the 52,614 options granted to Mr. Davis vest one-quarter per year on
January 31, 1999, 2000, 2001 and 2002.
47
<PAGE>
AGGREGATE FISCAL YEAR-END OPTION VALUES
The following table sets forth, for each of the Named Executive Officers,
information concerning the number and value of securities underlying unexercised
options held on January 31, 1998. No options were exercised by such persons
during fiscal 1997, although Messrs. Lewis, Brown and Davis will exercise
507,430 and 5,390 and 44,406 options, respectively, concurrently with the
offering. See "Certain Transactions--Stock Option Loan Program" and "Principal
and Selling Stockholders."
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
JANUARY 31, 1998 JANUARY 31, 1998 (1)
-------------------------- ---------------------------
NAME (2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Richard L. Linting............................. 256,672 239,085 $ 1,566,763 $ 1,186,237
Wyn P. Lewis................................... 462,000 120,952 3,721,800 283,982
Royce D. Brown................................. 38,500 82,390 309,925 29,375
John S. Davis, Jr.............................. 88,550 97,020 713,345 309,626
</TABLE>
- ------------------------
(1) Based on the fair market value of the Company's Common Stock at fiscal year
end (January 31, 1998) of $8.90 per share, as determined by the Company's
Board of Directors, less the exercise price payable for such shares.
(2) Messrs. Carreker and Antinori hold no options.
LONG TERM INCENTIVE PLAN
SCOPE. The Company has a 1994 Long Term Incentive Plan which was originally
adopted in 1994, and will be amended and restated prior to the completion of the
offering (as amended and restated, the "Long Term Incentive Plan"). The Long
Term Incentive Plan is designed to attract and retain qualified and competent
employees, non-employee directors and consultants, and to provide additional
equity-based incentives to employees, non-employee directors and consultants of
the Company. Awards under the Long Term Incentive Plan may be granted in the
form of incentive stock options, non-qualified options and restricted shares, as
determined by the Board of Directors at the time of grant and subject to the
applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Code"). The Board of Directors may delegate any or all of its discretion under
the Long Term Incentive Plan to the Compensation Committee. Although the Long
Term Incentive Plan itself is of indefinite duration, no awards of incentive
stock options may be made under the Long Term Incentive Plan after October 6,
2004.
SHARES RESERVED UNDER THE LONG TERM INCENTIVE PLAN. The Company has
reserved for issuance under the Long Term Incentive Plan 5,500,000 shares of
Common Stock, of which 1,236,882 shares previously have been issued pursuant to
options that have been exercised, 2,823,783 shares are subject to currently
outstanding options, 84,700 shares of restricted stock have been issued and
1,354,635 shares of Common Stock are reserved for future awards. If an award
made under the Long Term Incentive Plan expires, terminates or is forfeited,
cancelled or settled in cash, without issuance of shares of Common Stock covered
by the award, those shares will be available for future awards under the Long
Term Incentive Plan. Commencing on February 1, 1999, and for each year
thereafter, the number of shares of Common Stock available for awards under the
Long Term Incentive Plan will be increased by a number of shares equal to 2% of
the number of shares of Common Stock outstanding as of the effective date of the
amended and restated Long Term Incentive Plan.
ELIGIBILITY. Persons eligible to participate in the Long Term Incentive
Plan include all employees of the Company or any subsidiary of the Company, all
non-employee directors and all consultants for the Company. Awards of incentive
stock options under the Long Term Incentive Plan may be made only to employees
of the Company or any subsidiary.
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<PAGE>
ADMINISTRATION. The Long Term Incentive Plan is administered by the Board
of Directors, unless the Board of Directors delegates its authority to the
Compensation Committee. The Board of Directors has the authority to grant
options and restricted shares under the Long Term Incentive Plan and to
determine the vesting schedule and the exercise price of the options, and the
restrictions and terms thereof. The Board of Directors also has full power and
authority to construe, interpret and administer the Long Term Incentive Plan.
OPTION EXERCISE PRICE. The exercise price per share for the Common Stock
issued pursuant to incentive stock options under the Long Term Incentive Plan
may not be less than 100% of the fair market value on the date the option is
granted. The exercise price per share for non-qualified stock options under the
Long Term Incentive Plan may be determined by the Board or Committee, but may
not be less than the par value of the shares.
ADJUSTMENTS, TERMINATIONS AND AMENDMENT. In the event of any change in the
Company's capitalization, including any stock split, reverse stock split, stock
dividend, spinoff, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company, appropriate
adjustments will be made to the number of shares available under the Long Term
Incentive Plan as well as the price per share and/or number of shares covered by
any outstanding option or restricted stock award.
The Long Term Incentive Plan may be suspended, terminated, altered or
amended in any way by the Board of Directors, provided that stockholder approval
of any plan amendment will be required to the extent necessary and desirable to
comply with applicable provisions of the Securities Exchange Act of 1934 (the
"Exchange Act"), the Code or other legal requirements. No suspension,
termination, alteration or amendment of the Long Term Incentive Plan may alter
or impair any option or restricted stock award previously made under the Long
Term Incentive Plan.
BUSINESS COMBINATIONS. Unless provision is otherwise made in an award, or
by the terms of the agreement with respect to a business combination, in the
event of a change in control of the Company (as defined), then, with respect to
each option or restricted share outstanding immediately prior to the
consummation of such transaction and without the necessity of any action by the
Compensation Committee, all outstanding stock options and restricted stock shall
terminate or be forfeited, provided that the holders of any options may exercise
such awards to the extent then vested immediately prior to any such event.
DIRECTOR STOCK OPTION PLAN
The Company's Board of Directors will approve the Carreker-Antinori, Inc.
Director Stock Option Plan prior to the completion of the offering (the
"Director Plan"). The purpose of the Director Plan is to encourage ownership in
the Company by outside directors whose continued services as directors and
consultants are considered essential to the Company's further progress, thereby
providing them with an additional incentive to continue as directors of the
Company. The Director Plan will terminate on January 31, 2013.
PRINCIPAL FEATURES OF THE DIRECTOR PLAN. The Director Plan provides that
eligible directors of the Company may elect to receive options to purchase
Common Stock in lieu of all or a portion of their annual director's retainer and
various attendance fees and any consulting fees for consulting services rendered
to the Company (the "Fees"). Only directors of the Company who are not employees
of the Company are eligible to participate in the Director Plan.
Options will be granted automatically on the first trading day in any fiscal
quarter (the "Grant Date") to any eligible director who, prior to the Grant
Date, files with the committee administering the Director Plan an election to
receive a stock option in lieu of 25%, 50%, 75% or all of his Fees to be earned
in the period from the Grant Date to the end of the fiscal year. The per share
option price (the "Option Price")
49
<PAGE>
under the Director Plan is equal to 50% of the fair market value of the Common
Stock (the "Market Value") on the Grant Date. "Market Value" is the fair market
value of the Common Stock at the close of business on the relevant Grant Date,
as reported on the Nasdaq National Market. Elections will be deemed made for
each succeeding fiscal year, and options will be automatically granted on the
first trading day in each succeeding fiscal year, unless the director notifies
the Company of the cancellation of the election prior to the first day of the
fiscal year.
The number of option shares granted to an eligible director will be
determined by a formula which provides that each director will receive an option
equal to the nearest number of whole shares equivalent to the Deferred Retainer
and Fees divided by the Option Price. "Deferred Retainer and Fees" are the
amounts the director would have been entitled to receive (i) for serving as a
director and attending all regularly scheduled meetings of the Board of
Directors and its Committees and (ii) for serving as a consultant, during the
remainder of the fiscal year following the Grant Date but for the election
described above.
As an example, assuming a Market Value of the Common Stock equal to the
assumed initial public offering price of $11.00 per share, if a director elected
to participate in the Director Plan at a 100% level for fiscal year 1999, he
would have received an option for 1,818 shares. This amount is calculated by
dividing (i) the director's deferred retainer ($5,000) plus anticipated
attendance fees of $5,000 (assuming no committee meeting attendance fees) by
(ii) 50% of $11.00, the applicable Market Value for the Common Stock.
Generally, no option may be exercised prior to the first anniversary of the
date the option was granted. However, an option will become fully exercisable
upon the retirement of the director because of age, disability or death. In
addition, upon a merger or other business combination involving the Company, an
option will become fully exercisable unless the Company is the surviving
corporation in such merger or business combination or provision is made for the
continuance and assumption of the option. No option may be exercised after the
expiration of 15 years from the date the option was granted. If the optionee
ceases to be a director or consultant before an option granted under the
Director Plan becomes exercisable, is absent from a regularly scheduled meeting,
or fails to earn a consulting fee, the option shall terminate as to a pro rata
portion of the shares subject to the option, based upon the Fees actually
earned.
Unless limited by the option agreement pursuant to which an option is
granted, the option price may be paid upon exercise of an option by delivery of
shares of Common Stock, cash or a combination of cash and Common Stock. The
shares so delivered will be valued as of the exercise date.
Options granted under the Director Plan are transferable by the director by
will or the laws of descent and distribution and to members of the director's
immediate family. After a director's death, the option is exercisable by the
director's designee or, in the absence of a designation, the director's legal
representative.
SHARES RESERVED UNDER THE DIRECTOR PLAN. A total of 100,000 shares of
Common Stock may be issued pursuant to the Director Plan. The Company plans to
register the shares under the Securities Act. Upon the exercise of an option,
the Company may issue authorized but unissued shares or reissue shares
previously repurchased by or on behalf of the Company.
ADMINISTRATION. The Director Plan is administered by the Company's
Compensation Committee.
ADJUSTMENTS, TERMINATIONS AND AMENDMENT. The Compensation Committee has the
power to modify, extend or renew outstanding options and authorize the grant of
new options in substitution therefor, provided that any such action may not have
the effect of altering or impairing any rights or obligations of any option
previously granted without the consent of the optionee.
STOCK OPTIONS PREVIOUSLY AWARDED TO NON-EMPLOYEE DIRECTORS. Prior to its
adoption of the Director Plan, the Company granted options to certain of its
current and former non-employee directors. Messrs. James D. Carreker, Fischer
and Lee, as well as two former directors, each hold 55,263 options, all
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of which are fully vested. In addition, Messrs. James L. Carreker, Fischer, Lee,
Peck and Sias each hold 7,700 options, all of which are fully vested but not
exercisable until March 12, 1999. Mr. Donald L. House holds 30,000 options that
vest quarterly over a three year period beginning on May 1, 1998.
PROFIT SHARING PLAN
The Company maintains a Profit Sharing Incentive Plan (the "Profit Sharing
Plan") administered by the Compensation Committee in which substantially all
employees of the Company are eligible to participate. Under the terms of the
Profit Sharing Plan, each year the Compensation Committee reviews the Company's
actual financial performance in the preceding year compared to certain financial
performance objectives established at the outset of such year. If the Company
exceeded these financial objectives, then a bonus pool is established, and is
allocated among the various operating and corporate divisions of the Company
based upon the Compensation Committee's assessment of the gross contribution
made by each division to the Company's overall performance. Awards are allocated
among specific employees within each division on the basis of the employee's
individual performance and contribution to the overall goals of his or her
division and of the Company. The Compensation Committee seeks input from Company
management in making awards. Awards under the Profit Sharing Plan are made in
the form of cash bonuses and stock-based compensation pursuant to the Company's
Long Term Incentive Plan, with at least 50% of awards granted to senior
management consisting of stock-based compensation. An employee may at his or her
election substitute any cash award for an equivalent stock-based compensation
award. Messrs. John D. Carreker, Jr. and Antinori removed themselves from
consideration for awards under the Profit Sharing Plan in fiscal 1997, but all
other executive officers received awards in that year.
EMPLOYMENT AGREEMENTS
JOHN D. CARREKER, JR. The Company is a party to an employment agreement
with Mr. Carreker with a term extending through January 31, 1999. The agreement
may be renewed by Mr. Carreker for an additional one-year term upon six months'
prior written notice to the Company. The agreement provides that Mr. Carreker
will receive a base annual salary of not less than $450,000 and will be eligible
to receive bonuses as determined by the Board of Directors in its sole
discretion. The agreement may be terminated at any time by the Board of
Directors, with or without cause, and may be terminated during the first two
years of the agreement by Mr. Carreker if the Company is in material breach of
the agreement. Upon termination of the agreement by Mr. Carreker due to a breach
on the part of the Company or by the Company without cause, Mr. Carreker will be
entitled to receive, on the Company's regular payroll dates and less required
withholdings, his salary at the current rate for the remaining term of the
agreement.
RONALD R. ANTINORI. The Company is a party to an employment agreement with
Mr. Antinori with a term extending through January 31, 1999. The agreement
provides that Mr. Antinori will receive a base annual salary during the first
year of not less than $350,000. Mr. Antinori will be entitled to a salary
increase in the second year of the agreement: (i) if the Board of Directors, in
its sole discretion, so determines or (ii) if Mr. Carreker receives a salary
increase in the second year of his contract, Mr. Antinori will be entitled to
receive the same salary increase on a dollar-for-dollar basis. Mr. Antinori will
not receive a bonus for the fiscal year ending January 31, 1998 unless Mr.
Carreker receives a bonus for such fiscal year, in which event their bonuses for
such fiscal year shall be in the same proportion as are their salaries for such
year. If and to the extent the Board of Directors establishes a bonus pool for
the fiscal year ending January 31, 1999, then Mr. Antinori will be entitled to
participate in the same, with the amount of his bonus to be determined based
upon the bonus paid to Mr. Carreker in respect of such fiscal year. In such
event, Messrs. Antinori and Carreker's bonuses shall be in the same proportion
as are their salaries. In determining any bonus for Mr. Antinori, credit will be
given to the Company contributions to his profit-sharing account, if any. The
agreement may be terminated at any time by the Board of Directors, with or
without cause, and may be terminated by Mr. Antinori if the Company is in
material breach of the agreement. Upon termination by Mr. Antinori due to a
breach on the part of the Company or by the
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<PAGE>
Company without cause, Mr. Antinori will be entitled to receive, on the
Company's regular payroll dates and less required withholdings, his salary at
the current rate for the remaining term of the agreement.
OTHER EXECUTIVES. The Company is a party to employment agreements with
Messrs. Linting, Brown, Lewis and Gage. The agreement with Mr. Linting has a
term extending through December 1999 and the agreements with Messrs. Brown,
Lewis and Gage have a term extending through March 2001. Under the agreements,
Messrs. Linting, Brown, Lewis and Gage will receive an annual base salary of not
less than $350,000, $240,000, $300,000 and $180,000, respectively, and each is
entitled to a bonus of seventy percent of his annual base salary on terms no
less favorable than those applicable to other high-level officers of the Company
in each year of the applicable agreement if the Board of Directors, in its sole
discretion, so determines. The agreement with Mr. Linting also provides for the
Company to reimburse him in the aggregate amount of up to $48,000 per year for
rent and other living expenses. The agreements may be terminated at any time by
the Company, with or without cause, and may be terminated by the executive if
the Company is in material breach of the applicable agreement. The agreement
with Mr. Gage allows him to terminate the agreement if (i) Mr. John D. Carreker,
Jr. no longer serves as Chairman or Chief Executive Officer, or (ii) there is a
substantial diminution in his duties or responsibilities during two months prior
to, or six months after, the consummation of certain transactions involving a
change in control of the Company. Upon termination by the executive due to a
breach on the part of the Company or by the Company without cause, the executive
will be entitled to receive, on the Company's regular payroll dates and less
required withholdings, his salary at the current rate for the remaining term of
the agreement.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
As permitted by the Delaware General Corporation Law, the Company's
Certificate of Incorporation provides that no director of the Company will be
personally liable to the Company or its stockholders for monetary damages for
breach of his or her fiduciary duty as a director, except for: (i) any breach of
the director's duty of loyalty to the corporation or its stockholders; (ii) acts
or omissions not in good faith or that involve intentional misconduct or a
knowing violation of the law; (iii) unlawful payments of dividends or unlawful
stock repurchases or redemptions; or (iv) any transaction from which the
director derived an improper personal benefit. The Company's Certificate of
Incorporation and Bylaws provide for the Company's indemnification of its
officers and directors to the fullest extent permitted by the Delaware General
Corporation Law. The Company is also a party to an indemnification agreement
with each of its directors. In addition, the Company intends to maintain
directors' and officers' liability insurance. There is no pending litigation or
proceeding involving a director, officer or employee of the Company for which
indemnification is sought, nor is the Company aware of any threatened litigation
that may result in claims for indemnification.
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CERTAIN TRANSACTIONS
THE REINCORPORATION
Concurrently with the offering, the Company will change its state of
incorporation from Texas to Delaware (the "Reincorporation"). The
Reincorporation will be effected by merging Carreker-Antinori, Inc., a Texas
corporation ("C-A Texas"), into a newly organized, wholly-owned, Delaware
subsidiary that will be the surviving corporation (the "Company"). The Plan and
Agreement of Merger relating to the Reincorporation provides for: (i) the
conversion of each outstanding share of common stock of C-A Texas into 7.70
shares of Common Stock of the Company; (ii) the conversion of all options and
rights to acquire shares of common stock of C-A Texas under its various benefit
plans into options and rights to acquire shares of Common Stock of the Company
on a basis consistent with the Common Stock conversion ratio; and (iii) the
substitution of the charter and bylaws of the Company for those of C-A Texas.
The Reincorporation will not result in any material change in the business,
assets or financial position of C-A Texas, or in the persons who constitute its
Board of Directors or management.
MERGER WITH ANTINORI SOFTWARE, INC.
On January 31, 1997, a wholly-owned subsidiary of the Company merged with
and into ASI, with the result that ASI became a wholly-owned subsidiary of the
Company (the "Merger"). Pursuant to the Merger, the shareholders of ASI received
3,962,528 shares of Common Stock. Of this amount, Ronald R. Antinori, Vice
Chairman of the Board and Chief Technology Officer of the Company, received
3,526,654 shares of Common Stock and Susan Antinori, his wife, received 396,250
shares of Common Stock of the Company. Following resolution of certain issues
relating to the Merger, Mr. Antinori returned 317,032 shares of Common Stock to
the Company for cancellation. In addition, Ms. Antinori returned 19,789 shares
and another former shareholder of ASI returned 1,979 shares. The return of these
shares was intended to effectuate a post-merger adjustment to reflect the
relative values of the Company and ASI at the time of the Merger. In connection
with the Merger, Messrs. Carreker and Antinori and the Company entered into a
Shareholders Agreement which granted certain registration rights to Messrs.
Carreker and Antinori and certain former ASI shareholders. See "Description of
Capital Stock--Registration Rights." Also, Messrs. Carreker and Antinori entered
into certain Employment Agreements with the Company. See "Management--Employment
Agreements."
CONSULTING SERVICES
David K. Sias, a director of the Company, provided special consulting
services to the Company in connection with the Merger. In addition to a monthly
consulting fee of $4,167, the Board of Directors of the Company authorized the
payment of a special fee of $200,000 to Mr. Sias to compensate him for his time
and efforts spent on behalf of the Company in connection with the Merger. The
Company paid consulting fees to Mr. Sias in the aggregate amounts of $71,682,
$64,310 and $36,178 in fiscal 1997, 1996 and 1995, respectively. The Company and
Mr. Sias expect to enter into a new arrangement that will provide for
compensation to be paid to Mr. Sias following the offering that reflects both
his services as a director of and consultant to the Company.
SALE OF SHARES TO SAIC
On October 10, 1996, Science Applications International Corporation ("SAIC")
acquired 774,967 shares of the Company's Common Stock for $2.0 million and
entered into a Shareholder Agreement with the Company and John D. Carreker, Jr.
Pursuant to the Shareholder Agreement, SAIC was entitled to one representative
on the Board of Directors of the Company. Larry J. Peck, Sector Vice President
and Manager, Technology Solutions Sector, of SAIC was elected to the Board of
Directors. In addition, SAIC was granted an option to require the Company to
repurchase its shares of Common Stock pursuant to the Shareholder Agreement. The
Shareholder Agreement terminates upon completion of the offering. The
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Company and SAIC also entered into a three-year, non-exclusive Strategic
Alliance Agreement providing for joint efforts to offer services, products and
technology to customers.
SALE OF SHARES TO CROW FAMILY PARTNERSHIP, L.P.
On January 10, 1997, the Crow Family Partnership, L.P. ("Crow") acquired
269,500 shares of the Company's Common Stock for $834,050. In connection with
such purchase, Crow was granted certain registration rights with respect to
shares of Common Stock held by it. See "Description of Capital Stock--
Registration Rights." James D. Carreker, a director of the Company, serves as a
director of Crow Family, Inc., the general partner of Crow.
PROVISION OF MANAGEMENT SERVICES AND OTHER TRANSACTIONS INVOLVING ECCHO, PSN AND
INFITEQ
The Company provides management services to three organizations, ECCHO, PSN
and INFITEQ (See "Business--Strategic Banking Initiatives"). David Walker,
Senior Vice President of the Company, serves as Executive Director of ECCHO. For
the fiscal years ended January 31, 1998, 1997 and 1996, the Company recognized
revenues from ECCHO for its management services in the amount of approximately
$994,000, $866,000 and $696,000, respectively. John D. Carreker, Jr., Chairman
of the Board and Chief Executive Officer of the Company, serves as a director of
PSN. In the fiscal years ended January 31, 1998, 1997 and 1996, the Company
recognized revenues from PSN for its management services in the amounts of $1.4
million, $1.3 million and $1.3 million, respectively. John D. Carreker, Jr.
serves as Chairman of the Board of INFITEQ, and John D. Carreker, III, Senior
Vice President of the Company and the son of John D. Carreker, Jr., serves as
Executive Director of INFITEQ. Under a ten-year agreement entered into on
January 1998 with three other service providers in INFITEQ, the Company will
receive a monthly fee of $45,000 plus expenses for an initial period, and
thereafter, a fee calculated on a percentage of the charges from the service
providers to the banks, as well as certain other amounts. See "Management's
Discussion of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
The Company loaned PSN $500,000 in fiscal 1996, which amount has been
reserved due to the Company's belief that collection is doubtful. The Company
loaned PSN an additional $78,000 in fiscal 1996, which loan is currently being
repaid in accordance with its terms.
EMPLOYEE RELOCATION LOAN
In connection with the relocation of John S. Davis, Jr. to serve in the
Company's office in Atlanta, the Company agreed to advance Mr. Davis $90,000
without interest to allow him to recoup a portion of his equity in his Dallas
residence so that he would be able to purchase a home in Atlanta. In addition,
pending the sale of Mr. Davis' Dallas residence, the Company has agreed to make
all principal and interest payments on the mortgage applicable to that
residence. Amounts of principal and interest paid on such mortgage totaled
approximately $15,200 for fiscal 1997. Upon the sale of Mr. Davis' Dallas
residence, the Company will be entitled to receive the amount of the loan and of
principal payments made by it to the extent amounts are available after receipt
by Mr. Davis of his equity remaining in the Dallas residence and repayment of
the mortgage. Mr. Davis is entitled to any amounts remaining after the repayment
of the loan from the Company and the reimbursement of principal payments from
the Company.
FUTURE TRANSACTIONS
The Company intends to adopt a policy providing that all transactions
between the Company and related parties will be subject to approval by a
majority of all disinterested directors and must be on terms no less favorable
than those that could otherwise be obtained from unrelated third parties.
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock and as adjusted to reflect the sale of
shares of Common Stock in the offering, by: (i) each person known by the Company
to own beneficially more than 5% of the outstanding Common Stock; (ii) each of
the Company's directors; (iii) each of the Named Executive Officers; (iv) all
directors and executive officers of the Company as a group; and (v) each Selling
Stockholder. The share information set forth below assumes the full exercise of
all options that are eligible to participate in the loan program established by
BancAmerica Robertson Stephens. See "Underwriting." Unless otherwise noted, the
address for each of the following persons is: c/o Carreker-Antinori, Inc., 14001
N. Dallas Parkway, Suite 1100, Dallas, Texas 75240.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING NUMBER OF OFFERING
------------------------- SHARES -------------------------
NAME NUMBER PERCENT BEING OFFERED NUMBER PERCENT
- -------------------------------------------------- ------------ ----------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
John D. Carreker, Jr. (1)(2)...................... 5,116,203 40.3% 738,525 4,377,678 26.8%
Ronald R. Antinori (3)............................ 3,381,686 26.6 488,275 2,893,411 17.7
SAIC (4).......................................... 774,967 6.1 72,000 702,967 4.3
Wyn P. Lewis (2)(5)............................... 563,078 4.3 77,000 486,078 2.9
Richard L. Linting (6)............................ 279,772 2.2 -- 279,772 1.7
Royce D. Brown (2)(7)............................. 387,787 3.0 46,200 341,587 2.1
David K. Sias (8)................................. 242,173 1.9 -- 242,173 1.5
John S. Davis, Jr. (2)(9)......................... 144,429 1.1 -- 144,429 *
James L. Fischer (10)............................. 132,486 1.0 -- 132,486 *
James D. Carreker (11)............................ 387,772 3.0 -- 387,772 2.4
Richard R. Lee, Jr. (12).......................... 713,189 5.6 -- 713,189 4.3
Larry J. Peck (13)................................ 774,967 6.1 -- 702,967 4.3
Donald L. House (14).............................. 2,500 * -- 2,500 *
Lawrence D. Duckworth (15)........................ 188,227 1.5 28,000 160,227 1.0
Directors and executive officers as a group (15
persons)(2)(16).................................. 12,342,581 89.4 % 1,350,000 10,992,581 63.0 %
</TABLE>
- ------------------------
* Less than 1%
(1) Includes 189,281 shares held in family trusts for which Mr. Carreker is the
trustee; 252,375 shares held in a family limited partnership for which Mr.
Carreker is the general partner; and 189,281 shares held in family trusts
for which Connie B. Carreker, the wife of Mr. Carreker, is the trustee (as
to which shares Mr. Carreker disclaims beneficial ownership).
(2) Includes 68,746, 17,148, 42,866, 11,473 and 594,917 shares of Common Stock
held in the Employee Stock Option Plan ("ESOP") for the benefit of Messrs.
Carreker, Lewis, Brown and Davis, respectively, and all directors and
executive officers as a group.
(3) Includes 403,411 shares held by Susan Antinori, the wife of Mr. Antinori, as
to which Mr. Antinori disclaims beneficial ownership. The address for Mr.
Antinori is c/o the Company, 1201 Peachtree Street, Suite 450, Atlanta,
Georgia 30361.
(4) SAIC has granted an option to the Underwriters to purchase up to 702,967
shares, solely to cover over-allotments, if any. See "Underwriting." The
address for SAIC is 10260 Campus Point Drive, San Diego, California 92121.
(5) Includes 77,000 shares that will be issued to Mr. Lewis upon his exercise of
options contemporaneously with the offering, 385,000 shares held under
exercisable options and 38,500 shares of restricted stock issued under the
Long Term Incentive Plan.
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(6) Includes 256,672 shares held under currently exercisable options and 23,100
shares of restricted stock issued under the Long Term Incentive Plan.
(7) Includes 38,500 shares held under currently exercisable options.
(8) The address for Mr. Sias is 468 Meadowbrook Drive, Santa Barbara, California
93108.
(9) Includes 88,550 shares held under currently exercisable options.
(10) Includes 55,263 shares held under currently exercisable options. The
address for James L. Fischer is 7170 Kendallwood, Dallas, Texas 75240.
(11) Includes 55,263 shares held under currently exercisable options and 6,576
shares held by children of Mr. Carreker, as to which Mr. Carreker disclaims
beneficial ownership. Also includes 269,500 shares held by Crow Family
Holdings, L.P. for which Mr. Carreker serves as a director of the general
partner. Mr. Carreker disclaims beneficial ownership of all shares held by
Crow Family Holdings, L.P. The address for Mr. Carreker is 1950 Stemmons
Freeway, Suite 6001, Dallas, Texas 75207.
(12) Includes 55,263 shares held under currently exercisable options and 594,917
shares held in the ESOP for which Mr. Lee has full voting rights as trustee
of the ESOP. Mr. Lee disclaims beneficial ownership of all shares held in
the ESOP. The address for Mr. Lee is 12201 Merritt Drive, Suite 530, Dallas,
Texas 75251.
(13) Shares beneficially owned prior to offering includes 774,967 shares held by
SAIC, as to which Mr. Peck disclaims beneficial ownership. The address for
Mr. Peck is c/o SAIC, 10260 Campus Point Drive, San Diego, California 92121.
(14) Includes 2,500 shares held under currently exercisable options. The address
for Mr. House is 2480 Spalding Drive, Atlanta, Georgia 30350.
(15) The address for Mr. Duckworth is 15 Old Stratton Chase, Atlanta, Georgia
30328.
(16) Includes shares held by SAIC and Crow Family Holdings, L.P. Mr. Peck
disclaims beneficial ownership of all shares held by SAIC, and Mr. James D.
Carreker disclaims beneficial ownership of all shares held by Crow Family
Holdings, L.P.
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DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 100,000,000 shares of
Common Stock, $.01 par value per share ("Common Stock"), and 2,000,000 shares of
Preferred Stock, $.01 par value per share ("Preferred Stock"), issuable in
series. There will be 12,698,685 shares of Common Stock outstanding immediately
prior to consummation of the offering, held of record by 70 stockholders. No
shares of Preferred Stock are outstanding.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. The holders of
Common Stock are not entitled to cumulative voting rights with respect to the
election of directors, and as a consequence, minority stockholders will not be
able to elect directors on the basis of their votes alone. Subject to
preferences that may be applicable to any then outstanding shares of Preferred
Stock, holders of Common Stock are entitled to receive ratably such dividends as
may be declared by the Board of Directors out of funds legally available
therefor. See "Dividend Policy." In the event of a liquidation, dissolution or
winding up of the Company, holders of the Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities and the liquidation
preference of any then outstanding Preferred Stock. Holders of Common Stock have
no preemptive, conversion or other rights to subscribe for additional securities
of the Company. There are no redemption or sinking fund provisions applicable to
the Common Stock. All outstanding shares of Common Stock are, and all shares of
Common Stock to be outstanding upon completion of the offering will be, validly
issued, fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors has the authority, without further action by the
stockholders, to issue up to 2,000,000 shares of Preferred Stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences, sinking fund terms and the number of shares
constituting any series or the designation of such series, without any further
vote or action by stockholders. The issuance of Preferred Stock could adversely
affect the voting power of holders of Common Stock and the likelihood that such
holders will receive dividend payments and payments upon liquidation and could
have the effect of delaying, deferring or preventing a change in control of the
Company. The Company has no present plan to issue any shares of Preferred Stock.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
DELAWARE ANTI-TAKEOVER STATUTE. The Company is subject to the provisions of
Section 203 of the Delaware General Corporation Law, an anti-takeover law.
Subject to certain exceptions, the statute prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the interested
stockholder attained such status with the approval of the Board of Directors,
the business combination is approved in a prescribed manner or certain other
conditions are satisfied. For purposes of Section 203, a "business combination"
includes a merger, asset sale or other transaction resulting in a financial
benefit to the interested stockholder, and an "interested stockholder" is a
person who, together with affiliates and associates, owns (or within three years
prior, did own) 15% or more of the corporation's voting stock.
CERTIFICATE OF INCORPORATION. The Company's Certificate of Incorporation
(the "Certificate") provides: (i) for the authorization of the Board of
Directors to issue, without further action by the stockholders, up to 2,000,000
shares of Preferred Stock in one or more series and to fix the rights,
preferences, privileges and restrictions thereof; (ii) that any action required
or permitted to be taken by stockholders of the Company must be effected at a
duly called annual or special meeting of the stockholders and may not be
effected by a consent in writing; (iii) that special meetings of stockholders of
the Company may be called only by the Chairman of the Board, the Chief Executive
Officer or a majority
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of the members of the Board of Directors; (iv) for a classified Board of
Directors; (v) that vacancies on the Board of Directors, including newly created
directorships, can be filled only by a majority of the directors then in office,
and (vi) that directors of the Company may be removed only for cause and only by
the affirmative vote of holders of at least two-thirds of the outstanding shares
of voting stock, voting together as a single class.
These provisions are intended to enhance the likelihood of continuity and
stability in the composition of the Board of Directors and in the policies
formulated by the Board of Directors and to discourage certain types of
transactions that may involve an actual or threatened change of control of the
Company. These provisions are designed to reduce the vulnerability of the
Company to an unsolicited proposal for a takeover of the Company that does not
contemplate the acquisition of all of its outstanding shares, or an unsolicited
proposal for the restructuring or sale of all or part of the Company. Such
provisions, however, could discourage potential acquisition proposals and could
delay or prevent a change in control of the Company. Such provisions may also
have the effect of preventing changes in the management of the Company. See
"Risk Factors--Anti-Takeover Matters."
LIMITATIONS ON DIRECTOR LIABILITY
The Certificate provides that, to the fullest extent permitted by the
Delaware General Corporation Law, as the same exists or as may hereafter be
amended, directors of the Company will not be liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director.
REGISTRATION RIGHTS
Pursuant to an agreement among the Company, Ronald R. Antinori, Susan
Antinori (Mr. Antinori's wife), Michael Israel, Lawrence D. Duckworth and John
D. Carreker, Jr. (the "Shareholders"), the Shareholders are entitled to certain
rights with respect to the registration of shares of Common Stock under the
Securities Act. If the Company proposes to register any shares of Common Stock
under the Securities Act for its own account for cash, the Shareholders are
entitled to notice of such registration and entitled, subject to certain
limitations, to include shares of their Common Stock therein. The registration
rights of each of the Shareholders continue until such time as the Shareholder
can sell shares of Common Stock pursuant to Rule 144(k) under the Securities
Act. Additionally, at any time from and after one year after the completion of
the offering, the Shareholders holding not less than 50%, on a fully-diluted
basis, of the capital stock of the Company are entitled to certain demand
registration rights pursuant to which they may require the Company to file a
registration statement under the Securities Act; provided, however, that the
amount of shares to be offered for sale in the demand registration must have a
fair market value of $10 million or more. The Company is not obligated to effect
more than four demand registrations. The Company is required to use its best
efforts to effect such registrations. Generally, the Company is required to bear
all registration and selling expenses incurred in connection with any such
registrations. The rights are subject to certain conditions and limitations,
among them the right of the underwriters of an offering to limit the number of
shares included in such registrations.
John D. Carreker, Jr., Ronald R. Antinori and Lawrence D. Duckworth are
participating as Selling Stockholders in the offering pursuant to the above
described agreement. The Company will bear all registration and selling expenses
incurred in connection with the offering (other than underwriting discounts and
commissions attributable to their shares) and has agreed to indemnify such
Selling Stockholders for certain liabilities arising in connection with the
offering.
Pursuant to an agreement between the Company and Crow, Crow also has certain
registration rights. If any other stockholder of the Company exercises
contractual registration rights, Crow is entitled to notice of such registration
and is entitled, subject to certain limitations, to include shares of its Common
Stock therein. Generally, the Company is required to bear all registration and
selling expenses incurred in connection with such registrations. The rights are
subject to certain conditions and limitations, among them the right of the
underwriters of an offering to limit the number of shares included in such
registrations. The Crow registration rights terminate at such time as its shares
may be sold under Rule 144 of the Securities Act.
58
<PAGE>
TRADING MARKET, TRANSFER AGENT AND REGISTRAR
The Common Stock has been approved for quotation on the Nasdaq National
Market under the symbol CANI, subject to official notice of issuance. The
Transfer Agent and Registrar for the Common Stock is ChaseMellon Shareholder
Services, L.L.C.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, the Company will have an aggregate of
16,348,685 shares of Common Stock outstanding. Of these shares, all of the
shares sold in the offering will be freely transferable without restriction or
limitation under the Securities Act, except for any shares purchased by
"affiliates" or persons deemed to be acting as "underwriters" (as such terms are
defined under the Securities Act) of the Company. The remaining 11,248,685
shares constitute "restricted shares" within the meaning of Rule 144, and the
resale of such shares is restricted for one year from the date they were
acquired. Of these "restricted securities," 9,813,086 shares have been held for
the required one-year period and will be freely tradeable upon completion of the
offering, subject to the 180-day lock-up period described below. With respect to
the remaining 1,435,599 "restricted securities," the Company intends to file a
registration statement on Form S-8 after the offering providing for the resale
of approximately 1,152,174 shares of Common Stock, with the balance of such
shares remaining subject to the requisite Rule 144 one-year holding period and
other limitations (provided, that the sale of all such shares will in any event
be subject to the 180-day lock-up period described below). In addition, the
holders of 8,443,448 shares have certain rights to have shares registered in the
future under the Securities Act pursuant to the terms of agreements between such
holders and the Company. See "Description of Capital Stock--Registration
Rights."
In general, under Rule 144, as currently in effect, a person (or persons
whose shares are required to be aggregated) who has beneficially owned, for at
least one year, shares of Common Stock that have not been registered under the
Securities Act or that were acquired from an "affiliate" of the Company is
entitled to sell within any three-month period the number of shares of Common
Stock which does not exceed the greater of one percent of the number of then
outstanding shares or the average weekly reported trading volume during the four
calendar weeks preceding the sale. Sales under Rule 144 are also subject to
certain notice and manner of sale requirements and to the availability of
current public information about the Company and must be made in unsolicited
brokers' transactions or to a market maker. A person (or persons whose shares
are aggregated) who is not an "affiliate" of the Company under the Securities
Act during the three months preceding a sale and who has beneficially owned such
shares for at least two years is entitled to sell such shares under Rule 144
without regard to the volume, notice, information and manner of sale provisions
of such rule. Rule 144 does not require the same person to have held the
securities for the applicable periods.
The Company, its executive officers, directors and principal and other
stockholders, who will hold, collectively, 10,783,330 shares of Common Stock
after the offering, have agreed not to offer or sell any shares of Common Stock
for a period of 180 days following the date of this Prospectus without the prior
written consent of BancAmerica Robertson Stephens, except that the Company may
issue shares of Common Stock in connection with acquisitions and pursuant to the
exercise of stock options described in this Prospectus.
The resale provisions of Rule 701 under the Securities Act may be relied
upon by option holders of the Company's Common Stock for the resale of shares
issued upon the exercise of approximately 1,131,015 outstanding options held by
certain employees, directors, officers, consultants or advisors pursuant to a
written compensatory benefit plan or contract relating to the compensation of
such persons. Securities issued in reliance on Rule 701 are "restricted" shares
and, beginning 90 days after the date of this Prospectus, may be resold by
non-affiliates subject only to the manner of sale provisions of Rule 144 and by
affiliates under Rule 144 without compliance with the one-year holding period,
in each case subject to the lock-up agreements discussed above.
59
<PAGE>
After the offering, the Company intends to file a registration statement on
Form S-8 to register all of the shares of Common Stock reserved for issuance
pursuant to the Long Term Incentive Plan and the Director Plan. Accordingly,
shares issued upon exercise of such options will be freely tradeable by holders
who are not affiliates of the Company and, subject to the volume and other
limitations of Rule 144, by holders who are affiliates of the Company.
Prior to the offering, there has been no market for the Common Stock. No
predictions can be made of the effect, if any, that market sales of shares of
Common Stock or the availability of such shares for sale will have on the market
price prevailing from time to time. Nevertheless, sales of significant amounts
of Common Stock could adversely affect the prevailing market price of the Common
Stock, as well as impair the ability of the Company to raise capital through the
issuance of additional equity securities. See "Risk Factors--Shares Eligible for
Future Sale."
60
<PAGE>
UNDERWRITING
The Underwriters named below, acting through their representatives,
BancAmerica Robertson Stephens, Hambrecht & Quist LLC and Lehman Brothers Inc.
(the "Representatives"), have severally agreed with the Company and the Selling
Stockholders, subject to the terms and conditions of the Underwriting Agreement,
to purchase the number of shares of Common Stock set forth opposite their
respective names below. The Underwriters are committed to purchase and pay for
all such shares if any are purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ------------------------------------------------------------------------------------------- ----------
<S> <C>
BancAmerica Robertson Stephens.............................................................
Hambrecht & Quist LLC......................................................................
Lehman Brothers Inc........................................................................
----------
Total.................................................................................... 5,100,000
----------
----------
</TABLE>
The Representatives have advised the Company and the Selling Stockholders
that the Underwriters propose to offer the shares of Common Stock to the public
at the initial public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession of not in
excess of $ per share, of which $ may be reallowed to other dealers. After
the initial public offering, the public offering price, concession and
reallowance to dealers may be reduced by the Representatives. No such reduction
shall change the amount of proceeds to be received by the Company as set forth
on the cover page of this Prospectus.
The Company and a Selling Stockholder have granted to the Underwriters an
option, exercisable during the 30-day period after the date of this Prospectus,
to purchase up to 62,033 and 702,967 additional shares of Common Stock,
respectively (an aggregate of 765,000 shares of Common Stock), at the initial
public offering price per share set forth on the cover page of this Prospectus.
In the event the Underwriters exercise their right to purchase less than all of
the shares of Common Stock covered by the option, then the Underwriters will
first purchase the shares held by the Selling Stockholder and will thereafter
purchase shares issued by the Company. To the extent that the Underwriters
exercise the option, each of the Underwriters will have a firm commitment to
purchase approximately the same percentage of such additional shares that the
number of shares of Common Stock to be purchased by it shown in the above table
represents as a percentage of the total number of shares offered hereby. If
purchased, such additional shares will be sold by the Underwriters on the same
terms as those on which the shares offered hereby are being sold.
The Underwriting Agreement contains covenants of indemnity among the
Underwriters, the Company and the Selling Stockholders against certain civil
liabilities, including liabilities under the Securities Act and liabilities
arising from breaches of representations and warranties contained in the
Underwriting Agreement.
Pursuant to the terms of lock-up agreements, the holders of 10,783,330
shares of the Company's Common Stock have agreed, for a period of up to 180 days
after the date of this Prospectus, that, subject to certain exceptions, they
will not contract to sell or otherwise dispose of any shares of Common Stock,
any options or warrants to purchase shares of Common Stock or any securities
convertible into, or exchangeable for, shares of Common Stock, currently owned
by such holders, without the prior written consent of BancAmerica Robertson
Stephens. BancAmerica Robertson Stephens may, in its sole discretion, and at
61
<PAGE>
any time without notice, release all or any portion of the securities subject to
lock-up agreements. All of the shares of Common Stock subject to lock-up
agreements will be eligible for sale in the public market upon the expiration of
the lock-up agreements, subject to Rule 144.
In addition, the Company has agreed that until 180 days after the date of
this Prospectus, the Company will not, without the prior written consent of
BancAmerica Robertson Stephens, subject to certain exceptions, offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock, any options
or warrants to purchase any shares of Common Stock or any securities convertible
into, or exercisable or exchangeable for shares of Common Stock, other than the
Company's sale of shares in the offering, the issuance of shares of Common Stock
upon the exercise of outstanding options and the grant of options to purchase
shares of Common Stock under existing employee stock option or stock purchase
plans. Furthermore, the Company has agreed not to file any registration
statements on Form S-8 to register the shares of Common Stock reserved for
issuance under the Long Term Incentive Plan and the Director Plan until at least
180 days after the date of this Prospectus. See "Shares Eligible For Future
Sale."
The Underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
Prior to the offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price for the Common
Stock offered hereby will be determined through negotiations among the Company,
the Selling Stockholders and the Representatives. Among the factors to be
considered in such negotiations are prevailing market conditions, certain
financial information of the Company, market valuations of other companies that
the Company and the Representatives believe to be comparable to the Company,
estimates of the business potential of the Company, the present state of the
Company's development and other factors deemed relevant.
The Representatives have advised the Company that, pursuant to Regulation M
under the Securities Act, certain persons participating in the offering may
engage in transactions, including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids, which may have the effect of
stabilizing or maintaining the market price of the Common Stock at a level above
that which might otherwise prevail in the open market. A "stabilizing bid" is a
bid for or the purchase of the Common Stock on behalf of the Underwriters for
the purpose of fixing or maintaining the price of the Common Stock. A "syndicate
covering transaction" is the bid for or the purchase of the Common Stock on
behalf of the Underwriters to reduce a short position incurred by the
Underwriters in connection with the offering. A "penalty bid" is an arrangement
permitting the Representatives to reclaim the selling concession otherwise
accruing to an Underwriter or syndicate member in connection with the offering
if the Common Stock originally sold by such Underwriter or syndicate member is
purchased by the Representatives in a syndicate covering transaction and has
therefore not been effectively placed by such Underwriter or syndicate member.
The Representatives have advised the Company that such transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
A substantial number of the Company's employees hold options to purchase
shares of Common Stock that will terminate if unexercised contemporaneously with
the offering. BancAmerica Robertson Stephens intends to offer a margin loan
program (the "Loan Program") to these employees to loan to them the purchase
price required to exercise their options, plus additional amounts up to a
specified loan-to-value ratio. The interest rate applicable to the loans made to
enable the employees to exercise their options will be 5.3% per annum, and the
interest rate applicable to any additional amounts loaned will be 8.0% per
annum. All principal and interest will be due and payable upon maturity (two
years from the date of the initial loans). The shares of Common Stock received
by an option holder upon exercise of his or her options will be pledged to
secure the margin loans. It is expected that BancAmerica Robertson Stephens will
loan up to approximately $1.1 million to employees of the Company under the Loan
Program in order to enable them to exercise their options. It is expected that
certain employees of the Company will elect to make alternative arrangements
that will enable them to exercise the options held by them that would
62
<PAGE>
otherwise terminate if unexercised contemporaneously with the offering. For
purposes of determining the number of shares of Common Stock currently
outstanding, this Prospectus assumes that all options that terminate if
unexercised contemporaneously with the offering will be exercised and the
related shares of Common Stock will be issued (1,152,174 shares of Common Stock
in the aggregate). After the offering, the Company intends to file a
registration statement on Form S-8 that would provide for registration for
resale of all shares issued pursuant to options that would terminate if
unexercised contemporaneously with the offering. See "Shares Eligible for Future
Sale."
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered by this
Prospectus will be passed upon for the Company by Locke Purnell Rain Harrell (A
Professional Corporation), Dallas, Texas. Maurice E. Purnell, Jr., a shareholder
of Locke Purnell Rain Harrell (A Professional Corporation), is the Secretary of
the Company. Certain legal matters in connection with the offering will be
passed upon for the Underwriters by Brobeck, Phleger & Harrison LLP, Austin,
Texas.
EXPERTS
The Consolidated Financial Statements of Carreker-Antinori, Inc. as of
January 31, 1998 and 1997 and for each of the three years in the period ended
January 31, 1998 included in this Prospectus and the Registration Statement,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon appearing elsewhere herein and in the Registration
Statement, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a registration statement on Form
S-1 under the Securities Act with respect to the shares of Common Stock offered
hereby. This Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the shares offered by this
Prospectus, reference is made to the Registration Statement, including the
exhibits and schedules filed thereto. Statements contained in this Prospectus as
to the contents of any agreement, 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 or
such other document, each such statement being qualified in all respects by such
reference. A copy of the Registration Statement may be inspected by anyone
without charge at the Commission's principal office in Washington, D.C. and
copies of all or any part thereof may be obtained upon payment of certain fees
prescribed by the Commission from the Public Reference Section of the Commission
at the Commission's principal office, 450 Fifth Street, N.W., Washington, D.C.
20549, or at the Commission's Regional Offices in New York, located at 7 World
Trade Center, Suite 1300, New York, New York 10048, or in Chicago, located at
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The Commission
maintains a World Wide Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The address of the Commission's World Wide Web site is
http://www.sec.gov.
63
<PAGE>
CARREKER-ANTINORI, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Ernst & Young LLP, Independent Auditors.......................................................... F-2
Consolidated Balance Sheets as of January 31, 1997 and 1998................................................ F-3
Consolidated Statements of Operations for the years ended January 31, 1996, 1997 and 1998.................. F-4
Consolidated Statements of Stockholders' Equity for the years ended January 31, 1996, 1997 and 1998........ F-5
Consolidated Statements of Cash Flows for the years ended January 31, 1996, 1997 and 1998.................. F-6
Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Carreker-Antinori, Inc.
We have audited the accompanying consolidated balance sheets of
Carreker-Antinori, Inc. (the Company), as of January 31, 1997 and 1998, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended January 31, 1998. 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
Carreker-Antinori, Inc., at January 31, 1997 and 1998, and the results of its
operations and its cash flows for each of the three years in the period ended
January 31, 1998, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Dallas, Texas
March 18, 1998,
except for Notes 1 and 11
as to which the date is
, 1998
The foregoing report is in the
form that will be signed upon
completion of the reincorporation and
related restatement of capital
accounts described in Notes 1 and 11
to the Consolidated Financial
Statements.
ERNST & YOUNG LLP
Dallas, Texas
April 24, 1998
F-2
<PAGE>
CARREKER-ANTINORI, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
<TABLE>
<CAPTION>
JANUARY 31,
--------------------
1997 1998
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents.................................................................. $ 3,443 $ 1,975
Accounts receivable, net of allowance of $134 and $356 at January 31, 1997 and 1998,
respectively............................................................................. 9,075 11,392
Receivable from Electronic Check Clearing House Organization............................... 477 566
Receivable from Payment Solutions Network, Inc., net of allowance of $100 at January 31,
1998..................................................................................... 257 797
Inventory.................................................................................. 216 26
Income tax receivable...................................................................... 192 199
Prepaid expenses........................................................................... 719 646
Deferred income taxes...................................................................... 538 546
--------- ---------
Total current assets......................................................................... 14,917 16,147
Furniture, equipment, and leasehold improvements, net of accumulated depreciation of $835 and
$1,489 at January 31, 1997 and 1998, respectively.......................................... 891 1,580
Software costs capitalized, net of accumulated amortization of $2,571 and $3,300 at January
31, 1997 and 1998, respectively............................................................ 989 2,263
Other assets................................................................................. 103 329
--------- ---------
Total assets................................................................................. $ 16,900 $ 20,319
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................................................... $ 1,030 $ 2,036
Accrued compensation and benefits.......................................................... 1,846 1,652
Other accrued expenses..................................................................... 1,042 849
Deferred income taxes...................................................................... -- --
Deferred revenue........................................................................... 5,317 4,176
--------- ---------
Total current liabilities.................................................................... 9,235 8,713
Deferred income taxes........................................................................ 323 982
Commitments (Note 9)
Common stock subject to put.................................................................. 2,000 2,000
Stockholders' equity:
Preferred Stock, $.01 par value: 2,000 shares authorized; no shares issued and
outstanding.............................................................................. -- --
Common Stock, $.01 par value:
100,000 shares authorized; 11,770 and 12,007 shares issued at January 31, 1997 and 1998,
respectively............................................................................. 118 120
Additional paid-in capital................................................................. 1,128 2,078
Retained earnings.......................................................................... 4,635 7,690
Less treasury stock, at cost:
387 and 367 common shares as of January 31, 1997 and 1998, respectively.................... (539) (510)
Deferred compensation...................................................................... -- (754)
--------- ---------
Total stockholders' equity................................................................... 5,342 8,624
--------- ---------
Total liabilities and stockholders' equity................................................... $ 16,900 $ 20,319
--------- ---------
--------- ---------
</TABLE>
See accompanying notes.
F-3
<PAGE>
CARREKER-ANTINORI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
Consulting and management service fees......................................... $ 9,635 $ 14,407 $ 21,314
Software license fees.......................................................... 3,660 6,398 10,200
Software maintenance and implementation fees................................... 4,184 5,799 7,429
Hardware sales................................................................. 1,070 2,468 1,558
--------- --------- ---------
Total revenues............................................................... 18,549 29,072 40,501
--------- --------- ---------
Costs of revenues:
Consulting and management service fees......................................... 5,303 8,794 12,394
Software license fees.......................................................... 700 1,307 1,412
Software maintenance and implementation fees................................... 2,408 3,108 5,369
Hardware sales................................................................. 753 1,746 1,340
--------- --------- ---------
Total cost of revenues....................................................... 9,164 14,955 20,515
--------- --------- ---------
Gross profit..................................................................... 9,385 14,117 19,986
--------- --------- ---------
Operating costs and expenses:
Selling, general, and administrative........................................... 5,702 8,649 11,529
Research and development....................................................... 906 1,161 3,448
Merger related costs........................................................... 54 1,423 --
--------- --------- ---------
Total operating costs and expenses........................................... 6,662 11,233 14,977
Income from operations........................................................... 2,723 2,884 5,009
Other income (expense):
Interest income, net........................................................... 54 114 99
Other income (expense)......................................................... 250 (500) --
--------- --------- ---------
304 (386) 99
--------- --------- ---------
Income before provision for income taxes......................................... 3,027 2,498 5,108
Provision for income taxes (Note 5).............................................. 1,165 1,122 2,053
--------- --------- ---------
Net income....................................................................... $ 1,862 $ 1,376 $ 3,055
--------- --------- ---------
--------- --------- ---------
Basic earnings per share......................................................... $ .16 $ .13 $ .27
--------- --------- ---------
--------- --------- ---------
Diluted earnings per share....................................................... $ .15 $ .12 $ .23
--------- --------- ---------
--------- --------- ---------
Shares used in computing basic earnings per share................................ 11,543 10,914 11,477
--------- --------- ---------
--------- --------- ---------
Shares used in computing diluted earnings per share.............................. 12,092 11,878 13,244
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes.
F-4
<PAGE>
CARREKER-ANTINORI, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY STOCK
------------------------ PAID-IN RETAINED DEFERRED ----------------------
SHARES AMOUNT CAPITAL EARNINGS COMPENSATION SHARES AMOUNT
----------- ----------- ----------- ----------- --------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 31, 1995............ 11,746 $ 118 $ 1,811 $ 1,901 $ (163) 2 $ (2)
Compensation earned under employee
stock ownership plan................. -- -- -- -- 163 -- --
Issuance of stock options.............. -- -- -- 643 (643) -- --
Compensation earned under employee
stock option plan.................... -- -- -- -- 54
Purchase of treasury stock............. -- -- -- -- -- 4 (5)
Distributions to Antinori Software
shareholders......................... (445)
Net income............................. -- -- -- 1,862 -- -- --
Pro forma tax adjustment (Note 5)...... -- -- -- 149 -- -- --
----------- ----- ----------- ----------- ----- --------- -----------
Balance at January 31, 1996............ 11,746 118 1,811 4,110 (589) 6 (7)
Compensation earned under employee
stock option plan.................... -- -- -- -- 589 -- --
Purchase of treasury stock............. -- -- -- -- -- 1,431 (2,004)
Sale of treasury stock................. -- -- 1,378 -- -- (1,050) 1,472
Common shares subject to put (Note
6)................................... -- -- (2,000) -- -- -- --
Issuance of shares of common stock upon
exercise of stock options............ 24 -- 15 -- -- -- --
Distributions to Antinori Software
shareholders......................... -- -- -- (1,030) -- -- --
Merger with Antinori Software.......... -- -- (76) 76 -- -- --
Net income............................. -- -- -- 1,376 -- -- --
Pro forma tax adjustment (Note 5)...... -- -- -- 103 -- -- --
----------- ----- ----------- ----------- ----- --------- -----------
Balance at January 31, 1997............ 11,770 118 1,128 4,635 -- 387 (539)
Restricted stock grant................. 85 1 753 -- (754) -- --
Sale of treasury stock................. -- -- 39 -- -- (23) 33
Purchase of treasury stock............. -- -- -- -- -- 3 (4)
Adjustment of shares issued to Antinori
Software shareholders................ (198) (2) 2 -- -- -- --
Issuance of shares of common stock upon
exercise of stock options............ 350 3 156 -- -- -- --
Net income............................. -- -- 3,055 -- -- --
----------- ----- ----------- ----------- ----- --------- -----------
Balance at January 31, 1998............ 12,007 $ 120 $ 2078 $ 7,690 $ (754) 367 $ (510)
----------- ----- ----------- ----------- ----- --------- -----------
----------- ----- ----------- ----------- ----- --------- -----------
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
Balance at January 31, 1995............ $ 3,665
Compensation earned under employee
stock ownership plan................. 163
Issuance of stock options.............. --
Compensation earned under employee
stock option plan.................... 54
Purchase of treasury stock............. (5)
Distributions to Antinori Software
shareholders......................... (445)
Net income............................. 1,862
Pro forma tax adjustment (Note 5)...... 149
-------------
Balance at January 31, 1996............ 5,443
Compensation earned under employee
stock option plan.................... 589
Purchase of treasury stock............. (2,004)
Sale of treasury stock................. 2,850
Common shares subject to put (Note
6)................................... (2,000)
Issuance of shares of common stock upon
exercise of stock options............ 15
Distributions to Antinori Software
shareholders......................... (1,030)
Merger with Antinori Software.......... --
Net income............................. 1,376
Pro forma tax adjustment (Note 5)...... 103
-------------
Balance at January 31, 1997............ 5,342
Restricted stock grant................. --
Sale of treasury stock................. 72
Purchase of treasury stock............. (4)
Adjustment of shares issued to Antinori
Software shareholders................ --
Issuance of shares of common stock upon
exercise of stock options............ 159
Net income............................. 3,055
-------------
Balance at January 31, 1998............ $ 8,624
-------------
-------------
</TABLE>
See accompanying notes.
F-5
<PAGE>
CARREKER-ANTINORI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income....................................................................... $ 1,862 $ 1,376 $ 3,055
Pro forma tax adjustment (Note 5)................................................ 149 103 --
--------- --------- ---------
2,011 1,479 3,055
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of capitalized software........................................... 595 606 745
Depreciation and amortization of property and equipment........................ 201 350 601
(Income) loss on Payment Solutions Network, Inc. investment.................... (250) 500 --
Compensation earned under employee stock option plan........................... 54 589 --
Compensation earned under employee stock ownership plan........................ 163 -- --
Deferred income taxes.......................................................... (293) (635) 651
Provision for doubtful accounts................................................ 164 514 690
Changes in operating assets and liabilities:
Accounts receivable.......................................................... (788) (4,443) (3,636)
Inventory.................................................................... (91) (6) 190
Prepaid expenses, deposits, and other assets................................. 79 (533) (160)
Accounts payable and accrued expenses........................................ 811 1,458 619
Deferred revenue............................................................. 317 2,556 (1,141)
--------- --------- ---------
Net cash provided by operating activities.......................................... 2,973 2,435 1,614
INVESTING ACTIVITIES:
Investment in Payment Solutions Network, Inc..................................... 250 (500) --
Proceeds from note receivable.................................................... 214 -- --
Purchases of property and equipment.............................................. (388) (686) (1,290)
Computer software costs capitalized.............................................. (280) (708) (2,019)
--------- --------- ---------
Net cash used in investing activities.............................................. (204) (1,894) (3,309)
FINANCING ACTIVITIES:
Purchase of treasury stock....................................................... (5) (2,004) (4)
Sales of treasury stock.......................................................... -- 2,849 72
Proceeds from stock options exercised............................................ -- 15 159
Distributions to stockholders.................................................... (445) (1,030) --
Repayment of long-term borrowings................................................ (467) -- --
--------- --------- ---------
Net cash (used in) provided by financing activities................................ (917) (170) 227
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents............................... 1,852 371 (1,468)
Cash and cash equivalents at beginning of year..................................... 1,220 3,072 3,443
--------- --------- ---------
Cash and cash equivalents at end of year........................................... $ 3,072 $ 3,443 $ 1,975
--------- --------- ---------
--------- --------- ---------
Supplemental disclosures of cash flow information:
Cash paid for interest........................................................... $ 51 $ 4 $ 26
--------- --------- ---------
--------- --------- ---------
Cash paid for income taxes....................................................... $ 1,000 $ 1,880 $ 1,607
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes.
F-6
<PAGE>
CARREKER-ANTINORI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
1. DESCRIPTION OF BUSINESS
The accompanying consolidated financial statements of Carreker-Antinori,
Inc. (the Company), include the accounts of The Carreker Group, Inc. (TCG), a
Texas corporation, and Antinori Software, Inc. (ASI), a Georgia corporation. On
January 31, 1997, ASI was merged with TCG in a transaction accounted for as a
pooling of interests (Note 3). The Company is a leading provider of yield
management, payment systems, payment electronification and enabling technologies
solutions to the banking industry. The Company's solutions include comprehensive
service offerings coupled with a broad array of state-of-the-art, proprietary
software products which have been designed to address the unique requirements of
the banking industry. These solutions improve the competitiveness of a bank's
financial performance and operations, including payment processing, deposit
processing, customer service and cash management services among others. As
described in Note 8, the Company also provides consulting and administrative
services to certain organizations.
Net revenues of $3,021,000 and $4,669,000 to a major customer accounted for
16% of net revenues in each of the years ended January 31, 1996 and 1997. Net
revenues of $11,956,000 to two major customers accounted for 30% of net revenues
in the year ended January 31, 1998.
In connection with the Company's initial public offering, the Company will
change its state of incorporation from Texas to Delaware (the Reincorporation).
The Reincorporation will be effected by merging Carreker-Antinori, Inc., a Texas
corporation (C-A Texas), into a newly organized, wholly-owned, Delaware
subsidiary that will be the surviving corporation and is referred to herein as
the Company. The Plan and Agreement of Merger relating to the Reincorporation
provides for: (i) the conversion of each outstanding share of Class A voting
Common Stock and Class B non-voting Common Stock of C-A Texas into 7.7 shares of
Common Stock of the Company; (ii) the conversion of all options and rights to
acquire shares of Class A and Class B Common Stock of C-A Texas under its
various benefit plans into options and rights to acquire shares of Common Stock
of the Company on a basis consistent with the Common Stock conversion ratio; and
(iii) the substitution of the charter and bylaws of the Company for those of C-A
Texas. The financial statements included herein reflect the merger and resulting
change in capitalization as all share and per share amounts have been
retroactively restated to reflect the merger.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities of three
months or less when purchased to be cash equivalents. Cash and cash equivalents
consist primarily of demand deposit accounts and shares in a demand money market
account comprised of domestic and foreign commercial paper, certificates of
deposit and U.S. government obligations.
ACCOUNTS RECEIVABLE
A significant portion of the Company's business consists of providing
consulting services and licensing software to major domestic banks, which gives
rise to a concentration of credit risk in receivables. The Company performs
on-going credit evaluations of its customers' financial condition and generally
requires
F-7
<PAGE>
CARREKER-ANTINORI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
no collateral. The Company maintains an allowance for losses based upon the
expected collectibility of all accounts receivable. Writeoffs of receivables
during the three years ended January 31, 1996, 1997 and 1998 were $97,000,
$546,000 and $368,000, respectively.
Accounts receivable include unbilled amounts that represent receivables for
work performed for which billings upon mutual agreement have not been presented
to the customers. Such receivables are generally billed and collected within one
year of completion of the service. Accounts receivable include $2,053,000 and
$4,202,000 of unbilled receivables at January 31, 1997 and 1998, respectively.
INVENTORY
Inventory is stated at the lower of cost (first-in, first-out) or market and
is primarily comprised of computer hardware.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is calculated using
the straight-line method over the estimated useful lives of the respective
assets, generally from three to five years. Leasehold improvements are amortized
using the straight-line method over the shorter of the terms of the related
leases or the respective useful lives of the assets.
SOFTWARE COSTS CAPITALIZED
The Company capitalizes software development costs incurred in developing a
product once technological feasibility of the product has been determined.
Software development costs capitalized also include amounts paid for purchased
software on products that have reached technological feasibility. Technological
feasibility of the product is determined after completion of a detailed program
design and a determination has been made that any uncertainties related to
high-risk development issues have been resolved. If the process of developing
the product does not include a detail program design, technological feasibility
is determined only after completion of a working model which has been beta
tested. All software development costs capitalized are amortized using an amount
determined as the greater of: (i) the ratio that current gross revenues for a
capitalized software project bears to the total of current and future gross
revenues for that project or (ii) the straight-line method over the remaining
economic life of the product (generally three to five years). The Company
recorded amortization relating to software development costs capitalized of
$595,000, $606,000 and $745,000 in the years ended January 31, 1996, 1997 and
1998, respectively.
REVENUE RECOGNITION
Revenue for consulting services performed under fixed-price contracts which
are generally in duration in excess of six months is recognized on a
percentage-of-completion method. Revenue from these contracts is recognized in
the proportion that costs incurred bear to total estimated costs at completion.
Anticipated losses on fixed-price contracts are recognized when estimable.
Revenue generated from consulting services and under management services
contracts is recognized as services are performed. Revenue generated from
value-priced consulting services is recognized at the completion of all services
and the actual fee to be paid has been agreed to by the customer even though
F-8
<PAGE>
CARREKER-ANTINORI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
billings for such services may be delayed by mutual agreement for periods
generally not to exceed six months.
Maintenance contract revenue is recognized ratably over the term of the
related contract. Revenue from computer hardware sales is recognized upon
shipment.
In connection with software license agreements entered into with certain
banks and purchase agreements with vendors under which the Company acquired
software technology used in products sold to its customers, the Company is
required to pay royalties on future sales of the software. Approximately
$123,000, $724,000 and $816,000 of royalty expense was recorded under these
agreements in the years ended January 31, 1996, 1997 and 1998, respectively.
In October 1997, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
No. 97-2, "Software Revenue Recognition" (SOP 97-2), which supersedes Statement
of Position No. 91-1. SOP 97-2 will be effective for all transactions entered
into by the Company subsequent to January 31, 1998. The Company is continuing to
evaluate the impact that SOP 97-2 will have on license revenue transactions
entered into subsequent to January 31, 1998. Based upon the Company's reading
and interpretation of SOP 97-2, the Company believes that SOP 97-2 will not have
a material impact on future operating results. However, detailed implementation
guidelines for this standard have not been issued. Once issued, such detailed
implementation guidelines could result in changes in the Company's current
revenue recognition practices, and such changes could be material to the
Company's revenues and earnings.
DEFERRED REVENUE
Deferred revenue represents amounts billed to customers under terms
specified in consulting, software licensing, and maintenance contracts for which
completion of contractual terms or delivery of the software has not occurred.
RESEARCH AND PRODUCT DEVELOPMENT COSTS
Research and product development costs, which are not subject to Statement
of Financial Accounting Standards (SFAS) 86, "Accounting for the Cost of
Computer Software to be Sold, Leased, or Otherwise Marketed," are expensed as
incurred and relate mainly to the development of new products and the ongoing
maintenance of existing products. Research and development expenses incurred by
the Company are reported net of funding obtained under research and development
arrangements.
EARNINGS PER SHARE
Basic earnings per share is computed using the weighted average number of
shares of common stock outstanding during each period. Diluted earnings per
share is computed using the weighted average number of shares of common stock
outstanding during each period and common equivalent shares consisting of stock
options (using the treasury stock method).
INCOME TAXES
The Company accounts for income taxes under the liability method whereby
deferred income tax assets and liabilities result from temporary differences.
Temporary differences are differences between tax
F-9
<PAGE>
CARREKER-ANTINORI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
bases of assets and liabilities and their reported amounts in the financial
statements that will result in taxable or deductible amounts in future years.
STOCK-BASED COMPENSATION
Compensation expense on stock options issued to employees is measured in
accordance with Accounting Principles Board Opinion 25, "Accounting for Stock
Issued to Employees" (APB 25).
USE OF ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect the amounts reported in the financial statements. Actual
results could differ from these estimates.
NEW ACCOUNTING STANDARD
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (FASB 131), which supersedes existing
accounting standards related to disclosure of operating segment information. The
provisions of FASB 131 are effective for the Company beginning the year ended
January 31, 1999. Although the Company currently operates in one industry
segment, the Company is evaluating the potential impact of FASB 131 on its
reporting requirements.
3. BUSINESS COMBINATION
On January 31, 1997, TCG acquired all the outstanding common shares of ASI
from the shareholders of ASI in exchange for 3,962,528 shares of TCG common
stock. Effective with the merger, the combined entity changed its legal name to
Carreker-Antinori, Inc. The transaction was accounted for as a pooling of
interests, and accordingly, the accompanying consolidated financial statements
have been restated to include among other things the financial position and
results of operations of ASI for all periods presented. On January 29, 1998, the
Company and shareholders of ASI entered into a settlement agreement under which
the ASI shareholders agreed to return 338,800 shares of Common Stock to the
Company. Certain ASI software products were determined to require significantly
more development effort than anticipated at the time of the merger. The Company
and the ASI shareholders agreed to a settlement based upon the additional
development costs incurred by the Company to ready certain of the software
products for sale to customers. The settlement in shares was determined based
upon the fair value of the Company's Common Stock on the consummation date of
the merger. At January 31, 1998, 197,890 shares of Common Stock had been
returned to the Company and canceled.
During the year ended January 31, 1997, the Company recorded charges of
$834,220 in connection with the merger. These charges consisted of investment
banking, legal, accounting and other fees. Included in these charges are fees of
$200,000 payable to a director of the Company for consulting services performed
in connection with the merger.
4. CREDIT ARRANGEMENTS
The Company has a revolving credit agreement (the Revolving Credit
Agreement) with a bank which extends through July 1, 1998. The maximum amount of
borrowings allowed under the Revolving Credit
F-10
<PAGE>
CARREKER-ANTINORI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
4. CREDIT ARRANGEMENTS (CONTINUED)
Agreement is $3.0 million subject to a borrowing base calculated based on 70% of
qualified accounts receivable (as defined in the Revolving Credit Agreement). At
January 31, 1998, the maximum borrowings allowed under the Revolving Credit
Agreement was $3.0 million. The Company had no borrowings outstanding under the
Revolving Credit Agreement at January 31, 1998. Borrowings under the Revolving
Credit Agreement bear interest at the prime lending rate (8.5% at January 31,
1998) and are collateralized against certain assets of the Company, including
accounts and notes receivable, inventory, and intangibles. The Revolving Credit
Agreement contains certain financial covenants and restrictions including
limitations on capital expenditures, the maintenance of specified levels of
tangible net worth and certain financial ratios. The Company may not declare or
pay any dividends (unless such dividends are payable in the Company's stock)
without obtaining prior written consent from the lender.
5. PROVISION FOR INCOME TAXES
Prior to the merger of ASI and TCG, ASI had elected to be treated as an S
corporation for federal and state income tax purposes. As such, the taxable
income of ASI was reported to and subject to tax to its shareholders. The
provision for income taxes reported on the consolidated statement of operations
for the years ended January 31, 1996 and 1997, provides approximate federal and
state income taxes (by applying statutory income tax rates) that would have been
incurred if ASI had been subject to tax as a C corporation. The pro forma
adjustment to the tax provision amounted to $149,000 and $103,000 in the years
ended January 31, 1996 and 1997, respectively.
The Company's provision for income taxes, including pro forma amounts for
the years ended January 31, 1996 and 1997, consists of the following (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Federal:
Current.................................................................. $ 1,436 $ 1,519 $ 1,263
Deferred................................................................. (350) (518) 615
--------- --------- ---------
1,086 1,001 1,878
State:
Current.................................................................. 147 167 139
Deferred................................................................. (68) (46) 36
--------- --------- ---------
79 121 175
--------- --------- ---------
$ 1,165 $ 1,122 $ 2,053
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-11
<PAGE>
CARREKER-ANTINORI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
5. PROVISION FOR INCOME TAXES (CONTINUED)
The provisions for income taxes differ from the amounts computed by applying
the statutory United States federal income tax rate to income before provision
for income taxes as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Income tax expense at statutory rate....................................... $ 1,029 $ 849 $ 1,738
State income taxes, net of U.S. federal benefit............................ 77 76 92
Nondeductible expenses..................................................... 32 197 67
Other, net................................................................. 27 -- 156
--------- --------- ---------
Provision for income taxes................................................. $ 1,165 $ 1,122 $ 2,053
--------- --------- ---------
--------- --------- ---------
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The Company's deferred
tax assets and liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED JANUARY
31,
--------------------
1997 1998
--------- ---------
<S> <C> <C>
Deferred tax assets:
Cash to accrual adjustment............................................................ $ 241 $ 181
Loss on PSN note not currently deductible............................................. 180 --
Merger costs not currently deductible................................................. 72 72
Allowance for doubtful accounts....................................................... 21 164
Other................................................................................. 59 129
--------- ---------
Total deferred tax assets............................................................... 573 546
Deferred tax liabilities:
Amortization of capitalized software.................................................. 356 965
Other................................................................................. 2 17
--------- ---------
Total deferred tax liabilities.......................................................... 358 982
--------- ---------
Net deferred tax assets (liabilities)................................................... $ 215 $ (436)
--------- ---------
--------- ---------
</TABLE>
6. COMMON STOCK
In June 1996, the Company repurchased 1,427,249 shares of Common Stock,
representing all the shares held by Pacific USA Holdings Corp., for a total cash
price of $2,000,000.
In October 1996, Science Applications International Corporation (SAIC)
purchased 774,967 shares of common stock for a cash purchase price of
$2,000,000. In connection with the stock purchase, the Company and SAIC entered
into a Shareholders Agreement (the Shareholders Agreement) under which SAIC was
granted: (i) the right to participate in any future offerings of common stock by
the Company so as to avoid dilution of SAIC's equity interest in the Company and
(ii) a put option which requires, if exercised, the Company to purchase any or
all shares of common stock owned by SAIC under certain conditions, as defined in
the Shareholder Agreement. The Shareholders Agreement terminates upon the
F-12
<PAGE>
CARREKER-ANTINORI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
6. COMMON STOCK (CONTINUED)
closing of a firm underwritten public offering of the Company's common stock
which has an aggregate offering price of at least $15,000,000 or a merger
between the Company and another corporation or entity that is not affiliated
with or controlled by the Company in which the Company is not the surviving
corporation in the merger. The Company has classified the common stock subject
to the put outside of stockholders' equity on the consolidated balance sheet.
The put option will terminate if the Company's initial public offering is
consummated (Note 11).
7. BENEFIT PLANS
STOCK OPTION PLANS
Effective October 7, 1994, the Company adopted the 1994 Long Term Incentive
Plan (the Long Term Incentive Plan) under which officers and employees may be
granted awards in the form of incentive stock options, non-qualified stock
options and restricted shares. The exercise price per share for the Common Stock
issued pursuant to incentive stock options under the Long Term Incentive Plan
shall be no less than 100% of the fair market value on the date the option is
granted. The exercise price per share for non-qualified stock options under the
Long Term Incentive Plan may be determined by the Compensation Committee of the
Company's Board of Directors (the Committee), but may not be less than the par
value of the shares. Options granted under the Long Term Incentive Plan become
exercisable and vest as determined by the Committee. To date, options granted
under the Long Term Incentive Plan fully vest within two to three years from the
date of grant. The term of each option granted under the Long Term Incentive
Plan shall be as the Committee determines, but in no event shall any option have
a term of longer than ten years from the date of grant. Options may be granted
pursuant to the Long Term Incentive Plan up to October 7, 2004, unless the Board
of Directors terminates the Long Term Incentive Plan prior to such date.
At January 31, 1998, the Company's employees hold options to purchase
1,159,882 shares of Common Stock which immediately vest upon consummation of the
Company's initial public offering and are required to be exercised
contemporaneously with consummation of such offering (Note 11).
On January 31, 1998, the Committee issued 84,700 shares of restricted stock
with a fair market value of $8.90 per share to certain key employees under the
Company's Long Term Incentive Plan. Holders of restricted stock retain all
rights of a stockholder, except the shares cannot be sold until they vest. Upon
employee termination, all unvested shares are forfeited to the Company. The
restricted shares vest in full on January 31, 2001. At January 31, 1998, there
was deferred compensation related to the restricted shares totaling $754,000.
The deferred compensation will be charged to expense over the vesting period.
The Company has a Director Stock Option Plan (the Director Plan) under which
non-employee members of the Company's Board of Directors may be granted options
to purchase shares of the Company's Common Stock at prices determined by the
Committee. Options granted under the Director Plan expire after ten years from
the date of grant or at such earlier date as determined by the Committee and
specified in the applicable stock option agreement. Each option granted shall
become exercisable immediately or in one or more installments as determined by
the Committee and as provided in the applicable stock option agreement. All
shares issued and options granted pursuant to the Director Plan are subject to
restriction agreements.
As part of an employment contract, the President of ASI granted an option to
an officer of ASI in December 1995 to purchase 396,257 equivalent shares of the
Company's Common Stock at an exercise
F-13
<PAGE>
CARREKER-ANTINORI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
7. BENEFIT PLANS (CONTINUED)
price of $.54 per share from the President of ASI. The exercise price was set at
25% of the fair market value on the grant date. As a result, the Company
recorded deferred compensation of $642,633 to be expensed ratably over the
vesting period. The option initially vested over a two year period from the date
of grant but fully vested in the event of a change in control as defined in the
option agreement. The option fully vested as a result of the TCG and ASI merger
effective January 31, 1997. Therefore, all remaining deferred compensation
recorded relating to this stock option grant was expensed in the fourth quarter
of 1997. The fair value of these options as determined by the provisions of
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation (SFAS 123), was $.89 per option on the date of grant.
Stock option transactions for the years ended January 31, 1996, 1997 and
1998, are as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1996 1997 1998
------------------------ ------------------------ ------------------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE
OF EXERCISE OF EXERCISE OF EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at beginning of year........... 1,066 $ .64 1,942 $ .82 2,983 $ 1.45
Granted.......................................... 968 1.02 1,119 2.51 2,017 7.04
Exercised........................................ -- -- (24) .61 (350) .45
Canceled......................................... (92) .85 (54) 1.11 (335) 2.57
----- ----- -----
Options outstanding at end of year................. 1,942 .82 2,983 1.45 4,315 4.06
----- ----- -----
----- ----- -----
Options exercisable at end of year................. 627 1,272 1,557
Weighted average grant-date fair value of options
granted during the year.......................... $ .28 $ .48 $ 1.61
----- ----- -----
----- ----- -----
</TABLE>
Information related to options outstanding at January 31, 1998, is
summarized below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
WEIGHTED
OPTIONS AVERAGE OPTIONS WEIGHTED
OUTSTANDING REMAINING WEIGHTED EXERCISABLE AVERAGE
AT JANUARY CONTRACTUAL AVERAGE AT JANUARY EXERCISE
RANGE OF EXERCISE PRICE 31, 1998 LIFE EXERCISE PRICE 31, 1998 PRICE
- -------------------------------------- ------------- --------------- --------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
$ .45 to $1.30 1,513 4.4 $ .90 1,115 $ .78
$2.28 to $3.67 1,404 9.1 2.94 442 2.72
$6.88 to $8.90 1,398 10.0 8.60 -- --
----- -----
4,315 7.7 4.06 1,557 1.33
----- -----
----- -----
</TABLE>
As of January 31, 1998, the Company has reserved for issuance under the Long
Term Incentive Plan 5,120,500 shares of Common Stock, of which 84,700 shares of
restricted stock have been issued, 3,953,665 shares are subject to currently
outstanding options and 1,082,135 shares of Common Stock are reserved for future
awards. In addition to shares issued under the Long Term Incentive Plan, 276,315
shares of Common Stock are subject to currently outstanding options issued to
directors. A total of 100,000 shares of Common Stock are reserved for future
issuance under the Director Plan.
F-14
<PAGE>
CARREKER-ANTINORI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
7. BENEFIT PLANS (CONTINUED)
The Company has elected to follow APB 25 and related interpretations in
accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under SFAS 123 requires the use
of option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, no compensation expense is recorded when the
exercise price of the Company's employee stock options equals the fair value of
the underlying stock on the date of grant. Compensation equal to the intrinsic
value of employee stock options is recorded when the exercise price of the stock
options is less than the fair value of the underlying stock on the date of
grant. Any resulting compensation is amortized to expense over the option's
vesting period. During the years ended January 31, 1996 and 1997, total
compensation expense recorded relating to employee stock options was $53,552 and
$589,081, respectively. No compensation expense relating to employee stock
options was recorded during the year ended January 31, 1998.
Information regarding pro forma net income is required by SFAS 123, and has
been determined as if the Company had accounted for its employee stock options
under the fair value method of SFAS 123. The fair value of these options was
estimated at the date of grant using a Black-Scholes option pricing model with
no volatility and the following assumptions for 1996, 1997 and 1998,
respectively: weighted-average risk free interest rate of 5.92%, 6.22% and
5.95%, no dividends, and weighted average expected life of 5, 3.49 and 4.45
years.
The Black Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information (in thousands, except per share amounts) is as follows:
<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Pro forma net income....................................................... $ 1,799 $ 1,224 $ 2,641
--------- --------- ---------
--------- --------- ---------
Basic pro forma earnings per share......................................... $ .16 $ .11 $ .23
--------- --------- ---------
--------- --------- ---------
Diluted pro forma earnings per share....................................... $ .15 $ .10 $ .20
--------- --------- ---------
--------- --------- ---------
</TABLE>
The pro forma disclosures only include the effect of options granted
subsequent to January 31, 1995. Accordingly, the pro forma information does not
reflect the pro forma effect of all previous stock option grants of the Company,
and thus is not indicative of future amounts until SFAS 123 is applied to all
outstanding stock options.
EMPLOYEE STOCK OWNERSHIP PLAN
Effective October 22, 1984, the Company established an Employee Stock
Ownership Plan (the ESOP) for the benefit of eligible employees. In February
1992, the Company contributed $650,000 to the ESOP. The ESOP used the proceeds
from the contribution to purchase 278,054 shares of the Company's
F-15
<PAGE>
CARREKER-ANTINORI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
7. BENEFIT PLANS (CONTINUED)
Common Stock from an officer and principal stockholder of the Company. Shares of
Common Stock acquired by the ESOP have been allocated to each employee in
amounts based on the employee's compensation (all shares have been allocated as
of January 31, 1996). Compensation expense related to the ESOP is based upon the
shares of Common Stock allocated to participants and amounted to $162,500 in
1996. Unearned ESOP compensation is reported as a reduction to Common Stock in
stockholders' equity.
PROFIT SHARING PLAN
TCG has adopted a profit sharing plan pursuant to Section 401(k) of the
Internal Revenue Code (the Code) whereby participants may contribute a
percentage of compensation not in excess of the maximum allowed under the Code.
The plan provides for a matching contribution by TCG. Effective January 1, 1998,
employees of ASI became eligible to participate in the TCG plan. Employer
matching contributions amounted to $210,000, $304,000 and $421,000 in 1996, 1997
and 1998, respectively. TCG may make additional contributions at the discretion
of the Board of Directors. No discretionary contribution was made during 1996,
1997, or 1998. Prior to January 1, 1998, employees of ASI had a separate profit
sharing plan pursuant to Section 401(k) of the Code, whereby participants could
contribute a percentage of compensation not in excess of the maximum allowed
under the Code. Employer matching contributions are discretionary and amounted
to $135,000, $187,000 and $260,000 under the ASI plan for the years ended
January 31, 1996, 1997 and 1998, respectively.
BONUS PLAN
The Company pays bonuses to key employees based on Company profitability,
the extent to which individuals meet agreed-upon objectives for the year, and
executive management's discretion. The Company recorded bonus expense of
approximately $1,486,000, $2,179,000 and $1,051,000 in 1996, 1997 and 1998,
respectively.
8. MANAGEMENT SERVICES
The Company serves as Executive Director of the Electronic Check Clearing
House Organization (ECCHO) and provides consulting and administrative services
to ECCHO, for which the Company recorded net revenues of $696,000, $866,000 and
$994,000 in 1996, 1997 and 1998, respectively. Receivables from ECCHO were
$317,000, $477,000 and $566,000 at January 31, 1996, 1997 and 1998,
respectively.
The Company owns an equity interest in Payment Solutions Network, Inc. (PSN)
for which the Company has no book basis. PSN's articles of incorporation require
PSN to repurchase the Company's equity interest for $1,250,000 at a rate of
$250,000 per year over a five-year period, with the final year's payment
contingent upon the amount of operating revenue of PSN in the fifth year. The
annual repurchase of these units is subject to PSN maintaining certain cash and
net worth levels. The proceeds from the first scheduled repurchase of $250,000
was received by the Company from PSN in January 1996 and included in other
income. The scheduled 1997 and 1998 repurchase of $250,000 was not received due
to cash and net worth levels of PSN falling below the amounts stipulated in its
articles of incorporation. Additional payments, if any, to be received by the
Company from PSN in subsequent years will be recognized as other income when the
realization of such amounts is probable.
F-16
<PAGE>
CARREKER-ANTINORI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
8. MANAGEMENT SERVICES (CONTINUED)
To assist PSN in maintaining its liquidity, the Company and another
stockholder of PSN each advanced PSN a total of $500,000 in two increments in
August and December of the fiscal year ended January 31, 1997. The Company
believes ultimate collection of these advances is doubtful based upon PSN's
historical and forecasted operating results. Therefore, the Company fully
reserved the $500,000 receivable and charged $500,000 to other expense in 1997.
The Company has an additional long-term note receivable from PSN with a
remaining balance of $64,000 as of January 31, 1998. Such note receivable is
included in other assets in the consolidated balance sheet.
The Company has a management services contract (the PSN Agreement) with PSN
to provide consulting, sales, and administrative support to PSN for a five-year
term beginning January 31, 1995. During the years ended January 31, 1996, 1997
and 1998, the Company recorded management service fees related to the PSN
Agreement of $1,285,000, $1,344,000 and $1,378,000, respectively. Receivables
from PSN for management services (excluding the note receivable discussed above)
were $342,000, $257,000 and $797,000 at January 31, 1996, 1997 and 1998,
respectively. Subsequent to January 31, 1998, the Company received payments from
PSN for management services in the amount of $362,000.
The Company owns an equity interest (for which the Company has no book
basis) and serves as Managing Director of INFITEQ, LLC (INFITEQ), a
single-source provider of specialized outsourcing services to the banking
industry for transaction processing, information management, electronic commerce
and image technology. INFITEQ was incorporated on January 15, 1998. The Company
has a Management Services Agreement (the INFITEQ Agreement) with INFITEQ to
provide INFITEQ consulting, sales and administrative support through January
2008. The Company also is entitled to receive reimbursement of certain costs it
incurred for the benefit of INFITEQ. No management service fees were recognized
by the Company under this agreement during the year ended January 31, 1998 and
the Company has not recognized any receivables from INFITEQ due to uncertainties
surrounding collection of these amounts. INFITEQ has no operating history and is
expected to generate operating losses in its start-up phase and therefore,
collection of these receivables is considered to be doubtful as of January 31,
1998. Amounts reserved at January 31, 1998 totalled $368,000.
The Company has not provided guarantees of debt or other obligations, has
not agreed to fund any losses, or is not otherwise contingently liable with
respect to ECCHO, PSN or INFITEQ.
9. LEASE COMMITMENTS
The Company leases office facilities and certain equipment under operating
leases for various periods. Leases that expire are generally expected to be
renewed or replaced by other leases. Rental expense under these leases for 1996,
1997 and 1998 was approximately $421,000, $527,000 and $580,000, respectively.
Future minimum base rents under terms of noncancelable operating leases (in
thousands) are as follows at January 31, 1998:
Year ending January 31:
<TABLE>
<S> <C>
1999................................................................. $ 832
2000................................................................. 569
2001................................................................. 455
2002 and thereafter.................................................. 940
</TABLE>
F-17
<PAGE>
CARREKER-ANTINORI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
10. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings
per share (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Basic earnings per share:
Net income..................................................................... $ 1,862 $ 1,376 $ 3,055
Weighted average shares outstanding............................................ 11,543 10,914 11,477
Basic earnings per share....................................................... $ .16 $ .13 $ .27
--------- --------- ---------
--------- --------- ---------
Diluted earnings per share:
Net income..................................................................... $ 1,862 $ 1,376 $ 3,055
Weighted average shares outstanding............................................ 11,543 10,914 11,477
Assumed conversion of employee stock options................................... 549 964 1,767
--------- --------- ---------
Shares used in diluted earnings per share calculation.......................... 12,092 11,878 13,244
--------- --------- ---------
--------- --------- ---------
Diluted earnings per share..................................................... $ .15 $ .12 $ .23
--------- --------- ---------
--------- --------- ---------
</TABLE>
11. SUBSEQUENT EVENT
Subsequent to January 31, 1998, the Company's Board of Directors authorized
management of the Company to file a Registration Statement with the Securities
and Exchange Commission to sell up to 3,650,000 shares of the Company's Common
Stock through an initial public offering (the Offering). The Company intends to
use the proceeds from the Offering for working capital and other general
corporate purposes. The Company may also use a portion of the proceeds for
possible strategic alliances and acquisitions of businesses, products and
technologies that are complementary to those of the Company. Pending such uses,
the Company plans to invest the net proceeds in short-term, interest-bearing,
investment grade securities. If the Offering is consummated, the Shareholder
Agreement with SAIC will terminate (Note 6).
Subsequent to January 31, 1998, the Company's Board of Directors authorized
the merger of C-A Texas. The merger will be effected through the conversion of
each outstanding share of Class A voting Common Stock and Class B non-voting
Common Stock of C-A Texas into 7.7 shares of Common Stock of the Company.
Additionally, all options and rights to acquire shares of Class A and Class B
Common Stock of C-A Texas will be converted into rights to acquire shares of the
newly formed Delaware subsidiary on a basis consistent with the Common Stock
conversion ratio (Note 1).
F-18
<PAGE>
INSIDE BACK COVER DESCRIPTION:
TOP HALF OF PAGE:
Graphic of Carreker-Antinori Logo and image representing major banks
pointing to stylized logo of ECCHO and description stating "ECCHO, a rule-making
body for the electronification of the check payment system." Also included in
the graphic are images representing major banks, VISA and IBM and the
Carreker-Antinori Logo pointing to a stylized logo of PSN and a description
stating "PSN, a provider of database and information services critical to the
realization of check electronification benefits."
BOTTOM HALF OF PAGE:
Below a bubble across the middle of the page labeled "Strategic Banking
Initiatives," a graphic of images and logos representing FISERV, NPC, Brinks and
UPS all pointing to image and logo stating "INFITEQ -- The Answer," which points
to the Carreker-Antinori Logo with a statement at the bottom of the graphic
stating "INFITEQ, a single source provider of specialized outsourcing services
to the banking industry."
OUTSIDE BACK COVER DESCRIPTION:
Carreker - Antinori Logo: Carreker Antinori, Move Money
with Greater Intelligence-TM-
<PAGE>
PART II
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table indicates the estimated expenses to be incurred in
connection with the offering described in the Registration Statement. The
Company is paying certain of the offering expenses of the Selling Stockholders.
<TABLE>
<S> <C>
Securities and Exchange Commission filing fee............................. $ 20,763
NASD filing fee........................................................... 7,538
NASDAQ National Market listing fee........................................ 95,000
Blue Sky fees and expenses................................................ *
Printing and engraving fees............................................... *
Accountants' fees and expenses............................................ *
Legal Fees and expenses................................................... *
Transfer Agent's fees and expenses........................................ *
Miscellaneous............................................................. *
---------
Total................................................................... $ *
---------
---------
</TABLE>
- ------------------------
* To be supplied by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") provides,
in effect, that any person made a party to any action by reason of the fact that
he is or was a director, officer, employee or agent of the Company may and, in
certain cases, must be indemnified by the Company against, in the case of a
non-derivative action, judgments, fines, amounts paid in settlement and
reasonable expenses (including attorney's fees) incurred by him as a result of
such action, and in the case of a derivative action, against expenses (including
attorney's fees), if in either type of action he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company. This indemnification does not apply, in a derivative action, to
matters as to which it is adjudged that the director, officer, employee or agent
is liable to the Company, unless upon court order it is determined that, despite
such adjudication of liability, but in view of all the circumstances of the
case, he is fairly and reasonably entitled to indemnity for expenses, and, in a
non-derivative action, to any criminal proceeding in which such person had
reasonable cause to believe his conduct was unlawful.
Article Eight of the Company's Certificate of Incorporation provides that no
director of the Company shall be liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director to the fullest
extent permitted by the DGCL.
Article Eight of the Company's Certificate of Incorporation also provides
that the Company may indemnify to the fullest extent permitted by Delaware law
any and all of its directors and officers, or former directors and officers, or
any person who may have served at the Company's request as a director or officer
of another corporation, partnership, joint venture, trust or other enterprise.
In addition, Section 7.07 of the Company's Bylaws provides for similar
indemnification of officers and directors within the limits of Delaware law.
Reference is made to the Underwriting Agreement which is filed as part of
Exhibit 1.1 hereto, pursuant to which the underwriters have agreed to indemnify
officers and directors of the Company against certain liabilities under the
Securities Act.
The Company has entered into Indemnification Agreements with each director
and officer of the Company, a form of which is filed as an Exhibit to this
Registration Statement. Pursuant to such
II-1
<PAGE>
agreements, the Company does, to the extent permitted by applicable law,
indemnify such directors and officers against all expenses, judgments, fines and
penalties incurred in connection with the defense or settlement of any actions
brought against them by reason of the fact that they were directors or officers
of the Company or assumed certain responsibilities at the direction of the
Company. The Company has purchased directors and officers liability insurance in
order to limit its exposure to liability for indemnification of directors and
officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following information relates to all securities issued or sold by the
Company within the past three years and not registered under the Securities Act.
Immediately prior to the offering, the Company will effect a reincorporation
into the State of Delaware pursuant to an agreement and plan of merger by and
between the Company and Carreker-Antinori, Inc., a Texas corporation (the
"Merger"). The issuance of shares by the Company in connection with the Merger
will be exempt from registration under the Securities Act pursuant to Section
3(a)(9) thereof.
On January 31, 1997 a wholly-owned subsidiary of the Company merged with and
into ASI, with the result that ASI became a wholly-owned subsidiary of the
Company (the "ASI Merger"). Pursuant to the ASI Merger, the Company issued
3,962,528 shares of Common Stock to the shareholders of ASI. Such sale was
completed without registration under the Securities Act in reliance upon an
exemption provided by Section 4(2) of the Securities Act, no public offering
being involved.
On June 20, 1997 the Company issued 23,062 shares of Common Stock to Wyn P.
Lewis for $72,300. Such sale was completed without registration under the
Securities Act in reliance upon an exemption provided by Section 4(2) of the
Securities Act, no public offering being involved.
On January 10, 1997 the Company issued 269,500 shares of Common Stock to the
Crow Family Partnership, L.P. for $834,050. Such sale was completed without
registration under the Securities Act in reliance upon an exemption provided by
Section 4(2) of the Securities Act, no public offering being involved.
On October 10, 1996 the Company issued 774,967 shares of Common Stock to
Science Applications International Corporation for $2,000,000. Such sale was
completed without registration under the Securities Act in reliance upon an
exemption provided by Section 4(2) of the Securities Act, no public offering
being involved.
During the three-year period ended January 31, 1998, the Company issued
374,736 shares of Common Stock in connection with the exercise of stock options.
Such shares were issued without registration under the Securities Act in
reliance upon an exemption provided by Section 4(2) of the Securities Act, no
public offering being involved.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ---------- ------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement by and among the Company, the Selling Stockholders named therein and
the Underwriters.
2.1 Form of Agreement and Plan of Merger between Carreker-Antinori, Inc., a Texas corporation, and
Carreker-Antinori, Inc., a Delaware corporation.
3.1 Amended and Restated Certificate of Incorporation of the Company.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ---------- ------------------------------------------------------------------------------------------------------
<C> <S>
3.2 Bylaws of the Company.
4.1 Specimen Stock Certificate.
4.2 Amended and Restated Certificate of Incorporation and Bylaws of the Company (see Exhibits 3.1 and
3.2).
5.1 Opinion of Locke Purnell Rain Harrell (A Professional Corporation).
**+10.1 Employment Agreement dated January 31, 1997 between the Company and John D. Carreker, Jr.
**+10.2 Employment Agreement dated January 31, 1997 between the Company and Ronald R. Antinori.
+10.3 Employment Agreement dated March 19, 1998 between the Company and Terry L. Gage.
**+10.4 Employment Agreement dated March 12, 1998 between the Company and Wyn P. Lewis.
**+10.5 Employment Agreement dated March 10, 1998 between the Company and Richard L. Linting.
**+10.6 Employment Agreement dated March 13, 1998 between the Company and Royce D. Brown.
+10.7 Amended and Restated Carreker-Antinori 1994 Long Term Incentive Plan.
+10.8 Carreker-Antinori Director Stock Option Plan.
*+10.9 Carreker-Antinori Profit Sharing Incentive Plan.
10.10 Intentionally omitted.
**10.11 Management Services Agreement dated November 18, 1993 between the Company and Payment Systems Network,
Inc. (as amended).
**10.12 Management Services Agreement dated January 15, 1998 between the Company and INFITEQ, LLC.
**10.13 Strategic Alliance Agreement dated October 1996 between the Company and Science Applications
International Corporation.
10.14 Indemnification Agreement between the Company and John D. Carreker, Jr. (together with a schedule).
**10.15 Settlement Agreement dated January 29, 1998, between the Company and Ronald R. Antinori.
**10.16 Settlement Agreement dated January 29, 1998, between the Company and Susan Antinori.
**10.17 Settlement Agreement dated January 29, 1998, between the Company and Lawrence D. Duckworth.
**10.18 Settlement Agreement dated January 29, 1998, between the Company and Michael Israel.
**10.19 Loan and Security Agreement between Compass Bank and the Company dated September 1997.
**10.20 Stock Purchase Agreement by and among the Company and Science Applications International Corporation,
dated October 10, 1996.
**10.21 Stock Purchase Agreement by and between Crow Family Partnership, L.P. and the Company, dated January
10, 1997.
**10.22 Form of the Company's independent contractor agreement.
**10.23 Agreement and Plan of Merger between the Company and CAG Newco, Inc. and Antinori Software, Inc. dated
as of January 29, 1997.
10.24 Promissory Note dated September 1, 1997, between the Company and John S. Davis.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ---------- ------------------------------------------------------------------------------------------------------
<C> <S>
21.1 Subsidiaries of the Company (no significant subsidiaries).
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Locke Purnell Rain Harrell (A Professional Corporation) (included in its opinion filed as
Exhibit 5.1).
24.1 Power of Attorney (included on first signature page).
**27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
** Previously filed.
+ Management contract or compensatory plan or arrangement.
(b) Financial Statement Schedules.
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission have been omitted because
they are not required under the related instructions, are not applicable or the
information has been provided in the financial statements or the notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned Company hereby undertakes to provide the representatives of
the Underwriters at the closing specified in the Underwriting Agreement
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company, 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
Company in the successful defense of any action, suit or proceeding) is asserted
by any 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 Act, the information
omitted from the form of Prospectus filed as part of this Registration
Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or
497(h) under the 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 Act, each
post-effective amendment that contains a form of Prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Dallas,
State of Texas, on this 24th day of April, 1998.
<TABLE>
<S> <C> <C>
CARREKER-ANTINORI, INC.
By: /s/ JOHN D. CARREKER, JR.
-----------------------------------------
John D. Carreker, Jr.
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints John D. Carreker, Jr. and Terry L. Gage,
and each of them, such individual's true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for such individual
and in his or her name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Amendment No. 1
to Registration Statement and any registration statement related to the offering
contemplated by this registration statement that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same,
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
as fully and to intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
SIGNATURES TITLE DATE
- ------------------------------ -------------------------- -------------------
Chairman of the Board and
/s/ JOHN D. CARREKER, JR. Chief Executive Officer
- ------------------------------ (Principal Executive April 24, 1998
John D. Carreker, Jr. Officer)
Executive Vice President,
/s/ TERRY L. GAGE Treasurer and Chief
- ------------------------------ Financial Officer April 24, 1998
Terry L. Gage (Principal Financial and
Accounting Officer)
/s/ RONALD R. ANTINORI Vice Chairman of the Board
- ------------------------------ and Chief Technology April 24, 1998
Ronald R. Antinori Officer
II-5
<PAGE>
SIGNATURES TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ RICHARD L. LINTING
- ------------------------------ President, Chief Operating April 24, 1998
Richard L. Linting Officer and Director
/s/ JAMES D. CARREKER
- ------------------------------ Director April 24, 1998
James D. Carreker
/s/ JAMES L. FISCHER
- ------------------------------ Director April 24, 1998
James L. Fischer
/s/ RICHARD R. LEE, JR.
- ------------------------------ Director April 24, 1998
Richard R. Lee, Jr.
/s/ LARRY J. PECK
- ------------------------------ Director April 24, 1998
Larry J. Peck
/s/ DAVID K. SIAS
- ------------------------------ Director April 24, 1998
David K. Sias
/s/ DONALD HOUSE
- ------------------------------ Director April 24, 1998
Donald House
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ---------- ------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement by and among the Company, the Selling Stockholders named therein and
the Underwriters.
2.1 Form of Agreement and Plan of Merger between Carreker-Antinori, Inc., a Texas corporation, and
Carreker-Antinori, Inc., a Delaware corporation.
3.1 Amended and Restated Certificate of Incorporation of the Company.
3.2 Bylaws of the Company.
4.1 Specimen Stock Certificate.
4.2 Amended and Restated Certificate of Incorporation and Bylaws of the Company (see Exhibits 3.1 and
3.2).
5.1 Opinion of Locke Purnell Rain Harrell (A Professional Corporation).
**+10.1 Employment Agreement dated January 31, 1997 between the Company and John D. Carreker, Jr.
**+10.2 Employment Agreement dated January 31, 1997 between the Company and Ronald R. Antinori.
+10.3 Employment Agreement dated March 19, 1998 between the Company and Terry L. Gage.
**+10.4 Employment Agreement dated March 12, 1998 between the Company and Wyn P. Lewis.
**+10.5 Employment Agreement dated March 10, 1998 between the Company and Richard L. Linting.
**+10.6 Employment Agreement dated March 13, 1998 between the Company and Royce D. Brown.
+10.7 Amended and Restated Carreker-Antinori 1994 Long Term Incentive Plan.
+10.8 Carreker-Antinori Director Stock Option Plan.
*+10.9 Carreker-Antinori Profit Sharing Incentive Plan.
10.10 Intentionally omitted.
**10.11 Management Services Agreement dated November 18, 1993 between the Company and Payment Systems Network,
Inc. (as amended).
**10.12 Management Services Agreement dated January 15, 1998 between the Company and INFITEQ, LLC.
**10.13 Strategic Alliance Agreement dated October 1996 between the Company and Science Applications
International Corporation.
10.14 Indemnification Agreement between the Company and John D. Carreker, Jr. (together with a schedule).
**10.15 Settlement Agreement dated January 29, 1998, between the Company and Ronald R. Antinori.
**10.16 Settlement Agreement dated January 29, 1998, between the Company and Susan Antinori.
**10.17 Settlement Agreement dated January 29, 1998, between the Company and Lawrence D. Duckworth.
**10.18 Settlement Agreement dated January 29, 1998, between the Company and Michael Israel.
**10.19 Loan and Security Agreement between Compass Bank and the Company dated September 1997.
**10.20 Stock Purchase Agreement by and among the Company and Science Applications International Corporation,
dated October 10, 1996.
**10.21 Stock Purchase Agreement by and between Crow Family Partnership, L.P. and the Company, dated January
10, 1997.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ---------- ------------------------------------------------------------------------------------------------------
<C> <S>
**10.22 Form of the Company's independent contractor agreement.
**10.23 Agreement and Plan of Merger between the Company and CAG Newco, Inc. and Antinori Software, Inc. dated
as of January 29, 1997.
10.24 Promissory Note dated September 1, 1997, between the Company and John S. Davis.
21.1 Subsidiaries of the Company (no significant subsidiaries).
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Locke Purnell Rain Harrell (A Professional Corporation) (included in its opinion filed as
Exhibit 5.1).
24.1 Power of Attorney (included on first signature page).
**27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
** Previously filed.
+ Management contract or compensatory plan or arrangement.
<PAGE>
5,100,000 SHARES (1)
CARREKER-ANTINORI, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
________________ __, 1998
BANCAMERICA ROBERTSON STEPHENS
HAMBRECHT & QUIST LLC
LEHMAN BROTHERS INC.
As Representatives of the several Underwriters
c/o BancAmerica Robertson Stephens
555 California Street
Suite 2600
San Francisco, California 94104
Ladies and Gentlemen:
Carreker-Antinori, Inc., a Delaware corporation (the "Company"), and
certain stockholders of the Company named in Schedule B hereto (hereafter called
the "Selling Stockholders") address you as the Representatives of each of the
persons, firms and corporations listed in Schedule A hereto (herein collectively
called the "Underwriters") and hereby confirm their respective agreements with
the several Underwriters as follows:
1. DESCRIPTION OF SHARES. The Company proposes to issue and sell
3,650,000 shares of its authorized and unissued Common Stock, par value $.01 per
share, to the several Underwriters. The Selling Stockholders, acting severally
and not jointly, propose to sell an aggregate of 1,450,000 shares of the
Company's authorized and outstanding Common Stock, par value $.01 per share, to
the several Underwriters. The 3,650,000 shares of Common Stock, par value $.01
per share, of the Company to be sold by the Company are hereinafter called the
"Company Shares" and the 1,450,000 shares of Common Stock, par value $.01 per
share, to be sold by the Selling Stockholders are hereinafter called the
"Selling Stockholder Shares." The Company Shares and the Selling Stockholder
Shares are hereinafter collectively referred to as the "Firm Shares." The
Company and a Selling Stockholder also propose to grant, severally and not
jointly, to the Underwriters an option to purchase up to 765,000 additional
shares of the Company's Common Stock, par value $.01 per share (the "Option
Shares"), as provided in Section 7 hereof. As used in this Agreement, the term
"Shares" shall include the Firm Shares and the Option Shares. All shares of
Common Stock, par value $.01 per share, of the Company to be outstanding after
giving effect to the sales contemplated hereby, including the Shares, are
hereinafter referred to as "Common Stock."
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY AND THE
SELLING STOCKHOLDERS.
I. The Company represents and warrants to and agrees with each
Underwriter that:
(a) A registration statement on Form S-1 (File No. 333-48399)
with respect to the Shares, including a prospectus subject to completion, has
been prepared by the Company in conformity with the requirements
- ---------------------
(1) Plus an option to purchase up to 765,000 additional shares from the Company
and a Selling Stockholder of the Company to cover over-allotments.
<PAGE>
of the Securities Act of 1933, as amended (the "Act"), and the applicable rules
and regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") under the Act and has been filed with the
Commission; such amendments to such registration statement, such amended
prospectuses subject to completion and such abbreviated registration statements
pursuant to Rule 462(b) of the Rules and Regulations as may have been required
prior to the date hereof have been similarly prepared and filed with the
Commission; and the Company will file such additional amendments to such
registration statement, such amended prospectuses subject to completion and such
abbreviated registration statements as may hereafter be required. Copies of
such registration statement and amendments, of each related prospectus subject
to completion (the "Preliminary Prospectuses") and of any abbreviated
registration statement pursuant to Rule 462(b) of the Rules and Regulations have
been delivered to you. The Company meets the requirements for filing a
registration statement on Form S-1 under the Act.
If the registration statement relating to the Shares has been
declared effective under the Act by the Commission, the Company will prepare
and promptly file with the Commission the information omitted from the
registration statement pursuant to Rule 430A(a) or, if BancAmerica Robertson
Stephens, on behalf of the several Underwriters, shall agree to the
utilization of Rule 434 of the Rules and Regulations, the information
required to be included in any term sheet filed pursuant to Rule 434(b) or
(c), as applicable, of the Rules and Regulations pursuant to subparagraph
(1), (4) or (7) of Rule 424(b) of the Rules and Regulations or as part of a
post-effective amendment to the registration statement (including a final
form of prospectus). If the registration statement relating to the Shares
has not been declared effective under the Act by the Commission, the Company
will prepare and promptly file an amendment to the registration statement,
including a final form of prospectus, or, if BancAmerica Robertson Stephens,
on behalf of the several Underwriters, shall agree to the utilization of Rule
434 of the Rules and Regulations, the information required to be included in
any term sheet filed pursuant to Rule 434(b) or (c), as applicable, of the
Rules and Regulations. The term "Registration Statement" as used in this
Agreement shall mean such registration statement, including financial
statements, schedules and exhibits, in the form in which it became or
becomes, as the case may be, effective (including, if the Company omitted
information from the registration statement pursuant to Rule 430A(a) or files
a term sheet pursuant to Rule 434 of the Rules and Regulations, the
information deemed to be a part of the registration statement at the time it
became effective pursuant to Rule 430A(b) or Rule 434(d) of the Rules and
Regulations) and, in the event of any amendment thereto or the filing of any
abbreviated registration statement pursuant to Rule 462(b) of the Rules and
Regulations relating thereto after the effective date of such registration
statement, shall also mean (from and after the effectiveness of such
amendment or the filing of such abbreviated registration statement) such
registration statement as so amended, together with any such abbreviated
registration statement. The term "Prospectus" as used in this Agreement
shall mean the prospectus relating to the Shares as included in such
Registration Statement at the time it becomes effective (including, if the
Company omitted information from the Registration Statement pursuant to Rule
430A(a) of the Rules and Regulations, the information deemed to be a part of
the Registration Statement at the time it became effective pursuant to Rule
430A(b) of the Rules and Regulations); PROVIDED, HOWEVER, that if in reliance
on Rule 434 of the Rules and Regulations and with the consent of BancAmerica
Robertson Stephens, on behalf of the several Underwriters, the Company shall
have provided to the Underwriters a term sheet pursuant to Rule 434(b) or
(c), as applicable, prior to the time that a confirmation is sent or given
for purposes of Section 2(10)(a) of the Act, the term "Prospectus" shall mean
the "prospectus subject to completion" (as defined in Rule 434(g) of the
Rules and Regulations) last provided to the Underwriters by the Company and
circulated by the Underwriters to all prospective purchasers of the Shares
(including the information deemed to be a part of the Registration Statement
at the time it became effective pursuant to Rule 434(d) of the Rules and
Regulations). Notwithstanding the foregoing, if any revised prospectus shall
be provided to the Underwriters by the Company for use in connection with the
offering of the Shares that differs from the prospectus referred to in the
immediately preceding sentence (whether or not such revised prospectus is
required to be filed with the Commission pursuant to Rule 424(b) of the Rules
and Regulations), the term "Prospectus" shall refer to such revised
prospectus from and after the time it is first provided to the Underwriters
for such use. If in reliance on Rule 434 of the Rules and Regulations and
with the consent of BancAmerica Robertson Stephens, on behalf of the several
Underwriters, the Company shall have provided to the Underwriters a term
sheet pursuant to Rule 434(b) or (c), as applicable, prior to the time that a
confirmation is sent or given for purposes of Section 2(10)(a) of the Act,
the Prospectus and the term sheet, together, will not be materially different
from the prospectus in the Registration Statement.
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(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus or instituted proceedings
for that purpose, and each such Preliminary Prospectus has conformed in all
material respects to the requirements of the Act and the Rules and
Regulations and, as of its date, has not included any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and at the time the Registration Statement became or
becomes, as the case may be, effective and at all times subsequent thereto up
to and on the Closing Date (hereinafter defined) and on any later date on
which Option Shares are to be purchased, (i) the Registration Statement and
the Prospectus, and any amendments or supplements thereto, contained and will
contain all material information required to be included therein by the Act
and the Rules and Regulations and will in all material respects conform to
the requirements of the Act and the Rules and Regulations, (ii) the
Registration Statement, and any amendments or supplements thereto, did not
and will not include any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and (iii) the Prospectus, and any
amendments or supplements thereto, did not and will not include any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading; PROVIDED, HOWEVER, that none of the
representations and warranties contained in this subparagraph (b) shall apply
to information contained in or omitted from the Registration Statement or
Prospectus, or any amendment or supplement thereto, in reliance upon, and in
conformity with, written information furnished to the Company by such
Underwriter specifically for use in the preparation thereof.
(c) Each of the Company and Antinori Software, Inc., a
Georgia corporation (the "Subsidiary"), has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
State of Georgia with full power and authority (corporate and other) to own,
lease and operate its properties and conduct its business as described in the
Prospectus; the Company owns all of the outstanding capital stock of the
Subsidiary free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest; each of the Company and the
Subsidiary is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction in which the ownership or leasing of
its properties or the conduct of its business requires such qualification,
except where the failure to be so qualified or be in good standing would not
have a material adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and the
Subsidiary, considered as one enterprise; no proceeding has been instituted
in any such jurisdiction, revoking, limiting or curtailing, or seeking to
revoke, limit or curtail, such power and authority or qualification; each of
the Company and the Subsidiary is in possession of and operating in
compliance with all authorizations, licenses, certificates, consents, orders
and permits from state, federal and other regulatory authorities which are
material to the conduct of the business of the Company and the Subsidiary,
considered as one enterprise, all of which are valid and in full force and
effect; each material contract or other instrument to which the Company or
the Subsidiary is a party or by which their respective properties or business
is or may be bound or affected has been duly and validly executed by the
Company and is in full force and effect in all material respects and is
enforceable against the parties thereto in accordance with its terms, except
as the enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable principles;
neither the Company nor the Subsidiary is in violation of its respective
charter or bylaws or in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in any
material bond, debenture, note or other evidence of indebtedness, or in any
material lease, contract, indenture, mortgage, deed of trust, loan agreement,
joint venture or other agreement or instrument to which the Company or the
Subsidiary is a party or by which it or the Subsidiary or their respective
properties may be bound; and neither the Company nor the Subsidiary is in
material violation of any law, order, rule, regulation, writ, injunction,
judgment or decree of any court, government or governmental agency or body,
domestic or foreign, having jurisdiction over the Company or the Subsidiary
or over their respective properties of which it has knowledge. The Company
does not own or have any ownership interest in, directly or indirectly, any
corporation, association or other entity other than the Subsidiary and
INFITEQ, LLC.
(d) The Company has full legal right, power and authority to
enter into this Agreement and perform the transactions contemplated hereby.
This Agreement has been duly authorized, executed and delivered by the
Company and is a valid and binding agreement on the part of the Company,
enforceable in accordance with its terms,
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except as rights to indemnification or contribution hereunder may be limited
by applicable law or public policy and except as the enforcement hereof may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to or affecting creditors' rights generally or
by general equitable principles; the performance of this Agreement and the
consummation of the transactions herein contemplated will not result in a
material breach or violation of any of the terms and provisions of, or
constitute a default under, (i) any bond, debenture, note or other evidence
of indebtedness, or under any lease, contract, indenture, mortgage, deed of
trust, loan agreement, license agreement, joint venture or other agreement or
instrument to which the Company or the Subsidiary is a party or by which it
or the Subsidiary or their respective properties may be bound, (ii) the
charter or bylaws of the Company or the Subsidiary, or (iii) any law, order,
rule, regulation, writ, injunction, judgment or decree of any court,
government or governmental agency or body, domestic or foreign, having
jurisdiction over the Company or the Subsidiary or over their respective
properties. No consent, approval, authorization or order of or qualification
with any court, government or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or the Subsidiary or over their
respective properties is required for the execution and delivery of this
Agreement and the consummation by the Company or the Subsidiary of the
transactions herein contemplated, except such as may be required under the
Act or under state or other securities or Blue Sky laws, all of which
requirements have been satisfied in all material respects.
(e) There is not any pending or, to the best of the Company's
knowledge, threatened action, suit, claim or proceeding against the Company,
the Subsidiary or any of their respective officers or any of their respective
properties, assets or rights before any court, government or governmental
agency or body, domestic or foreign, having jurisdiction over the Company or
the Subsidiary or over their respective officers or properties or otherwise
which (i) could result in any material adverse change in the condition
(financial or otherwise), earnings, operations, business or business
prospects of the Company and the Subsidiary, considered as one enterprise, or
might materially and adversely affect their properties, assets or rights,
(ii) could prevent consummation of the transactions contemplated hereby or
(iii) is required to be disclosed in the Registration Statement or Prospectus
and is not so disclosed; and there are no agreements, contracts, leases or
documents of the Company or the Subsidiary of a character required to be
described or referred to in the Registration Statement or Prospectus or to be
filed as an exhibit to the Registration Statement by the Act or the Rules and
Regulations which have not been accurately described in all material respects
in the Registration Statement or Prospectus or filed as exhibits to the
Registration Statement.
(f) All outstanding shares of capital stock of the Company
(including, as of the Closing Date, the Selling Stockholder Shares) have been
duly authorized and validly issued and are fully paid and nonassessable, have
been issued in compliance with all federal and state securities laws, were
not issued in violation of or subject to any preemptive rights or other
rights to subscribe for or purchase securities, and the authorized and
outstanding capital stock of the Company is as set forth in the Prospectus
under the caption "Capitalization" and conforms in all material respects to
the statements relating thereto contained in the Registration Statement and
the Prospectus (and such statements correctly state the substance of the
instruments defining the capitalization of the Company); the Company Shares
and the Option Shares to be purchased from the Company have been duly
authorized for issuance and sale to the Underwriters pursuant to this
Agreement and, when issued and delivered by the Company against payment
therefor in accordance with the terms of this Agreement, will be duly and
validly issued and fully paid and nonassessable, and will be sold free and
clear of any pledge, lien, security interest, encumbrance, claim or equitable
interest; and no preemptive right, co-sale right, registration right, right
of first refusal or other similar right of stockholders to which the Company
is a party exists with respect to any of the Company Shares or Option Shares
to be purchased from the Company hereunder or the issuance and sale thereof
other than those that have been satisfied or expressly waived prior to the
date hereof and those that will automatically expire upon and will not apply
to the consummation of the transactions contemplated on the Closing Date. No
further approval or authorization of any stockholder, the Board of Directors
of the Company or others is required for the issuance and sale or transfer of
the Shares except as may be required under the Act, the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or under state or other
securities or Blue Sky laws. All issued and outstanding shares of capital
stock of the Subsidiary have been duly authorized and validly issued and are
fully paid and nonassessable, and were not issued in violation of or subject
to any preemptive right, or other rights to subscribe for or purchase shares
and are owned by the Company free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest. Except as disclosed in
the Prospectus and the financial
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statements of the Company, and the related notes thereto, included in the
Prospectus, neither the Company nor the Subsidiary has outstanding any
options to purchase, or any preemptive rights or other rights to subscribe
for or to purchase, any securities or obligations convertible into, or any
contracts or commitments to issue or sell, shares of its capital stock or any
such options, rights, convertible securities or obligations. The description
of the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted and exercised
thereunder, set forth in the Prospectus accurately and fairly presents the
information required to be shown with respect to such plans, arrangements,
options and rights.
(g) Ernst & Young LLP, which has examined the consolidated
financial statements of the Company, together with the related schedules and
notes, as of January 31, 1997 and 1998 and for each of the years in the three
(3) years ended January 31, 1998 filed with the Commission as a part of the
Registration Statement, which are included in the Prospectus, are independent
accountants within the meaning of the Act and the Rules and Regulations; the
audited consolidated financial statements of the Company, together with the
related schedules and notes, and the unaudited consolidated financial
information, forming part of the Registration Statement and Prospectus,
fairly present the financial position and the results of operations of the
Company and the Subsidiary at the respective dates and for the respective
periods to which they apply; and all audited consolidated financial
statements of the Company, together with the related schedules and notes, and
the unaudited consolidated financial information, filed with the Commission
as part of the Registration Statement, have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved except as may be otherwise stated therein. The selected and
summary financial and statistical data included in the Registration Statement
present fairly the information shown therein and have been compiled on a
basis consistent with the audited financial statements presented therein. No
other financial statements or schedules are required to be included in the
Registration Statement.
(h) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, there has
not been (i) any material adverse change in the condition (financial or
otherwise), earnings, operations, business or business prospects of the
Company and the Subsidiary, considered as one enterprise, (ii) any
transaction that is material to the Company and the Subsidiary, considered as
one enterprise, except transactions entered into in the ordinary course of
business, (iii) any obligation, direct or contingent, that is material to the
Company and the Subsidiary, considered as one enterprise, incurred by the
Company or the Subsidiary, except obligations incurred in the ordinary course
of business, (iv) any change in the capital stock or outstanding indebtedness
of the Company or the Subsidiary that is material to the Company and the
Subsidiary, considered as one enterprise, (v) any dividend or distribution of
any kind declared, paid or made on the capital stock of the Company or the
Subsidiary, or (vi) any loss or damage (whether or not insured) to the
property of the Company or the Subsidiary which has been sustained which has
a material adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and the
Subsidiary, considered as one enterprise.
(i) Except as set forth in the Registration Statement and
Prospectus, (i) each of the Company and the Subsidiary has good and
marketable title to all properties and assets described in the Registration
Statement and Prospectus as owned by it, free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest, other than such
as would not have a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the
Company and the Subsidiary, considered as one enterprise, (ii) the agreements
to which the Company or the Subsidiary is a party described in the
Registration Statement and Prospectus are valid agreements, enforceable by
the Company and the Subsidiary (as applicable), except as the enforcement
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally or by general equitable principles and, to the best of the
Company's knowledge, the other contracting party or parties thereto are not
in material breach or material default under any of such agreements, and
(iii) each of the Company and the Subsidiary has valid and enforceable leases
for all properties described in the Registration Statement and Prospectus as
leased by it, except as the enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles. Except as set forth in the Registration Statement and
Prospectus, the
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Company owns or leases all such properties as are necessary to its operations
as now conducted or as proposed to be conducted.
(j) The Company and the Subsidiary have timely filed all
necessary federal, state and foreign income and franchise tax returns and
have paid all taxes shown thereon as due, and there is no tax deficiency that
has been or, to the best of the Company's knowledge, might be asserted
against the Company or the Subsidiary, except where the failure to file such
tax returns or pay such taxes or the existence of such tax deficiency would
not have a material adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and the
Subsidiary, considered as one enterprise; and all tax liabilities are
adequately provided for on the books of the Company and the Subsidiary.
(k) Except as described in the Registration Statement and the
Prospectus, neither the Company nor the Subsidiary has any employee benefit
plans (including, without limitation, profit sharing plans) or deferred
compensation arrangements.
(l) The Company and the Subsidiary maintain insurance with
insurers of recognized financial responsibility of the types and in the
amounts generally deemed adequate for their respective businesses and
consistent with insurance coverage maintained by similar companies in similar
businesses, including, but not limited to, insurance covering real and
personal property owned or leased by the Company or the Subsidiary against
theft, damage, destruction, acts of vandalism and all other risks customarily
insured against, all of which insurance is in full force and effect; neither
the Company nor the Subsidiary has been refused any insurance coverage sought
or applied for; and neither the Company nor the Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as
and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that would
not materially and adversely affect the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and the
Subsidiary, considered as one enterprise.
(m) To the best of the Company's knowledge, no labor
disturbance by the employees of the Company or the Subsidiary exists or is
imminent; and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its principal suppliers,
subassemblers, value added resellers, subcontractors, independent software
vendors, original equipment manufacturers, authorized dealers or distributors
that might be expected to result in a material adverse change in the
condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and the Subsidiary, considered as one
enterprise. No collective bargaining agreement exists with any of the
Company's employees and, to the Company's knowledge, no such agreement is
imminent.
(n) Each of the Company and the Subsidiary owns or possesses
adequate rights to use all patents, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names and copyrights which are
necessary to conduct its businesses as described in the Registration
Statement and Prospectus; the expiration of any patents, patent rights, trade
secrets, trademarks, service marks, trade names or copyrights would not have
a material adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and the
Subsidiary, considered as one enterprise; the Company has not received any
notice of, and has no knowledge of, any infringement of or conflict with
asserted rights of the Company by others with respect to any patent, patent
rights, inventions, trade secrets, know-how, trademarks, service marks, trade
names or copyrights; and the Company has not received any notice of, and has
no knowledge of, any infringement of or conflict with asserted rights of
others with respect to any patent, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names or copyrights which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, might have a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the
Company and the Subsidiary, considered as one enterprise.
(o) The statements in the Prospectus, under the heading "Certain
Transactions," set forth all existing agreements, arrangements, understandings
or transactions or proposed agreements, arrangements,
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understandings or transactions, between or among the Company and the
Subsidiary, on the one hand, and any officer, director or stockholder of the
Company or the Subsidiary, or with any partner, affiliate or associate of any
of the foregoing persons or entities, on the other hand, required to be set
forth or described thereunder.
(p) The Common Stock has been approved for quotation on The
Nasdaq National Market, subject to official notice of issuance.
(q) The Company has been advised concerning the Investment
Company Act of 1940, as amended (the "1940 Act"), and the rules and
regulations thereunder, and has in the past conducted, and intends in the
future to conduct, its affairs in such a manner as to ensure that it will not
become an "investment company" or a company "controlled" by an "investment
company" within the meaning of the 1940 Act and such rules and regulations.
(r) The Company has not distributed and will not distribute
prior to the later of (i) the Closing Date, or any date on which Option
Shares are to be purchased, as the case may be, and (ii) completion of the
distribution of the Shares, any offering material in connection with the
offering and sale of the Shares other than any Preliminary Prospectuses, the
Prospectus, the Registration Statement and other materials, if any, permitted
by the Act.
(s) Neither the Company nor the Subsidiary has at any time
during the last five (5) years (i) made any unlawful contribution to any
candidate for foreign office or failed to disclose fully any contribution in
violation of law, or (ii) made any payment to any federal or state
governmental officer or official, or other person charged with similar public
or quasi-public duties, other than payments required or permitted by the laws
of the United States or any jurisdiction thereof.
(t) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares.
(u) Each officer and director of the Company who owns shares
of Common Stock or options to purchase shares of Common Stock that will vest
within 180 days of the date of this Agreement, each Selling Stockholder and
each other beneficial owner of 1,000 or more shares of Common Stock and/or
options to purchase shares of Common Stock that will vest within 180 days of
the date of this Agreement has agreed in writing that such person will not,
for a period of 180 days from the date that the Registration Statement is
declared effective by the Commission (the "Lock-up Period"), offer to sell,
contract to sell, or otherwise sell, dispose of, loan, pledge or grant any
rights with respect to (collectively, a "Disposition") any shares of Common
Stock, any options or warrants to purchase any shares of Common Stock or any
securities convertible into or exchangeable for shares of Common Stock
(collectively, "Securities") now owned or hereafter acquired directly by such
person or with respect to which such person has or hereafter acquires the
power of disposition, otherwise than (i) as a bona fide gift or gifts,
PROVIDED the donee or donees thereof agree in writing to be bound by this
restriction, (ii) as a distribution to partners or stockholders of such
person, PROVIDED that the distributees thereof agree in writing to be bound
by the terms of this restriction, or (iii) with the prior written consent of
BancAmerica Robertson Stephens (which consent has been given with respect to
the pledge of any shares of Common Stock that were purchased pursuant to the
Company's "Stock Option Loan Program" described in the Registration Statement
or any other loan program approved in writing by BancAmerica Robertson
Stephens). The foregoing restriction has been expressly agreed to preclude
the holder of the Securities from engaging in any hedging or other
transaction which is designed to or reasonably expected to lead to or result
in a Disposition of Securities during the Lock-up Period, even if such
Securities would be disposed of by someone other than such holder. Such
prohibited hedging or other transactions would include, without limitation,
any short sale (whether or not against the box) or any purchase, sale or
grant of any right (including, without limitation, any put or call option)
with respect to any Securities or with respect to any security (other than a
broad-based market basket or index) that includes, relates to or derives any
significant part of its value from Securities. Such person has also agreed
and consented to the entry of stop transfer instructions with the Company's
transfer agent against the transfer of the Securities held by such person
except in
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compliance with this restriction. Furthermore, each such person has also
agreed that, without the prior written consent of BancAmerica Robertson
Stephens, such person will not, during the period ending with the conclusion
of the Lock-Up Period, make any demand for or exercise any right with respect
to, the registration of any Securities, except pursuant to the Registration
Statement to the extent set forth in Schedule B hereto. The Company has
provided to counsel for the Underwriters a complete and accurate list of all
securityholders of the Company and the number and type of securities held by
each securityholder. The Company has provided to counsel for the
Underwriters true, accurate and complete copies of all of the agreements
pursuant to which its officers (to the extent that they are stockholders of
the Company), directors (to the extent that they are stockholders of the
Company) and stockholders have agreed to such or similar restrictions (the
"Lock-up Agreements") presently in effect or effected hereby. The Company
hereby represents and warrants that, prior to the conclusion of the Lock-Up
Period, it will not release any of its officers, directors or other
stockholders from any Lock-up Agreements currently existing or hereafter
effected without the prior written consent of BancAmerica Robertson Stephens.
(v) Except as set forth in the Registration Statement and
Prospectus, (i) the Company is in compliance with all rules, laws and
regulations relating to the use, treatment, storage and disposal of toxic
substances and protection of health or the environment ("Environmental Laws")
which are applicable to its business, (ii) the Company has received no notice
from any governmental authority or third party of an asserted claim under
Environmental Laws, which claim is required to be disclosed in the
Registration Statement and the Prospectus, (iii) the Company will not be
required to make future material capital expenditures to comply with
Environmental Laws and (iv) no property which is owned, leased or occupied by
the Company has been designated as a Superfund site pursuant to the
Comprehensive Response, Compensation, and Liability Act of 1980, as amended
(42 U.S.C. Section 9601, ET SEQ.), or otherwise designated as a contaminated
site under applicable state or local law.
(w) The Company and the Subsidiary maintain a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets,
(iii) access to assets is permitted only in accordance with management's
general or specific authorization, and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(x) There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or
guarantees of indebtedness by the Company to or for the benefit of any of the
officers or directors of the Company or any of the members of the families of
any of them, except as disclosed in the Registration Statement and the
Prospectus.
(y) The Company has not incurred any liability for any
finder's fees or similar payments in connection with the transactions
contemplated herein.
(z) The Company's products are designed to be in compliance
with all federal, state and local banking laws and regulation and similar
laws and regulations of other countries.
(aa) The Company has complied with all provisions of Section
517.075, Florida Statutes relating to doing business with the Government of
Cuba or with any person or affiliate located in Cuba.
(ab) The Company has given notice of the filing of the
Registration Statement and the offering contemplated thereby as required by
the Shareholders Agreements, dated January 29, 1997, by and among the Company
and certain of its stockholders.
II. Each Selling Stockholder, severally and not jointly,
represents and warrants to and agrees with each Underwriter that:
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(a) Such Selling Stockholder on the Closing Date and on any
later date on which Option Shares are purchased will have valid marketable
title to the Shares to be sold by such Selling Stockholder under this
Agreement, free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest other than pursuant to this
Agreement; and upon delivery of such Shares hereunder and payment of the
purchase price as herein contemplated, each of the Underwriters will obtain
valid marketable title to the Shares purchased by it from such Selling
Stockholder, free and clear of any pledge, lien, security interest pertaining
to such Selling Stockholder or such Selling Stockholder's property,
encumbrance, claim or equitable interest, including any liability for estate
or inheritance taxes, or any liability to or claims of any creditor, devisee,
legatee or beneficiary of such Selling Stockholder.
(b) Such Selling Stockholder has duly authorized (if
applicable), executed and delivered, in the form heretofore furnished to the
Representatives, an irrevocable Custody Agreement and Power of Attorney (the
"Selling Stockholder Agreement") appointing John D. Carreker, Jr., Richard L.
Linting and Terry L. Gage as attorneys-in-fact (collectively, the "Attorneys"
and individually, an "Attorney") and a Letter of Transmittal and Custody
Agreement (the "Custody Agreement") with ChaseMellon Shareholder Services,
L.L.C., as custodian (the "Custodian"); the Selling Stockholder Agreement of
each Selling Stockholder constitutes a valid and binding agreement on the
part of such Selling Stockholder, enforceable in accordance with its terms,
except as the enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable principles; and
each of such Selling Stockholder's Attorneys, acting alone, is authorized to
execute and deliver this Agreement and the certificate referred to in Section
6(h) hereof on behalf of such Selling Stockholder, to determine the purchase
price to be paid by the several Underwriters to such Selling Stockholder as
provided in Section 3 hereof, to authorize the delivery of the Selling
Stockholder Shares and the Option Shares to be sold by such Selling
Stockholder under this Agreement and to duly endorse (in blank or otherwise)
the certificate or certificates representing such Shares or a stock power or
powers with respect thereto, to accept payment therefor, and otherwise to act
on behalf of such Selling Stockholder in connection with this Agreement.
(c) All consents, approvals, authorizations and orders
required for the execution and delivery by such Selling Stockholder of the
Selling Stockholder Agreement, the execution and delivery by or on behalf of
such Selling Stockholder of this Agreement and the sale and delivery of the
Selling Stockholder Shares and the Option Shares to be sold by such Selling
Stockholder under this Agreement (other than, at the time of the execution
hereof (if the Registration Statement has not yet been declared effective by
the Commission), the issuance of the order of the Commission declaring the
Registration Statement effective and such consents, approvals, authorizations
or orders as may be necessary under state or other securities or Blue Sky
laws or under the rules and regulations of the National Association of
Securities Dealers, Inc. (the "NASD")) have been obtained and are in full
force and effect; such Selling Stockholder, if other than a natural person,
has been duly organized and is validly existing in good standing under the
laws of the jurisdiction of its organization as the type of entity that it
purports to be; and such Selling Stockholder has full legal right, power and
authority to enter into and perform its obligations under this Agreement and
such Selling Stockholder Agreement, and to sell, assign, transfer and deliver
the Shares to be sold by such Selling Stockholder under this Agreement.
(d) Such Selling Stockholder will not, during the Lock-up
Period, effect the Disposition of any Securities now owned or hereafter
acquired directly by such Selling Stockholder or with respect to which such
Selling Stockholder has or hereafter acquires the power of disposition,
otherwise than (i) as a bona fide gift or gifts, PROVIDED the donee or donees
thereof agree in writing to be bound by this restriction, (ii) as a
distribution to partners or stockholders of such Selling Stockholder,
PROVIDED that the distributees thereof agree in writing to be bound by the
terms of this restriction, or (iii) with the prior written consent of
BancAmerica Robertson Stephens (which consent has been given with respect to
the pledge of any shares of Common Stock that were purchased by such Selling
Stockholder pursuant to the Company's "Stock Option Loan Program" described
in the Registration Statement or any other loan program approved in writing
by BancAmerica Robertson Stephens). The foregoing restriction is expressly
agreed to preclude the holder of the Securities from engaging in any hedging
or other transaction which is designed to or reasonably expected to lead to
or result in a Disposition of Securities during the Lock-up Period, even if
such Securities would be disposed of by someone other than the Selling
Stockholder. Such prohibited hedging or other transactions
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would including, without limitation, any short sale (whether or not against
the box) or any purchase, sale or grant of any right (including, without
limitation, any put or call option) with respect to any Securities or with
respect to any security (other than a broad-based market basket or index)
that includes, relates to or derives any significant part of its value from
Securities. Such Selling Stockholder also agrees and consents to the entry
of stop transfer instructions with the Company's transfer agent against the
transfer of the securities held by such Selling Stockholder except in
compliance with this restriction. Furthermore, such Selling Stockholder also
agrees that, without the prior written consent of BancAmerica Robertson
Stephens, such Selling Stockholder will not, during the period ending with
the conclusion of the Lock-Up Period, make any demand for or exercise any
right with respect to, the registration of any Securities, except pursuant to
the Registration Statement to the extent set forth in Schedule B hereto.
(e) Certificates in negotiable form for all Shares to be sold
by such Selling Stockholder under this Agreement, together with a stock power
or powers duly endorsed in blank by such Selling Stockholder, have been
placed in custody with the Custodian for the purpose of effecting delivery
hereunder, except for the Selling Stockholder Shares to be sold by Wyn P.
Lewis which certificates and stock power will be delivered by Mr. Lewis or on
his behalf to the Underwriters at the time of the Closing.
(f) This Agreement has been duly authorized by each Selling
Stockholder that is not a natural person and has been duly executed and
delivered by or on behalf of such Selling Stockholder and is a valid and
binding agreement of such Selling Stockholder, enforceable in accordance with
its terms, except as rights to indemnification or contribution hereunder may
be limited by applicable law or public policy and except as the enforcement
hereof may be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to or affecting creditors' rights generally or
by general equitable principles; and the performance of this Agreement and
the consummation of the transactions herein contemplated will not (i) result
in a material breach or violation of any of the terms and provisions of or
constitute a default under any bond, debenture, note or other evidence of
indebtedness, or under any lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or instrument to
which such Selling Stockholder is a party or by which such Selling
Stockholder, or any Shares to be sold by such Selling Stockholder hereunder,
may be bound or, (ii) to the best of such Selling Stockholders' knowledge,
result in any violation of any law, order, rule, regulation, writ,
injunction, judgment or decree of any court, government or governmental
agency or body, domestic or foreign, having jurisdiction over such Selling
Stockholder or over the properties of such Selling Stockholder, or (iii) if
such Selling Stockholder is other than a natural person, result in any
violation of any provisions of the charter, bylaws or other organizational
documents of such Selling Stockholder.
(g) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of
the Common Stock to facilitate the sale or resale of the Shares.
(h) Such Selling Stockholder has not distributed and will not
distribute any prospectus or other offering material in connection with the
offering and sale of the Shares.
(i) All information furnished by or on behalf of such Selling
Stockholder relating to such Selling Stockholder, in his or its capacity as
such, and the Selling Stockholder Shares that is contained in the
representations and warranties of such Selling Stockholder in such Selling
Stockholder's Selling Stockholder Agreement or set forth in the Registration
Statement or the Prospectus is, and at the time the Registration Statement
became or becomes, as the case may be, effective and at all times subsequent
thereto up to and on the Closing Date, and on any later date on which Option
Shares are to be purchased, was or will be, true, correct and complete in all
material respects, and does not, and at the time the Registration Statement
became or becomes, as the case may be, effective and at all times subsequent
thereto up to and on the Closing Date, and on any later date on which Option
Shares of such Selling Stockholder are to be purchased, will not, contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make such information not misleading.
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(j) Such Selling Stockholder (other than Lawrence D.
Duckworth) will review the Prospectus and such Selling Stockholder will
comply with all agreements and satisfy all conditions on his or its part to
be complied with or satisfied pursuant to this Agreement on or prior to the
Closing Date, or any later date on which Option Shares of such Selling
Stockholder are to be purchased, as the case may be, and will advise one of
its Attorneys and BancAmerica Robertson Stephens prior to the Closing Date or
such later date on which Option Shares are to be purchased, as the case may
be, if any statement to be made on behalf of such Selling Stockholder in the
certificate contemplated by Section 6(h) would be inaccurate if made as of
the Closing Date or such later date on which Option Shares of such Selling
Stockholder are to be purchased, as the case may be.
(k) Such Selling Stockholder does not have, or has waived
prior to the date hereof, any preemptive right, co-sale right or right of
first refusal or other similar right to purchase any of the Shares that are
to be sold by the Company or any of the other Selling Stockholders to the
Underwriters pursuant to this Agreement; such Selling Stockholder does not
have, or has waived prior to the date hereof, any registration right or other
similar right to participate in the offering made by the Prospectus, other
than such rights of participation as have been satisfied by the participation
of such Selling Stockholder in the transactions to which this Agreement
relates in accordance with the terms of this Agreement; and such Selling
Stockholder does not own any warrants, options or similar rights to acquire,
and does not have any right or arrangement to acquire, any capital stock,
rights, warrants, options or other securities from the Company, other than
those referred to in the Registration Statement and the Prospectus.
(l) Except as disclosed to the Underwriters in writing, such
Selling Stockholder is not directly or indirectly an affiliate of or
associate with any member of the NASD.
(m) In addition to the other representations and warranties
set forth in this Section 2.II, each of John D. Carreker, Jr. and Ronald R.
Antinori, severally and not jointly, further represents and warrants that, to
the best of their respective knowledge, the representations and warranties of
the Company set forth in Section 2.I of this Agreement are true and correct
in all material respects.
(n) In addition to the other representations and warranties
set forth in this Section 2.II, each of Wyn P. Lewis, Royce D. Brown
[and SAIC], severally and not jointly, further represents and warrants that,
to their respective knowledge, each Preliminary Prospectus, as of its date,
has not included any untrue statement of a material fact or omitted to state
a material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and at the time the
Registration Statement became or becomes, as the case may be, effective and
at all times subsequent thereto up to and on the Closing Date and on any
later date on which Option Shares are to be purchased, the Registration
Statement, and any amendments or supplements thereto, did not and will not
include any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and the Prospectus, and any amendments or supplements
thereto, did not and will not include any untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
PROVIDED, HOWEVER, that none of the representations and warranties contained
in this subparagraph (n) shall apply to information contained in or omitted
from the Registration Statement or Prospectus, or any amendment or supplement
thereto, in reliance upon, and in conformity with, written information
furnished to the Company by such Underwriter specifically for use in the
preparation thereof.
3. PURCHASE, SALE AND DELIVERY OF SHARES. On the basis of the
representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company and the Selling
Stockholders agree, severally and not jointly, to sell to the Underwriters,
and each Underwriter agrees, severally and not jointly, to purchase from the
Company and the Selling Stockholders, respectively, at a purchase price of
$__.__ per share, the respective number of Company Shares as hereinafter set
forth and Selling Stockholder Shares set forth opposite the names of the
Company and the Selling Stockholders in Schedule B hereto. The obligation of
each Underwriter to the Company and to each Selling Stockholder shall be to
purchase from the Company or such Selling Stockholder that number of Company
Shares or Selling Stockholder Shares, as the case may be, which (as nearly as
practicable, as
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determined by you) is in the same proportion to the number of Company Shares
or Selling Stockholder Shares, as the case may be, set forth opposite the
name of the Company or such Selling Stockholder in Schedule B hereto as the
number of Firm Shares which is set forth opposite the name of such
Underwriter in Schedule A hereto (subject to adjustment as provided in
Section 10) is to the total number of Firm Shares to be purchased by all the
Underwriters under this Agreement.
The certificates in negotiable form for the Selling
Stockholder Shares have been placed in custody (for delivery under this
Agreement) under the Selling Stockholder Agreement, except for the Selling
Stockholder Shares to be sold by Wyn P. Lewis which certificates, together
with duly endorsed stock powers, will be delivered by Mr. Lewis or on his
behalf to the Underwriters at the time of the Closing. Each Selling
Stockholder agrees that the certificates for the Selling Stockholder Shares
of such Selling Stockholder are subject to the interests of the Underwriters
hereunder, that the arrangements made by such Selling Stockholder for the
custody of the Selling Stockholder Shares, including the Selling Stockholder
Agreement, is to that extent irrevocable and that the obligations of such
Selling Stockholder hereunder shall not be terminated by the act of such
Selling Stockholder or by operation of law, whether by the death or
incapacity of such Selling Stockholder or the occurrence of any other event,
except as specifically provided herein or in the Selling Stockholder
Agreement. If any Selling Stockholder should die or be incapacitated, or if
any other such event should occur, before the delivery of the certificates
for the Selling Stockholder Shares hereunder, the Selling Stockholder Shares
to be sold by such Selling Stockholder shall, except as specifically provided
herein or in the Selling Stockholder Agreement, be delivered by the Custodian
in accordance with the terms and conditions of this Agreement as if such
death, incapacity or other event had not occurred, regardless of whether the
Custodian shall have received notice of such death or other event.
Delivery of definitive certificates for the Firm Shares to be
purchased by the Underwriters pursuant to this Section 3 shall be made
against payment of the purchase price therefor by the several Underwriters by
certified or official bank check or checks drawn in same-day funds or by wire
transfer in same-day funds, payable to the order of the Company with regard
to the Shares being purchased from the Company, and to the order of the
Custodian for the respective accounts of the Selling Stockholders with regard
to the Shares being purchased from such Selling Stockholders, at the offices
of Locke Purnell Rain Harrell, 2200 Ross Avenue, Suite 2200, Dallas, Texas
(or at such other place as may be agreed upon among the Representatives and
the Company), at 7:00 A.M., San Francisco time (a) on the third (3rd) full
business day following the first day that Shares are traded, (b) if this
Agreement is executed and delivered after 1:30 P.M., San Francisco time, the
fourth (4th) full business day following the day that this Agreement is
executed and delivered or (c) at such other time and date not later than
seven (7) full business days following the first day that Shares are traded
as the Representatives and the Company may determine (or at such time and
date to which payment and delivery shall have been postponed pursuant to
Section 10 hereof), such time and date of payment and delivery being herein
called the "Closing Date"; PROVIDED, HOWEVER, that if the Company has not
made available to the Representatives copies of the Prospectus within the
time provided in Section 4(d) hereof (through no fault of the
Representatives), the Representatives may, in their sole discretion, postpone
the Closing Date until no later than two (2) full business days following
delivery of copies of the Prospectus to the Representatives. The
certificates for the Firm Shares to be so delivered will be made available to
you at such office or such other location including, without limitation, in
New York City, as you may reasonably request for checking at least one (1)
full business day prior to the Closing Date and will be in such names and
denominations as you may request, such request to be made at least two (2)
full business days prior to the Closing Date. If the Representatives so
elect, delivery of the Firm Shares may be made by credit through full fast
transfer to the accounts at The Depository Trust Company designated by the
Representatives.
It is understood that you, individually, and not as the
Representatives of the several Underwriters, may (but shall not be obligated
to) make payment of the purchase price on behalf of any Underwriter or
Underwriters whose check or checks shall not have been received by you prior
to the Closing Date for the Firm Shares to be purchased by such Underwriter
or Underwriters. Any such payment by you shall not relieve any such
Underwriter or Underwriters of any of its or their obligations hereunder.
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After the Registration Statement becomes effective, the several
Underwriters intend to make an initial public offering (as such term is
described in Section 11 hereof) of the Firm Shares at an initial public offering
price of $__.__ per share. After the initial public offering, the several
Underwriters may, in their discretion, vary the public offering price.
The information set forth in the last paragraph on the front
cover page (insofar as such information relates to the Underwriters), on the
inside front cover concerning stabilization and over-allotment by the
Underwriters, and under the second, seventh, eighth and ninth paragraphs
under the caption "Underwriting" in any Preliminary Prospectus and in the
Prospectus constitutes the only information furnished by the Underwriters to
the Company for inclusion in any Preliminary Prospectus, the Prospectus or
the Registration Statement, and you, on behalf of the respective
Underwriters, represent and warrant to the Company and the Selling
Stockholders that the statements made therein do not include any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
4. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees with the
several Underwriters that:
(a) The Company will use its best efforts to cause the
Registration Statement and any amendment thereof, if not effective at the
time and date that this Agreement is executed and delivered by the parties
hereto, to become effective as promptly as possible; the Company will use its
best efforts to cause any abbreviated registration statement pursuant to Rule
462(b) of the Rules and Regulations as may be required subsequent to the date
the Registration Statement is declared effective to become effective as
promptly as possible; the Company will notify you, promptly after it shall
receive notice thereof, of the time when the Registration Statement, any
subsequent amendment to the Registration Statement or any abbreviated
registration statement has become effective or any supplement to the
Prospectus has been filed; if the Company omitted information from the
Registration Statement at the time it was originally declared effective in
reliance upon Rule 430A(a) of the Rules and Regulations, the Company will
provide evidence satisfactory to you that the Prospectus contains such
information and has been filed, within the time period prescribed, with the
Commission pursuant to subparagraph (1) or (4) of Rule 424(b) of the Rules
and Regulations or as part of a post-effective amendment to such Registration
Statement as originally declared effective which is declared effective by the
Commission; if the Company files a term sheet pursuant to Rule 434 of the
Rules and Regulations, the Company will provide evidence satisfactory to you
that the Prospectus and term sheet meeting the requirements of Rule 434(b) or
(c), as applicable, of the Rules and Regulations, have been filed, within the
time period prescribed, with the Commission pursuant to subparagraph (7) of
Rule 424(b) of the Rules and Regulations; if for any reason the filing of the
final form of Prospectus is required under Rule 424(b)(3) of the Rules and
Regulations, it will provide evidence satisfactory to you that the Prospectus
contains such information and has been filed with the Commission within the
time period prescribed; it will notify you promptly of any request by the
Commission for the amending or supplementing of the Registration Statement or
the Prospectus or for additional information; promptly upon your request, it
will prepare and file with the Commission any amendments or supplements to
the Registration Statement or Prospectus which, in the opinion of counsel for
the several Underwriters ("Underwriters' Counsel"), may be necessary or
advisable in connection with the distribution of the Shares by the
Underwriters; it will promptly prepare and file with the Commission, and
promptly notify you of the filing of, any amendments or supplements to the
Registration Statement or Prospectus which may be necessary to correct any
statements or omissions, if, at any time when a prospectus relating to the
Shares is required to be delivered under the Act, any event shall have
occurred as a result of which the Prospectus or any other prospectus relating
to the Shares as then in effect would include any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; in case any Underwriter is required to deliver a
prospectus nine (9) months or more after the effective date of the
Registration Statement in connection with the sale of the Shares, it will
prepare promptly upon request, but at the expense of such Underwriter, such
amendment or amendments to the Registration Statement and such prospectus or
prospectuses as may be necessary to permit compliance with the requirements
of Section 10(a)(3) of the Act; and it will file no amendment or supplement
to the Registration Statement or Prospectus, or, prior to the end of the
period of time in which a prospectus relating to the Shares is required to be
delivered under the Act, which shall not
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previously have been submitted to you a reasonable time prior to the proposed
filing thereof or to which you shall reasonably object in writing, subject,
however, to compliance with the Act and the Rules and Regulations and the
provisions of this Agreement.
(b) The Company will advise you, promptly after it shall
receive notice or obtain knowledge, of the issuance of any stop order by the
Commission suspending the effectiveness of the Registration Statement or of
the initiation or threat of any proceeding for that purpose; and it will
promptly use its best efforts to prevent the issuance of any stop order or to
obtain its withdrawal at the earliest possible moment if such stop order
should be issued.
(c) The Company will use its best efforts to qualify the
Shares for offering and sale under the securities laws of such jurisdictions
as you may designate and to continue such qualifications in effect for so
long as may be required for purposes of the distribution of the Shares,
except that the Company shall not be required in connection therewith or as a
condition thereof to qualify as a foreign corporation or to execute a general
consent to service of process in any jurisdiction in which it is not
otherwise required to be so qualified or to so execute a general consent to
service of process. In each jurisdiction in which the Shares shall have been
qualified as above provided, the Company will make and file such statements
and reports in each year as are or may be required by the laws of such
jurisdiction.
(d) The Company will furnish to you, as soon as available,
and, in the case of the Prospectus and any term sheet or abbreviated term
sheet under Rule 434, in no event later than the first (1st) full business
day following the first day that Shares are traded, copies of the
Registration Statement (three of which will be signed and which will include
all exhibits), each Preliminary Prospectus, the Prospectus and any amendments
or supplements to such documents, including any prospectus prepared to permit
compliance with Section 10(a)(3) of the Act, all in such quantities as you
may from time to time reasonably request. Notwithstanding the foregoing, if
BancAmerica Robertson Stephens, on behalf of the several Underwriters, shall
agree to the utilization of Rule 434 of the Rules and Regulations, the
Company shall provide to you copies of a Preliminary Prospectus updated in
all respects through the date specified by you in such quantities as you may
from time to time reasonably request.
(e) The Company will make generally available to its
securityholders as soon as practicable, but in any event not later than the
forty-fifth (45th) day following the end of the fiscal quarter first
occurring after the first anniversary of the effective date of the
Registration Statement, an earnings statement (which will be in reasonable
detail but need not be audited) complying with the provisions of Section
11(a) of the Act and covering a twelve (12) month period beginning after the
effective date of the Registration Statement.
(f) During a period of three (3) years after the date hereof,
the Company will furnish to its stockholders as soon as practicable after the
end of each respective period, annual reports (including financial statements
audited by independent certified public accountants) within one hundred
twenty (120) days after the end of each fiscal year and will make available
unaudited quarterly reports of operations for each of the first three
quarters of the fiscal year within sixty (60) days after the end of each
fiscal quarter, and will furnish to you and the other several Underwriters
hereunder, upon request (i) concurrently with furnishing such reports to its
stockholders, statements of operations of the Company for each of the first
three (3) quarters in the form furnished to the Company's stockholders, (ii)
concurrently with furnishing to its stockholders, a balance sheet of the
Company as of the end of such fiscal year, together with statements of
operations, of stockholders' equity, and of cash flows of the Company for
such fiscal year, accompanied by a copy of the certificate or report thereon
of independent certified public accountants, (iii) as soon as they are
available, copies of all reports (financial or other) mailed to stockholders,
(iv) as soon as they are available, copies of all reports and financial
statements furnished to or filed with the Commission, any securities exchange
or the NASD, and (v) every material press release and every material news
item or article in respect of the Company or its affairs which was generally
released to stockholders. During such three (3) year period, if the Company
shall have active subsidiaries, the foregoing financial statements shall be
on a consolidated basis to the extent that the accounts of the Company and
such subsidiaries are consolidated, and shall be accompanied by similar
financial statements for any significant subsidiary which is not so
consolidated.
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(g) The Company will apply the net proceeds from the sale of the
Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(h) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar (which may
be the same entity as the transfer agent) for its Common Stock.
(i) If at any time during the ninety (90) day period after
the Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in your
opinion the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company
will, after written notice from you advising the Company to the effect set
forth above, forthwith consult with you concerning the substance of and
advisability of disseminating a press release or other public statement
responding to or commenting on such rumor, publication or event.
(j) For a period of twenty-five (25) days following the date
the Registration Statement is declared effective by the Commission, the
Company will not issue any press release or engage in any other publicity
without the Representatives' prior written consent, other than normal
customary releases issued in the ordinary course of the Company's business or
those releases required by law.
(k) During the Lock-up Period, the Company will not, without
the prior written consent of BancAmerica Robertson Stephens, effect the
Disposition of, directly or indirectly, any Securities other than the sale of
the Company Shares and the Option Shares to be sold by the Company hereunder
and the Company's issuance of options or Common Stock under the Company's
presently authorized 1994 Long Term Incentive Plan, the Company's Director
Stock Option Plan or pursuant to certain options granted to non-employee
directors of the Company (collectively, the "Option Arrangements").
(l) During a period of ninety (90) days from the effective
date of the Registration Statement, the Company will not file a registration
statement registering shares under the Option Plan or other employee benefit
plan.
(n) The Company will conduct its affairs in such a manner to
ensure that the Company will not be an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act.
5. EXPENSES.
(a) The Company and the Selling Stockholders agree with each
Underwriter that the Company and the Selling Stockholders will pay and bear
all costs and expenses in connection with the preparation, printing and
filing of the Registration Statement (including financial statements,
schedules and exhibits), Preliminary Prospectuses and the Prospectus and any
amendments or supplements thereto; the printing of this Agreement, the
Agreement Among Underwriters, the Selected Dealer Agreement, the Preliminary
Blue Sky Survey and any Supplemental Blue Sky Survey, the Underwriters'
Questionnaire and Power of Attorney, and any instruments related to any of
the foregoing; the issuance and delivery of the Shares hereunder to the
several Underwriters, including transfer taxes, if any; the cost of all
certificates representing the Shares and transfer agents' and registrars'
fees; the fees and disbursements of counsel for the Company; all fees and
other charges of the Company's independent certified public accountants; the
cost of furnishing to the several Underwriters copies of the Registration
Statement (including appropriate exhibits), Preliminary Prospectus and the
Prospectus, and any amendments or supplements to any of the foregoing; NASD
filing fees and the cost of qualifying the Shares under the laws of such
jurisdictions as you may designate (including filing fees and fees and
disbursements of Underwriters' Counsel in connection with such NASD filings
and Blue Sky qualifications); and all other expenses directly incurred by the
Company and the Selling Stockholders in connection with the performance of
their obligations hereunder. Any additional expenses incurred as a result of
the sale of the Shares by the Selling
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Stockholders will be borne collectively by the Company and the Selling
Stockholders or as otherwise may be mutually agreed to by them, but shall not
be, in any event, borne by the Underwriters. The provisions of this Section
5(a) are intended to relieve the Underwriters from the payment of the
expenses and costs which the Selling Stockholders and the Company hereby
agree to pay, but shall not affect any agreement which the Selling
Stockholders and the Company may make, or may have made, for the sharing of
any of such expenses and costs. Such agreements shall not impair the
obligations of the Company and the Selling Stockholders hereunder to the
several Underwriters.
(b) If the transactions contemplated hereby are not
consummated by reason of any failure, refusal or inability on the part of the
Company or any Selling Stockholder to perform any agreement on their
respective parts to be performed hereunder or to fulfill any condition of the
Underwriters' obligations hereunder, or if the Company shall terminate this
Agreement pursuant to Section 11(a) hereof, or if the Underwriters shall
terminate this Agreement pursuant to Section 11(b)(i), the Company will
reimburse the several Underwriters for all out-of-pocket expenses (including
fees and disbursements of Underwriters' Counsel) incurred by the Underwriters
in investigating or preparing to market or marketing the Shares. Subject to
the provisions of Section 8, the Underwriters agree to pay, whether or not
the transactions contemplated hereby are consummated or this Agreement is
terminated, all costs and expenses incident to the performance of the
obligations of the Underwriters under this Agreement that are not payable by
the Company or the Selling Stockholders pursuant to Section 5(a) above or the
first sentence of this Section 5(b), including, without limitation, the fees
and disbursements of counsel for the Underwriters.
(c) In addition to its other obligations under Section 8(a)
hereof, the Company agrees that, as an interim measure during the pendency of
any claim, action, investigation, inquiry or other proceeding described in
Section 8(a) hereof, it will reimburse the Underwriters on a monthly basis
for all reasonable legal or other expenses incurred in connection with
investigating or defending any such claim, action, investigation, inquiry or
other proceeding, notwithstanding the absence of a judicial determination as
to the propriety and enforceability of the Company's obligation to reimburse
the Underwriters for such expenses and the possibility that such payments
might later be held to have been improper by a court of competent
jurisdiction. To the extent that any such interim reimbursement payment is
so held to have been improper, the Underwriters shall promptly return such
payment to the Company together with interest, compounded daily, determined
on the basis of the prime rate (or other commercial lending rate for
borrowers of the highest credit standing) listed from time to time in The
Wall Street Journal which represents the base rate on corporate loans posted
by a substantial majority of the nation's thirty (30) largest banks (the
"Prime Rate"). Any such interim reimbursement payments which are not made to
the Underwriters within thirty (30) days of a request for reimbursement shall
bear interest at the Prime Rate from the date of such request.
(d) In addition to their other obligations under Section 8(b)
hereof, each Selling Stockholder agrees that, as an interim measure during
the pendency of any claim, action, investigation, inquiry or other proceeding
described in Section 8(b) hereof relating to such Selling Stockholder, it
will reimburse the Underwriters on a monthly basis for all reasonable legal
or other expenses incurred in connection with investigating or defending any
such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety
and enforceability of such Selling Stockholder's obligation to reimburse the
Underwriters for such expenses and the possibility that such payments might
later be held to have been improper by a court of competent jurisdiction;
PROVIDED, that if such claim, action, investigation or other proceeding is
within the purview of Section 8(a) hereof, the Underwriters shall first
demand interim reimbursement from the Company pursuant to Section 5(c)
hereof, and shall have failed to be so reimbursed in full within thirty (30)
days of such demand, prior to invoking its rights against such Selling
Stockholder pursuant to this Section 5(d). To the extent that any such
interim reimbursement payment is so held to have been improper, the
Underwriters shall promptly return such payment to the Selling Stockholders,
together with interest, compounded daily, determined on the basis of the
Prime Rate. Any such interim reimbursement payments which are not made to
the Underwriters within thirty (30) days of a request for reimbursement shall
bear interest at the Prime Rate from the date of such request.
(e) In addition to their other obligations under Section 8(c)
hereof, the Underwriters severally and not jointly agree that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other
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proceeding described in Section 8(c) hereof, they will reimburse the Company
and each Selling Stockholder on a monthly basis for all reasonable legal or
other expenses incurred in connection with investigating or defending any
such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety
and enforceability of the Underwriters' obligation to reimburse the Company
and each such Selling Stockholder for such expenses and the possibility that
such payments might later be held to have been improper by a court of
competent jurisdiction. To the extent that any such interim reimbursement
payment is so held to have been improper, the Company and each such Selling
Stockholder shall promptly return such payment to the Underwriters together
with interest, compounded daily, determined on the basis of the Prime Rate.
Any such interim reimbursement payments which are not made to the Company and
each such Selling Stockholder within thirty (30) days of a request for
reimbursement shall bear interest at the Prime Rate from the date of such
request.
(f) It is agreed that any controversy arising out of the
operation of the interim reimbursement arrangements set forth in Sections
5(c), 5(d) and 5(e) hereof, including the amounts of any requested
reimbursement payments, the method of determining such amounts and the basis
on which such amounts shall be apportioned among the reimbursing parties,
shall be settled by arbitration conducted under the provisions of the
Constitution and Rules of the Board of Governors of the New York Stock
Exchange, Inc. or pursuant to the Code of Arbitration Procedure of the NASD.
Any such arbitration must be commenced by service of a written demand for
arbitration or a written notice of intention to arbitrate, therein electing
the arbitration tribunal. In the event the party demanding arbitration does
not make such designation of an arbitration tribunal in such demand or
notice, then the party responding to said demand or notice is authorized to
do so. Any such arbitration will be limited to the operation of the interim
reimbursement provisions contained in Sections 5(c), 5(d) and 5(e) hereof and
will not resolve the ultimate propriety or enforceability of the obligation
to indemnify for expenses which is created by the provisions of Sections
8(a), 8(b) and 8(c) hereof or the obligation to contribute to expenses which
is created by the provisions of Section 8(e) hereof.
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of
the several Underwriters to purchase and pay for the Shares as provided
herein shall be subject to the accuracy, as of the date hereof and the
Closing Date and any later date on which Option Shares are to be purchased,
as the case may be, of the representations and warranties of the Company and
the Selling Stockholders herein, to the performance by the Company and the
Selling Stockholders of their respective obligations hereunder and to the
following additional conditions:
(a) The Registration Statement shall have become effective
not later than 2:00 P.M., San Francisco time, on the date following the date
of this Agreement, or such later date as shall be consented to in writing by
you; and no stop order suspending the effectiveness thereof shall have been
issued and no proceedings for that purpose shall have been initiated or, to
the knowledge of the Company, any Selling Stockholder or any Underwriter,
threatened by the Commission, and any request of the Commission for
additional information (to be included in the Registration Statement or the
Prospectus or otherwise) shall have been complied with to the satisfaction of
Underwriters' Counsel.
(b) All corporate proceedings and other legal matters in
connection with this Agreement, the form of Registration Statement and the
Prospectus, and the registration, authorization, issue, sale and delivery of
the Shares, shall have been reasonably satisfactory to Underwriters' Counsel,
and such counsel shall have been furnished with such papers and information
as they may reasonably have requested to enable them to pass upon the matters
referred to in this Section.
(c) Subsequent to the execution and delivery of this
Agreement and prior to the Closing Date, or any later date on which Option
Shares are to be purchased, as the case may be, there shall not have been any
change in the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and the Subsidiary, considered
as one enterprise, from that set forth in the Registration Statement or
Prospectus, which, in your reasonable judgment, is material and adverse and
that makes it, in your reasonable judgment, impracticable or inadvisable to
proceed with the public offering of the Shares as contemplated by the
Prospectus.
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(d) You shall have received on the Closing Date and on any
later date on which Option Shares that are Company Shares are to be
purchased, as the case may be, the following opinion of respective counsel
for the Company and the Selling Stockholders, dated the Closing Date or such
later date on which Option Shares are to be purchased addressed to the
Underwriters and with reproduced copies or signed counterparts thereof for
each of the Underwriters, to the effect that:
(i) Each of the Company and the Subsidiary, which
is the only "significant subsidiary" of the Company (as
defined in Regulation S-X of the Act), has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its
incorporation;
(ii) Each of the Company and the Subsidiary has the
corporate power and authority to own, lease and operate its
respective properties and to conduct its business as described
in the Prospectus;
(iii) The Company is duly qualified to do business as
a foreign corporation and is in good standing in the State of
Texas, and based solely upon an examination of an officer's
certificate (which such firm shall state that it believes it
is justified in relying upon) and certificates of governmental
authorities, each of the Company and the Subsidiary is duly
qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which the ownership or
leasing of its properties or the conduct of its business
requires such qualification, except where the failure to be so
qualified or be in good standing would not have a material
adverse effect on the condition (financial or otherwise),
earnings, operations or business of the Company and the
Subsidiary, considered as one enterprise. To such counsel's
knowledge, the Company does not own or have any ownership
interest in, directly or indirectly, any corporation,
association or other entity other than the Subsidiary and
INFITEQ, LLC;
(iv) All issued and outstanding shares of capital
stock of the Subsidiary have been duly authorized and validly
issued and are fully paid and nonassessable, and to such
counsel's knowledge, have not been issued in violation of or
subject to any preemptive right, co-sale right, registration
right, right of first refusal or other similar right and are
owned by the Company free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest;
(v) The authorized, issued and outstanding capital
stock of the Company is as set forth in the Prospectus under
the caption "Capitalization" as of the dates stated therein,
and the issued and outstanding shares of capital stock of the
Company (including the Selling Stockholder Shares) have been
duly and validly issued, are nonassessable and, to such
counsel's knowledge, are fully paid;
(vi) The Firm Shares or the Option Shares, as the
case may be, to be issued by the Company pursuant to the terms
of this Agreement have been duly authorized and, upon issuance
and delivery against payment therefor in accordance with the
terms hereof, will be duly and validly issued and fully paid
and nonassessable, and will not have been issued in violation
of or subject to any preemptive right, co-sale right,
registration right, right of first refusal or other similar
right;
(vii) The Company has the corporate power and
authority to enter into this Agreement and to issue, sell and
deliver to the Underwriters the Shares to be issued and sold
by it hereunder;
(viii) This Agreement has been duly authorized by all
necessary corporate action on the part of the Company and has
been duly executed and delivered by the Company and, assuming
due authorization, execution and delivery by you, is a valid
and binding agreement of the Company, enforceable in
accordance with its terms, except that no opinion need be
expressed as to indemnification or contribution provisions and
except as enforceability may be limited by bankruptcy,
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insolvency, reorganization, moratorium or similar laws
relating to or affecting creditors' rights generally or by
general equitable principles;
(ix) The Registration Statement has been duly
authorized and executed by the Company and the filing of such
document with the Commission has been duly authorized by the
Company;
(x) Based upon the oral advice of the Commission,
the Registration Statement has become effective under the Act
and, to such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been instituted or
are pending or threatened under the Act;
(xi) The Registration Statement and the Prospectus,
and each amendment or supplement thereto (other than the
financial statements, and the notes and schedules thereto, and
other financial and statistical information derived therefrom
as to which such counsel need express no opinion), as of the
effective date of the Registration Statement, complied as to
form in all material respects with the requirements of the Act
and the applicable Rules and Regulations;
(xii) The information in the Prospectus under the
caption "Description of Capital Stock," to the extent that it
constitutes matters of law or legal conclusions, has been
reviewed by such counsel and is a fair summary in all material
respects of such matters and conclusions; and the form of
certificate evidencing the Common Stock and filed as an
exhibit to the Registration Statement complies with Delaware
law;
(xiii) The description in the Registration Statement
and the Prospectus of the charter and bylaws of the Company
are accurate and fairly present the information required to be
presented by the Act and the applicable Rules and Regulations;
(xiv) To such counsel's knowledge, there are no
agreements, contracts, leases or documents to which the
Company is a party of a character required to be described or
referred to in the Registration Statement or Prospectus or to
be filed as an exhibit to the Registration Statement which are
not described or referred to therein or filed as required;
(xv) The performance of this Agreement and the
consummation of the transactions herein contemplated (other
than performance of the Company's indemnification obligations
hereunder, concerning which no opinion need be expressed) will
not (a) result in any violation of the Company's charter or
bylaws or (b) result in a material breach or violation of any
of the terms and provisions of, or constitute a default under,
any bond, debenture, note or other evidence of indebtedness,
or any lease, contract, indenture, mortgage, deed of trust,
loan agreement, joint venture or other agreement or instrument
to which the Company is a party or by which its properties are
bound and which is listed as an exhibit to or otherwise
referred to in the Registration Statement or is otherwise
identified on a schedule certified by an officer of the
Company, or any applicable statute, rule or regulation or, to
the best of such counsel's knowledge, any order, writ or
decree of any court, government or governmental agency or body
having jurisdiction over the Company or the Subsidiary, or
over any of their properties or operations;
(xvi) No consent, approval, authorization or order
of or qualification with any court, government or governmental
agency or body having jurisdiction over the Company or the
Subsidiary or over any of their respective properties or
operations is necessary in connection with the consummation by
the Company of the transactions herein contemplated, except
such as have been obtained under the Act or such as may be
required under state or other securities or Blue Sky laws
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in connection with the purchase and the distribution of the
Shares by the Underwriters, as to which such counsel need not
express an opinion;
(xvii) To such counsel's knowledge, there are no
legal or governmental proceedings pending or threatened
against the Company or the Subsidiary of a character required
to be disclosed in the Registration Statement or the
Prospectus by the Act or the Rules and Regulations, other than
those described therein;
(xviii) To such counsel's knowledge, neither the
Company nor the Subsidiary is presently (a) in material
violation of its respective charter or bylaws or (b) in
material breach of any applicable statute, rule or regulation
known to such counsel or, to such counsel's knowledge, any
order, writ or decree of any court or governmental agency or
body having jurisdiction over the Company or the Subsidiary,
or over any of their properties or operations;
(xix) To such counsel's knowledge, except as set
forth in the Registration Statement and Prospectus, no holders
of Common Stock or other securities of the Company have
registration rights with respect to securities of the Company
and, except as set forth in the Registration Statement and
Prospectus, all holders of securities of the Company having
rights known to such counsel to registration of such shares of
Common Stock or other securities, because of the filing of the
Registration Statement by the Company have, with respect to
the offering contemplated thereby, waived such rights or such
rights have expired by reason of lapse of time following
notification of the Company's intent to file the Registration
Statement or have included securities in the Registration
Statement pursuant to the exercise of and in full satisfaction
of such rights;
(xx) The Shares have been duly approved for
inclusion on the Nasdaq National Market, subject to the
consummation of the transactions contemplated by this
Agreement and to official notice of issuance;
(xxi) The Company is not, and, assuming the
application of the net proceeds from the sale of the Shares as
described in the Prospectus under the caption "Use of
Proceeds," will not become, an "investment company" subject to
registration under the 1940 Act;
(xxii) Each Selling Stockholder which is not a natural
person has full right, power and authority to enter into and
to perform its obligations under the Selling Stockholder
Agreement to be executed and delivered by it or him in
connection with the transactions contemplated herein; the
Selling Stockholder Agreement of each Selling Stockholder that
is not a natural person has been duly authorized by such
Selling Stockholder; the Selling Stockholder Agreement of each
Selling Stockholder has been duly executed and delivered by or
on behalf of such Selling Stockholder; and the Power of
Attorney and Custody Agreement of each Selling Stockholder
constitutes the valid and binding agreement of such Selling
Stockholder, enforceable in accordance with its terms, except
as the enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally or by
general equitable principles;
(xxiii) Each of the Selling Stockholders has full
power, authority and to such counsel's knowledge, right to
enter into and to perform its obligations under this Agreement
and to sell, transfer, assign and deliver the Shares to be
sold by such Selling Stockholder hereunder;
(xxiv) This Agreement has been duly authorized by each
Selling Stockholder that is not a natural person and has been
duly executed and delivered by or on behalf of each Selling
Stockholder; and
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(xxv) Upon the delivery of and payment for the Shares
as contemplated in this Agreement, each of the Underwriters
will receive valid marketable title to the Shares purchased by
it from such Selling Stockholder, free and clear of any
pledge, lien, security interest, encumbrance, claim or
equitable interest. In rendering such opinion, such counsel
may assume that the Underwriters are without notice of any
defect in the title of the Shares being purchased from the
Selling Stockholders.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company, the Representatives, Underwriters' Counsel and the independent
certified public accountants of the Company, at which such conferences the
contents of the Registration Statement and Prospectus and related matters
were discussed, and although they have not independently verified the
accuracy, fairness or completeness of the statements contained in the
Registration Statement or the Prospectus, nothing has come to the attention
of such counsel which leads them to believe that, at the time the
Registration Statement became effective and at all times subsequent thereto
up to and on the Closing Date and on any later date on which Option Shares
are to be purchased, the Registration Statement and any amendment or
supplement thereto (other than the financial statements and the notes and
schedules thereto and other financial and statistical information derived
therefrom, as to which such counsel need express no comment) contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or at the Closing Date or any later date on which the Option
Shares are to be purchased, as the case may be, the Registration Statement,
the Prospectus and any amendment or supplement thereto (except as aforesaid)
contained any untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
Counsel rendering the foregoing opinion may rely as to questions of
law not involving the laws of the United States or the States of Texas and
Delaware upon opinions of local counsel, and as to questions of fact upon
representations or certificates of officers of the Company, the Selling
Stockholders or officers of the Selling Stockholders (when the Selling
Stockholder is not a natural person), and of government officials, in which
case their opinion is to state that they are so relying and that they have no
knowledge of any material misstatement or inaccuracy in any such opinion,
representation or certificate. Copies of any opinion, representation or
certificate so relied upon shall be delivered to you, as Representatives of
the Underwriters, and to Underwriters' Counsel.
(e) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, an
opinion of Brobeck, Phleger & Harrison LLP, in form and substance
satisfactory to you, with respect to the sufficiency of all such corporate
proceedings and other legal matters relating to this Agreement and the
transactions contemplated hereby as you may reasonably require, and the
Company shall have furnished to such counsel such documents as they may have
requested for the purpose of enabling them to pass upon such matters.
(f) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, a letter
from Ernst & Young LLP addressed to the Underwriters, dated the Closing Date
or such later date on which Option Shares are to be purchased, as the case
may be, confirming that they are independent certified public accountants
with respect to the Company within the meaning of the Act and the applicable
published Rules and Regulations and based upon the procedures described in
such letter delivered to you concurrently with the execution of this
Agreement (herein called the "Original Letter"), but carried out to a date
not more than five (5) business days prior to the Closing Date or such later
date on which Option Shares are to be purchased, as the case may be, (i)
confirming, to the extent true, that the statements and conclusions set forth
in the Original Letter are accurate as of the Closing Date or such later date
on which Option Shares are to be purchased, as the case may be, and (ii)
setting forth any revisions and additions to the statements and conclusions
set forth in the Original Letter which are necessary to reflect any changes
in the facts described in the Original Letter since the date of such letter,
or to reflect the availability of more recent financial statements, data or
information. The letter shall not disclose any change in the condition
(financial or otherwise), earnings, operations, business or business
prospects of the Company and the
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Subsidiary, considered as one enterprise from that set forth in the
Registration Statement or Prospectus, which, in your reasonable judgment, is
material and adverse and that makes it, in your reasonable judgment,
impracticable or inadvisable to proceed with the public offering of the
Shares as contemplated by the Prospectus. The Original Letter from Ernst &
Young LLP shall be addressed to or for the use of the Underwriters in form
and substance satisfactory to the Underwriters and shall (i) represent, to
the extent true, that they are independent certified public accountants with
respect to the Company within the meaning of the Act and the applicable
published Rules and Regulations, (ii) set forth their opinion with respect to
their examination of the consolidated balance sheet of the Company as of
January 31, 1998 and related consolidated statements of operations,
stockholders' equity, and cash flows for the twelve (12) months ended January
31, 1998, and (iii) address other matters agreed upon by Ernst & Young LLP
and you. In addition, you shall have received from Ernst & Young LLP a
letter addressed to the Company and made available to you for the use of the
Underwriters stating that their review of the Company's system of internal
accounting controls, to the extent they deemed necessary in establishing the
scope of their examination of the Company's consolidated financial statements
as of January 31, 1998, did not disclose any weaknesses in internal controls
that they considered to be material weaknesses.
(g) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, a
certificate of the Company, dated the Closing Date or such later date on
which Option Shares are to be purchased, as the case may be, signed by the
Chief Executive Officer and Chief Financial Officer of the Company, to the
effect that, and you shall be satisfied that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the Closing
Date or any later date on which Option Shares are to be purchased,
as the case may be, and the Company has complied with all the
agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to the Closing Date or any later
date on which Option Shares are to be purchased, as the case may be;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or threatened under the
Act;
(iii) When the Registration Statement became effective and
at all times subsequent thereto up to the delivery of such
certificate, the Registration Statement and the Prospectus, and any
amendments or supplements thereto, contained all material
information required to be included therein by the Act and the
Rules and Regulations and in all material respects conformed to the
requirements of the Act and the Rules and Regulations, the
Registration Statement, and any amendment or supplement thereto,
did not and does not include any untrue statement of a material
fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, the
Prospectus, and any amendment or supplement thereto, did not and
does not include any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading, and, since the effective date of the Registration
Statement, there has occurred no event required to be set forth in
an amended or supplemented Prospectus which has not been so set
forth; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus,
there has not been (a) any material adverse change in the condition
(financial or otherwise), earnings, operations, business or
business prospects of the Company and the Subsidiary, considered as
one enterprise, (b) any transaction that is material to the Company
and the Subsidiary, considered as one enterprise, except
transactions entered into in the ordinary course of business, (c)
any obligation, direct or contingent, that is material to the
Company and the Subsidiary, considered as one enterprise, incurred
by the Company or the Subsidiary, except obligations incurred in
the ordinary course of business, (d) any change in the capital
stock or outstanding indebtedness of the Company or the Subsidiary
that is material to the Company and the
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Subsidiary, considered as one enterprise, (e) any dividend or
distribution of any kind declared, paid or made on the capital
stock of the Company or the Subsidiary, or (f) any loss or damage
(whether or not insured) to the property of the Company or the
Subsidiary which has been sustained or will have been sustained
which has a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of
the Company and the Subsidiary, considered as one enterprise.
(h) You shall be satisfied that, and you shall have received a
certificate, dated the Closing Date, or any later date on which Option Shares
are to be purchased, as the case may be, from the Attorneys for each Selling
Stockholder to the effect that, as of the Closing Date, or any later date on
which Option Shares are to be purchased, as the case may be, they have not
been informed that:
(i) The representations and warranties made by such Selling
Stockholder herein are not true or correct in any material respect
on the Closing Date or on any later date on which Option Shares are
to be purchased, as the case may be; or
(ii) Such Selling Stockholder has not complied in any material
respect with any obligation or failed to satisfy in any material
respect any condition which is required to be performed or
satisfied on the part of such Selling Stockholder at or prior to
the Closing Date or any later date on which Option Shares are to be
purchased, as the case may be.
(i) The Company shall have obtained and delivered to you an
agreement from each officer and director of the Company who owns shares of
Common Stock or options to purchase shares of Common Stock that will vest
within 180 days of the date of this Agreement, each Selling Stockholder and
each other beneficial owner of 1,000 or more shares of Common Stock and/or
options to purchase shares of Common Stock that will vest within 180 days of
the date of this Agreement officer in writing prior to the date hereof that
such person will not, during the Lock-up Period, effect the Disposition of
any Securities now owned or hereafter acquired directly by such person or
with respect to which such person has or hereafter acquires the power of
disposition, otherwise than (i) as a bona fide gift or gifts, PROVIDED the
donee or donees thereof agree in writing to be bound by this restriction,
(ii) as a distribution to partners or stockholders of such person, PROVIDED
that the distributees thereof agree in writing to be bound by the terms of
this restriction, or (iii) with the prior written consent of BancAmerica
Robertson Stephens (which consent has been given with respect to the pledge
of any shares of Common Stock that were purchased pursuant to the Company's
"Stock Option Loan Program" described in the Registration Statement or any
other loan program approved in writing by BancAmerica Robertson Stephens).
The foregoing restriction shall have been expressly agreed to preclude the
holder of the Securities from engaging in any hedging or other transaction
which is designed to or reasonably expected to lead to or result in a
Disposition of Securities during the Lock-up Period, even if such Securities
would be disposed of by someone other than the such holder. Such prohibited
hedging or other transactions would including, without limitation, any short
sale (whether or not against the box) or any purchase, sale or grant of any
right (including, without limitation, any put or call option) with respect to
any Securities or with respect to any security (other than a broad-based
market basket or index) that includes, relates to or derives any significant
part of its value from Securities. Such person will have also agreed and
consented to the entry of stop transfer instructions with the Company's
transfer agent against the transfer of the Securities held by such person
except in compliance with this restriction. Furthermore, such person will
have also agreed that, without the prior written consent of BancAmerica
Robertson Stephens, such person will not, during the period ending with the
conclusion of the Lock-Up Period, make any demand for or exercise any right
with respect to, the registration of any Securities, except pursuant to the
Registration Statement to the extent set forth in Schedule B hereto.
(j) The Company and the Selling Stockholders shall have furnished
to you such further certificates and documents as you shall reasonably
request (including certificates of officers of the Company, the Selling
Stockholders or officers of the Selling Stockholders (when the Selling
Stockholder is not a natural person)) as to the accuracy of the
representations and warranties of the Company and the Selling Stockholders
herein, as to the
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performance by the Company and the Selling Stockholders of their respective
obligations hereunder and as to the other conditions concurrent and precedent
to the obligations of the Underwriters hereunder.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably
satisfactory to Underwriters' Counsel. The Company and the Selling
Stockholders will furnish you with such number of conformed copies of such
opinions, certificates, letters and documents as you shall reasonably request.
7. OPTION SHARES.
(a) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth,
the Company and the Selling Stockholder that is identified in Schedule B
hereto, severally and not jointly, hereby grant to the several Underwriters,
for the purpose of covering over-allotments in connection with the
distribution and sale of the Firm Shares only, a nontransferable option to
purchase up to 62,033 and 702,967 Option Shares, respectively, at the
purchase price per share for the Firm Shares set forth in Section 3 hereof.
Such option may be exercised by the Representatives on behalf of the several
Underwriters on one (1) or more occasions in whole or in part during the
period of thirty (30) days after the date on which the Firm Shares are
initially offered to the public, by giving written notice to the Company and
such Selling Stockholder. Any exercise of the option granted to the
Underwriters pursuant to this Section 7 shall first be applied to the Option
Shares offered by the Selling Stockholder, with any Option Shares in excess
of 702,967 Option Shares to be sold to the Underwriters by the Company. The
number of Option Shares to be purchased by each Underwriter upon the exercise
of such option shall be the same proportion of the total number of Option
Shares to be purchased by the several Underwriters pursuant to the exercise
of such option as the number of Firm Shares purchased by such Underwriter
(set forth in Schedule A hereto) bears to the total number of Firm Shares
purchased by the several Underwriters (set forth in Schedule A hereto),
adjusted by the Representatives in such manner as to avoid fractional shares.
Delivery of definitive certificates for the Option Shares to be
purchased by the several Underwriters pursuant to the exercise of the option
granted by this Section 7 shall be made against payment of the purchase price
therefor by the several Underwriters by certified or official bank check or
checks drawn in same-day funds or by wire transfer in same-day funds, payable
to the order of the Company (to the extent that the Option Shares are sold by
the Company) and the Custodian (to the extent that the Option Shares are sold
by the Selling Stockholder) for the account of the Selling Stockholder. Such
delivery and payment shall take place at the offices of Locke Purnell Rain
Harrell, 2200 Ross Avenue, Suite 2200, Dallas, Texas, or at such other place
as may be mutually agreed upon among the Representatives, the Selling
Stockholder and the Company (i) on the Closing Date, if written notice of the
exercise of such option is received by the Company at least two (2) full
business days prior to the Closing Date, or (ii) on a date which shall not be
later than the third (3rd) full business day following the date the Company
and the Selling Stockholder (directly or indirectly through the Custodian)
receive written notice of the exercise of such option, if such notice is
received by the Company and the Selling Stockholder (directly or indirectly
through the Custodian) less than two (2) full business days prior to the
Closing Date.
The certificates for the Option Shares to be so delivered will be
made available to you at such office or such other location including,
without limitation, in New York City, as you may reasonably request for
checking at least one (1) full business day prior to the date of payment and
delivery and will be in such names and denominations as you may request, such
request to be made at least two (2) full business days prior to such date of
payment and delivery. If the Representatives so elect, delivery of the
Option Shares may be made by credit through full fast transfer to the
accounts at The Depository Trust Company designated by the Representatives.
It is understood that you, individually, and not as the
Representatives of the several Underwriters, may (but shall not be obligated
to) make payment of the purchase price on behalf of any Underwriter or
Underwriters whose funds shall not have been received by you prior to the
date of payment and delivery for the Option Shares to be
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purchased by such Underwriter or Underwriters. Any such payment by you shall
not relieve any such Underwriter or Underwriters of any of its or their
obligations hereunder.
(b) Upon exercise of any option provided for in Section 7(a)
hereof, the obligations of the several Underwriters to purchase such Option
Shares will be subject (as of the date hereof and as of the date of payment
and delivery for such Option Shares) to the accuracy of and compliance with
the representations, warranties and agreements of the Company and the Selling
Stockholder herein, to the accuracy of the statements of the Company, the
Selling Stockholder and officers of the Company made pursuant to the
provisions hereof, to the performance by the Company and the Selling
Stockholder of their respective obligations hereunder, to the conditions set
forth in Section 6 hereof, and to the condition that all proceedings taken at
or prior to the payment date in connection with the sale and transfer of such
Option Shares shall be satisfactory in form and substance to you and to
Underwriters' Counsel, and you shall have been furnished with all such
documents, certificates and opinions as you may request in order to evidence
the accuracy and completeness of any of the representations, warranties or
statements, the performance of any of the covenants or agreements of the
Company and the Selling Stockholder or the satisfaction of any of the
conditions herein contained.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject (including, without
limitation, in its capacity as an Underwriter or as a "qualified independent
underwriter" within the meaning of Schedule E of the Bylaws of the NASD),
under the Act, the Exchange Act or otherwise, specifically including, but not
limited to, losses, claims, damages or liabilities (or actions in respect
thereof) arising out of or based upon (i) any breach of any representation,
warranty, agreement or covenant of the Company herein contained, (ii) any
untrue statement or alleged untrue statement of any material fact contained
in the Registration Statement or any amendment or supplement thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(iii) any untrue statement or alleged untrue statement of any material fact
contained in any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and agrees to reimburse each Underwriter for any legal
or other expenses reasonably incurred by it in connection with investigating
or defending any such loss, claim, damage, liability or action; PROVIDED,
HOWEVER, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or action arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, such Preliminary
Prospectus or the Prospectus, or any such amendment or supplement thereto, in
reliance upon, and in conformity with, written information relating to any
Underwriter furnished to the Company by such Underwriter, directly or through
you, specifically for use in the preparation thereof; and, PROVIDED, FURTHER,
that the indemnity agreement provided in this Section 8(a) with respect to
any Preliminary Prospectus shall not inure to the benefit of any Underwriter
from whom the person asserting any losses, claims, damages, liabilities or
actions based upon any untrue statement or alleged untrue statement of a
material fact or omission or alleged omission to state therein a material
fact purchased Shares, if a copy of a subsequent Preliminary Prospectus in
which such untrue statement or alleged untrue statement or omission or
alleged omission was corrected had not been sent or given to such person
prior to the time that such person purchased such Shares, unless such failure
is the result of noncompliance by the Company with Section 4(d) hereof.
The indemnity agreement in this Section 8(a) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each person,
if any, who controls any Underwriter within the meaning of the Act or the
Exchange Act. This indemnity agreement shall be in addition to any
liabilities which the Company or such Selling Stockholders may otherwise have.
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(b) Each Selling Stockholder, severally and not jointly, agrees to
indemnify and hold harmless each Underwriter against any losses, claims,
damages or liabilities, joint or several, to which such Underwriter may
become subject (including, without limitation, in its capacity as an
Underwriter or as a "qualified independent underwriter" within the meaning of
Schedule E or the Bylaws of the NASD) under the Act, the Exchange Act or
otherwise, specifically including, but not limited to, losses, claims,
damages or liabilities (or actions in respect thereof) arising out of or
based upon (i) any breach of any representation, warranty, agreement or
covenant of such Selling Stockholder herein contained, (ii) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement or any amendment or supplement thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(iii) any untrue statement or alleged untrue statement of any material fact
contained in any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, in the case of
subparagraphs (ii) and (iii) of this Section 8(b) to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company or such Underwriter by such
Selling Stockholder, directly or through such Selling Stockholder's
representatives, specifically for use in the preparation thereof, and agrees
to reimburse each Underwriter for any legal or other expenses reasonably
incurred by it in connection with investigating or defending any such loss,
claim, damage, liability or action; PROVIDED, HOWEVER, that the Company shall
not be liable in any such case to the extent that any such loss, claim,
damage, liability or action arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
the Registration Statement, such Preliminary Prospectus or the Prospectus, or
any such amendment or supplement thereto, in reliance upon, and in conformity
with, written information relating to any Underwriter furnished to the
Company by such Underwriter, directly or through you, specifically for use in
the preparation thereof; and, PROVIDED, FURTHER, that the indemnity agreement
provided in this Section 8(a) with respect to any Preliminary Prospectus
shall not inure to the benefit of any Underwriter from whom the person
asserting any losses, claims, damages, liabilities or actions based upon any
untrue statement or alleged untrue statement of a material fact or omission
or alleged omission to state therein a material fact purchased Shares, if a
copy of a subsequent Preliminary Prospectus in which such untrue statement or
alleged untrue statement or omission or alleged omission was corrected had
not been sent or given to such person prior to the time that such person
purchased such Shares, unless such failure is the result of noncompliance by
the Company with Section 4(d) hereof.
The indemnity agreement in this Section 8(b) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each person, if
any, who controls any Underwriter within the meaning of the Act or the Exchange
Act. This indemnity agreement shall be in addition to any liabilities which
such Selling Stockholder may
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otherwise have. Notwithstanding, no Selling Stockholder shall be liable
hereunder to the Underwriters for the obligations owed by any other Selling
Stockholder to the Underwriters.
(c) Each Underwriter, severally and not jointly, agrees to
indemnify and hold harmless the Company and each Selling Stockholder against
any losses, claims, damages or liabilities, joint or several, to which the
Company or such Selling Stockholder may become subject under the Act or
otherwise, specifically including, but not limited to, losses, claims,
damages or liabilities (or actions in respect thereof) arising out of or
based upon (i) any breach of any representation, warranty, agreement or
covenant of such Underwriter herein contained, (ii) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement or any amendment or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iii) any untrue
statement or alleged untrue statement of any material fact contained in any
Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, or the omission or alleged omission to state therein a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, in the case of subparagraphs (ii)
and (iii) of this Section 8(c) to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by such Underwriter, directly or through you,
specifically for use in the preparation thereof, and agrees to reimburse the
Company and each such Selling Stockholder for any legal or other expenses
reasonably incurred by the Company and each such Selling Stockholder in
connection with investigating or defending any such loss, claim, damage,
liability or action.
The indemnity agreement in this Section 8(c) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each officer
of the Company who signed the Registration Statement and each director of the
Company, each Selling Stockholder and each person, if any, who controls the
Company or any Selling Stockholder within the meaning of the Act or the
Exchange Act. This indemnity agreement shall be in addition to any
liabilities which each Underwriter may otherwise have.
(d) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against any indemnifying
party under this Section 8, notify the indemnifying party in writing of the
commencement thereof but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under this Section 8 unless the indemnifying party is materially
prejudiced by such failure to be timely notified. In case any such action is
brought against any indemnified party, and it notified the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it shall elect by written notice delivered to
the indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; PROVIDED, HOWEVER, that if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of the indemnifying party's election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 8 for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding sentence
(it being understood, however, that the indemnifying party shall not be liable
for the expenses of more than one separate counsel (together with appropriate
local counsel) approved by the indemnifying party representing all the
indemnified parties under Section 8(a), 8(b) or 8(c) hereof who are parties to
such action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party; PROVIDED,
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that in no event shall the indemnifying party be liable to such indemnified
party for any legal fees or expenses in excess of reasonable legal fees and
expenses. In no event shall any indemnifying party be liable in respect of
any amounts paid in settlement of any action unless the indemnifying party
shall have approved the terms of such settlement; PROVIDED that such consent
shall not be unreasonably withheld. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is
or could have been a party and indemnification could have been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on all
claims that are the subject matter of such proceeding and does not include
any statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of such indemnified party.
(e) In order to provide for just and equitable contribution in any
action in which a claim for indemnification is made pursuant to this Section
8 but it is judicially determined (by the entry of a final judgment or decree
by a court of competent jurisdiction and the expiration of time to appeal or
the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 8 provides
for indemnification in such case, all the parties hereto shall contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that, except
as set forth in Section 8(f) hereof, the Underwriters severally and not
jointly are responsible pro rata for the portion represented by the
percentage that the underwriting discount bears to the initial public
offering price, and the Company and the Selling Stockholders are responsible
for the remaining portion, PROVIDED, HOWEVER, that (i) no Underwriter shall
be required to contribute any amount in excess of the amount by which the
underwriting discount applicable to the Shares purchased by such Underwriter
exceeds the amount of damages which such Underwriter has otherwise required
to pay and (ii) no person guilty of a fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution
from any person who is not guilty of such fraudulent misrepresentation. The
contribution agreement in this Section 8(e) shall extend upon the same terms
and conditions to, and shall inure to the benefit of, each person, if any,
who controls any Underwriter, the Company or any Selling Stockholder within
the meaning of the Act or the Exchange Act and each officer of the Company
who signed the Registration Statement and each director of the Company.
(f) The liability of each Selling Stockholder under the
representations, warranties and agreements contained herein and under the
indemnity and contribution agreements contained in the provisions of this
Section 8 shall be limited to an amount equal to the initial public offering
price of the Selling Stockholder Shares sold by such Selling Stockholder to
the Underwriters minus the amount of the underwriting discount paid thereon
to the Underwriters by such Selling Stockholder. The Company and such
Selling Stockholders may agree, as among themselves and without limiting the
rights of the Underwriters under this Agreement, as to the respective amounts
of such liability for which they each shall be responsible; and nothing
contained herein shall be construed to alter any pre-existing arrangements
between the Company and any such Selling Stockholder with respect to their
responsibility for liability.
(g) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation,
the provisions of this Section 8, and are fully informed regarding said
provisions. They further acknowledge that the provisions of this Section 8
fairly allocate the risks in light of the ability of the parties to
investigate the Company and its business in order to assure that adequate
disclosure is made in the Registration Statement and Prospectus as required
by the Act.
9. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties, covenants and agreements of the
Company, the Selling Stockholders and the Underwriters herein or in certificates
delivered pursuant hereto, and the indemnity and contribution agreements
contained in Section 8 hereof shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Underwriter
or any person controlling any Underwriter within the meaning of the Act or the
Exchange Act, or by or on behalf of the Company or any Selling Stockholder, or
any of their officers, directors or controlling persons within the meaning of
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the Act or the Exchange Act, and shall survive the delivery of the Shares to
the several Underwriters hereunder or termination of this Agreement.
10. SUBSTITUTION OF UNDERWRITERS. If any Underwriter or Underwriters
shall fail to take up and pay for the number of Firm Shares agreed by such
Underwriter or Underwriters to be purchased hereunder upon tender of such
Firm Shares in accordance with the terms hereof, and if the aggregate number
of Firm Shares which such defaulting Underwriter or Underwriters so agreed
but failed to purchase does not exceed 10% of the Firm Shares, the remaining
Underwriters shall be obligated, severally in proportion to their respective
commitments hereunder, to take up and pay for the Firm Shares of such
defaulting Underwriter or Underwriters.
If any Underwriter or Underwriters so defaults and the aggregate
number of Firm Shares which such defaulting Underwriter or Underwriters
agreed but failed to take up and pay for exceeds 10% of the Firm Shares, the
remaining Underwriters shall have the right, but shall not be obligated, to
take up and pay for (in such proportions as may be agreed upon among them)
the Firm Shares which the defaulting Underwriter or Underwriters so agreed
but failed to purchase. If such remaining Underwriters do not, at the
Closing Date, take up and pay for the Firm Shares which the defaulting
Underwriter or Underwriters so agreed but failed to purchase, the Closing
Date shall be postponed for twenty-four (24) hours to allow the several
Underwriters the privilege of substituting within twenty-four (24) hours
(including non-business hours) another underwriter or underwriters (which may
include any nondefaulting Underwriter) satisfactory to the Company. If no
such underwriter or underwriters shall have been substituted as aforesaid by
such postponed Closing Date, the Closing Date may, at the option of the
Company, be postponed for a further twenty-four (24) hours, if necessary, to
allow the Company the privilege of finding another underwriter or
underwriters, satisfactory to you, to purchase the Firm Shares which the
defaulting Underwriter or Underwriters so agreed but failed to purchase. If
it shall be arranged for the remaining Underwriters or substituted
underwriter or underwriters to take up the Firm Shares of the defaulting
Underwriter or Underwriters as provided in this Section 10, (i) the Company
shall have the right to postpone the time of delivery for a period of not
more than seven (7) full business days, in order to effect whatever changes
may thereby be made necessary in the Registration Statement or the
Prospectus, or in any other documents or arrangements, and the Company agrees
promptly to file any amendments to the Registration Statement, supplements to
the Prospectus or other such documents which may thereby be made necessary,
and (ii) the respective number of Firm Shares to be purchased by the
remaining Underwriters and substituted underwriter or underwriters shall be
taken as the basis of their underwriting obligation. If the remaining
Underwriters shall not take up and pay for all such Firm Shares so agreed to
be purchased by the defaulting Underwriter or Underwriters or substitute
another underwriter or underwriters as aforesaid and the Company shall not
find or shall not elect to seek another underwriter or underwriters for such
Firm Shares as aforesaid, then this Agreement shall terminate.
In the event of any termination of this Agreement pursuant to the
preceding paragraph of this Section 10, neither the Company nor any Selling
Stockholder shall be liable to any Underwriter (except as provided in Sections 5
and 8 hereof) nor shall any Underwriter (other than an Underwriter who shall
have failed, otherwise than for some reason permitted under this Agreement, to
purchase the number of Firm Shares agreed by such Underwriter to be purchased
hereunder, which Underwriter shall remain liable to the Company, the Selling
Stockholders and the other Underwriters for damages, if any, resulting from such
default) be liable to the Company or any Selling Stockholder (except to the
extent provided in Sections 5 and 8 hereof).
The term "Underwriter" in this Agreement shall include any person
substituted for an Underwriter under this Section 10.
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11. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION.
(a) This Agreement shall become effective at the earlier of (i) 6:30
A.M., San Francisco time, on the first business day following the effective date
of the Registration Statement, or (ii) the time of the initial public offering
of any of the Shares by the Underwriters after the Registration Statement
becomes effective. The time of the initial public offering shall mean the time
of the release by you, for publication, of the first newspaper advertisement
relating to the Shares, or the time at which the Shares are first generally
offered by the Underwriters to the public by letter, telephone, telegram or
telecopy, whichever shall first occur. By giving notice as set forth in
Section 12 before the time this Agreement becomes effective, you, as
Representatives of the several Underwriters, or the Company, may prevent this
Agreement from becoming effective without liability of any party to any other
party, except as provided in Sections 4(i), 5 and 8 hereof.
(b) You, as Representatives of the several Underwriters, shall have
the right to terminate this Agreement by giving notice as hereinafter specified
at any time on or prior to the Closing Date or on or prior to any later date on
which Option Shares are to be purchased, as the case may be, (i) if the Company
or any Selling Stockholder shall have failed, refused or been unable to perform
any agreement on its part to be performed, or because any other condition of the
Underwriters' obligations hereunder required to be fulfilled is not fulfilled,
including, without limitation, any change in the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company
and the Subsidiary, considered as one enterprise from that set forth in the
Registration Statement or Prospectus, which, in your sole judgment, is material
and adverse, or (ii) if additional material governmental restrictions, not in
force and effect on the date hereof, shall have been imposed upon trading in
securities generally or minimum or maximum prices shall have been generally
established on the New York Stock Exchange or on the American Stock Exchange or
in the over the counter market by the NASD, or trading in securities generally
shall have been suspended on either such exchange or in the over the counter
market by the NASD, or if a banking moratorium shall have been declared by
federal, New York or California authorities, or (iii) if the Company shall have
sustained a loss by strike, fire, flood, earthquake, accident or other calamity
of such character as to interfere materially with the conduct of the business
and operations of the Company regardless of whether or not such loss shall have
been insured, or (iv) if there shall have been a material adverse change in the
general political or economic conditions or financial markets as in your
reasonable judgment makes it inadvisable or impracticable to proceed with the
offering, sale and delivery of the Shares, or (v) if there shall have been an
outbreak or escalation of hostilities or of any other insurrection or armed
conflict or the declaration by the United States of a national emergency which,
in the reasonable opinion of the Representatives, makes it impracticable or
inadvisable to proceed with the public offering of the Shares as contemplated by
the Prospectus. In the event of termination pursuant to subparagraph (i) above,
the Company shall remain obligated to pay costs and expenses pursuant to
Sections 4(i), 5 and 8 hereof. Any termination pursuant to any of subparagraphs
(ii) through (v) above shall be without liability of any party to any other
party except as provided in Sections 5 and 8 hereof.
If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section 11, you shall promptly
notify the Company by telephone, telecopy or telegram, in each case confirmed by
letter. If the Company shall elect to prevent this Agreement from becoming
effective, the Company shall promptly notify you by telephone, telecopy or
telegram, in each case, confirmed by letter.
12. NOTICES. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to you shall be
mailed, delivered, telegraphed (and confirmed by letter) or telecopied (and
confirmed by letter) to you c/o BancAmerica Robertson Stephens, 555 California
Street, Suite 2600, San Francisco, California 94104, telecopier number (415)
781-0278, Attention: General Counsel; if sent to the Company, such notice shall
be mailed, delivered, telegraphed (and confirmed by letter) or telecopied (and
confirmed by letter) to 14001 North Dallas Parkway, Suite 1100, Dallas, Texas
75240, telecopier number (972) 458-2567, Attention: John D. Carreker, Chairman
and Chief Executive Officer; if sent to one or more of the Selling Stockholders,
such notice shall be sent
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mailed, delivered, telegraphed (and confirmed by letter) or telecopied (and
confirmed by letter) to the respective address for such Selling Stockholder
or Selling Stockholders as set forth in their respective Selling Stockholder
Agreements.
13. PARTIES. This Agreement shall inure to the benefit of and be binding
upon the several Underwriters and the Company and the Selling Stockholders and
their respective executors, administrators, successors and assigns. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any person or entity, other than the parties hereto and their respective
executors, administrators, successors and assigns, and the controlling persons
within the meaning of the Act or the Exchange Act, officers and directors
referred to in Section 8 hereof, any legal or equitable right, remedy or claim
in respect of this Agreement or any provisions herein contained, this Agreement
and all conditions and provisions hereof being intended to be and being for the
sole and exclusive benefit of the parties hereto and their respective executors,
administrators, successors and assigns and said controlling persons and said
officers and directors, and for the benefit of no other person or entity. No
purchaser of any of the Shares from any Underwriter shall be construed a
successor or assign by reason merely of such purchase.
In all dealings with the Company and the Selling Stockholders under
this Agreement, you shall act on behalf of each of the several Underwriters, and
the Company and the Selling Stockholders shall be entitled to act and rely upon
any statement, request, notice or agreement made or given by you jointly or by
BancAmerica Robertson Stephens on behalf of you.
14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA.
15. COUNTERPARTS. This Agreement may be signed in several counterparts,
each of which will constitute an original.
[Signature page follows]
31
<PAGE>
If the foregoing correctly sets forth the understanding among the
Company, the Selling Stockholders and the several Underwriters, please so
indicate in the space provided below for that purpose, whereupon this letter
shall constitute a binding agreement among the Company, the Selling
Stockholders and the several Underwriters.
Very truly yours,
CARREKER-ANTINORI, INC.
By
-------------------------------------------
SELLING STOCKHOLDERS
By
-------------------------------------------
Attorney-in-Fact for the Selling
Stockholders named in Schedule B hereto
Accepted as of the date first above written:
BANCAMERICA ROBERTSON STEPHENS
HAMBRECHT & QUIST LLC
LEHMAN BROTHERS INC.
On their behalf and on behalf of each of the
several Underwriters named in Schedule A hereto.
By BANCAMERICA ROBERTSON STEPHENS
By
-------------------------------------------
Authorized Signatory
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Firm Shares
To Be
Underwriters Purchased
- --------------------------------- --------------------
<S> <C>
[ ]
BancAmerica Robertson Stephens . . . . . . . . . . .
[ ]
Hambrecht & Quist LLC . . . . . . . . . . . . . . . .
[ ]
Lehman Brothers Inc. . . . . . . . . . . . . . . . .
[ ]
[underwriter] . . . . . . . . . . . . . . . . . . . .
[ ]
Total . . . . . . . . . . . . . . . . . . . . .
-------
-------
</TABLE>
<PAGE>
SCHEDULE B
<TABLE>
<CAPTION>
Number of
Company
Shares To
Be Sold
----------------
<S> <C>
Carreker-Antinori, Inc.................................... [ ]2
-------
</TABLE>
<TABLE>
<CAPTION>
Number of
Selling
Stockholder
Shares
Name of Selling Stockholder To Be Sold
- --------------------------------------------------------------------------
<S> <C>
[Stockholder] ...........................................
[Stockholder] ........................................... [ ]
[Stockholder] ........................................... [ ]
[Stockholder] ........................................... [ ]3
[Stockholder] ........................................... [ ]
-----------
Total ............................................... [ ]
-----------
-----------
</TABLE>
- -----------------------
(2) In addition to the shares shown, Carreker-Antinori, Inc. also will include
62,033 shares of Common Stock for sale to the Underwriters upon exercise of the
over-allotment option in accordance with Section 7 of the Underwriting
Agreement.
(3) In addition to the shares shown, this Selling Stockholder also will include
702,967 shares of Common Stock for sale to the Underwriters upon exercise of the
over-allotment option in accordance with Section 7 of the Underwriting
Agreement.
<PAGE>
EXHIBIT 2.1
PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER (the "Agreement") dated as of
_________________________, 1998, pursuant to Article 5.16 of the Texas
Business Corporation Act (the "TBCA") and Section 253 of the General
Corporation Law of Delaware (the "DGCL") is made and entered into by and
between Carreker-Antinori, Inc., a Texas corporation ("C-A Texas"), and
Carreker-Antinori, Inc., a Delaware corporation ("C-A Delaware").
W I T N E S S E T H:
WHEREAS, C-A Texas is a corporation organized and existing under the
laws of the State of Texas, having been incorporated on January 22, 1979; and
WHEREAS, C-A Delaware is a wholly-owned subsidiary corporation of C-A
Texas, organized and existing under the laws of the State of Delaware, having
been incorporated on March 10, 1998; and
WHEREAS, the respective Boards of Directors of C-A Texas and C-A
Delaware have determined that it is desirable to merge C-A Texas with and
into C-A Delaware (hereinafter the "Merger");
NOW, THEREFORE, in consideration of the premises, the mutual covenants
herein contained and other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree that
C-A Texas shall merge with and into C-A Delaware upon the terms and
conditions set forth.
ARTICLE I
MERGER
On the effective date of the Merger (the "Effective Date") as provided
herein, C-A Texas shall be merged with and into C-A Delaware, the separate
existence of C-A Texas shall cease and C-A Delaware (hereinafter sometimes
referred to as the "Surviving Corporation") shall continue to exist under the
name of C-A Delaware by virtue of, and shall be governed by, the laws of the
State of Delaware. The address of the registered office of the Surviving
Corporation in the State of Delaware will be Corporation Trust Center, 1209
Orange Street, in the County of New Castle, in the City of Wilmington,
Delaware 19801. The name of the registered agent is The Corporation Trust
Company.
<PAGE>
ARTICLE II
CERTIFICATE OF INCORPORATION OF SURVIVING CORPORATION
The name of the Surviving Corporation shall be "Carreker-Antinori, Inc."
The Certificate of Incorporation of the Surviving Corporation as in effect on
the date hereof shall be the Certificate of Incorporation of C-A Delaware
(the "Delaware Charter") without change unless and until amended in
accordance with Article VIII of this Agreement or otherwise amended in
accordance with applicable law.
ARTICLE III
BYLAWS OF THE SURVIVING CORPORATION
The Bylaws of the Surviving Corporation as in effect on the date hereof
shall be the Bylaws of C-A Delaware (the "Delaware Bylaws") without change
unless and until amended in accordance with applicable law.
ARTICLE IV
EFFECT OF MERGER ON STOCK OF CONSTITUENT CORPORATIONS
4.1 On the Effective Date, (i) each outstanding share of Class A
voting Common Stock of C-A Texas, no par value (the "Class A Common Stock"),
shall be converted into 7.7 shares of C-A Delaware common stock, par value
$.01 per share (the "Delaware Common Stock"), rounded to the nearest whole
share; (ii) each outstanding share of Class B non-voting Common Stock of C-A
Texas, no par value (the "Class B Common Stock"), shall be converted into 7.7
shares of the Delaware Common Stock, rounded to the nearest whole share (the
Class A Common Stock and the Class B Common Stock, collectively referred to
hereinafter as the "Texas Common Stock"), other than the shares, if any, for
which appraisal rights shall be perfected under Articles 5.12 and 5.13 of the
TBCA, (iii) each outstanding share of the Texas Common Stock held by C-A
Texas shall be retired and cancelled; and (iv) each outstanding share of the
Delaware Common Stock held by C-A Texas shall be retired and cancelled.
4.2 All options and rights to acquire any Texas Common Stock under
employee benefit plans and other options plans and under all other
outstanding options, warrants or rights outstanding on the Effective Date
will automatically be converted into options and rights to purchase shares of
Delaware Common Stock on the basis of 7.7 shares of Delaware Common Stock for
each share of Texas Common Stock, rounded to the nearest whole share.
4.3 After the Effective Date, certificates representing shares of the
Texas Common Stock will represent shares of Delaware Common Stock and upon
surrender of the same to the transfer agent for C-A Delaware, the holder
thereof shall be entitled to receive in exchange
-2-
<PAGE>
therefor a certificate or certificates representing the number of shares of
Delaware Common Stock into which such shares of Texas Common Stock shall have
been converted pursuant to Article 4.1 of this Agreement.
ARTICLE V
CORPORATE EXISTENCE, POWERS AND
LIABILITIES OF SURVIVING CORPORATION
5.1 On the Effective Date, the separate existence of C-A Texas shall
cease. C-A Texas shall be merged with and into C-A Delaware, the Surviving
Corporation, in accordance with the provisions of this Agreement.
Thereafter, C-A Delaware shall possess all the rights, privileges, powers and
franchises of a public as well as of a private nature, and shall be subject
to all the restrictions, disabilities and duties of each of the parties to
this Agreement; all singular rights, privileges, powers and franchises of C-A
Texas and C-A Delaware, and all property, real, personal and mixed and all
debts due to each of them on whatever account, shall be vested in C-A
Delaware; and all property, rights, privileges, powers and franchises, and
all and every other interest shall be thereafter as effectually the property
of C-A Delaware, the Surviving Corporation, as they were of the respective
constituent entities, and the title to any real estate, whether by deed or
otherwise, vested in C-A Texas and C-A Delaware, or either of them, shall not
revert or be in any way impaired by reason of the Merger, but all rights of
creditors and all liens upon the property of the parties hereto, shall be
preserved unimpaired, and all debts, liabilities and duties of C-A Texas,
shall thenceforth attach to C-A Delaware, and may be enforced against it to
the same extent as if said debts, liabilities and duties had been incurred or
contracted by it.
5.2 C-A Texas agrees that it will execute and deliver, or cause to be
executed and delivered, all such deeds and other instruments and will take or
cause to be taken such further or other action as the Surviving Corporation
may deem necessary in order to vest in and confirm to the Surviving
Corporation title to and possession of all the property, rights, privileges,
immunities, powers, purposes and franchises, and all and every other interest
of C-A Texas and otherwise to carry out the intent and purposes of this
Agreement.
ARTICLE VI
OFFICERS AND DIRECTORS OF SURVIVING CORPORATION
6.1 Upon the Effective Date, the officers of C-A Texas shall become
the officers of C-A Delaware, and such persons shall hold office in
accordance with the Delaware Bylaws until their respective successors shall
have been appointed or elected. Upon the Effective Date, the directors of
C-A Delaware shall remain the directors of the Surviving Corporation, such
persons to hold office in accordance with the Delaware Charter and Delaware
Bylaws and until their successors shall have been duly elected and qualified.
-3-
<PAGE>
6.2 If upon the Effective Date, a vacancy shall exist in the Board of
Directors of the Surviving Corporation, such vacancy shall be filled in the
manner provided by the Delaware Bylaws.
ARTICLE VII
DISSENTING SHARES
Holders of shares of Texas Common Stock who have complied with all
requirements for perfecting their rights of appraisal set forth in Articles
5.12 and 5.13 of the TBCA shall be entitled to their rights under Texas law.
ARTICLE VIII
APPROVAL BY SHAREHOLDERS, EFFECTIVE DATE,
CONDUCT OF BUSINESS PRIOR TO EFFECTIVE DATE
8.1 Soon after the approval of this Agreement by the requisite number
of shareholders of C-A Texas, the respective Boards of Directors of C-A Texas
and C-A Delaware will cause their duly authorized officers to make and
execute Articles of Merger and a Certificate of Ownership and Merger or other
applicable certificates or documentation effecting this Agreement and shall
cause the same to be filed with the Secretaries of State of Texas and
Delaware, respectively, in accordance with the TBCA and the DGCL, the
Effective Date shall be the date on which the Merger becomes effective under
the TBCA or the date on which the Merger becomes effective under the DGCL,
whichever occurs later.
8.2 The Boards of Directors of C-A Texas and C-A Delaware may amend
this Agreement and the Delaware Charter at any time prior to the Effective
Date, provided that an amendment made subsequent to the approval of the
Merger by the shareholders of C-A Texas may not (i) change the type of shares
or the number of shares to be received in exchange for or on conversion of
the shares of the Texas Common Stock, (ii) alter or change any term of the
Delaware Charter, or (iii) change any term of the terms and conditions of
this Agreement if such change would adversely affect the holders of the Texas
Common Stock.
ARTICLE IX
TERMINATION OF MERGER
This Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Date, whether before or after shareholder approval of
this Agreement, by the consent of the Boards of Directors of C-A Texas and
C-A Delaware.
-4-
<PAGE>
ARTICLE X
MISCELLANEOUS
In order to facilitate the filing and recording of the Agreement, this
Agreement may be executed in counterparts, each of which when so executed
shall be deemed to be an original, and all such counterparts shall together
constitute one and the same instrument. This Agreement shall be governed by
and construed in accordance with the laws of the State of Texas.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective Chief Executive Officers and Secretaries, all as
of the day and year first above written.
CARREKER-ANTINORI, INC.,
a Texas corporation
By:
----------------------------------------
Chairman of the Board and
Chief Executive Officer
ATTEST:
- ------------------------
Secretary
CARREKER-ANTINORI, INC.,
a Delaware corporation
By:
----------------------------------------
Chairman of the Board and
Chief Executive Officer
ATTEST:
- ------------------------
Secretary
-5-
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CARREKER-ANTINORI, INC.
This Amended and Restated Certificate of Incorporation amends and restates
the Certificate of Incorporation, as amended to date, of Carreker-Antinori,
Inc., a corporation originally incorporated in Delaware as "Carreker-Antinori,
Inc." on March 10, 1998. This Amended and Restated Certificate of
Incorporation has been duly adopted pursuant to Sections 242 and 245 of the
Delaware General Corporation Law.
ARTICLE ONE
NAME
The name of the corporation is Carreker-Antinori, Inc.
ARTICLE TWO
REGISTERED AGENT
The address of the corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the County of New
Castle, in the City of Wilmington, Delaware 19801. The name of the
corporation's registered agent at such address is The Corporation Trust
Company.
ARTICLE THREE
PURPOSE
The purpose of the corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE FOUR
CAPITAL STOCK
The corporation shall have the authority to issue 100,000,000 shares of
Common Stock, par value $0.01 per share.
<PAGE>
The Board of Directors has the authority, without further action by the
stockholders, to issue 2,000,000 shares of Preferred Stock, par value $.01 per
share, in one or more series and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption, liquidation preferences, sinking fund terms and
the number of shares constituting any series or the designation of such series,
without any further vote or action by the stockholders.
At every annual or special meeting of stockholders of the corporation,
every holder of Common Stock shall be entitled to one vote, in person or by
proxy, for each share of Common Stock standing in such holder's name on the
books of the corporation, subject to the rights of the holders of Preferred
Stock. Subject to the rights of the holders of the Preferred Stock, the Common
Stock shall be entitled to dividends out of funds legally available therefor,
when, as and if declared and paid to the holders of Common Stock, and upon
liquidation, dissolution or winding up of the corporation, to share ratably in
the assets of the corporation. The Common Stock shall not be redeemable.
ARTICLE FIVE
EXISTENCE
The corporation is to have perpetual existence.
ARTICLE SIX
INCORPORATOR
The name and mailing address of the sole incorporator is as follows:
Name Mailing Address
---- ---------------
Maurice E. Purnell, Jr. Locke Purnell Rain Harrell
(A Professional Corporation)
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201
ARTICLE SEVEN
INITIAL DIRECTORS
The number of directors constituting the initial Board of Directors is
eight (8). Thereafter, the number of directors constituting the Board of
Directors shall be fixed by or in accordance with the bylaws of the
corporation. The following persons shall serve as the directors of the
-2-
<PAGE>
corporation until their term expires pursuant to the provisions of Article
Eight or until their successors are duly elected and qualified:
Name Address
---- -------
Ronald R. Antinori 14001 North Dallas Parkway, Suite 1100
Dallas, Texas 75240
James D. Carreker 14001 North Dallas Parkway, Suite 1100
Dallas, Texas 75240
John D. Carreker, Jr. 14001 North Dallas Parkway, Suite 1100
Dallas, Texas 75240
James L. Fischer 14001 North Dallas Parkway, Suite 1100
Dallas, Texas 75240
Richard R. Lee, Jr. 14001 North Dallas Parkway, Suite 1100
Dallas, Texas 75240
Richard L. Linting 14001 North Dallas Parkway, Suite 1100
Dallas, Texas 75240
Larry J. Peck 14001 North Dallas Parkway, Suite 1100
Dallas, Texas 75240
David K. Sias 14001 North Dallas Parkway, Suite 1100
Dallas, Texas 75240
ARTICLE EIGHT
CLASSIFIED BOARD OF DIRECTORS
Subject to the rights, if any, of any series of Preferred Stock then
outstanding, the directors shall be divided into three classes, designated
Class I, Class II and Class III. The number of directors in each class shall
be the whole number contained in the quotient arrived at by dividing the
authorized number of directors by three, and if a fraction is also contained in
such quotient then if such fraction is one-third (1/3) the extra director shall
be a member of Class III and if the fraction is two-thirds (2/3) then one of
the extra directors shall be a member of Class III and the other shall be a
member of Class II. John D. Carreker, Jr. and Larry J. Peck shall be members
of Class I, Ronald R. Antinori, James L. Fischer, and Richard R. Lee, Jr. shall
be members of Class II, and James D. Carreker, Richard L. Linting and David K.
Sias shall be members of Class III. The term of office of directors in each
class shall expire as follows: Class I shall expire at the 1999 annual meeting
of stockholders, Class II shall expire at the 2000 annual
-3-
<PAGE>
meeting of stockholders, and Class III shall expire at the 2001 annual
meeting of stockholders. At each annual meeting of stockholders beginning
with the 1999 annual meeting, the successors to directors whose terms then
expire will be elected to serve from the time of their election and
qualification until the third annual meeting following election and until
their successors have been duly elected and qualified, or until their earlier
resignation or removal.
ARTICLE NINE
DIRECTOR VACANCIES
Subject to the rights, if any, of the holders of any series of Preferred
Stock then outstanding, newly created directorships resulting from any increase
in the authorized number of directors or any vacancies in the Board of
Directors resulting from death, resignation, disqualification or removal may be
filled only by a majority vote of the directors then in office, though less
than a quorum, and directors so chosen shall hold office for a term expiring at
the annual meeting of stockholders at which the term of office of the class to
which they have been elected expires and until such director's successor shall
have been duly elected and qualified.
ARTICLE TEN
DIRECTOR REMOVAL
Any director or the entire Board of Directors may be removed only for cause
and only by the vote of the holders of two-thirds (2/3) of the securities of
the corporation then entitled to vote at an election of directors voting
together as a single class.
ARTICLE ELEVEN
CUMULATIVE VOTING PROHIBITED
Cumulative voting in the election of directors or otherwise is hereby
expressly prohibited.
ARTICLE TWELVE
PREEMPTIVE RIGHTS DENIED
No stockholder shall have, as a stockholder of the corporation, any
preemptive right to acquire, purchase or subscribe for the purchase of any or
all additional issues of stock of the corporation or any or all classes or
series thereof, or for any securities convertible into such stock, whether now
or hereafter authorized. Nothing in this Article will prohibit the corporation
from granting by contract preemptive rights or other rights to purchase stock
of the corporation.
-4-
<PAGE>
ARTICLE THIRTEEN
SHAREHOLDER MEETING
Any action required or permitted to be taken at any annual or special
meeting of stockholders may only be taken upon the vote of the stockholders at
an annual or special meeting duly called and may not be taken by written
consent of the stockholders. Special meetings of the stockholders, unless
otherwise prescribed by statute, may be called at any time only by the Chairman
of the Board or the Chief Executive Officer of the corporation or a majority of
the Board of Directors.
ARTICLE FOURTEEN
BYLAWS
In furtherance and not in limitation of the powers conferred by statute,
the board of directors of the corporation is expressly authorized to adopt,
alter or repeal the bylaws of the corporation.
ARTICLE FIFTEEN
INDEMNIFICATION
To the fullest extent permitted by the General Corporation Law of Delaware,
as the same may be amended from time to time, the corporation shall indemnify
any and all of its directors, officers, employees or agents of the corporation
or former directors and officers, or any person who is or was serving at the
corporation's request as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise. 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 is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust, limited
liability company or other enterprise, against any liability asserted against
such person and incurred by such person in any such capacity, or arising out of
such person's status as such, whether or not the corporation would have the
power to indemnify such person against such liability.
No amendment nor repeal of this Article, nor the adoption of any provision
of this corporation's Certificate of Incorporation inconsistent with this
Article, shall eliminate or reduce the effect of this Article, in respect of
any matter occurring, or any action or proceeding accruing or arising or that,
but for this Article, would accrue or arise, prior to such amendment, repeal or
adoption of an inconsistent provision.
-5-
<PAGE>
ARTICLE SIXTEEN
DIRECTOR LIABILITY
To the fullest extent permitted by the General Corporation Law of Delaware,
as the same may be amended from time to time, a director or former director of
the corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director
except for: (i) any breach of the director's duty of loyalty to the corporation
or its stockholders; (ii) acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of the law; (iii) unlawful
payments of dividends or unlawful stock repurchases or redemptions; or (iv) any
transaction from which the director derived an improper personal benefit. No
repeal, amendment or modification of this Article, whether direct or indirect,
shall eliminate or reduce its effect with respect to any act or omission of a
director or former director of the corporation prior to such repeal, amendment
or modification.
ARTICLE SEVENTEEN
ELECTION OF DIRECTORS
Elections of directors need not be by written ballot unless the bylaws of
the corporation shall so provide.
ARTICLE EIGHTEEN
COMPROMISE OR AGREEMENT WITH CREDITORS
Whenever a compromise or arrangement is proposed between this corporation
and its creditors or any class of them and/or between this corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this corporation under the provisions
of section 291 of Title 8 of the Delaware Code or on the application of
trustees in dissolution or of any receiver or receivers appointed for this
corporation under the provisions of section 279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangements and to
any reorganization of this corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
-6-
<PAGE>
ARTICLE NINETEEN
AMENDMENTS
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation. In addition to any affirmative
vote required by applicable law or any other provision of this Certificate of
Incorporation or specified in any agreement, the affirmative vote of the
holders of not less than two-thirds (2/3) of the voting power of all securities
of the corporation entitled to vote generally in the election of directors
shall be required to amend, add, alter, change, repeal or adopt any provisions
inconsistent with Article Eight, Article Nine, Article Ten, Article Thirteen or
this Article Nineteen of this Certificate of Incorporation.
IN WITNESS WHEREOF, the corporation has caused this Amended and Restated
Certificate to be duly executed this 27th day of March, 1998.
By: /s/ John D. Carreker, Jr.
------------------------------
John D. Carreker, Jr.
ATTEST:
/s/ Maurice E. Purnell, Jr.
- -------------------------------
Maurice E. Purnell, Jr.
Secretary
-7-
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
CARREKER-ANTINORI, INC.
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE. The registered office shall be
located in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. OTHER OFFICES. The corporation also may have offices at
such other places both within and without the State of Delaware as the Board
of Directors may from time to time determine or as the business of the
corporation may require.
ARTICLE II
MEETINGS OF THE STOCKHOLDERS
Section 1. PLACE OF MEETINGS. All meetings of the stockholders for
the election of directors or for any other proper purpose shall be held at
such place either within or without the State of Delaware as the Board of
Directors may from time to time designate, as stated in the notice of such
meeting or a duly executed waiver of notice thereof.
Section 2. ANNUAL MEETING. An annual meeting of the stockholders
shall be held at such time and date as the Board of Directors may determine.
At such meeting the stockholders entitled to vote shall elect a Board of
Directors and may transact such other business as properly may be brought
before the meeting.
Section 3. SPECIAL MEETING. Special meetings of the stockholders
may be called only by the Chairman of the Board of Directors, the Chief
Executive Officer or a majority of the members of the Board of Directors then
in office.
Section 4. NOTICE OF ANNUAL OR SPECIAL MEETING. Written or printed
notice stating the location, date and hour of the meeting and, in case of a
special meeting, the purpose or purposes for which the meeting is called,
shall be delivered not less than ten (10) nor more than sixty (60) days
before the date of the meeting, either personally or by mail, by or at the
direction of the Chairman of the Board, the President, the Secretary, or the
officer or person calling the meeting, to each stockholder of record entitled
to vote at such meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail, addressed to the
stockholder at his address as it appears on the stock transfer books of the
corporation, with postage thereon prepaid.
<PAGE>
Section 5. BUSINESS AT SPECIAL MEETING. The business transacted at
any special meeting of the stockholders shall be limited to the purposes
stated in the notice thereof.
Section 6. QUORUM OF STOCKHOLDERS. Unless otherwise provided in the
Certificate of Incorporation or applicable law, the holders of a majority of
the shares entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of the stockholders. If, however, a quorum
shall not be present or represented at any meeting of the stockholders, the
stockholders present in person or represented by proxy shall have power to
adjourn the meeting from time to time, without notice other than announcement
of location, date, and hour of the adjourned meeting, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally notified, unless the adjournment is
for more than thirty (30) days or a new record date is fixed for the
adjourned meeting, in which case notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at such meeting. The
stockholders present at a duly organized meeting may continue to transact
business until adjournment, and the subsequent withdrawal of any stockholder
or the refusal of any stockholder to vote shall not affect the presence of
quorum at the meeting.
Section 7. ACT OF STOCKHOLDERS' MEETING. Except with respect to the
election of directors, the vote of the holders of a majority of the shares
entitled to vote and represented in person or by proxy at a meeting at which
a quorum is present shall be the act of the stockholders' meeting, unless the
vote of a greater number is required by law or the Certificate of
Incorporation. Unless otherwise provided in the Certificate of Incorporation,
directors shall be elected by a plurality of the votes cast by the holders of
shares entitled to vote in the election of directors at a meeting of
stockholders at which a quorum is present. Where a separate vote by a class
or classes is required, a majority of the outstanding shares of such class or
classes, present in person or represented by proxy, shall constitute a quorum
entitled to take action with respect to that vote on that matter and the
affirmative vote of the majority of shares of such class or classes present
in person or represented by proxy at the meeting shall be the act of such
class.
Section 8. VOTING OF SHARES. Each outstanding share shall be
entitled to one vote on each matter submitted to a vote at a meeting of the
stockholders, except to the extent that the voting rights of the shares of
any class are limited or denied by the Certificate of Incorporation or by a
resolution of the Board of Directors designating a series of preferred stock.
At each election for directors, every stockholder entitled to vote at such
election shall have the right to vote, in person or by proxy, the number of
shares owned by him for as many persons as there are directors to be elected
and for whose election he has the right to vote. Unless permitted by the
Certificate of Incorporation, no stockholder shall be entitled to cumulate
his votes by giving one candidate as many votes as the number of such
directors to be elected multiplied by the number of shares owned by such
stockholder or by distributing such votes on the same principle among any
number of such candidates.
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Section 9. PROXIES. At any meeting of the stockholders, each
stockholder having the right to vote shall be entitled to vote either in
person or by proxy executed in writing by the stockholder or by his duly
authorized attorney-in-fact. No proxy shall be valid after three (3) years
from its date of execution unless otherwise provided in the proxy. Each
proxy shall be revocable unless expressly provided therein to be irrevocable
and the proxy is coupled with an interest or otherwise made irrevocable by
law.
Section 10. VOTING LIST. The officer or agent having charge of the
stock ledger of the corporation shall make, at least ten (10) days before
each meeting of the stockholders, a complete list of the stockholders
entitled to vote at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of and number of shares held by each,
which list shall be maintained, for a period of ten (10) days prior to such
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held, and shall be subject
to inspection by any stockholder at any time during ordinary business hours.
Such list shall also be produced and kept open at the time and place of the
meeting and shall be subject to the inspection of any stockholder during the
whole time of the meeting. The original stock ledger shall be the only
evidence as to who are the stockholders entitled to examine such list or
transfer books of the corporation or to vote at any such meeting of
stockholders.
Section 11. ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any action
required or permitted to be taken at any annual or special meeting of the
stockholders may only be taken upon the vote of the stockholders at an annual
or special meeting called and may not be taken by written consent of the
stockholders.
Section 12. VOTING PROCEDURES; JUDGES OF ELECTION. Except as
otherwise provided by applicable law, the Certificate of Incorporation, or
these Bylaws, or as directed by the chairman of the meeting, the election of
directors and the vote upon any other matter need not be by written ballot.
In advance of any meeting of stockholders, the Board of Directors may appoint
one or more judges of election, who need not be stockholders, to act at such
meeting or any adjournment thereof. If judges of election are not so
appointed, the chairman of any such meeting may, and, upon the demand of any
stockholder entitled to vote or such stockholder's proxy, at the meeting and
before voting begins, shall appoint judges of election. In the case of
judges appointed upon demand of a stockholder, the number of judges shall be
either one (1) or three (3), as determined by the stockholders present or
represented by proxy, entitled to cast a majority of votes that all
stockholders present or so represented are entitled to cast thereon. No
person who is a candidate for office shall act as a judge. In case any person
appointed as judge fails to appear or refuses to act, the vacancy may be
filled by appointment made by the Board of Directors in advance of the
convening of the meeting, or at the meeting by the chairman of the meeting.
Except as provided in the Certificate of Incorporation, if judges of
election are appointed as aforesaid, they shall (a) determine the number of
shares outstanding and the voting power of
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each, the shares represented at the meeting, the existence of a quorum, and
the authenticity, validity, and effect of proxies; (b) receive votes or
ballots; (c) hear and determine all challenges and questions in any way
arising in connection with the right to vote; (d) count and tabulate all
votes; (e) determine the results of the election or other vote; and (f) do
such acts as may be proper to conduct the election or vote with fairness to
all stockholders. If there be three (3) or more judges of election, the
decision, act, or certificate of a majority shall be effective in all
respects as the decision, act, or certificate of all.
On request of the chairman of the meeting or of any stockholder entitled
to vote or such stockholder's proxy, the judges shall make a report in
writing of any challenge, question, or other matter determined by them, and
shall execute a certificate of any fact found by them.
Section 13. ORGANIZATION. At every meeting of the stockholders, the
Chairman of the Board, or in the case of a vacancy in the office or absence
of the Chairman of the Board, one of the following persons present in the
order stated: the Vice Chairmen in their order of rank, the President, the
Vice-Presidents in their order of rank, a chairman designated by the Board of
Directors, or a chairman chosen by the stockholders entitled to cast
two-thirds (2/3) of the votes that all stockholders present in person or by
proxy are entitled to cast, shall act as chairman of the meeting, and the
Secretary, or, in such person's absence, an Assistant Secretary, if any, or
any person appointed by the chairman of the meeting, shall act as secretary
of the meeting.
ARTICLE III
BOARD OF DIRECTORS
Section 1. POWERS. The business and affairs of the corporation
shall be managed by or under the direction of its Board of Directors, which
may exercise all such powers of the corporation and do all such lawful acts
and things as are not by statute or by the Certificate of Incorporation or by
these Bylaws directed or required to be exercised and done by the
stockholders.
Section 2. NUMBER OF DIRECTORS. The number of directors shall
initially consist of eight (8) directors. At or prior to the first meeting
of the Board of Directors after the organizational meeting of the Board of
Directors and thereafter, the number of directors shall be at least one (1)
but not more than twenty-five (25) members as determined from time to time in
accordance with these Bylaws by resolution of the Board of Directors, but no
decrease in the number of directors shall have the effect of shortening the
term of any incumbent director.
Section 3. ELECTION AND TERM. Subject to the rights, if any, of any
series of Preferred Stock then outstanding, the directors shall be divided
into three classes, designated Class I, Class II and Class III. The number
of directors in each class shall be the whole number contained in the
quotient arrived at by dividing the authorized number of directors by three,
and if a fraction
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is also contained in such quotient then if such fraction is one-third (1/3)
the extra director shall be a member of Class III and if the fraction is
two-thirds (2/3) then one of the extra directors shall be a member of Class
III and the other shall be a member of Class II. The terms of office of the
Board of Directors are divided into three classes: Class I, which consists
of John D. Carreker, Jr. and Larry Peck, expires at the annual meeting of
stockholders to be held in 1999; Class II, which consists of Ronald R.
Antinori, James L. Fischer and Richard R. Lee, Jr. will expire at the annual
meeting of stockholders to be held in 2000; and Class III, which consists of
James Carreker, Richard L. Linting and David K. Sias, will expire at the
annual meeting of stockholders to be held in 2001. At each annual meeting of
stockholders beginning with the 1999 annual meeting, the successors to
directors whose terms then expire will be elected to serve from the time of
their election and qualification until the third annual meeting following
election and until their successors have been duly elected and qualified, or
until their earlier resignation or removal. The officers of the Company are
appointed by and serve at the discretion of the Board of Directors.
Section 4. VACANCIES. Any vacancy occurring in the Board of
Directors for any reason other than an increase in the number of directors
shall be filled by the affirmative vote of a majority of the remaining
directors then in office, though less than a quorum of the Board of
Directors. A director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office. Any directorship to be filled by
reason of an increase in the number of directors may be filled by the
affirmative vote of a majority of the directors then in office. A director
elected to fill a newly created directorship shall hold office until his
successor is elected and qualified or until his death, resignation or removal.
Notwithstanding the preceding provisions of this Section 4 of the
Article III, unless otherwise provided in the Certificate of Incorporation or
these Bylaws, when one (1) or more directors shall resign from the Board of
Directors effective at a future date, a majority of the directors then in
office, including those who so resigned, shall have power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation
or resignations shall become effective, and each director so chosen shall
hold office as provided in this Section 4 in the filling of other vacancies.
Notwithstanding the preceding provisions of this Section 4, whenever the
holders of any class or series of shares are entitled to elect one or more
directors by the provisions of the Certificate of Incorporation, any
vacancies in such directorships and any newly created directorships of such
class or series to be filled by reason of an increase in the number of such
directors may be filled by the affirmative vote of a majority of the
directors elected by such class or series then in office or by a sole
remaining director so elected.
Section 5. REMOVAL. At any meeting of stockholders called expressly
for the purpose of removing a director or directors, any director or the
entire Board of Directors may be removed, only for cause, by a vote of the
holders of two-thirds of the shares then entitled to vote at an election of
directors.
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Section 6. RESIGNATIONS. Any director of the Corporation may resign
at any time by giving written notice to the Chairman of the Board, the
President, or the Secretary of the Corporation. Such resignation shall take
effect at the date of the receipt of such notice or at any later time
specified therein and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 7. ORGANIZATION. At every meeting of the Board of
Directors, the Chairman of the Board, or in the case of a vacancy in the
office or absence of the Chairman of the Board, one of the following offices
present in the order stated: the President, the Vice Presidents in their
order of rank, or a chairman chosen by the affirmative vote of the directors
holding two-thirds (2/3) of the votes of the Board of Directors present,
shall act as chairman of the meeting and the Secretary, or, in the absence of
the Secretary, an Assistant Secretary, if any, or any other person appointed
by the chairman of the meting, shall act as secretary of the meeting.
Section 8. COMPENSATION OF DIRECTORS. As specifically prescribed
from time to time by resolution of the Board of Directors, the directors of
the corporation may be paid their expenses of attendance at each meeting of
the Board and may be paid a fixed sum for attendance at each meeting of the
Board or a stated salary in their capacity as directors. This provision
shall not preclude any director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
ARTICLE IV
MEETINGS OF THE BOARD
Section 1. FIRST MEETING. The first meeting of each newly elected
Board of Directors shall be held immediately following the annual meeting of
the stockholders and no notice of such meeting shall be necessary to the
newly elected directors in order legally to constitute the meeting, provided
a quorum shall be present.
Section 2. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held with or without notice at such time and at such place
either within or without the State of Delaware as from time to time shall be
prescribed by the Board of Directors.
Section 3. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board, the Chief Executive
Officer or by a majority of the Board of Directors. Written notice of
special meetings of the Board of Directors shall be given to each director at
least twenty-four (24) hours before the time of the meeting.
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Section 4. BUSINESS AT REGULAR OR SPECIAL MEETING. Neither the
business to be transacted at, nor the purpose of, any regular or special
meeting of the Board of Directors need be specified in the notice or waiver
of notice of such meeting.
Section 5. QUORUM OF DIRECTORS. A majority of the Board of
Directors shall constitute a quorum for the transaction of business, unless a
greater number is required by law or the Certificate of Incorporation. A
quorum once established, shall not be broken by the withdrawal of enough
directors to leave less than a quorum and the directors present may continue
to transact business until adjournment. If a quorum shall not be present at
any meeting of the Board of Directors, the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present.
Section 6. ACT OF DIRECTORS' MEETING. The act of a majority of the
directors present at a meeting at which a quorum is present shall be the act
of the Board of Directors, unless the act of a greater number is required by
law, the Certificate of Incorporation or these Bylaws.
Section 7. ACTION BY UNANIMOUS WRITTEN CONSENT WITHOUT A MEETING.
Any action required or permitted to be taken at a meeting of the Board of
Directors under the provisions of any applicable law, the Certificate of
Incorporation or these Bylaws may be taken without a meeting if a consent in
writing setting forth the action so taken is signed by all members of the
Board of Directors, and such consent is filed with the minutes of proceedings
of the Board of Directors. Such consent shall have the same force and effect
as a unanimous vote of the Board of Directors.
Section 8. CONFERENCE TELEPHONE MEETINGS. Subject to the provisions
required or permitted for notice of meetings, unless otherwise restricted by
the Certificate of Incorporation or these Bylaws, members of the Board of
Directors or members of any committee designated by such Board of Directors
may participate in and hold a meeting of such Board of Directors or committee
by conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and
participation in such a meeting shall constitute presence in person at such
meeting, except where a person participates in the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of
any business on the ground that the meeting is not lawfully called or
convened.
Section 9. INTERESTED DIRECTORS. No contract or transaction between
the corporation and one or more of its directors or officers, or between the
corporation and any other corporation, partnership, association, or other
organization in which one (1) or more of the corporation's directors or
officers or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof
that authorizes the contract or transaction, or solely because his or their
votes are counted for such purpose, if:
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(a) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board of Directors or committee in good
faith authorizes the contract or transaction by the affirmative vote of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or
(b) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the corporation as of
the time it is authorized, approved, or ratified by the Board of Directors,
a committee thereof, or the stockholders.
Common or interested directors may be counted in determining the presence of
a quorum at a meeting of the Board of Directors or of a committee that
authorizes the contract or transaction.
ARTICLE V
COMMITTEES
The Board of Directors may designate one or more committees, each
committee to consist of one or more of the directors of the corporation. The
Board of Directors may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of
a committee, the member or members present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the Board of Directors to
act at the meeting in the place of any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the Board of
Directors, or in these Bylaws, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; provided that no such
committee shall have the power or authority in reference to the following
matter: (i) approving or adopting, or recommending to the stockholders, any
action or matter expressly required by law to be submitted to stockholders
for approval or (ii) adopting, amendment or repealing any bylaw of the
corporation.
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ARTICLE VI
NOTICES
Section 1. METHODS OF GIVING NOTICE. Whenever any notice is
required to be given to any stockholder or director under the provisions of
any law, the Certificate of Incorporation or these Bylaws, it shall be given
in writing and delivered personally or mailed to such stockholder or director
at such address as appears on the books of the corporation, and such notice
shall be deemed to be given at the time the same shall be deposited in the
United States mail with sufficient postage thereon prepaid. Notice to
directors may also be given by telegram, telex, telecopy or similar means of
visual data transmission, and notice given by any of such means shall be
deemed to be delivered when transmitted for delivery to the recipient.
Section 2. WAIVER OF NOTICE. Whenever any notice is required to be
given to any stockholder or director under the provisions of any law, the
Certificate of Incorporation or these Bylaws, a waiver thereof in writing
signed by the person or persons entitled to said notice, whether before or
after the time stated therein, shall be deemed equivalent to the giving of
such notice.
Section 3. ATTENDANCE AS WAIVER. Attendance of a stockholder or
director at a meeting shall constitute a waiver of notice of such meeting,
except where a stockholder or director attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of
any business on the ground that the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, a
meeting need be specified in any written waiver unless required by the
Certificate of Incorporation or these Bylaws.
ARTICLE VII
OFFICERS
Section 1. EXECUTIVE OFFICERS. The officers of the corporation
shall consist of a President and a Secretary, and may also include one or
more Vice Presidents, a Treasurer, and such other officers as are provided
for in this Article or by resolution of the Board of Directors. Any two (2)
or more offices may be held by the same person. The Board of Directors shall
also elect, from among the members of the Board, a Chairman of the Board, and
may elect one or more Vice Chairmen of the Board, each of which shall be
deemed to be an officer of the Corporation.
Section 2. ELECTION AND QUALIFICATION. The Board of Directors, at
its first meeting held immediately after each annual meeting of stockholders,
shall choose a President and a Secretary. The Board of Directors also may
elect one or more Vice Presidents, a Treasurer, and such other officers and
agents, including assistant officers and agents as may be deemed necessary,
who shall
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hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the Board of
Directors.
Section 3. SALARIES. The compensation of all officers and agents of
the corporation shall be determined by the Board of Directors.
Section 4. TERM, REMOVAL AND VACANCIES. Each officer of the
corporation shall hold office until his successor is chosen and qualified or
until his death, resignation, or removal. Any officer may resign at any time
upon giving written notice to the corporation. Any officer or agent or
member of any committee elected or appointed by the Board of Directors may be
removed by the Board of Directors with or without cause, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. Election or appointment of an officer or agent shall not of itself
create contract rights. Any vacancy occurring in any office of the
corporation by death, resignation, removal or otherwise shall be filled by
the Board of Directors.
Section 5. CHAIRMAN OF THE BOARD. The Chairman of the Board shall
be elected from among the members of the Board of Directors. The Chairman of
the Board shall counsel with and advise the President and perform such other
duties as may be from time to time assigned to the Chairman by the Board of
Directors. Except as otherwise provided by resolution of the Board, the
Chairman of the Board shall be ex-officio a member of all committees of the
Board.
Section 6. VICE CHAIRMAN OF THE BOARD. The Vice Chairmen of the
Board shall perform the duties of the Chairman of the Board in the Chairman's
absence (in their order of rank) and such other duties as may from time to
time be assigned to them by the Board of Directors, the Chairman of the
Board, or the President.
Section 7. PRESIDENT. The President shall perform all of the duties
usually incident to such office, and such other duties as may from time to
time be assigned to the President by the Board of Directors. In the absence
of the Chairman of the Board and any Vice Chairmen of the Board, the
President shall preside at all meetings of the stockholders and of the Board
of Directors.
Section 8. VICE PRESIDENT. Each Vice President shall perform all
such duties as from time to time may be assigned to him or her by the Board
of Directors, the Chairman of the Board or the Chief Executive Officer. At
the request of the President or in his or her absence or in the event of his
or her inability or refusal to act, the Vice President, or if there shall be
more than one, the Vice Presidents in order determined by the Board of
Directors (or if there shall be no such determination, then the Vice
Presidents in the order of their election), shall perform the duties of the
President, and, when so acting, shall have the powers of and be subject to
the restrictions placed upon the President in respect of the performance of
such duties.
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Section 9. SECRETARY. The Secretary of in the Secretary's absence
the Assistant Secretary; (i) shall keep or cause to be kept in one or more
books provided for the purpose, the minutes of all meetings of the Board of
Directors, the committees of the Board of Directors and the stockholders;
(ii) shall ensure that all notices are duly given in accordance with the
provisions of these Bylaws and as required by law; (iii) shall be the
custodian of the records and the seal of the corporation and affix and attest
to seal of all certificates for shares of the corporation (unless the seal of
the corporation on such certificates shall be a facsimile, as hereinafter
provided) and affix and attest the seal to all other documents to be executed
on behalf of the corporation under its seal; (iv) shall ensure that the
books, reports, statements certificates and other documents and records
required by law to be kept and filed are properly kept and filed; and (v)
shall perform all duties incident to the office of Secretary and such other
duties as from time to time may be assigned to him or her by the Board of
Directors.
Section 10. ASSISTANT SECRETARIES. Unless otherwise determined by
the Board of Directors, the Assistant Secretaries, in the order of their
seniority as such seniority may from time to time be designated by the Board
of Directors, shall perform the duties and exercise the powers of the
Secretary in the absence or disability of the Secretary. They shall perform
such other duties and have such other powers as the Board of Directors may
from time to time prescribe.
Section 11. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit
of the corporation in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the corporation as may be ordered
by the Board of Directors, taking proper vouchers for such disbursements, and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
Section 12. ASSISTANT TREASURER. Unless otherwise determined by the
Board of Directors, the Assistant Treasurer shall perform the duties and
exercise the powers of the Treasurer in the absence or disability of the
Treasurer. He shall perform such other duties and have such other powers as
the Board of Directors may from time to time prescribe.
Section 13. OFFICERS' BOND. If required by the Board of Directors,
any officer so required shall give the corporation a bond (which shall be
renewed as the Board of Directors may require) in such sum and with such
surety or sureties as shall be satisfactory to the Board of Directors for the
faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal
from office, of any and all books, papers, vouchers, money and other property
of whatever kind in his possession or under his control belonging to the
corporation.
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ARTICLE VIII
CERTIFICATES FOR SHARES
Section 1. CERTIFICATES REPRESENTING SHARES. The corporation shall
deliver certificates representing all shares to which stockholders are
entitled. Such certificates shall be numbered and shall be entered in the
books of the corporation as they are issued, and shall be signed by the
Chairman or Vice Chairman of the Board of Directors, the President or a Vice
President, and by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary of the corporation, and may be sealed with the seal
of the corporation or a facsimile thereof. Any or all signatures on the
certificate may be a facsimile. In case any officer who has signed or whose
facsimile signature has been placed upon such certificate shall have ceased
to be such officer before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer at the date of
its issuance. If the corporation is authorized to issue shares of more than
one class, there shall be set forth upon the face or back of the certificate
a statement that the corporation will furnish to any stockholder upon request
and without charge a full statement of all of the powers, designations,
preferences, limitations and relative, participating, optional, or other
special rights of the shares of each class authorized to be issued and the
qualifications, limitations or restrictions of such preferences and/or rights
and, if the corporation is authorized to issue any preferred or special class
in series, the variations in the relative rights and preferences between the
shares of each such series so far as the same have been fixed and determined
and the authority of the Board of Directors to fix and determine the relative
rights and preferences of subsequent series. Each certificate representing
shares shall state upon the face thereof that the corporation is organized
under the laws of the State of Delaware, the name of the person to whom
issued, the number and the class and the designation of the series, if any,
which such certificate represents and the par value of each share represented
by such certificate or a statement that the shares are without par value. No
certificate shall be issued for any share until the consideration therefor
has been fully paid.
Section 2. RESTRICTION ON TRANSFER OF SHARES. If any restriction on
the transfer, or registration of the transfer, of shares shall be imposed or
agreed to by the corporation, as permitted by law, the Certificate of
Incorporation, or the Bylaws, such restriction shall be noted conspicuously
on each certificate representing shares in accordance with applicable law.
Section 3. VOTING AGREEMENTS. A written counterpart of any voting
agreement entered into among any number of stockholders of the corporation,
or any number of stockholders of the corporation and the corporation itself,
for the purpose of providing that shares of the corporation shall be voted in
the manner prescribed in the agreement shall be deposited with the
corporation at its registered office in Delaware and shall be subject to the
inspection by any stockholder of the corporation or any beneficiary of the
agreement daily during business hours. In addition, certificates of stock or
uncertificated stock shall be issued to the person or persons, or corporation
or corporations authorized to act as trustee for purposes of vesting in such
person or persons, corporation or corporations, the right to vote such
shares, to represent any stock of an original
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issue so deposited with him or them, and any certificates of stock or
uncertificated stock so transferred to the voting trustee or trustees shall
be surrendered and cancelled and new certificates or uncertificated stock
shall be issued therefore to the voting trustee or trustees. In the
certificate so issued, if any, it shall be stated that it is issued pursuant
to such agreement, and that fact shall also be stated in the stock ledger of
the corporation.
Section 4. TRANSFER OF SHARES. Subject to the provisions of this
Article, upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall
be the duty of the corporation to issue a new certificate to the person
entitled thereto, cancel the old certificate, and record the transaction upon
its books.
Section 5. TRANSFER AGENTS AND REGISTRARS. The Board of Directors
may appoint, or authorize any officer or officers to appoint, one or more
transfer agents and one or more registrars.
Section 6. REGULATIONS. The Board of Directors may make such
additional rules and regulations, not inconsistent with these By-Laws, as it
may deem expedient concerning the issue, transfer and registration of
certificates for shares of stock of the corporation.
Section 7. LOST, STOLEN OR DESTROYED CERTIFICATE. The Board of
Directors may direct a new certificate or certificates to be issued in place
of any certificate or certificates theretofore issued by the corporation
alleged to have been lost, stolen or destroyed upon the making of an
affidavit of that fact by the person claiming the certificate to be lost,
stolen or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors, in its discretion and as a condition
precedent to the issuance thereof, may require the owner of such lost, stolen
or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or to give the
corporation a bond in such sum as it may direct to indemnify the corporation
against any claim that may be made against the corporation with respect to
the certificate alleged to have been lost, stolen or destroyed or the
issuance of such new certificate.
Section 8. CLOSING OF TRANSFER BOOKS AND FIXING RECORD DATE. For
the purpose of determining stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, or entitled to
receive payment of any dividend or other distribution, or in order to make a
determination of stockholders for any other proper purpose (other than
determining stockholders entitled to consent to action taken by stockholders
that is proposed to be taken without a meeting of stockholders), the Board of
Directors may fix a date as the record date for any such determination of
stockholders, such date to not precede the date of adoption of the resolution
fixing the record date, and such date to be not more than sixty (60) days,
and, in case of a meeting of stockholders, not less than ten (10) days, prior
to the date on which the particular action requiring such determination of
stockholders is to be taken. If no record date is fixed for the
determination of stockholders entitled to notice of or to vote at a meeting
-13-
<PAGE>
of stockholders, or stockholders entitled to receive payment of a dividend or
other distribution, or for any other proper purpose, the close of business on
the day next preceding the date on which notice of the meeting is mailed or
if notice is waived, the close of business on the day next preceding the day
on which the meeting is held or the date on which the resolution of the Board
of Directors declaring such dividend or relating to such other proper purpose
is adopted, as the case may be, shall be the record date for such
determination of stockholders. When a determination of stockholders entitled
to vote at any meeting of stockholders has been made as provided in this
Section 6, such determination shall apply to any adjournment thereof;
provided that the Board of Directors may fix a new record date for the
adjourned meeting. Whenever action by stockholders is proposed to be taken
by consent in writing without a meeting of stockholders, the Board of
Directors may fix a record date for the purpose of determining stockholders
entitled to consent to that action, which record date shall not precede, and
shall not be more than ten (10) days after, the date upon which the
resolution fixing the record date is adopted by the Board of Directors. If
no record date has been fixed by the Board of Directors and the prior action
of the Board of Directors is not required by law, the record date for
determining stockholders entitled to consent to action in writing without a
meeting shall be the first date on which a signed written consent setting
forth the action taken or proposed to be taken is delivered to the
corporation by delivery to its registered office, its principal place of
business, or an officer or agent of the corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Delivery
to the corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. If no record date shall have been
fixed by the Board of Directors and prior action of the Board of Directors is
required by law, the record date for determining stockholders entitled to
consent to action in writing without a meeting shall be at the close of
business on the date on which the Board of Directors adopts a resolution
taking such prior action.
Section 9. REGISTERED STOCKHOLDERS. The corporation shall be
entitled to recognize the exclusive right of a person registered on its books
as the owner of shares to receive dividends, and to vote as such owner, and
shall not be bound to recognize any equitable or other claim to or interest
in such share or shares on the part of any other person, whether or not it
shall have express or other notice thereof, except as otherwise provided by
the laws of the State of Delaware.
ARTICLE IX
GENERAL PROVISIONS
Section 1. DIVIDENDS. The Board of Directors from time to time may
declare, and the corporation may pay, dividends on its outstanding shares in
cash, property, or its own shares pursuant to law and subject to the
provisions of the Certificate of Incorporation and these Bylaws.
-14-
<PAGE>
Section 2. RESERVES. The Board of Directors may by resolution
create a reserve or reserves out of earned surplus for any proper purpose or
purposes, and may abolish any such reserve in the same manner.
Section 3. NEGOTIABLE INSTRUMENTS. All bills, notes, checks or
instruments for the payment of money shall be signed by such officer or
officers or such other person or persons as permitted by these Bylaws or in
such manner as the Board of Directors from time to time may designate.
Section 4. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
Section 5. BOOKS AND RECORDS. The corporation shall keep books and
records of account and shall keep minutes of the proceedings of the
stockholders, the Board of Directors, and each committee of the Board of
Directors. The corporation shall keep at its registered office or principal
place of business, or at the office of its transfer agent or registrar, a
record of the original issuance of shares issued by the corporation and a
record of each transfer of those shares that have been presented to the
corporation for registration of transfer. Such records shall contain the
names and addresses of all past and current stockholders of the corporation
and the number and class of shares issued by the corporation held by each of
them. Any books, records, minutes, and share transfer records may be in
written form or in any other form capable of being converted into written
form within a reasonable time.
Section 6. EXECUTION OF CONTRACTS, DEEDS, ETC. The Board of
Directors may authorize any officer or officers, agent or agents, in the name
and on behalf of the corporation to enter into or execute and deliver any and
all contracts, deeds, bonds, mortgages and other obligations or instruments,
and such authority may general or confined to specific instances.
Section 7. VOTING OF STOCK IN OTHER CORPORATIONS. Unless otherwise
provided by resolution of the Board of Directors, the Chairman of the Board
or the Chief Executive Officer, from time to time, may (or may appoint one or
more attorneys or agents to) cast the votes that the corporation may be
entitled to cast as a stockholder or otherwise in any other corporation or
business enterprise, any of whose shares or securities may be held by the
corporation, at meetings of the holders of the shares or other securities of
such other corporation or business enterprise. If one or more attorneys or
agents are appointed, then the Chairman of the Board or the Chief Executive
Officer may instruct the person or persons so appointed as to the manner of
casting such votes or giving such consent. The Chairman of the Board or the
Chief Executive Officer may, or may instruct the attorneys or agents
appointed to, execute or cause to be executed in the name and on behalf of
the corporation or under its seal or otherwise, such written proxies,
consents, waivers or other instruments as may be necessary or proper in the
circumstances.
-15-
<PAGE>
ARTICLE X
INDEMNIFICATION
Section 1. MANDATORY INDEMNIFICATION. To the fullest extent
permitted by the General Corporation Law of Delaware, as the same may be
amended from time to time, the corporation shall indemnify any current or
former director or officer of the corporation (or his or her testator or
estate) made or threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding, whether criminal, civil
administrative, or investigative, by reason of the fact that he or she is or
was a director or officer of the corporation or is or was serving, at the
request of the corporation, as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, employee benefit
plan, or other enterprise. Subject to applicable law, the corporation may
indemnify an employee or agent of the corporation to the extent that and with
respect to such proceedings as, the Board of Directors may determine by
resolution, in its discretion.
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 is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, limited liability company or other enterprise, against
any liability asserted against such person and incurred by such person in any
such capacity, or arising out of such person's status as such, whether or not
the corporation would have the power to indemnify such person against such
liability.
Section 2. MANDATORY ADVANCEMENT OF EXPENSES. To the fullest extent
permitted by the General Corporation Law of Delaware, as the same may be
amended from time to time, the corporation shall pay in advance all expenses
(including attorneys' fees) incurred by any director or officer, or former
director or officer, or any person who is serving or has served at the
corporation's request as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, in defending any
civil, criminal, administrative or investigative action, suit or proceeding.
Such person shall repay such amount to the corporation if it shall ultimately
be determined that he is not entitled to be indemnified by the corporation as
authorized by this Article XI.
ARTICLE XI
AMENDMENTS
These Bylaws may be altered, amended, or repealed or new Bylaws may be
adopted by the Board of Directors at any regular or special meeting of the
Board, subject to the stockholders' right to adopt, amend or repeal these
Bylaws or adopt new Bylaws. Notwithstanding the foregoing and anything
contained in the Bylaws to the contrary, the Bylaws shall not be amended or
repealed by the stockholders, and no provision inconsistent therewith shall
be adopted by the stockholders, without the affirmative vote of the holders
of at least two-thirds (2/3) of the voting power of all shares of the
corporation entitled to vote generally in the election of directors voting
together as a single class.
-16-
<PAGE>
COMMON STOCK PAR VALUE $.01 PER SHARE
CARREKER-ANTINORI
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFICATE IS TRANSFERABLE CUSIP 144433 10 9
IN NEW YORK, NEW YORK AND SEE REVERSE FOR
RIDGEFIELD PARK, NEW JERSEY CERTAIN DEFINITIONS
This Certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK,
PAR VALUE $.01 PER SHARE, OF
CARREKER-ANTINORI, INC.
(hereinafter referred to as the Corporation), transferable on the books of the
Corporation by the holder hereof in person or by duly authorized attorney upon
surrender of this Certificate properly endorsed. This Certificate and the
shares represented hereby are issued and shall be held subject to all of the
provisions of the Certificate of Incorporation and Bylaws, as amended from
time to time, of the Corporation (copies of which are on file with the
Transfer Agent), to all of which the holder, by acceptance hereof, assents.
This Certificate is not valid until countersigned by the Transfer Agent and
registered by the Registrar.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by its duly authorized officers and its facsimile seal to be hereunto
affixed.
Dated:
COUNTERSIGNED AND REGISTERED:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
TRANSFER AGENT AND REGISTRAR
BY
/s/ J. D. CARREKER /s/ MAURICE E. PURNELL, JR.
CHAIRMAN OF THE BOARD SECRETARY
AND CHIEF EXECUTIVE AUTHORIZED SIGNATURE
OFFICER
[CARREKER-ANTINORI, INC. SEAL]
<PAGE>
CARREKER-ANTINORI, INC.
The Corporation will furnish without charge to each stockholder who so
requests a statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or
series thereof of the Corporation, and the qualifications, limitations or
restrictions of such preferences and/or rights. Any such request may be made
to the Corporation or the Transfer Agent.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT -- Custodian
---------------- -----------------
(Cust) (Minor)
under Uniform Gifts to Minors
Act
----------------------------------------
(State)
UNIF TRF MIN ACT -- Custodian (until age )
------------ ----------
(Cust)
-------------------- under Uniform Transfers
(Minor)
to Minors Act
------------------------------
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, _____________________ HEREBY SELL, ASSIGN AND TRANSFER UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------------
- ---------------------------------------
- -------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ------------------------------------------------------------------------ SHARES
OF THE CAPITAL STOCK REPRESENTED BY THE WITHIN CERTIFICATE, AND DO HEREBY
IRREVOCABLY CONSTITUTE AND APPOINT
- ---------------------------------------------------------------------- ATTORNEY
TO TRANSFER THE SAID STOCK ON THE BOOKS OF THE WITHIN NAMED CORPORATION WITH
FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED
---------------------------
X
-------------------------------------
(SIGNATURE)
NOTICE:
THE SIGNATURE(S) TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME(S)
AS WRITTEN ON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGES WHATEVER
X
-------------------------------------
(SIGNATURE)
- -------------------------------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION AS
DEFINED IN RULE 17Ad-15 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
- -------------------------------------------------------------------------------
SIGNATURE(S) GUARANTEED BY:
- -------------------------------------------------------------------------------
<PAGE>
April 22, 1998
(214) 740-8444
[email protected]
Carreker-Antinori, Inc.
14001 N. Dallas Parkway
Suite 1100
Dallas, Texas 75240
Re: Registration Statement on Form S-1
(No. 333-48399)
Dear Sirs:
We have acted as counsel for Carreker-Antinori, Inc., a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended (the "Act"), of an aggregate of 5,865,000
shares of the Company's Common Stock, $.01 par value per share (the
"Securities"). We have examined such documents and questions of law as we
have deemed necessary to render the opinion expressed below.
Based upon the foregoing, we are of the opinion that the Securities,
when issued and sold as described in the above-referenced Registration
Statement, will be legally issued, fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm in the prospectus
under the caption "Legal Matters." In giving this consent, we do not thereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Act or the rules and regulations of the Securities and
Exchange Commission promulgated thereunder.
Respectfully submitted,
LOCKE PURNELL RAIN HARRELL
(A Professional Corporation)
By: /s/ Maurice E. Purnell, Jr.
----------------------------------
Maurice E. Purnell, Jr.
<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "AGREEMENT") is entered into on this
19th day of March 1998 between Carreker-Antinori, Inc., a Texas corporation
(the "COMPANY"), and Terry L. Gage ("MR. GAGE").
RECITALS
This Agreement sets forth in definitive form the terms of Mr. Gage's
employment by the Company.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements of the parties contained herein, the Company and Mr. Gage hereby
agree as follows:
1. EMPLOYMENT. The Company will employ Mr. Gage and Mr. Gage accepts
employment with the Company for a period of one year beginning on the date of
this Agreement; PROVIDED, HOWEVER, that on each of the first and second
anniversary dates of this Agreement such period of employment shall extend
for an additional one year unless either party notifies the other party to
the contrary at least ninety (90) days prior to such anniversary date (such
period, as the same may be extended as provided above, being the "INITIAL
PERIOD"). Mr. Gage's employment may continue after the Initial Period but
will then be terminable by either party at will, with or without cause. The
obligations of the Company and Mr. Gage set forth in that certain
"Noncompetition, Property Rights and Trade Secrets Agreement" and in that
certain "Confidentiality Agreement" (each as defined in Section 8) (referring
to noncompetition, intellectual property rights and confidentiality,
respectively) and in Section 9 (referring to termination) will survive
termination of Mr. Gage's employment, regardless of reason.
2. RESIDENCE AND BUSINESS TRAVEL. Each of the parties agrees that the
primary location at which Mr. Gage will be expected to render services
hereunder will be in Dallas, Texas or its environs, but that Mr. Gage will,
from time to time, be expected to travel to other locations where the Company
transacts (or proposes to transact) business and undertake such other
business travel as is reasonably required in the discharge of his duties set
forth below and for the successful operation of the Company.
3. DUTIES. Mr. Gage will be employed initially as the Chief Financial
Officer of the Company, reporting to the Chief Executive Officer of the
Company. In such capacity, Mr. Gage shall be responsible for the preparation
of the Company's financial statements, supervising and maintaining the
Company's accounts and conducting the Company's financial affairs generally,
supervising the Company's personnel involved in the foregoing, and
supervising the Company's Human Resources functions and personnel. In
discharging his duties, Mr. Gage shall have such authority as is reasonably
necessary to perform such duties.
Mr. Gage agrees that, to the best of his ability and experience, he will
at all times conscientiously perform such duties and obligations as may be
assigned to him by the Company's Chief Executive Officer or the Company's
Board of Directors.
<PAGE>
4. FULL-TIME EMPLOYMENT. Mr. Gage's employment will be on a full-time
basis, in accordance with policies of the Company applicable to executive
officers. In addition to such restrictions as are set forth in the
Noncompetition, Property Rights and Trade Secrets Agreement referenced
herein, Mr. Gage will not engage in any other business or render any
commercial or professional services, directly or indirectly, to any other
person or organization, whether for compensation or otherwise, provided that
Mr. Gage may (a) provide incidental assistance to family members on matters
of family business or with respect to their personal investments; (b) engage
in charitable activities on behalf of civic, educational or other nonprofit
organizations; and (c) subject to the approval of the Company's Chief
Executive Officer (which approval may be given or withheld in his sole
discretion), sit on the board of directors of corporations and other business
organizations; provided in each case that such activities do not conflict
with or interfere with Mr. Gage's obligations to the Company. The parties
recognize and agree that Mr. Gage currently is a member of the Board of
Directors of FAAC Incorporated, and that the consent of the Company's Chief
Executive Officer contemplated by the preceding sentence has been previously
given with regard thereto and is ratified hereby. Mr. Gage may make personal
investments in non-publicly traded corporations, partnerships or other
entities that are not engaged in any business activities competitive with the
Company. Notwithstanding anything to the contrary contained in this
Agreement, Mr. Gage may make personal investments in publicly traded
corporations regardless of the business they are engaged in, provided that
Mr. Gage does not at any time own in excess of two percent (2%) of any class
of the issued and outstanding equity securities of any such corporation.
5. SALARY; POTENTIAL INCENTIVE COMPENSATION; ANNUAL REVIEW. Mr.
Gage's annual base salary for the Initial Period will be not less than
$180,000. All base salary will be payable on the Company's regular payroll
dates, less required withholdings.
If the Company's financial performance meets or exceeds the standards
for financial performance established for a fiscal year by the Company's
Board of Directors (i.e., the Company's "board plan"), then Mr. Gage will be
eligible to receive, subject to such reasonably achievable incentive
compensation criteria as the Company's Board of Directors establishes from
time to time, incentive compensation (which may be in cash or other forms of
consideration, or both) equal to up to seventy percent (70%) of Mr. Gage's
annual base salary, on terms no less favorable than those applicable to other
executive officers of the Company (e.g., its Chairman, Vice-Chairman, Chief
Executive Officer and Chief Financial Officer). Mr. Gage acknowledges that
the Company's Board of Directors has complete and sole discretion
(exercisable in good faith) to establish and revise the Company's "board
plan" and such reasonably achievable criteria; PROVIDED, HOWEVER, that no
such action may retroactively alter or limit the amount of any incentive
compensation actually and previously earned by Mr. Gage.
The Company, acting through its Chief Executive Officer or his or her
designee, shall provide to Mr. Gage, and provide Mr. Gage the opportunity to
participate in, an employment performance review not less frequently than
annually.
6. BENEFITS. Mr. Gage will also be entitled to insurance, vacation
and other employee benefits commensurate with his position (and reasonably
consistent with the level of such benefits as are afforded other executive
officers of the Company) in accordance with the Company's
EMPLOYMENT AGREEMENT - Page 2
<PAGE>
policies in effect from time to time with respect to executive officers. (As
used in the preceding sentence, employee benefits do not include stock option
grants or other equity-based compensation.) Mr. Gage acknowledges receipt of
a summary of the Company's standard employee benefits policies in effect as
of the date of this Agreement.
7. REIMBURSEMENT OF NORMAL BUSINESS EXPENSES. The Company will, but
in accordance with the Company's policies in effect from time to time,
reimburse Mr. Gage for all out-of-pocket reasonable business expenses
incurred by Mr. Gage in connection with the performance of his duties under
this Agreement, upon submission of the required documentation required
pursuant to the Company's standard policies and record-keeping procedures.
8. INTELLECTUAL PROPERTY. Simultaneously with the execution of this
Agreement, Mr. Gage agrees to execute and deliver (if he has not done so
already) that certain Noncompetition, Property Rights and Trade Secrets
Agreement between him and the Company, a copy of which is attached to this
Agreement as ATTACHMENT A, and that certain Confidentiality Agreement between
him and the Company, a copy of which is attached to this Agreement as
ATTACHMENT B.
9. TERMINATION.
(a) BY THE COMPANY. Notwithstanding Section 1, the Company may
terminate Mr. Gage's employment at any time during the Initial Period, with
or without cause, upon notice to Mr. Gage.
(b) BY MR. GAGE. During the Initial Period, Mr. Gage may
terminate his employment upon notice to the Company only if (i) the Company
is in material breach of this Agreement, (ii) there shall exist a Post
Transaction Reassignment (as subsequently defined), or (iii) Mr. J.D.
Carreker is no longer either or both of the Chairman or the Chief Executive
Officer of the Company; PROVIDED, HOWEVER, that in the case of clauses (i)
and (ii) above, such termination will become effective only upon the
expiration of 30 days following such notice and then only if the breach or
event, as applicable, remains uncured or unremedied, respectively, as of the
effective time of such termination. Such termination shall be deemed a
termination by the Company of Mr. Gage's employment under Section 9(a)
without cause, for which Mr. Gage shall have the remedy set forth in Section
9(c).
For the purposes hereof, a "Post Transaction Reassignment" shall mean
the substantial diminution in Mr. Gage's duties or responsibilities during
the two months prior to, or the six months after, the consummation of any
transaction (or the last of any series of related transactions) involving the
Company's equity securities or a merger or consolidation of the Company (i)
resulting in the acquisition by any person, entity or group (within the
meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended), not currently possessing the power to elect a majority of the Board
of Directors of the Company, of such power, or (ii) following which the Chief
Executive Officer of the Company serves neither in that capacity nor as
Chairman of the Company (each of the matters referred to in clause (i) and
(ii) above being a "Transaction").
EMPLOYMENT AGREEMENT - Page 3
<PAGE>
(c) REMEDY. Upon termination of Mr. Gage's employment during the
Initial Period pursuant to Section 9(a) without cause, or pursuant to Section
9(b), only (at which time he shall cease to be an employee of the Company for
all purposes), the Company will (i) thereafter pay to Mr. Gage on the
Company's regular payroll dates and less required withholdings, base salary
at the rate paid to Mr. Gage immediately prior to such termination for the
lesser of (1) the period commencing immediately after such termination and
ending when Mr. Gage accepts other full-time employment and (2) the greater
of (A) nine months and (B) the remaining balance of the Initial Period (the
"Severance Period"); (ii) provide Mr. Gage, for the Severance Period, with
major medical health and dental insurance reasonably comparable to employee
benefits then provided to the Company's executive officers in accordance with
the Company's employee benefits policies; and (iii) pay to Mr. Gage, as and
when the same would be otherwise payable, any incentive compensation for the
Severance Period based on incentive compensation criteria that, prior to or
on the date of termination, have been established by the Company's Board of
Directors, determined as to amount as if Mr. Gage had remained an employee of
the Company hereunder throughout the Severance Period; PROVIDED, HOWEVER,
that nothing in this Agreement shall be construed as entitling Mr. Gage to
receive stock option grants or grants of other equity-based compensation, or
other consideration in lieu thereof, after such date of termination. Where
the Severance Period shall end prior to the conclusion of any measurement
period relating to incentive compensation, Mr. Gage shall not be disqualified
from receiving such incentive compensation, but instead shall be entitled to
a pro rata amount, based upon the number of days during which he was deemed
to have been eligible for incentive compensation, as compared to the number
of days constituting the entire such measurement period.
In addition, upon termination of Mr. Gage's employment during the
Initial Period pursuant to Section 9(a) without cause, or pursuant to Section
9(b), only, and notwithstanding any provision in any stock option agreement
or restricted stock grant to the contrary, for purposes of the vesting of
stock options granted to Mr. Gage on or before the date of this Agreement
(including stock options granted to Mr. Gage as of January 31, 1998), and the
lapse of restrictions associated with a restricted stock grant to Mr. Gage as
of January 31, 1998, such termination shall be deemed to have occurred on the
later of (i) nine months after the actual date of such termination and (ii)
the last day of the Initial Period (and the vesting of such stock options,
and the lapse of such restrictions, shall to that extent be accelerated
accordingly).
PROVIDED, HOWEVER, that upon termination of Mr. Gage's employment
pursuant to Section 9(a), without cause, during the Initial Period AND within
six months after a Transaction, then, notwithstanding any provision in any
stock option agreement or restricted stock grant to the contrary, for
purposes of the vesting of stock options granted to Mr. Gage on or before the
date of this Agreement (including stock options granted to Mr. Gage as of
January 31, 1998), and the lapse of restrictions associated with a restricted
stock grant to Mr. Gage as of January 31, 1998, such termination shall be
deemed to have occurred four years after the actual date of such termination
(and the vesting of such stock options, and the lapse of such restrictions,
shall to that extent be accelerated accordingly).
If the Company terminates Mr. Gage's employment with cause, or if Mr.
Gage terminates his employment in circumstances constituting a breach of this
Agreement, then none of the
EMPLOYMENT AGREEMENT - Page 4
<PAGE>
foregoing post-termination payments or benefits, or any other
post-termination or severance payments or benefits, shall be made or provided
to Mr. Gage.
For purposes of this Agreement, the term "cause" shall mean conduct
involving one or more of the following as determined by the Company in its
reasonable discretion: (i) the substantial, material and continuing failure
of Mr. Gage, after reasonable notice thereof, to render services to the
Company or any subsidiary in accordance with the terms or requirements of
this Agreement; (ii) disloyalty, gross negligence, willful misconduct,
dishonesty or breach of fiduciary duty to the Company or any subsidiary that
results in direct or indirect material loss, damage or injury to the Company
or any subsidiary; (iii) the commission of an act of embezzlement or fraud;
(iv) deliberate disregard of the rules or policies of the Company that
results in direct or indirect material loss, damage or injury to the Company
or any subsidiary; (v) the unauthorized and intentional disclosure of any
trade secret or confidential information of the Company or any subsidiary;
(vi) the commission of an act that constitutes unfair competition with the
Company or any subsidiary or which induces any customer or supplier to
terminate a contract with the Company or any subsidiary, that results in
direct or indirect material loss, damage or injury to the Company or any
subsidiary; (vii) habitual drunkenness or an addiction to drugs; or (viii)
commission of a crime of moral turpitude.
The Company's obligation to make payments (and provide benefits), if
any, pursuant to this Section 9(c) is subject to the condition that Mr. Gage
execute and deliver to the Company a comprehensive, general release of the
Company (and its directors, officers, shareholders, employees, agents and
other representatives), in form satisfactory to the Company and its counsel,
releasing the Company from and against any claims, damages and the like that
the Company might or allegedly could otherwise be obligated to pay Mr. Gage
as a result of the termination of Mr. Gage's employment with the Company
(including for claims of employment discrimination, wrongful termination or
breach of this Agreement).
(d) UPON DEATH. Except as otherwise provided for in this
Agreement, if Mr. Gage dies during the term of this Agreement, then the
Company will pay his estate an amount equal to all earned and unpaid salary,
bonuses (if any) accrued and payable and accrued benefits, all as of the date
of his death.
(e) SURVIVAL. Mr. Gage's and the Company's obligations under
Sections 8, 9 and 10(h) of this Agreement and, to the extent that any
allowable expenses have not been reimbursed as of the time of such
termination, under Section 7 of this Agreement, will survive the termination
of Mr. Gage's employment with the Company.
10. MISCELLANEOUS.
(a) NOTICES. Any and all notices permitted or required to be
given under this Agreement must be in writing. Notices will be deemed given
(i) when personally received or when sent by facsimile transmission (to the
receiving party's facsimile number), (ii) on the first business day after
having been sent by commercial overnight courier with written verification of
receipt, or (iii) on the third business day after having been sent by
registered or certified mail from a location on the United States mainland,
return receipt requested, postage prepaid,
EMPLOYMENT AGREEMENT - Page 5
<PAGE>
whichever occurs first, at the address set forth below or at any new address,
notice of which will have been given in accordance with this Section 10(a):
(i) If to the Company: Carreker-Antinori, Inc.
14001 North Dallas Parkway, Suite 1100
Dallas, Texas 75240
Attention: Chief Executive Officer
Phone: (972) 458-1981
Fax: (972) 458-2567
with a copy to:
Locke Purnell Rain Harrell
(A Professional Corporation)
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201
Attention: Russell F. Coleman
Phone: (214) 740-8686
Fax: (214) 740-8800
(ii) If to Mr. Gage: Terry L. Gage
5209 Gentle Road
Flower Mound, Texas 75028
Phone: (817) 430-1258
Fax: (817) 491-1258
with a copy to:
Arter & Hadden
1717 Main Street, Suite 4100
Dallas, Texas 75201
Attention: Jeffrey M. Sone
Phone: (214) 761-4780
Fax: (214) 741-7139
(b) AMENDMENTS. This Agreement, including the Attachments hereto,
contains the entire agreement and supersedes and replaces all prior
agreements between the Company and Mr. Gage concerning Mr. Gage's employment
and employment benefits. This Agreement may not be changed or modified in
whole or in part except by a writing signed by the party against whom
enforcement of the change or modifications is sought.
(c) SUCCESSORS AND ASSIGNS. This Agreement will not be assignable
by either Mr. Gage or the Company, except that the rights and obligations of
the Company under this Agreement may be assigned to a corporation which
succeeds the Company as the result of a merger or other corporate
reorganization and which continues the business of the Company, or
EMPLOYMENT AGREEMENT - Page 6
<PAGE>
a subsidiary of the Company, provided that the Company guarantees the
performance by such assignee of the Company's obligations hereunder.
(d) GOVERNING LAW. The laws of the State of Texas (without regard
to its choice of law principles that might apply the law of another
jurisdiction) will govern the validity of this Agreement, the construction of
its terms, and the interpretation and enforcement of the rights and duties of
the parties.
(e) NO WAIVER. The failure of any party to enforce any of the
provisions of this Agreement will not be construed to be a waiver of the
right of such party thereafter to enforce such provisions. The waiver by any
party of the right to enforce any of the provisions of this Agreement on any
occasion will not be construed to be a waiver of the right of such party to
enforce such provisions on any other occasion.
(f) SEVERABILITY. Mr. Gage and the Company recognize that the
limitations contained in this Agreement are reasonably and properly required
for the adequate protection of the interests of the Company. If for any
reason a court of competent jurisdiction or an arbitrator in a binding
arbitration proceeding finds any provision of this Agreement, or the
application thereof, to be unenforceable, then the remaining provisions of
this Agreement will be interpreted so as best to reasonably effect the intent
of the parties. The parties further agree that the court or arbitrator shall
replace any such invalid or unenforceable provisions with valid and
enforceable provisions designed to achieve, to the extent possible, the
business purposes and intent of such unenforceable provisions.
(g) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which will be an original as regards any party whose signature
appears thereon and all of which together will constitute one and the same
instrument. This Agreement will become binding when one or more counterparts
hereof, individually or taken together, bear the signatures of both parties
reflected hereon as signatories.
(h) DISPUTE RESOLUTION.
(i) ARBITRATION OF DISPUTES. Any dispute under this
Agreement shall be resolved by arbitration in Dallas, Texas and, except as
herein specifically stated, in accordance with the commercial arbitration
rules of the American Arbitration Association ("AAA RULES") then in effect,
except that depositions and documentary discovery shall be freely permitted.
However, in all events, these arbitration provisions shall govern over any
conflicting rules that may now or hereafter be contained in the AAA Rules.
Any judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction over the subject matter thereof. The arbitrator
shall have the authority to grant any equitable and legal remedies that would
be available in any judicial proceeding instituted to resolve such dispute,
and may, in his or her discretion, award attorneys' fees, expenses and costs.
(ii) COMPENSATION OF ARBITRATOR. Any such arbitration will
be conducted before a single arbitrator who will be compensated for his or
her services at a rate to be determined by the parties or by the American
Arbitration Association, but based upon reasonable
EMPLOYMENT AGREEMENT - Page 7
<PAGE>
hourly or daily consulting rates for the arbitrator if the parties are not
able to agree upon his or her rate of compensation.
(iii) SELECTION OF ARBITRATOR. The American Arbitration
Association will have the authority to select an arbitrator from a list of
arbitrators who are lawyers familiar with Texas contract law; PROVIDED,
HOWEVER, that such lawyers cannot work for a firm then performing services
for either party, that each party will have the opportunity to make such
reasonable objection to any of the arbitrators listed as such party may wish
and that the American Arbitration Association will select the arbitrator from
the list of arbitrators as to whom neither party makes any such objection.
If the foregoing procedure is not followed, then each party will choose one
person from the list of arbitrators provided by the American Arbitration
Association (provided that such person does not have a conflict of interest),
and the two persons so selected will select from the list provided by the
American Arbitration Association the person who will act as the arbitrator.
(iv) PAYMENT OF COSTS. Subject to the last sentence of
Section 10(h)(i) above, the Company and Mr. Gage will each pay 50% of the
initial compensation to be paid to the arbitrator in any such arbitration and
50% of the costs of transcripts and other normal and regular expenses of the
arbitration proceedings.
(v) BURDEN OF PROOF. For any dispute submitted to
arbitration, the burden of proof will be as it would be if the claim were
litigated in a Texas judicial proceeding.
(vi) AWARD. Upon the conclusion of any arbitration
proceedings hereunder, the arbitrator will render findings of fact and
conclusions of law and a written opinion setting forth the basis and reasons
for any decision reached and will deliver such documents to each party to
this Agreement along with a signed copy of the award.
(vii) TERMS OF ARBITRATION. The arbitrator chosen in
accordance with these provisions will not have the power to alter, amend or
otherwise affect the terms of these arbitration provisions or the provisions
of this Agreement.
(viii) NATURE OF REMEDY. Except as specifically otherwise
provided below, arbitration will be the sole and exclusive remedy of the
parties for any dispute arising out of this Agreement.
(ix) EQUITABLE REMEDY. Notwithstanding the provisions of
this Section 10(h) and the arbitration provided for herein, actions initiated
or maintained by the parties for injunctive or similar equitable relief are
not subject to arbitration, and may be brought by the parties in any court
that has jurisdiction, and, should the party bringing any such action
prevail, all costs and expenses (including legal fees) shall be borne by the
party against whom such action was brought.
[THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
EMPLOYMENT AGREEMENT - Page 8
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first set forth above.
CARREKER-ANTINORI, INC. EMPLOYEE
By: /s/ J.D. Carreker /s/ Terry L. Gage
----------------------------- ---------------------------
J.D. Carreker Terry L. Gage
Chairman of the Board and
Chief Executive Officer
EMPLOYMENT AGREEMENT - Page 9
<PAGE>
EXHIBIT 10.7
CARREKER-ANTINORI, INC.
1994 LONG TERM INCENTIVE PLAN
(As Amended and Restated
Effective March 30, 1998)
WHEREAS, on October 7, 1994, J. D. Carreker & Associates, Inc. adopted
the J. D. Carreker & Associates, Inc. Long Term Incentive Plan, which was
approved by its shareholders; and
WHEREAS, The Carreker Group, Inc. (successor to J. D. Carreker &
Associates, Inc.) subsequently amended and restated the plan as The Carreker
Group, Inc. Amended and Restated 1994 Long Term Incentive Plan, which was
approved at the annual meeting of its shareholders in 1997; and
WHEREAS, the name of the corporation was changed from The Carreker
Group, Inc. to Carreker-Antinori, Inc. (the "Company"); and
WHEREAS, incident to the Company's reincorporation in the state of
Delaware, and the registration of its equity securities in a registered
offering pursuant to the Securities Act of 1934, the Board of Directors of
the Company has determined that it is advisable and in the best interests of
the Company to amend and restate the 1994 Long Term Incentive Plan, effective
as of the filing of the Merger Agreement in the state of Delaware, subject to
the approval of the Company's shareholders;
NOW, THEREFORE, as amended and restated, the terms of the 1994 Long Term
Incentive Plan (the "Plan") shall be as follows.
I. GENERAL
1. PURPOSE. The Plan has been established by the Company to:
(a) attract and retain employees, consultants and non-employee
directors;
(b) motivate participating employees, consultants and non-employee
directors, by means of appropriate incentive, to achieve
long-range goals;
(c) provide incentive compensation opportunities for participating
employees, consultants and non-employee directors which are
competitive with those of other major corporations; and
(d) further identify the interests of participating employees,
consultants and non-employee directors with those of the
Company's other shareholders through compensation alternatives
based on the Company's common stock;
<PAGE>
and thereby promote the long-term financial interest of the Company and its
Subsidiaries, including the growth in value of the Company's equity and
enhancement of long-term shareholder return.
2. EFFECTIVE DATE. The provisions of the Plan originally became
effective on October 7, 1994. The Plan shall be unlimited in duration and,
in the event of plan termination, shall remain in effect as long as any
awards under it are outstanding; PROVIDED, HOWEVER, that no awards of
incentive stock options ("INCENTIVE STOCK OPTIONS") as provided in Section
422 of the Code may be made under the Plan after October 6, 2004. The
provisions of the Plan as restated and amended herein shall become effective
as of the filing of the Merger Agreement in the state of Delaware (the
"EFFECTIVE DATE"), subject to the approval of the holders of a majority of
the shares of voting stock of all classes of the Company present, or
represented, and entitled to vote at a meeting of its stockholders, or the
unanimous written consent of all holders of common stock.
3. DEFINITIONS. The following definitions are applicable to the Plan.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Compensation Committee of the Board or, if no
Compensation Committee is in existence, the entire Board.
"Disabled" means the inability of a Participant, by reason of a physical
or mental impairment, to engage in any substantial gainful activity, of
which the Board shall be the sole judge.
"Fair Market Value" of Stock means as of any date, the value of Stock
determined as follows:
(a) If the Stock is listed on any established stock exchange or a national
market system, including without limitation the National Market System
of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, the Fair Market Value of a Share of Stock
shall be the closing sales price for such stock (or the closing bid,
if no sales were reported) as quoted on such system or exchange (or
the exchange with the greatest volume of trading in Stock) on the date
of grant, as reported in THE WALL STREET JOURNAL or such other source
as the Board deems reliable;
(b) If the Stock is quoted on the NASDAQ System (but not on the National
Market System thereof) or regularly quoted by a recognized securities
dealer but selling prices are not reported, the Fair Market Value of a
Share of Stock shall be the mean between the bid and asked prices for
the Stock on the last market trading
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<PAGE>
day prior to the day of determination, as reported in THE WALL STREET
JOURNAL or such other source as the Board deems reliable; or
(c) In the absence of an established market for the Stock, the Fair Market
Value thereof shall be determined in good faith by the Committee.
"Option Date" means, with respect to any Stock Option, the date on which
the Stock Option is awarded under the Plan.
"Participant" means any employee, consultant or non-employee director of
the Company or any Subsidiary who is selected by the Board to participate in
the Plan.
"Performance Period" has the meaning ascribed to it in Article IV.
"Related Company" means any corporation during any period in which it is
a Subsidiary, or during any period in which it directly or indirectly owns
50% or more of the total combined voting power of all classes of stock of the
Company that are entitled to vote.
"Restricted Stock" has the meaning ascribed to it in Article IV.
"Stock" means Carreker-Antinori, Inc. common stock, $.01 par value.
"Stock Option" means the right of a Participant to purchase Stock
pursuant to an Incentive Stock Option or Non-Qualified Option awarded
pursuant to the provisions of the Plan.
"Subsidiary" means any corporation during any period of which 50% or
more of the total combined voting power of all classes of stock entitled to
vote is owned, directly or indirectly, by the Company.
4. ADMINISTRATION. The authority to manage and control the operation
and administration of the Plan shall be vested in the Board. Subject to the
provisions of the Plan, the Board will have authority to select employees,
consultants and/or non-employee directors to receive awards of Stock Options
and/or Restricted Stock, to determine the time or times of receipt, to
determine the types of awards and the number of shares covered by the awards,
to establish the terms, conditions, performance criteria, restrictions, and
other provisions of such awards, and to cancel or suspend awards. In making
such award determinations, the Board may take into account the nature of
services rendered by the respective employee, consultant and/or non-employee
director, his or her present and potential contribution to the Company's
success, and such other factors as the Board deems relevant. The Board is
authorized to interpret the Plan, to establish, amend, and rescind any rules
and regulations relating to the Plan, to determine the terms and provisions
of any agreements made pursuant to the Plan, to modify such agreements, and
to make all other determinations that may be necessary or advisable for the
administration of the Plan.
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The Board, in its discretion, may delegate any or all of its authority,
powers, and discretion under this Plan to the Committee, and the Board in its
discretion may revest any or all such authority, powers, and discretion in
itself at any time. If appointed, the Committee shall function as follows:
A majority of the Committee shall constitute a quorum, and the acts of a
majority of the members present at any meeting at which a quorum is present,
or acts approved in writing by all members of the Committee, shall be the
acts of the Committee, unless provisions to the contrary are embodied in the
Company's Bylaws or resolutions duly adopted by the Board. All actions taken
and decisions and determinations made by the Board or the Committee pursuant
to the Plan shall be binding and conclusive on all persons interested in the
Plan. No member of the Board or the Committee shall be liable for any action
or determination taken or made in good faith with respect to the Plan.
5. PARTICIPATION. Subject to the terms and conditions of the Plan,
the Board shall determine and designate, from time to time, the employees,
consultants and non-employee directors of the Company and/or its Subsidiaries
who will participate in the Plan. In the discretion of the Board, more than
one award may be granted to a Participant. Except as otherwise agreed to by
the Company and the Participant, any award under the Plan shall not affect
any previous award to the Participant under the Plan or any other plan
maintained by the Company or its Subsidiaries.
6. SHARES SUBJECT TO THE PLAN. The shares of Stock with respect to
which awards may be made under the Plan shall be either authorized and
unissued shares or issued and outstanding shares (including, in the
discretion of the Board, shares purchased in the market). Subject to the
provisions of paragraph I.10, the number of shares of Stock available under
the Plan shall not exceed 5,500,000 shares in the aggregate, increased as of
the first day of each fiscal year, commencing February 1, 1999, by that
number of shares of Stock equal to two per cent (2%) of the number of shares
of Stock outstanding as of the Effective Date. If, for any reason, any award
under the Plan otherwise distributable in shares of Stock, or any portion of
the award, shall expire, terminate, or be forfeited or cancelled, or be
settled in cash pursuant to the terms of the Plan and, therefore, any such
shares are no longer distributable under the award, such shares of Stock
shall again be available for award under the Plan.
7. COMPLIANCE WITH APPLICABLE LAWS AND WITHHOLDING OF TAXES.
Notwithstanding any other provision of the Plan, the Company shall have no
liability to issue any shares of Stock under the Plan unless such issuance
would comply with all applicable laws and the applicable requirements of any
securities exchange or similar entity. Prior to the issuance of any shares
of Stock under the Plan, the Company may require a written statement that the
recipient is acquiring the shares for investment and not for the purpose or
with the intention of distributing the shares. If the redistribution of
shares is restricted, certificates representing such shares may bear a legend
referring to such restrictions. All awards and payments under the Plan are
subject to withholding of all applicable taxes, which withholding obligations
may be satisfied, with the consent of the Board, through the surrender of
shares of Stock which the Participant already owns, or to which a Participant
is otherwise entitled under the Plan. The Company shall have the right to
deduct from all amounts paid in cash in consequence of the exercise of a
Stock Option under the Plan
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<PAGE>
any taxes required by law to be withheld with respect to such cash payments.
Where an employee or other person is entitled to receive shares of Stock
pursuant to the exercise of a Stock Option pursuant to the Plan, the Company
shall have the right to require the employee or such other person to pay to
the Company the amount of any taxes that the Company is required to withhold
with respect to such shares, or, in lieu thereof, to retain, or sell without
notice, a sufficient number of such shares to cover the amount required to be
withheld. Upon the disposition (within the meaning of Code Section 424(c))
of shares of Stock acquired pursuant to the exercise of an Incentive Stock
Option prior to the expiration of the holding period requirements of Code
Section 422(a)(1), the employee shall be required to give notice to the
Company of such disposition and the Company shall have the right to require
the employee to pay to the Company the amount of any taxes that are required
by law to be withheld with respect to such disposition.
8. TRANSFERABILITY. Stock Options awarded under the Plan are not
transferable except as designated by the Participant by will or by the laws
of descent and distribution. Stock Options may be exercised during the
lifetime of the Participant only by the Participant or his guardian or legal
representative.
9. EMPLOYEE, CONSULTANT, NON-EMPLOYEE DIRECTOR AND STOCKHOLDER STATUS.
The Plan does not constitute a contract of employment, and selection as a
Participant will not give any employee, consultant or non-employee director
the right to be retained in the employ or as a consultant or non-employee
director of the Company or any Subsidiary. No award under the Plan shall
confer upon the holder thereof any right as a stockholder of the Company
prior to the date on which he fulfills all service requirements and other
conditions for receipt of shares of Stock.
10. ADJUSTMENTS TO NUMBER OF SHARES SUBJECT TO THE PLAN. Subject to
the following provisions of this paragraph 10, in the event of any change in
the outstanding shares of Stock of the Company by reason of any stock
dividend, split, spinoff, recapitalization, merger, consolidation,
combination, exchange of shares or other similar change, the aggregate number
of shares of Stock with respect to which awards may be made under the Plan,
the terms and the number of shares of any outstanding Stock Options, and the
purchase price of a share of Stock under Stock Options, may be equitably
adjusted by the Board in its sole discretion.
11. CAPITAL TRANSACTION. In the event that there shall occur (a) a
merger or consolidation of the Company with or into another corporation in
which the Company shall not be the surviving corporation (other than such a
merger or consolidation undertaken to reincorporate in another jurisdiction)
(for purposes of this Section 11, the Company shall not be deemed the
surviving corporation in any such transaction if, as the result thereof, it
becomes a wholly-owned subsidiary of another corporation), (b) a dissolution
of the Company, or (c) a transfer of all or substantially all of the assets
or shares of stock of the Company in one transaction or a series of related
transactions to one or more other persons or entities (any such transaction
being referred to herein as a "Capital Transaction"), then:
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<PAGE>
(A) If there is a plan or agreement respecting the Capital Transaction and
if such plan or agreement specifically provides for the change, conversion,
or exchange of the shares of Stock under outstanding and unexercised
Options for securities of another corporation, then the Board shall adjust
the shares of Stock underlying such outstanding and unexercised Options
(and shall adjust the shares of Stock remaining under the Plan which are
then available to be awarded under the Plan, if such plan or agreement
makes specific provision therefor) in a manner not inconsistent with the
provisions of such plan or agreement for the adjustment, change,
conversion, or exchange of such shares of Stock and such Options;
(B) If there is no plan or agreement respecting the Capital Transaction or
if such plan or agreement does not specifically provide for the change,
conversion, or exchange of the shares of Stock under outstanding and
unexercised Options for securities of another corporation, then the
Committee shall provide the Participant with thirty (30) days advance
written notice of such transaction and the Participant, without the
necessity of any further action by the Committee, shall be entitled to
purchase, prior to the effective date of such Capital Transaction, the
number of Option Shares which are then vested. The unvested or unexercised
portion of the Option shall be deemed cancelled and terminated as of the
effective date of such transaction.
Notwithstanding the foregoing, the Board or the Committee may provide that
upon the occurrence of such events as it shall deem appropriate, any or all
outstanding Options shall become fully vested and exercisable.
12. AGREEMENT WITH COMPANY. At the time of any awards under the Plan,
the Board will require a Participant to enter into an agreement with the
Company in a form specified by the Board, agreeing to the terms and
conditions of the Plan and to such additional terms and conditions, not
inconsistent with the Plan, as the Board may, in its sole discretion,
prescribe.
13. AMENDMENT AND TERMINATION OF PLAN. Subject to the following
provisions of this paragraph 13, the Board may at any time and in any way
amend, suspend, or terminate the Plan. No amendment of the Plan and, except
as provided in paragraphs 6 and 10, no action by the Board shall, without
further approval of the stockholders of the Company, increase the total
number of shares of Stock with respect to which awards may be made under the
Plan, materially increase the benefits accruing to Participants under the
Plan, or materially modify the requirements as to eligibility for
participation in the Plan, if stockholder approval of such amendment is a
condition of Securities and Exchange Commission Rule 16b-3 or the Code at the
time such amendment is adopted. No amendment, suspension, or termination of
the Plan shall alter or impair any Stock Option or Restricted Stock
previously awarded under the Plan without the consent of the holder thereof.
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<PAGE>
II. INCENTIVE STOCK OPTIONS
1. DEFINITION. The award of an Incentive Stock Option under the Plan
entitles the Participant to purchase shares of Stock at a price fixed at the
time the option is awarded, subject to the following terms of this Part II.
2. ELIGIBILITY. The Board shall designate the Participants to whom
Incentive Stock Options, as described in section 422(b) of the Code or any
successor section thereto, are to be awarded under the Plan and shall
determine the number of option shares to be offered to each of them.
Incentive Stock Options may be awarded only to employees, and not to
consultants or non-employee directors. In no event shall the aggregate Fair
Market Value (determined at the time the option is awarded) of Stock with
respect to which Incentive Stock Options are exercisable for the first time
by an individual during any calendar year (under all plans of the Company and
all Related Companies) exceed $100,000.
3. PRICE. The purchase price of a share of Stock under each Incentive
Stock Option shall be determined by the Board, provided, however, that in no
event shall such price be less than the greater of (a) 100% of the Fair
Market Value of a share of Stock as of the Option Date (or 110% of such Fair
Market Value if the holder of the option owns stock possessing more than 10%
of the combined voting power of all classes of stock of the Company or any
Subsidiary) or (b) the par value of a share of Stock on such date. The full
purchase price of each share of Stock purchased upon the exercise of any
Incentive Stock Option shall be paid in cash at the time of such exercise or,
with the approval of the Board, in shares of Stock, valued at the Fair Market
Value per share on the date of exercise. As soon as practicable thereafter,
a certificate representing the shares so purchased shall be delivered to the
person entitled thereto.
4. EXERCISE. Each Option shall become and be exercisable at such time
or times and during such period or periods, in full or in such installments
as may be determined by the Board at the Option Date.
5. OPTION EXPIRATION DATE. The "Expiration Date" with respect to an
Incentive Stock Option or any portion thereof awarded to a Participant under
the Plan means the earliest of:
(a) the date that is 10 years after the date on which the Incentive
Stock Option is awarded (or, if the Participant owns stock
possessing more than 10% of the combined voting power of all
classes of stock of the Company or any Subsidiary, the date
that is 5 years after the date on which the Incentive Stock
Option is awarded);
(b) the date established by the Board at the time of the award;
(c) the date that is one year after the Participant's employment
with the Company and all Related Companies is terminated by
reason of the Participant becoming Disabled or by reason of the
Participant's death; or
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<PAGE>
(d) the date that is three months after the date the Participant's
employment with the Company and all Related Companies is
terminated for any other reason.
All rights to purchase shares of Stock pursuant to an Incentive Stock Option
shall cease as of such option's Expiration Date.
III. NON-QUALIFIED STOCK OPTIONS
1. DEFINITION. The award of a Non-Qualified Stock Option under the
Plan entitles the Participant to purchase shares of Stock at a price fixed at
the time the option is awarded, subject to the following terms of this Part
III.
2. ELIGIBILITY. The Board shall designate the Participants to whom
Non-Qualified Stock Options are to be awarded under the Plan and shall
determine the number of option shares to be offered to each of them.
3. PRICE. The purchase price of a share of Stock under each
Non-Qualified Stock Option shall be determined by the Board; provided,
however, that in no event shall such price be less than the par value of a
share of such Stock on such date. The full purchase price of each share of
Stock purchased upon the exercise of any Non-Qualified Stock Option shall be
paid in cash at the time of such exercise or, with the approval of the Board,
in shares of Stock, valued at the Fair Market Value per share on the date of
exercise. If the Company shall have a class of its Common Stock registered
pursuant to Section 12 of the 1934 Act, an option holder may also make
payment at the time of exercise of an option by delivering to the Company a
properly executed exercise notice together with irrevocable instructions to a
broker approved by the Company that upon such broker's sale of shares with
respect to which such option is exercised, it is to deliver promptly to the
Company the amount of sale proceeds necessary to satisfy the option exercise
price and any required withholding taxes. As soon as practicable thereafter,
a certificate representing the shares so purchased shall be delivered to the
person entitled thereto.
4. EXERCISE. Each Option shall become and be exercisable at such time
or times and during such period or periods, in full or in such installments
as may be determined by the Board at the Option Date.
5. OPTION EXPIRATION DATE. The "Expiration Date" with respect to a
Non-Qualified Stock Option or any portion thereof awarded to a Participant
under the Plan means the earliest of:
(a) the date established by the Board at the time of the award; or
(b) the date that is one year after the Participant's employment
with the Company and all Related Companies is terminated by
reason of the Participant becoming Disabled or by reason of the
Participant's death; or
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(c) the date that is three months after the date the Participant's
employment with the Company and all Related Companies is
terminated for any other reason, or the date the Participant
ceases to serve as a consultant or non-employee director of the
Company for any reason.
All rights to purchase shares of Stock pursuant to a Non-Qualified Stock
Option shall cease as of such option's Expiration Date.
IV. RESTRICTED STOCK
1. DEFINITION. A Restricted Stock award is an offer by the Company to
sell to an eligible person shares of Stock that are subject to restrictions.
The Board will determine to whom an offer will be made, the number of shares
of Stock the person may purchase, the price to be paid, the restrictions to
which the shares will be subject, and all other terms and conditions of the
Restricted Stock award, subject to the following.
2. ELIGIBILITY. The Board shall designate the Participants to whom
Restricted Stock is to be awarded and the number of shares of Stock that are
subject to the award. The offer of Restricted Stock will be accepted by the
Participant's execution and delivery of the Restricted Stock Purchase
Agreement and full payment for the Shares to the Company within thirty (30)
days from the date the Restricted Stock Purchase Agreement is delivered to
the person.
3. TERMS AND CONDITIONS OF AWARDS. The purchase price of shares sold
pursuant to a Restricted Stock Award will be determined by the Committee on
the date the Restricted Stock Award is granted. Restricted Stock Awards
shall be subject to such restrictions as the Committee may impose. These
restrictions may be based upon completion of a specified number of years of
service with the Company or upon completion of the performance goals as set
out in advance in the Participant's individual Restricted Stock Purchase
Agreement. Restricted Stock Awards may vary from Participant to Participant
and between groups of Participants. Prior to the grant of a Restricted Stock
Award, the Committee shall: (a) determine the nature, length and starting
date of any Performance Period for the Restricted Stock Award; (b) select
from among the Performance Factors to be used to measure performance goals,
if any; and (c) determine the number of shares that may be awarded to the
Participant. Prior to the payment of any Restricted Stock Award, the
Committee shall determine the extent to which such Restricted Stock Award has
been earned. Performance Periods may overlap and Participants may
participate simultaneously with respect to Restricted Stock Awards that are
subject to different Performance Periods and having different performance
goals and other criteria.
4. TERMINATION DURING PERFORMANCE PERIOD. If a Participant is
terminated during a Performance Period for any reason, then such Participant
will be entitled to payment (whether in shares of Stock, cash or otherwise)
with respect to the Restricted Stock Award only to the extent earned as of
the date of termination in accordance with the Restricted Stock Purchase
Agreement, unless the Committee determines otherwise.
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<PAGE>
5. STOCK CERTIFICATE LEGEND. Each certificate issued in respect of
shares of Restricted Stock awarded under the Plan shall be registered in the
name of the Participant and, at the discretion of the Board, each such
certificate may be deposited in a bank designated by the Board. Each such
certificate shall bear the following (or a similar) legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) contained in the Carreker-Antinori, Inc., 1994 Long-Term
Incentive Plan and an agreement entered into between the registered
owner and Carreker-Antinori, Inc. A copy of such plan and agreement
is on file in the office of the Secretary of Carreker-Antinori, Inc.,
14001 North Dallas Parkway, Suite 1100, Dallas, Texas 75240."
At the end of the Performance Period for Restricted Stock, such Restricted
Stock will be transferred free of all restrictions to a Participant (or his
or her legal representative, beneficiary or heir).
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<PAGE>
EXHIBIT 10.8
CARREKER-ANTINORI, INC.
DIRECTOR STOCK OPTION PLAN
SECTION 1. PURPOSE.
The purpose of this Director Stock Option Plan (the "PLAN") of
Carreker-Antinori, Inc. (the "COMPANY") is to encourage ownership in the
Company by outside directors of the Company whose continued services are
considered essential to the Company's continued progress and thus to provide
them with a further incentive to continue as directors of the Company.
SECTION 2. ADMINISTRATION.
The Plan shall be administered by the Stock Option Committee (the
"COMMITTEE") appointed by the Board of Directors of the Company. Grants and
stock options under the Plan and the amount and nature of the awards to be
granted shall be automatic as described in section 6 hereof. However, all
questions or interpretation of the Plan or of any opinions issued under it
shall be determined by the Committee and such determination shall be final
and binding upon all persons having an interest in the Plan. Any or all
powers and discretion vested in the Committee under the Plan may be exercised
by any subcommittee so authorized by the Committee.
SECTION 3. PARTICIPATION IN THE PLAN.
All directors of the Company shall be eligible to participate in the
Plan unless they are employees of the Company or any subsidiary of the
Company.
SECTION 4. STOCK SUBJECT TO THE PLAN.
The stock which is made the subject of awards granted under the Plan
shall be the Company's Common Stock ("COMMON STOCK"), par value $.01 per
share. The total number of shares issuable under the Plan shall not exceed
[500,000] shares (subject to adjustment under Section 11). If any
outstanding option under the Plan for any reason expires or is terminated
without having been exercised in full, the shares allocable to the
unexercised portion of such option shall again become available for grant
pursuant to the Plan.
SECTION 5. NON-STATUTORY STOCK OPTIONS.
All options granted under the Plan shall be non-statutory options not
entitled to special tax treatment under Section 422 of the Internal Revenue
Code of 1986.
SECTION 6. TERMS, CONDITIONS AND FORM OF OPTIONS.
Each option granted under the Plan shall be evidenced by a written
agreement in such form as the Committee shall from time to time approve (the
"OPTION AGREEMENT"), which agreements shall comply with and be subject to the
following terms and conditions:
<PAGE>
a. OPTION GRANT DATES. Options shall be granted automatically on
the first trading day in any calendar quarter (the "GRANT DATE") of any
year to any eligible director who prior to such Grant Date files with the
Committee or its designate an irrevocable election to receive a stock
option in lieu of all or twenty-five (25%), fifty (50%) or seventy-five
(75%) percent of the annual retainer and fees which would be paid to the
eligible director for attendance at all anticipated regularly scheduled
meetings of the Board of Directors and its Committees to be earned by the
director during the twelve month period following such Grant Date (the
"GRANT YEAR"). The percentage of fees to be foregone in favor of an option
shall be stated in the election to be filed with the Committee, as provided
above. In the event that the annual retainer or fees are increased during
any particular Grant Year or unanticipated meetings occur for which fees
are payable to the eligible director, an additional grant shall be made as
respects the incremental increase or additional fee consistent with the
director's previous election as of the day upon which such increase or
additional fee becomes effective.
Unless prior to the end of a Grant Year the Director notifies the
Committee of his intent to terminate or modify the previous election,
additional options shall be granted automatically on the first trading day
in the calendar quarter immediately following the end of the preceding
Grant Year consistent with the Director's previous election.
b. OPTION FORMULA. The number of option shares granted to any
eligible director shall be equal to the number of shares (rounded to the
nearest whole share) determined in accordance with the following formula:
Deferred Retainer Number of
------------------------ = Shares
(Fair Market Value x .5)
"DEFERRED RETAINER" shall mean the amount which the director would be
entitled to receive for serving as a director in the relevant Grant Year
(including attendance fees which would be paid to the eligible director for
attendance at all anticipated regularly scheduled meetings of the Board of
Directors and its Committees) but for the election referred to in
Subsection 6.A above. "FAIR MARKET VALUE" shall mean the fair market value
of the Company's Common Stock at the close of business on the relevant
Grant Date as reported on the New York Stock Exchange Composite Tape.
c. OPTIONS LIMITED TRANSFERABILITY. Each option granted under the
Plan by its terms shall not be transferable by the director otherwise than
(i) by will or, if he dies intestate, by the laws of descent and
distribution of the state of his domicile at the time of his death, or (ii)
to an immediate family member or trust, corporation, partnership or other
entity controlled by the director or an immediate family member or in which
the director or an immediate family member is a beneficiary, partner,
shareholder or member. The term "immediate family member" means any child,
stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law,
or sister-in-law, and shall include adoptive relationships. The transferee
of a director shall not have the right to transfer the options transferred
to him except by will or, if he dies intestate, by the laws of descent and
distribution. A transfer to a minor shall not be permitted except pursuant
to the Uniform Transfers to
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<PAGE>
Minors Act or similar legislation. If a director transfers of an option
he shall immediately notify the Committee in writing of the name and
address of the transferee, the number of options transferred and the date
the transfer was made. Except as provided above, no option or interest
therein may be transferred, assigned, pledged or hypothecated by the
director during his lifetime, whether by operation of law or otherwise,
or be made subject to execution, attachment or similar process.
d. PERIOD OF OPTION. Subject to the paragraph below concerning
options granted due to retainer increases during a Grant Year, options
become exercisable on the first anniversary of the date on which they were
granted; provided, however, that any option granted pursuant to the Plan
shall become exercisable in full upon the death of the director, his
retirement because of age or his total and permanent disability. No option
shall be exercisable after the expiration of fifteen (15) years from the
date on which such option is granted. Each option shall be subject to
termination before its date of expiration as hereinafter provided.
Options granted due to an increase in retainer during a Grant Year
("INCREASE OPTIONS") shall become exercisable and shall terminate at the
same time and in the same manner as the options granted at the beginning of
that Grant Year.
e. EXERCISE OF OPTION. An option granted hereunder may be exercised
only by delivering a written notice to the Company accompanied by payment
of the full consideration for such shares as to which such options are
exercised. Unless otherwise prohibited by the Option Agreement, such
consideration may be paid by delivery of shares of Common Stock or a
combination of cash and shares of Common Stock; any such shares shall be
valued at the fair market value of such shares on the date of exercise.
Options may be exercised in full or in part for whole shares (no fractional
shares will be issued) and any exercisable portion of an option grant not
exercised may be later exercised subject to the expiration date stated
above. The written notice referred to above shall specify the number of
shares the optionee then desires to purchase.
If any option has not been fully exercised on the last day of the term
("expiration date"), and the option exercise price is less than the then
current Fair Market Value of the option shares, the unexercised portion of
the Option shall be deemed exercised on such expiration date. In such
event, shares of Common Stock shall not be issued until the option price
and any other required amounts have been paid.
f. EXERCISE BY REPRESENTATIVE FOLLOWING DEATH OF DIRECTOR. Upon the
death of a director, his options shall be exercisable by the person or
persons entitled to do so under his will or by written designation filed
with the Committee, or, if the director shall fail to make testamentary
disposition of said options or shall die instate, by the director's legal
representative or representatives. All such options must be exercised
prior to the specified expiration date of such options as provided in
Section 6.1). Any exercise by a representative shall be subject to the
provisions of this Plan.
g. PRORATION. In the event an optionee ceases to be a director of
the Company for any reason prior to such time as an option granted under
the Plan becomes exercisable,
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<PAGE>
such option shall terminate in respect to the nearest whole number of
optioned shares as is the product of the total number of shares subject
to such option multiplied by a fraction (the "FRACTION"), the numerator
of which is the number of months remaining in the Grant Year following
the month in which said optionee ceases to be a director and the
denominator of which is twelve (12).
As to Increase Options the numerator of the Fraction shall be the
number of months remaining in the Grant Year and the denominator shall be
the number of months between the date on which the Increase Options were
granted and the end of the Grant Year.
If the optionee fails to attend any regularly scheduled meetings of
the Board of Directors or its Committees, the director's option shall
terminate as to the number of shares attributable to the attendance fees
applicable to such meeting.
SECTION 7. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS.
The Committee shall have the power to modify, extend or renew
outstanding options and authorize the grant of new options in substitution
therefor, provided that any such action may not have the effect of altering
or impairing any rights or obligations of any option previously granted
without the consent of the director.
SECTION 8. OPTION PRICE.
The option price per share for the shares covered by each option shall
be .5 x Fair Market Value.
SECTION 9. ASSIGNABILITY.
The rights and benefits under this Plan shall not be assignable or
transferable by the director excepted as provided herein.
SECTION 10. TIME FOR GRANTING OPTIONS.
All options for shares subject to the Plan shall be granted, if at all,
not later than [January 31, 2013.]
SECTION 11. LIMITATION OF RIGHTS.
a. NO RIGHT TO CONTINUE AS A DIRECTOR. Neither the Plan, nor the
granting of an option nor any other action taken pursuant to the Plan shall
constitute or be evidence of any agreement or understanding, expressed or
implied, that the Company will retain a director for any period of time, or
at any particular rate of compensation.
b. NO SHAREHOLDERS' RIGHT FOR OPTIONS. An optionee shall have no
rights as a shareholder with respect to the shares covered by his options
until the date of the issuance to him
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<PAGE>
of a stock certificate therefor, and no adjustment will be made for dividends
or other rights for which the record date is prior to the date such
certificate is issued.
SECTION 12. ADJUSTMENT OF NUMBER OF SHARES.
In the event that a stock dividend or stock split shall hereafter be
declared with respect to the Company's Common Stock, the number of shares of
Common Stock then subject to any outstanding option under the Plan, the
number of shares as to which an option is to be granted to a director under
the Plan, and the number of shares reserved for issuance pursuant to the plan
but not yet covered by an outstanding option shall be adjusted by adding to
each such shares the number of shares which would be distributable thereon if
such share had been outstanding on the date fixed for determining the
shareholders entitled to receive such stock dividend or stock split. In the
event that the outstanding shares of Common Stock shall be changed into or
exchanged for a different number or kind of shares of stock or other
securities of the Company, whether through reorganization, recapitalization
or reclassification, then there shall be substituted for each share of Common
Stock subject to an outstanding option and for each share of Common Stock
reserved for delivery pursuant to the Plan but not yet covered by an option,
the number and kind of shares of stock or other securities in to which each
outstanding share of Common stock shall be so changed or for which each such
share shall be so exchanged. In the event there shall be any change other
than as specified above in this Section 12 or in Section 13 in the
outstanding shares of Common Stock or of any stock or other securities into
which such Common Stock shall have been changed or for which it shall have
been exchanged, then the Committee may make such adjustment or change, if
any, as it deems equitable in the number or kind of shares or other
securities then subject to outstanding options. In the case of any such
substitution or adjustment provided for in this Section 12, the option price
for each share covered by outstanding options prior to such substitution or
adjustment will be the option price for all shares of stock or other
securities which shall have been substituted for such share or to which such
share shall have been adjusted pursuant to this Section 12. No adjustment or
substitution provided for in this Section 12 shall require the Company to
sell a fractional share, and any fractional share resulting from any such
adjustment or substitution shall be eliminated from the option in question.
SECTION 13. BUSINESS COMBINATIONS.
In the event that, while there remain options outstanding hereunder,
there shall occur a dissolution of the Company, a merger or consolidation in
which the Company is not the surviving corporation (for such purpose, the
Company shall not be deemed the surviving corporation in any such transaction
if, as a result thereof, it becomes a wholly owned subsidiary of another
corporation) or a transfer, in one or a series of related transactions, of
substantially all of the assets of the Corporation:
(a) If a provision is made in writing in connection with such
transaction for the assumption and continuance of any such option, or the
substitution for such option of a new substantially equivalent option
covering different shares or securities, with appropriate adjustment as to
the number and kinds of shares or other securities deliverable with respect
thereto, the existing option, or the new option substituted therefor, as
the case may be, shall continue in the manner and under the terms provided;
or
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<PAGE>
(b) If provision is not made in such transaction for the continuance
and assumption of any such option or for the substitution of a new
substantially equivalent option, then the holder of such option shall be
entitled immediately prior to the effective date of any such transaction to
purchase the full number of shares covered by such option whether or not
then exercisable as to such shares. The unexercised portion of any option
shall be deemed cancelled as of the effective date of such transaction.
SECTION 14. EFFECTIVE DATE OF PLAN; SHAREHOLDER APPROVAL.
The Plan took effect on March 30, 1998 and was adopted by the Company's
shareholders on April 22, 1998.
SECTION 15. AMENDMENT OF THE PLAN.
The Board of Directors may suspend or discontinue the plan or amend it
in any respect whatsoever; provided, however, that without approval of the
shareholders of the Company, no revision or amendment shall increase the
number of shares subject to the Plan (except as provided in Section 12),
change the designation of the class of directors eligible to receive options,
or materially increase the benefits accruing to participants under the Plan.
SECTION 16. NOTICE.
Any written notice to the Company or the Committee required by any
provisions of the Plan shall be addressed to the Secretary of the Company and
shall become effective when it is received.
SECTION 17. GOVERNING LAW.
The Plan and all determinations made and actions taken pursuant thereto
shall be governed by the laws of the State of Texas and construed accordingly.
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<PAGE>
Exhibit 10.14
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (this "Agreement") dated as of March 30,
1998, is between Carreker-Antinori, Inc., a Delaware corporation (the
"Company"), and the undersigned director of the Company (the "Indemnitee"), with
reference to the following facts:
The Indemnitee is currently serving as a director of the Company and the
Company desires that the Indemnitee continue in such capacity. The Indemnitee
is willing, under certain circumstances, to continue serving as a director of
the Company.
Section 145 of the General Corporation Law of the State of Delaware, under
which law the Company is organized, empowers a corporation to indemnify a person
serving as a director, officer, employee or agent of the corporation and a
person who serves at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, and such Section 145 and the bylaws of the Company specify
that the indemnification set forth in said Section 145 and in the bylaws,
respectively, shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.
In order to induce the Indemnitee to continue to serve as a director of the
Company and in consideration of his or her continued service, the Company hereby
agrees to indemnify the Indemnitee as follows:
1. INDEMNITY. The Company shall indemnify the Indemnitee and his or
her executors, administrators or assigns, for any Expenses (as defined
below) that the Indemnitee is or becomes legally obligated to pay in
connection with any Proceeding. As used in this Agreement the term
"Proceeding" shall include any threatened, pending or
<PAGE>
completed claim, action, suit, investigation or proceeding, whether
brought by or in the right of the Company or otherwise and whether of a
civil, criminal, administrative or investigative nature, in which the
Indemnitee may be or may have been involved as a party, witness or
otherwise, by reason of the fact that Indemnitee is or was a director or
officer of the Company, by reason of any actual or alleged error or
misstatement or misleading statement made or suffered by the Indemnitee,
by reason of any action taken by him or her or of any inaction on his or
her part while acting as such director or officer, or by reason of the
fact that he or she was serving at the request of the Company as a
director, trustee, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise; PROVIDED,
HOWEVER, that in each such case Indemnitee acted in good faith and in a
manner which he or she reasonably believed to be in or not opposed to
the best interests of the Company, and, in the case of a criminal
proceeding, in addition had no reasonable cause to believe that his or
her conduct was unlawful. As used in this Agreement, the term "other
enterprise" shall include (without limitation) employee benefit plans
and administrative committees thereof, and the term "fines" shall
include (without limitation) any excise tax assessed with respect to any
employee benefit plan. Any corporation, partnership, limited liability
company or other entity on behalf of which Indemnitee may be deemed to
be acting in connection with his or her service to the Company shall be
entitled to the benefits of the indemnity provided for by this Agreement
to the same extent and under the same conditions upon which Indemnitee
is entitled to such indemnity.
INDEMNIFICATION AGREEMENT - Page 2
<PAGE>
2. EXPENSES. As used in this Agreement, the term "Expenses" shall
include, without limitation, damages, judgments, fines, penalties,
settlements and costs, attorneys' fees and disbursements and costs of
attachment or similar bonds, investigations, and any expenses of
establishing a right to indemnification under this Agreement.
3. ENFORCEMENT. If a claim or request under this Agreement is not
paid by the Company, or on its behalf, within 30 calendar days after a
written claim or request has been received by the Company, then the
Indemnitee may at any time thereafter bring suit against the Company to
recover the unpaid amount of the claim or request and if successful in
whole or in part, the Indemnitee shall be entitled to be paid also the
Expenses of prosecuting such suit. The burden of proving that the
Indemnitee is not entitled to indemnification for any reason shall be upon
the Company.
4. SUBROGATION. Upon any payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of the Indemnitee, who shall execute all papers required and shall
do everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the Company effectively to
bring suit to enforce such rights.
5. EXCLUSIONS. The Company shall not be liable under this Agreement
to pay any Expenses in connection with any claim made against the
Indemnitee:
(a) to the extent that payment is actually made to the
Indemnitee under a valid, enforceable and collectible insurance
policy;
(b) to the extent that the Indemnitee is indemnified and
actually paid otherwise than pursuant to this Agreement;
INDEMNIFICATION AGREEMENT - Page 3
<PAGE>
(c) in connection with a judicial action by or in the right of
the Company, in respect of any claim, issue or matter as to which the
Indemnitee shall have been adjudged to be liable to the Company unless
and only to the extent that any court in which such action was brought
shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, the
Indemnitee is fairly and reasonably entitled to indemnity for such
expenses as such court shall deem proper;
(d) if it is proved by final judgment in a court of law or
other final adjudication to have been based upon or attributable to
the Indemnitee's in fact having gained any personal profit or
advantage to which he or she was not legally entitled;
(e) for a disgorgement of profits made from the purchase and
sale by the Indemnitee of securities pursuant to Section 16(b) of the
Securities Exchange Act of 1934, as amended, and amendments thereto or
similar provisions of any state statutory law or common law; or
(f) for any judgment, fine or penalty which the Company is
prohibited by applicable law from paying.
6. INDEMNIFICATION OF EXPENSES OF SUCCESSFUL PARTY. Notwithstanding
any other provision of this Agreement, to the extent that the Indemnitee
has been successful on the merits or otherwise in defense of any Proceeding
or in defense of any claim, issue or matter therein, including dismissal
without prejudice, Indemnitee shall be indemnified against any and all
Expenses incurred in connection therewith.
INDEMNIFICATION AGREEMENT - Page 4
<PAGE>
7. PARTIAL INDEMNIFICATION. If the Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses, but not, however, for the total amount thereof, the
Company shall nevertheless indemnify the Indemnitee for the portion of such
Expenses to which the Indemnitee is entitled.
8. ADVANCE OF EXPENSES. Expenses incurred by the Indemnitee in
connection with any Proceeding, except the amount of any settlement, shall
be paid by the Company in advance upon request of the Indemnitee that the
Company pay such expenses. The Indemnitee hereby undertakes to repay to
the Company the amount of any Expenses theretofore paid by the Company to
the extent that it is ultimately determined that such Expenses were not
reasonable or that the Indemnitee is not entitled to indemnification.
9. NOTICE OF CLAIM. The Indemnitee, as a condition precedent to his
or her right to be indemnified under this Agreement, shall give to the
Company notice in writing as soon as practicable of any claim made against
him or her for which indemnity will or could be sought under this
Agreement, but a failure to give such notice will affect the obligations of
the Company hereunder only to the extent that the Company is actually and
materially prejudiced thereby. Notice to the Company shall be given at its
corporate headquarters and shall be directed to the corporate secretary (or
such other addressee as the Company shall designate in writing to the
Indemnitee); notice shall be deemed received if sent by prepaid mail
properly addressed, the date of such notice being the date postmarked. In
addition, the Indemnitee shall give the Company such information and
cooperation as it may reasonably require in connection with such claim.
INDEMNIFICATION AGREEMENT - Page 5
<PAGE>
10. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one instrument.
11. INDEMNIFICATION HEREUNDER NOT EXCLUSIVE. Nothing herein shall be
deemed to diminish or otherwise restrict the Indemnitee's right to
indemnification under any provision of the Certificate of Incorporation or
bylaws of the Company and amendments thereto or under law.
12. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with Delaware law, without giving effect to the principles of
conflict of laws thereof.
13. SAVING CLAUSE. Wherever there is conflict between any provision
of this Agreement and any applicable present or future statute, law or
regulation contrary to which the Company and the Indemnitee have no legal
right to contract, the latter shall prevail, but in such event the affected
provisions of this Agreement shall be curtailed and restricted only to the
extent necessary to bring them within applicable legal requirements.
14. COVERAGE. The provisions of this Agreement shall apply with
respect to the Indemnitee's service as a director of the Company prior to
the date of this Agreement and with respect to all periods of such service
after the date of this Agreement, even though the Indemnitee may have
ceased to be a director of the Company.
15. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
legatees, legal representatives, successors and permitted assigns.
INDEMNIFICATION AGREEMENT - Page 6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and signed as of the day and year first above written.
CARREKER-ANTINORI, INC.
By: /s/ Maurice E. Purnell, Jr.
----------------------------------
Printed Name: Maurice E. Purnell, Jr.
------------------------
Title: Secretary
-------------------------------
INDEMNITEE
By: /s/John D. Carreker, Jr.
---------------------------------
Printed Name: John D. Carreker, Jr.
INDEMNIFICATION AGREEMENT - Page 7
<PAGE>
SCHEDULE OF INDIVIDUALS
ENTERING INTO AN INDEMNIFICATION AGREEMENT WITH THE COMPANY
DIRECTORS:
Ronald R. Antinori
James D. Carreker
John D. Carreker, Jr.
James L. Fischer
Donald L. House
Richard R. Lee, Jr.
Richard L. Linting
Larry J. Peck
David K. Sias
OFFICERS:
Ronald R. Antinori
Royce D. Brown
John D. Carreker, Jr.
John S. Davis, Jr.
Richard C. Ercole
H. Douglas Eubanks
Terry L. Gage
Wyn P. Lewis
Richard L. Linting
CONSULTANT:
David K. Sias
INDEMNIFICATION AGREEMENT - Page 8
<PAGE>
CARREKER-ANTINORI, INC.
PROMISSORY NOTE
$ (To be determined upon the sale of the house located September 1, 1997
at 922 Hills Creek Drive, McKinney TX 75070) Dallas, Texas
FOR VALUE RECEIVED, John S. Davis ("Maker") promises to pay to the order
Carreker-Antinori, Inc. (the "Corporation"), at its corporate offices at
Dallas, Dallas County, Texas, the principal sum of Ninety Thousand and
No/100 Dollars ($90,000) plus all future amounts paid toward the reduction in
the outstanding principal balance of the mortgage on the house located at 922
Hills Creek Drive, McKinney, TX 75070 and amounts paid in excess of customary
and usual taxes and other liabilities related thereto beginning September 1,
1997 until said house is sold, upon the terms and conditions specified below.
1. INTEREST. This Note bears no interest.
2. PRINCIPAL. The entire principal balance of this Note shall become
due and payable in one lump sum on the closing date of the sale of the house
located at 922 Hills Creek Drive, McKinney, TX 75070.
3. PAYMENT. Payment shall be made in lawful tender of the United
States.
4. EVENTS OF ACCELERATION. The entire unpaid principal balance of this
Note shall become due and payable prior to the specified due date of this
Note upon the occurrence of one or more of the following events and in the
following manner:
A. in 12 equal monthly increments beginning upon the expiration of
the thirty (30)-day period following the date the Maker ceases for any
reason to remain in the Corporation's employ; or
B. immediately upon the insolvency of the Maker, the commission of
any act of bankruptcy by the Maker, the execution by the Maker of a general
assignment for the benefit of creditors, the filing by or against the
Maker of any petition in bankruptcy or any petition for relief under the
provisions of the Federal bankruptcy act or any other state or Federal law
for the relief of debtors and the continuation of such petition without
dismissal of a period of thirty (30) days or more, the appointment of a
receiver or trustee to take possession of any property or assets of the
Maker or the attachment of or execution against any property or assets of
the Maker.
5. EMPLOYMENT. For purposes of applying the provisions of this Note,
the maker shall be considered to remain in the Corporation's employ for so
long as the Maker renders services as a full-time employee of the
corporation, any successor entity or one or more of the Corporation's fifty
percent (50%)-or-more owned (directly or indirectly) subsidiaries.
<PAGE>
6. APPLICATION OF PROCEEDS. The proceeds of the loan evidenced by this
Note shall be applied solely toward the reduction in the principal balance
and payment of the monthly interest on the mortgage on the house located at
922 Hills Creek Drive, McKinney, TX 75070 and to pay amounts in excess of
customary and usual taxes and other liabilities related thereto beginning
September 1, 1997 until said house is sold. In addition, proceeds of the loan
are to be used as an advance on the available equity in said house that
shall be dedicated to the purchase of a house located at 4787 Crest Park
Lane, Marietta, GA 30068.
7. SECURITY. The Maker shall remain personally liable for payment of
this Note and assets of the Maker may be applied to the satisfaction of the
Maker's obligations hereunder.
8. COLLECTION. If action is instituted to collect this Note, the Maker
promises to pay all costs and expenses (including reasonable attorney fees)
incurred in connection with such action.
9. WAIVER. A waiver of any term of this Note must be made in writing
and signed by a duly-authorized officer of the Corporation and any such
waiver shall be limited to its express terms. No delay by the Corporation in
action with respect to the terms of this Note shall constitute a waiver of
any breach, default, or failure of a condition under this Note.
The Maker waives presentment, demand, notice of dishonor, notice
of default or delinquency, notice of acceleration, notice of protest and
nonpayment, notice of costs, expenses or losses and interest thereon, notice
of interest on interest and diligence in taking any action to collect any
sums owing under this Note or in proceeding against any of the rights or
interests in or to properties securing payment of this Note.
10. CONFLICTING AGREEMENTS. In the event of any inconsistencies
between the terms of this Note and the terms of any other document related to
the loan evidenced by the Note, the terms of this Note shall prevail.
11. GOVERNING LAW. This Note shall be construed in accordance with the
laws of the State of Texas.
/s/ John S. Davis
--------------------------
John S. Davis
MAKER: John S. Davis
DATE: 9/1/97
2
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Selected
Consolidated Financial Data" and "Experts" and to the use of our report dated
March 18, 1998 (except for Notes 1 and 11, as to which the date is
________, 1998) in the Registration Statement (Form S-1) and related
Prospectus of Carreker-Antinori, Inc. for the registration of 5,100,000 shares
of its common stock.
ERNST & YOUNG LLP
Dallas, Texas
________, 1998
The foregoing consent is in the form
that will be signed upon completion of the
reincorporation and related restatement of
capital accounts described in Notes 1 and 11
to the consolidated financial statements,
which are expected to occur prior to the
effectiveness of this Registration
Statement.
/s/ ERNST & YOUNG LLP
Dallas, Texas
April 24, 1998
