<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 20, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
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. / /
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE OFFERING PRICE
<S> <C> <C> <C>
Common Stock, $.01 par value....................... 5,865,000 (1) $12.00 (2) $70,380,000 (2)
<CAPTION>
TITLE OF EACH CLASS OF AMOUNT OF
SECURITIES TO BE REGISTERED REGISTRATION FEE
<S> <C>
Common Stock, $.01 par value....................... $20,763
</TABLE>
(1) Includes 765,000 shares as to which the Company and a Selling Stockholder
have granted the Underwriters an option to cover over-allotments, if any.
(2) Estimated solely for the purposes of calculating the registration fee.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 20, 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 Company
has applied to have the Common Stock approved for quotation on the Nasdaq
National Market under the symbol "CANI."
-------------------
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 Leadership." Each of these three bubbles points to
a larger bubble labeled "Carreker-Antinori Banking Solutions." From this larger
bubble are three arrows labeled "Increase Bank Revenue," "Reduce Bank Costs,"
and "Enhance Delivery of Customer Service Offerings." These arrows point to a
large bubble labelled "Maximization of Bank Market Value."
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" (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 and Technology."
Graphic in upper left part of page with the heading "Yield
Management--Helping banks enhance 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--Assisting
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 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.................................................................................................. 15
Dividend Policy.................................................................................................. 15
Capitalization................................................................................................... 16
Dilution......................................................................................................... 17
Selected Consolidated Financial Data............................................................................. 18
Management's Discussion and Analysis of Financial Condition and Results of Operations............................ 19
Business......................................................................................................... 27
Management....................................................................................................... 41
Certain Transactions............................................................................................. 51
Principal and Selling Stockholders............................................................................... 53
Description of Capital Stock..................................................................................... 55
Shares Eligible for Future Sale.................................................................................. 57
Underwriting..................................................................................................... 59
Legal Matters.................................................................................................... 60
Experts.......................................................................................................... 60
Additional Information........................................................................................... 61
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 Fiserv, Inc.,
UPS Worldwide Logistics and National Processing Company 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).... 16,742,664 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 (loss) per share (3).............................. -- .06 .15 .12 .23
Shares used in computing basic earnings (loss) per share (3)....... 11,547 11,548 11,543 10,914 11,477
Shares used in computing diluted earnings (loss) 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 462,000 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 1,159,882 shares
upon the exercise of options outstanding under the Long Term Incentive Plan
that terminate if unexercised contemporaneously with the offering. The
Company has established a stock option loan program to facilitate the
exercise of such options. See "Certain Transactions--Stock Option Loan
Program" and "Principal and Selling Stockholders." Excludes: (i) 3,793,418
shares of Common Stock reserved for issuance under the Long Term Incentive
Plan of which options to purchase 2,408,783 shares are outstanding at a
weighted average exercise price of $5.77 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. 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. 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 incur significant expenses to develop such projections before a bank
will commit to purchase the Company's solutions, and therefore assumes the risk
of incurring 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 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
7
<PAGE>
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, 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
8
<PAGE>
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 and,
therefore, does not pay federal or state employment taxes or withhold income
taxes for such persons. Further, the Company does not include these independent
contractors in its employee benefit plans. From time to time persons engaged as
independent contractors are determined to be employees as a result of challenges
by the Internal Revenue Service (the "IRS") and state authorities asserted in
administrative proceedings or court actions. In certain instances, persons
engaged to be independent contractors also could initiate court proceedings
asserting that they are employees under state law and, therefore, are entitled
to participate in employee benefit plans. Such determinations of employee status
are made on a case-by-case basis and are based upon the particular facts of each
case. In the event persons engaged by the Company as independent contractors are
determined to be employees by the IRS or any state taxation department, 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. 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. At January 31, 1998, 60
consultants were engaged by the Company as independent contractors, and 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
9
<PAGE>
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. 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 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
10
<PAGE>
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."
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 contains all necessary date code changes or that such
software 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,
11
<PAGE>
although the Company believes that each of the software programs used in the 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 participation in INFITEQ, are
forms of strategic alliances. The Company has made investments in, and has
extended credit to, these entities to support their growth. 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."
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."
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<PAGE>
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."
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
16,742,664 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 11,642,664 shares
constitute "restricted securities" 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," 10,697,792 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. The remaining
944,872 "restricted securities" have not been held for the requisite one-year
period and, upon completion of the offering, will be tradeable after the
expiration of the lock-up period and subject to the volume and price limitations
of Rule 144. 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, 5,749,764 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 2,408,783 shares of Common Stock
granted pursuant to the Long Term Incentive Plan,
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<PAGE>
of which 1,825,061 shares are not subject to lock-up agreements and may be
eligible for sale 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."
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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<PAGE>
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 discount 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."
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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 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 462,000 shares of
Common Stock to a Selling Stockholder upon the exercise of options under the
Long Term Incentive Plan, and the issuance of 1,159,882 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
"Certain Transactions--Stock Option Loan Program" and "Principal and Selling
Stockholders." Also, excludes: (i) 3,793,418 shares of Common Stock reserved
for issuance under the Company's Long Term Incentive Plan, of which options
to purchase 2,408,783 shares of Common Stock are outstanding at a weighted
average exercise price of $5.77 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.
16
<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)....................... 13,092,664 78.2% $ 6,299,000 13.6% $ 0.48
New investors (1)............................... 3,650,000 21.8 40,150,000 86.4 11.00
------------ ----- ------------- -----
Total......................................... 16,742,664 100.0% $ 46,449,000 100.0%
------------ ----- ------------- -----
------------ ----- ------------- -----
</TABLE>
- ------------------------
(1) Sales by the Selling Stockholders in the offering will reduce the number of
shares held by existing stockholders to 11,642,664 shares, or 69.5% of the
total shares of Common Stock outstanding after this offering, and will
increase the number of shares held by new investors to 5,100,000 shares, or
30.5% 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 34.9% 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 462,000 options by a Selling Stockholder
contemporaneously with the offering and the assumed exercise of 1,159,882
options that will otherwise terminate if unexercised contemporaneously with the
completion of the offering. See "Certain Transactions--Stock Option Loan
Program" and "Principal and Selling Stockholders." Options to purchase 2,408,783
shares of Common Stock are outstanding under the Company's Long Term Incentive
Plan at a weighted average exercise price of $5.77 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."
17
<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 (loss) per share (2)...................................................... -- .06 .15
Shares used in computing basic earnings (loss) per share (2)............................... 11,547 11,548 11,543
Shares used in computing diluted earnings (loss) 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 (loss) per share (2)...................................................... .12 .23
Shares used in computing basic earnings (loss) per share (2)............................... 10,914 11,477
Shares used in computing diluted earnings (loss) 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 income 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.
18
<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 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
19
<PAGE>
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. When
fees are to be paid based on a percentage of actual revenues or savings, the
Company recognizes revenue as the amounts of actual revenues or savings are
confirmed by the customer. The Company typically must first incur significant
expenses 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 incurring expenses 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.
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
20
<PAGE>
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 both continued demand for the Company's services,
as well as greater use of value-pricing arrangements. 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 from growth in the number of
products offered and the use of value pricing for appropriate engagements during
fiscal 1997. Software maintenance and implementation revenues increased by 27.6%
from $5.8 million in fiscal 1996 to $7.4 million in fiscal 1997. High renewals
by existing maintenance customers, coupled with maintenance agreements generated
from new license sales, contributed to growth in this area. Hardware sales
decreased 36.0% from $2.5 million in fiscal 1996 to
21
<PAGE>
$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. 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 and, to a lesser extent, services related to INFITEQ. 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, sales and implementations of
products under value-pricing engagements caused the recognition of costs during
the period for efforts where revenue may be recognized in a later period.
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. See "--Overview." Furthermore,
in addition to planned research and development efforts during fiscal 1997, the
Company undertook 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.
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
22
<PAGE>
$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 coupled with an increase in the number of value-priced arrangements.
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 as a result of 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 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.
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.
23
<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 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 cost (expense):
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 expense..................... 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 cost (expense):
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 expense..................... 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>
24
<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 value-priced 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. 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. 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 Year 2000 compliant and the remainder of
the Company's products are targeted to be Year 2000 compliant by April 1998. The
Year 2000 compliance activities will be performed as part of the Company's
normal
25
<PAGE>
development activity. The Company 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.
26
<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.
27
<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.
28
<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.
29
<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 or 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 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 availability
of funds of deposited checks to customers, 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 19 bank
holding companies representing more than 180 banks in all 50 states, which
collectively hold over 40% of bank deposits in the
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United States. 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 incentive 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 and Fiserv, Inc., 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 and application interfaces so that the
Company's software products are constructed from reusable components which are
linked together in a tool-set fashion.
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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. 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 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."
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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.
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-
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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.
40
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information concerning the executive
officers, directors and director nominees of the Company as of March 16, 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, Nominee and Chief Technology
Officer
Richard L. Linting......................... 52 President, Chief Operating Officer and Director Nominee
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 & Chief Financial Officer
Wyn P. Lewis............................... 48 Executive Vice President and Managing Director of Yield
Management
James D. Carreker (2)...................... 50 Director Nominee
James L. Fischer (1)....................... 70 Director Nominee
Richard R. Lee, Jr. (1).................... 51 Director Nominee
Larry J. Peck (2).......................... 50 Director Nominee
David K. Sias (2).......................... 60 Director Nominee
</TABLE>
- ------------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit 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 is the nominee
to serve as Vice Chairman of the Board of the Company. 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 is a director nominee of the Company. From
February 1996 to October 1996, Mr. Linting served as Executive
41
<PAGE>
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 is a director nominee of the Company. 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 is a director nominee of the Company. 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.
42
<PAGE>
RICHARD R. LEE, JR. is a director nominee of the Company. Mr. Lee has served
as President of Lee Financial Corporation, a financial advisory firm, since
1975.
LARRY J. PECK is a director nominee of the Company. Mr. Peck has served as
Sector Vice President and Manager, Technology Solutions Sector, of Science
Applications International Corporation, 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 is a director nominee of the Company 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 will provide for a
classified Board of Directors. Following election of the director nominees to
the Board of Directors, Messrs. John D. Carreker, Jr. and Peck will be appointed
to Class I and will serve until the annual meeting of stockholders to be held in
1999; Messrs. Antinori, Fischer and Lee will be 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 will be appointed to Class III and will
serve until the annual meeting of stockholders to be held in 2001. Prior to the
completion of the offering, the Company's Board of Directors intends to appoint
an additional director who will not be affiliated with the Company. 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, following the
offering, will consist of Messrs. Fischer and Lee, and an Audit Committee,
which, following the offering, will consist of Messrs. James D. Carreker, Peck
and Sias. The Compensation Committee will make 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 will serve as Chairman of the Compensation Committee. The Audit
Committee will make recommendations to the Board of Directors regarding the
selection of independent auditors, review the results and scope of audits and
other accounting-related services and review and evaluate the Company's internal
control functions. Mr. Sias will serve 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 services and corporate advice rendered by Mr. Lee in his capacity as
trustee of 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,
43
<PAGE>
that 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.
Employee directors will not receive compensation for their services as
directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Following the offering, the Compensation Committee will consist of Messrs.
Fischer and Lee. None of these individuals was at any time during fiscal 1997,
or any other time, an officer or employee of the Company. No prospective 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
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.
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<PAGE>
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 AT ASSUMED ANNUAL
NUMBER OF RATES OF STOCK PRICE
SECURITIES APPRECIATION FOR OPTION
UNDERLYING % OF TOTAL OPTIONS 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 $ 153,996 $ 900,900
33,757 1.7 8.90 1/31/08 189,039 478,674
Wyn P. Lewis (5)............. 6,930 * 3.45 3/31/07 15,038 530,977
75,522 3.9 8.90 1/31/08 422,923 1,070,902
Royce D. Brown (5)........... 5,390 * 3.45 3/31/07 11,696 412,982
77,000 4.0 8.90 1/31/08 431,200 1,091,860
John S. Davis, Jr. (5)....... 770 * 3.45 3/31/07 1,671 58,997
52,614 2.7 8.90 1/31/08 294,638 746,067
</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) In accordance with the rules of the Commission, the potential realizable
values for such options shown in the table are based on assumed rates of
stock price appreciation of 5% and 10%, compounded annually from the date
the options were granted 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.
(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.
45
<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 1,621,882 shares previously have been issued pursuant to
options that have been exercised, 2,408,783 shares are subject to currently
outstanding options, 84,700 shares of restricted stock have been issued and
1,384,635 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.
46
<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
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 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 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. 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 retainer and
attendance 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") 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
47
<PAGE>
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 for serving as a
director and attending all regularly scheduled meetings of the Board of
Directors and its Committees 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 before an option granted under the Director Plan becomes
exercisable or is absent from a regularly scheduled meeting, the option shall
terminate as to a pro rata portion of the shares subject to the option, based
upon the number of Board and committee meetings attended during the relevant
period.
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 of which
are fully vested.
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<PAGE>
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 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 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 and Lewis. The agreement with Mr. Linting has a term
extending through December 1999 and the
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agreements with Messrs. Brown and Lewis have a term extending through March
2001. Under the agreements, Messrs. Linting, Brown and Lewis will receive an
annual base salary of not less than $350,000, $240,000 and $300,000,
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. 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.
The Company also intends to enter into an employment agreement with Mr. Gage
prior to the completion of the offering.
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 nominee 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 176,122 shares of Common
Stock to the Company for cancellation and is obligated to return an additional
140,910 shares on or before March 31, 1998. 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 nominee 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
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Shareholder Agreement. The Shareholder Agreement terminates upon completion of
the offering. The 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 nominee of the Company,
serves as a director of Crow Family, Inc., the general partner of Crow.
PROVISION OF MANAGEMENT SERVICES TO 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."
STOCK OPTION LOAN PROGRAM
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. The Company intends to offer a stock option loan program (the
"Loan Program") to these employees to loan to them, on a full recourse basis,
the purchase price required to exercise their options immediately prior to
consummation of the offering. The interest rate on such loans will be
approximately 5.3% per annum, with interest payments due annually and the
principal due upon maturity (two years from the date of the loans). The shares
of Common Stock received by an option holder upon exercise of his or her options
will be pledged as collateral to secure the loan and each option holder will
agree not to transfer such shares until the original vesting date of the options
to which such shares relate (subject to certain exceptions permitting earlier
sales of the related shares). In the event that all eligible option holders
elect to fully participate in the Loan Program, the Company will permit
employees to exercise their options by executing promissory notes in the
aggregate approximate amount of $3,022,373, of which $18,599, $85,702, $48,860,
$427,760 and $120,463 will represent loans to Messrs. Brown, Davis, Eubanks,
Gage and Lewis, respectively. 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 (1,159,882
shares of Common Stock in the aggregate).
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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 Company stock option loan
program. See "Certain Transactions--Stock Option Loan Program." 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 39.1% 738,525 4,377,678 26.1%
Ronald R. Antinori (3)............................ 3,381,686 25.8 488,275 2,909,581 17.3
SAIC (4).......................................... 774,967 5.9 72,000 702,967 4.2
Wyn P. Lewis (2)(5)............................... 563,078 4.3 77,000 486,078 2.9
Richard L. Linting (6)............................ 279,772 2.1 -- 279,772 1.6
Royce D. Brown (2)(7)............................. 387,787 3.0 46,200 341,587 2.0
David K. Sias (8)................................. 242,173 1.8 -- 242,173 1.4
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 2.9 -- 387,772 2.3
Richard R. Lee, Jr. (12).......................... 713,189 5.4 -- 713,189 4.2
Larry J. Peck (13)................................ 774,967 5.9 -- 702,967 4.2
Lawrence D. Duckworth (14)........................ 188,227 1.4 28,000 160,227 1.0
Directors and executive officers as a group (14
persons)(2)(15).................................. 12,340,081 89.4 % 1,350,000 10,990,081 63.0 %
------------ ---
</TABLE>
- ------------------------
* Less than 1%
(1) Includes 630,938 shares held in family trusts for which Mr. Carreker is the
trustee.
(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 376,461 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 462,000 shares that will be issued to Mr. Lewis upon his exercise
of options contemporaneously with the offering and 38,500 shares of
restricted stock issued under the Long Term Incentive Plan.
(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.
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(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) The address for Mr. Duckworth is 15 Old Stratton Chase, Atlanta, Georgia
30328.
(15) 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 13,092,664 shares of Common Stock outstanding immediately
prior to consummation of the offering, held of record by 55 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 and Lawrence D. Duckworth (the
"ASI Shareholders"), and John D. Carreker, Jr. (together with the ASI
Shareholders, 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.
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.
TRADING MARKET, TRANSFER AGENT AND REGISTRAR
The Company has applied for quotation of the Common Stock on the Nasdaq
National Market under the symbol CANI. The Transfer Agent and Registrar for the
Common Stock is ChaseMellon Shareholder Services, L.L.C.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, the Company will have an aggregate of
16,742,664 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 11,642,664
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," 10,697,792 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. The remaining
944,872 "restricted securities" have not been held for the requisite one-year
period and, upon completion of the offering, will be tradeable after the
expiration of the lock-up period and subject to the volume and price limitations
of Rule 144. 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.
Any employee, officer or director of or consultant to the Company who
purchased or was awarded shares or options to purchase shares pursuant to a
written compensatory plan or contract is entitled to rely on the resale
provisions of Rule 701 under the Securities Act, which permits affiliates and
non-affiliates to sell such shares without having to comply with the holding
period restrictions of Rule 144, in each case commencing 90 days after the date
of this Prospectus. In addition, non-affiliates may sell such shares without
complying with the public information, volume and notice provisions of Rule 144.
Rule 701 is available for option holders of the Company as to all shares issued
pursuant to the exercise of options granted prior to the offering.
The Company, its executive officers, directors and principal and other
stockholders, who will hold, collectively, 5,749,764 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 2,408,783 shares of
Common Stock, of which 1,825,061 shares are not subject to lock-up agreements
and may be eligible for sale until at least 90 days following the date of this
Prospectus.
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
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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."
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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 5,749,764 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, owned directly or hereafter
acquired by such holders or with respect to which they have the power of
disposition, without the prior written consent of BancAmerica Robertson
59
<PAGE>
Stephens. BancAmerica Robertson Stephens may, in its sole discretion, and at 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.
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
60
<PAGE>
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.
61
<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
March 18, 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 margin..................................................................... 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 have not been presented to the customers or
which are not contractually billable. Unbilled receivables are generally billed
and collected within one year. 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. 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 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 the
contractual terms when the performance fee is agreed to by the customer and the
fee contingency has been removed.
Revenue from sales of software licenses are recognized when software
products are delivered to the customer and no significant vendor obligations
remain.
F-8
<PAGE>
CARREKER-ANTINORI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 bases of assets and
liabilities and their reported amounts in the financial statements that will
result in taxable or deductible amounts in future years.
F-9
<PAGE>
CARREKER-ANTINORI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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. 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 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.
F-10
<PAGE>
CARREKER-ANTINORI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
4. CREDIT ARRANGEMENTS (CONTINUED)
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>
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>
F-11
<PAGE>
CARREKER-ANTINORI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
5. PROVISION FOR INCOME TAXES (CONTINUED)
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
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
F-12
<PAGE>
CARREKER-ANTINORI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
7. BENEFIT PLANS (CONTINUED)
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). The Company
intends to offer a stock option loan program to provide loans to the employees,
on a full recourse basis, for the purchase price required to exercise their
options immediately prior to consummation of the offering.
On January 31, 1998, the Committee issued 84,700 shares of restricted stock
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 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.
F-13
<PAGE>
CARREKER-ANTINORI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
7. BENEFIT PLANS (CONTINUED)
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.................
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.
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
F-14
<PAGE>
CARREKER-ANTINORI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
7. BENEFIT PLANS (CONTINUED)
$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 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.
F-15
<PAGE>
CARREKER-ANTINORI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
7. BENEFIT PLANS (CONTINUED)
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.
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 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.
F-16
<PAGE>
CARREKER-ANTINORI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
8. MANAGEMENT SERVICES (CONTINUED)
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 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 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. The Company has a Management Services Agreement (the
INFITEQ Agreement) with INFITEQ to provide INFITEQ consulting, sales and
administrative support for a ten-year term beginning January 15, 1998. No
management service fees were recognized by the Company under this agreement
during the year ended January 31, 1998. The Company intends to recognize
management service fees under the INFITEQ Agreement on a cash basis in the near
term as INFITEQ has no operating history and is expected to generate operating
losses in its start-up phase.
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 "Role-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 "Provider of
database and information services critical to the realization of check
electronification benefits."
BOTTOM HALF OF PAGE:
A graphic of images and logos representing FISERV, NPC and UPS and the
Carreker-Antinori Logo all pointing to image and logo of INFITEQ 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 will be 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 will enter into Indemnification Agreements with each director of
the Company, a form of which will be filed as an Exhibit to this Registration
Statement. Pursuant to such agreements, the
II-1
<PAGE>
Company will, to the extent permitted by applicable law, indemnify such
directors 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 of the Company or assumed certain
responsibilities at the direction of the Company. The Company will also purchase
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 Agreement and Plan of Merger dated , 1998 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.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
*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 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 Form of Promissory Note and Pledge Agreement (for certain options under the 1994 Long Term Incentive
Plan).
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 Form of 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.
21.1 Subsidiaries of the Company.
(a) Antinori Software, Inc., a Georgia corporation.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
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.
+ 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 Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Dallas, State of Texas,
on this 20th day of March, 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
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 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 March 20, 1998
John D. Carreker, Jr. Officer)
Executive Vice President,
/s/ TERRY L. GAGE Treasurer and Chief
- ------------------------------ Financial Officer March 20, 1998
Terry L. Gage (Principal Financial and
Accounting Officer)
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS PAGE
- --------- ----------------------------------------------------------------------------------------------- ---------
<C> <S> <C>
*1.1 Form of Underwriting Agreement by and among the Company, the Selling Stockholders named therein
and the Underwriters
*2.1 Agreement and Plan of Merger dated , 1998 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 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 Form of Promissory Note and Pledge Agreement (for certain options under the 1994 Long Term
Incentive Plan)
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 Form of 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.....
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS PAGE
- --------- ----------------------------------------------------------------------------------------------- ---------
<C> <S> <C>
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............................................................
21.1 Subsidiaries of the Company.
(a) Antinori Software, Inc., a Georgia corporation...........................................
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.
+ Management contract or compensatory plan or arrangement.
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "AGREEMENT") shall become effective as of
the Effective Date indicated below between The Carreker Group, Inc., a Texas
corporation (the "COMPANY"), and J.D. Carreker ("MR. CARREKER").
RECITAL
Mr. Carreker is the Chief Executive Officer and Chairman of the board of
directors of the Company. In consideration for the Company's entering into and
performing under this Agreement, Mr. Carreker has also agreed to enter into
this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements of the parties contained herein, the Company and Mr. Carreker hereby
agree as follows:
1. EMPLOYMENT. The Company will employ Mr. Carreker and Mr. Carreker
accepts employment with the Company for a period of two years from the
Effective Date; provided, however, that by irrevocable written notice given to
the Company not less than six months prior to the expiration of such two year
period, Mr. Carreker may extend the period by an additional year (such two or
three year period, as applicable, being the "INITIAL PERIOD"). Mr. Carreker's
employment may continue after the Initial Period but will then be terminable by
either party at will, with or without cause (provided that any termination by
the Company shall occur only pursuant to a determination of its board of
directors (and not a committee thereof)), which determination may be made in
its sole discretion. The obligations of the Company and Mr. Carreker set forth
in the "Intellectual Property Rights Agreement" and the "Confidentiality
Agreement" (each as defined in Section 7) (referring to intellectual property
and confidentiality, respectively) and in Section 8 (referring to termination)
will survive termination of Mr. Carreker's employment, regardless of cause.
Mr. Carreker's primary location of employment shall be in Dallas,
Texas or its environs, and he shall undertake such business travel as is
reasonably required in the discharge of his duties set forth below.
2. DUTIES. Mr. Carreker will be employed as a full-time employee of the
Company and initially will serve as its Chief Executive Officer and as a
director. Mr. Carreker agrees that, to the best of his ability and experience,
he will at all times conscientiously perform all of the duties and obligations
assigned to him under this Agreement.
3. FULL-TIME EMPLOYMENT. Mr. Carreker's employment will be on a full-
time basis, in accordance with standard employee policies for the Company. Mr.
Carreker 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. Carreker
may (i) provide incidental assistance to family members on matters of family
business; and (ii) sit on the board of directors of corporations and other
organizations (including, without limitation, charitable and other nonprofit
organizations) that do not compete with the Company; provided in each case that
such activities do not conflict with or interfere with Mr. Carreker's
<PAGE>
normal full-time and first priority obligations to the Company. Mr. Carreker
may make personal investments in nonpublicly traded corporations,
partnerships or other entities that, to the knowledge of the Company, are not
at the time of such investment engaged in any business activities competitive
with the Company. Notwithstanding anything to the contrary contained in this
Agreement, Mr. Carreker may make personal investments in publicly traded
corporations regardless of the business they are engaged in, provided that
Mr. Carreker does not at any time own in excess of 1% of the issued and
outstanding stock of any such corporation.
4. SALARY; POTENTIAL BONUS. Mr. Carreker's salary for the first year of
the Initial Period will be not less than $450,000. If the Company does not
consummate an initial public offering of its equity securities during such
first year and if the Company's financial performance meets or exceeds the
standards for financial performance established in respect of such first year
by the Company's board of directors (i.e., the Company's "board plan"), then
Mr. Carreker's salary for the second year of the Initial Period will be not
less than $500,000. If Mr. Carreker validly exercises his option to extend the
term hereof such that the Initial Period is three years, if the Company does
not consummate an initial public offering of its equity securities during the
second year of the Initial Period and if the Company's financial performance
meets or exceeds the standards for financial performance established in respect
of such second year by the Company's board of directors, then Mr. Carreker's
salary for the third year of the Initial Period will be not less than $550,000.
All salary is payable on the Company's regular payroll dates, less required
withholdings.
Mr. Carreker acknowledges that the Company's board of directors has
complete and sole discretion to establish and revise the Company's "board
plan."
The board of directors of the Company has the sole discretion whether or
not to establish a bonus pool. If and to the extent the board of directors of
the Company establishes a bonus pool for 1997 or any subsequent year, then Mr.
Carreker will be entitled to participate in the same.
5. BENEFITS. Mr. Carreker will also be entitled to insurance, vacation
and other benefits commensurate with his position in accordance with the
Company's standard employee policies in effect from time to time. Mr. Carreker
acknowledges receipt of a summary of the Company's standard employee benefits
policies in effect as of the date hereof.
6. REIMBURSEMENT OF BUSINESS EXPENSES. The Company will, in accordance
with the Company's policies in effect from time to time, reimburse Mr. Carreker
for all out-of-pocket reasonable business expenses incurred by Mr. Carreker 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.
7. INTELLECTUAL PROPERTY. Simultaneously with the execution of this
Agreement, Mr. Carreker is executing and delivering and hereby adopts and
agrees to be bound by the Intellectual Property Rights Agreement, a copy of
which is attached to this Agreement as ATTACHMENT A, and by the Confidentiality
Agreement, a copy of which is attached to this Agreement as ATTACHMENT B.
EMPLOYMENT AGREEMENT - Page 2
<PAGE>
8. TERMINATION.
(a) THE COMPANY. Notwithstanding Section 1, the Company, acting by a
determination of its board of directors (and not a committee thereof), may
terminate Mr. Carreker's employment at any time during the Initial Period
(whether two or three years) with or without cause upon written notice to Mr.
Carreker.
(b) BY MR. CARREKER. During the first two years of the Initial
Period (i.e., determined without regard to an extension of the Initial Period
to three years), Mr. Carreker may terminate Mr. Carreker's employment upon
written notice to the Company only if the Company is in material breach of
this Agreement, provided that such termination will become effective only
upon the expiration of 30 days following such notice and then only if the
breach remains uncured. Such termination shall be deemed a termination by
the Company of Mr. Carreker's employment under Section 8(a) for which Mr.
Carreker shall have the remedy set forth in Section 8(c).
(c) REMEDY. Upon termination of Mr. Carreker's employment pursuant
to Section 8(a) without cause or Section 8(b) only (at which time he shall cease
to be an employee of the Company for all purposes, including for all benefit
plan, insurance and other purposes), the Company will pay to Mr. Carreker, on
the Company's regular payroll dates and less required withholdings (if any),
salary at the rate paid to Mr. Carreker immediately prior to such termination,
for the remaining balance (if any) of the first two years of the Initial Period
(i.e., determined without regard to an extension of the Initial Period to three
years) (the "TERMINATION PAYMENTS"). The Company's obligation to make the
Termination Payments pursuant to this Section 8(c) is in lieu of any damages or
any other payment or benefits, including without limitation stock benefits,
that the Company might otherwise be obligated to pay Mr. Carreker as a result
of Mr. Carreker's termination of employment; PROVIDED, HOWEVER, that if at any
time the Company terminates Mr. Carreker's employment without cause under
circumstances in which Mr. Carreker is not entitled to Termination Payments, or
is entitled to Termination Payments that in the aggregate are less than a lump-
sum severance payment consistent with the Company's standard severance payment
policy, if any, as may be in effect at the time of termination, then Mr.
Carreker shall be entitled to such lump-sum severance payment. (For purposes
of reference and example only, the Company's standard severance payment policy
as of the date of this Agreement provides for the payment of one week's salary
at the time of termination for each year of service as an employee.) The
Company and Mr. Carreker agree that, in view of the nature of the issues likely
to arise in the event of such a termination, it would be impracticable or
extremely difficult to fix the actual damages resulting from such termination
and proving actual damages, causation and foreseeability in the case of such
termination would be costly, inconvenient and difficult. In requiring the
Company to make the Termination Payments as set forth herein, it is the intent
of the parties to provide, as of the date of this Agreement, for a liquidated
amount of damages to be paid by the Company to Mr. Carreker. Such liquidated
amount shall be deemed full and adequate damages for such termination and is
not intended by either party to be a penalty.
EMPLOYMENT AGREEMENT - Page 3
<PAGE>
(d) UPON DEATH. If Mr. Carreker dies during the term of this
Agreement, then the Company will pay his estate an amount equal to all salary
accrued, bonuses (if any) accrued and payable and benefits accrued as of the
date of his death.
(e) SURVIVAL. Mr. Carreker's and the Company's obligations under
Sections 7, 8 and 9(i) of this Agreement will survive the termination of
Carreker's employment of Mr. Carreker.
(f) CAUSE. As used in this Agreement the term "with cause" shall
mean and be limited to: (i) a material breach of this Agreement by Mr.
Carreker that is not corrected within thirty (30) days after written notice
of same from the board of directors of the Company to Mr. Carreker; (ii)
gross and willful neglect by Mr. Carreker of his duties and responsibilities
hereunder; (iii) fraud, criminal misconduct, breach of fiduciary duty,
dishonesty, or gross and willful misconduct by Mr. Carreker in connection
with the performance of his duties and responsibilities hereunder; (iv) Mr.
Carreker being under the influence of alcohol or drugs during business hours,
or being habitually drunk or addicted to drugs; (v) the commission by Mr.
Carreker of any crime of moral turpitude; (vi) material breach by Mr.
Carreker of his obligations under any assignment of copyright and other
intellectual property rights, noncompetition agreement, trade secret
agreement or confidentiality agreement, which breach is not cured within
thirty (30) days after written notice of same from the board of directors of
the Company to Mr. Carreker; or (vii) habitual breach by Mr. Carreker of any
of the material provisions of this Agreement or such other assignment or
agreements (regardless of any prior cure thereof).
9. MISCELLANEOUS.
(a) NOTICES. Any and all notice 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, 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 9(a):
(i) If to the Company: The Carreker Group, Inc.
14001 North Dallas Parkway, Suite 1100
Dallas, Texas 75240
Attention: President
Phone: (972) 458-1981
Fax: (972) 458-2567
with a copy to:
Locke Purnell Rain Harrell
(A Professional Corporation)
2200 Ross Avenue, Suite 2200
EMPLOYMENT AGREEMENT - Page 4
<PAGE>
Dallas, Texas 75201
Attention: Russell F. Coleman
Phone: (214) 740-8686
Fax: (214) 740-8800
(ii) If to Mr. Carreker: J.D. Carreker
4321 Overhill
Dallas, Texas 75205
Phone: (214) 528-8303
(b) AMENDMENTS. This Agreement, including the Attachments hereto,
contains the entire agreement and supersedes and replaces all prior agreements
between the Company and Mr. Carreker concerning Mr. Carreker'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. Carreker 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 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 hereof 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 hereof 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. Carreker 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
EMPLOYMENT AGREEMENT - Page 5
<PAGE>
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) EFFECT OF AGREEMENT. This Agreement will be void and have no
effect if the Effective Date does not occur on or before February 1, 1997.
(i) 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.
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.
(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 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. The Company and Mr. Carreker 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; PROVIDED, HOWEVER, that the
prevailing party in any arbitration will be entitled to an award of
attorneys' fees and costs, and all costs of arbitration, including those
provided for above, will be paid by the non-prevailing party, and the
arbitrator will be authorized to make such determinations.
(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.
EMPLOYMENT AGREEMENT - Page 6
<PAGE>
(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 9(i) 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 7
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the Effective Date.
THE CARREKER GROUP, INC. /s/ J.D. CARREKER
J.D. CARREKER
By: /s/ Terry Gage
Terry Gage
Senior Vice President
EMPLOYMENT AGREEMENT - Page 8
<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "AGREEMENT") shall become effective as of
the Effective Date indicated below between The Carreker Group, Inc., a Texas
corporation ("CARREKER"), and Ronald R. Antinori ("MR. ANTINORI").
RECITALS
A. This Agreement is entered into connection with and is ancillary to an
Agreement and Plan of Merger (the "AGREEMENT") dated as of January 29, 1997
between Carreker and Antinori Software Inc., a Georgia corporation, pursuant to
which a wholly-owned subsidiary of Carreker is to merge with and into Antinori
Software, Inc. (the "MERGER"), such that Antinori Software, Inc. will become a
wholly-owned subsidiary of Carreker. The date on which the Merger becomes
effective will be the effective date of this Agreement (the "EFFECTIVE DATE").
As provided in Section 9(h) below, this Agreement will be void and have no
effect if the Merger does not become effective, i.e., the Effective Date does
not occur, by February 1, 1997.
B. Mr. Antinori is the principal shareholder and the Chairman of the
board of directors of Antinori Software, Inc. and has been and remains actively
involved in the development and marketing of Antinori Software, Inc.'s
products. Carreker intends to continue the business of Antinori Software, Inc.
after the Merger and integrate such business into Carreker's ongoing business.
To preserve and protect the assets of Antinori Software, Inc., including
Antinori Software, Inc.'s goodwill, customers and trade secrets of which Mr.
Antinori has and will have knowledge and to preserve and protect Carreker's
goodwill and business interests going forward, and in consideration for
Carreker's entering into and performing under the Agreement, Mr. Antinori has
agreed to enter into this Agreement.
C. In addition, as contemplated by Section 7 below, Mr. Antinori is
concurrently herewith entering into an Intellectual Property Rights Agreement
and a Confidentiality Agreement in favor of Carreker for the purpose of
protecting Carreker's proprietary rights.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements of the parties contained herein, Carreker and Mr. Antinori hereby
agree as follows:
1. EMPLOYMENT. Carreker will employ Mr. Antinori and Mr. Antinori
accepts employment with Carreker for a period of two years from the Effective
Date; provided, however, that by irrevocable written notice given to the
Company not less than six months prior to the expiration of such two year
period, Mr. Antinori may extend the period by an additional year (such two or
three year period, as applicable, being the "INITIAL PERIOD"). Mr. Antinori's
employment may continue after the Initial Period but will then be terminable by
either party at will, with or without cause (provided that any termination by
Carreker shall occur only pursuant to a determination of its board of directors
(and not a committee thereof)), which determination may be made in its sole
discretion. The obligations of Carreker and Mr. Antinori set forth in the
"Intellectual Property Rights Agreement" and the "Confidentiality Agreement"
(each as defined in Section 7) (referring to intellectual property and
confidentiality, respectively) and in Section
<PAGE>
8 (referring to termination) will survive termination of Mr. Antinori's
employment, regardless of cause.
Mr. Antinori's primary location of employment shall be in Atlanta, Georgia
or its environs, and he shall undertake such business travel as is reasonably
required in the discharge of his duties set forth below.
2. DUTIES. Mr. Antinori will be employed as a full-time employee of
Carreker and will serve as Vice Chairman, Product and Business Development,
reporting directly to the Chairman of the Board. Mr. Antinori agrees that, to
the best of his ability and experience, he will at all times conscientiously
perform all of the duties and obligations assigned to him under this Agreement.
3. FULL-TIME EMPLOYMENT. Mr. Antinori's employment will be on a full-
time basis, in accordance with standard employee policies for Carreker. Mr.
Antinori 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. Antinori
may (i) provide incidental assistance to family members on matters of family
business; and (ii) sit on the boards of corporations and other organizations
(including, without limitation, charitable and other nonprofit organizations)
that do not compete with Carreker; provided in each case that such activities
do not conflict with or interfere with Mr. Antinori's normal full-time and
first priority obligations to Carreker. Mr. Antinori may make personal
investments in nonpublicly traded corporations, partnerships or other entities
that, to the knowledge of Carreker, are not at the time of such investment
engaged in any business activities competitive with Carreker. Notwithstanding
anything to the contrary contained in this Agreement, Mr. Antinori may make
personal investments in publicly traded corporations regardless of the business
they are engaged in, provided that Mr. Antinori does not at any time own in
excess of 1% of the issued and outstanding stock of any such corporation.
4. SALARY; POTENTIAL BONUS. Mr. Antinori's salary for the first year of
the Initial Period will be not less than $350,000. If the Company does not
consummate an initial public offering of its equity securities during such
first year and if the Company's financial performance meets or exceeds the
standards for financial performance established in respect of such first year
by the Company's board of directors (i.e., the Company's "board plan"), then
Mr. Antinori's salary for the second year of the Initial Period will be not
less than $400,000. If Mr. Antinori validly exercises his option to extend the
term hereof such that the Initial Period is three years, if the Company does
not consummate an initial public offering of its equity securities during the
second year of the Initial Period and if the Company's financial performance
meets or exceeds the standards for financial performance established in respect
of such second year by the Company's board of directors, then Mr. Antinori's
salary for the third year of the Initial Period will be not less than $450,000.
All salary is payable on Carreker's regular payroll dates, less required
withholdings.
Mr. Antinori acknowledges that the Company's board of directors has
complete and sole discretion to establish and revise the Company's "board
plan."
EMPLOYMENT AGREEMENT - Page 2
<PAGE>
The board of directors of Carreker has the sole discretion whether or not
to establish a bonus pool. If and to the extent the board of directors of
Carreker establishes a bonus pool for 1997 or any subsequent year, then Mr.
Antinori will be entitled to participate in the same at a level consistent with
the participation of that of the Chairman of Carreker.
In further consideration of his execution and delivery of this Agreement,
Mr. Antinori shall receive a cash bonus of $175,000, less required
withholdings, on the Effective Date.
5. BENEFITS. Mr. Antinori will also be entitled to insurance, vacation
and other benefits commensurate with his position (and consistent with the
level of such benefits as are afforded the Chairman of Carreker) in accordance
with Carreker's standard employee policies in effect from time to time. Mr.
Antinori acknowledges receipt of a summary of Carreker's standard employee
benefits policies in effect as of the date hereof.
6. REIMBURSEMENT OF BUSINESS EXPENSES. Carreker will, in accordance
with Carreker's policies in effect from time to time, reimburse Mr. Antinori
for all out-of-pocket reasonable business expenses incurred by Mr. Antinori in
connection with the performance of his duties under this Agreement upon
submission of the required documentation required pursuant to Carreker's
standard policies and record-keeping procedures (and consistent with the
application of such policies to the Chairman of Carreker).
7. INTELLECTUAL PROPERTY AND CONFIDENTIALITY. Simultaneously with the
execution of this Agreement, Mr. Antinori is executing and delivering and
hereby adopts and agrees to be bound by the Intellectual Property Rights
Agreement and the Confidentiality Agreement, a copy of each of which is
attached to this Agreement as ATTACHMENT A and ATTACHMENT B, respectively.
8. TERMINATION.
(a) CARREKER. Notwithstanding Section 1, Carreker, acting by a
determination of its board of directors (and not a committee thereof), may
terminate Mr. Antinori's employment at any time during the Initial Period
(whether two or three years) with or without cause upon written notice to Mr.
Antinori.
(b) BY MR. ANTINORI. During the first two years of the Initial
Period (i.e., determined without regard to an extension of the Initial Period
to three years), Mr. Antinori may terminate Mr. Antinori's employment upon
written notice to Carreker only if Carreker is in material breach of this
Agreement, provided that such termination will become effective only upon the
expiration of 30 days following such notice and then only if the breach
remains uncured. Such termination shall be deemed a termination by Carreker
of Mr. Antinori's employment under Section 8(a) for which Mr. Antinori shall
have the remedy set forth in Section 8(c).
(c) REMEDY. Upon termination of Mr. Antinori's employment pursuant
to Section 8(a) without cause or Section 8(b) only (at which time he shall
cease to be an employee of Carreker for all purposes, including for all
benefit plan, insurance and other purposes), Carreker will pay to Mr.
Antinori, on Carreker's regular payroll dates and less required
EMPLOYMENT AGREEMENT - Page 3
<PAGE>
withholdings, salary at the rate paid to Mr. Antinori immediately prior to
such termination, for the remaining balance (if any) of the first two years
of the Initial Period (i.e., determined without regard to an extension of the
Initial Period to three years) (the "TERMINATION PAYMENTS"). Carreker's
obligation to make the Termination Payments pursuant to this Section 8(c) is
in lieu of any damages or any other payment or benefits, including without
limitation stock benefits, that Carreker might otherwise be obligated to pay
Mr. Antinori as a result of Mr. Antinori's termination of employment;
PROVIDED, HOWEVER, that if at any time Carreker terminates Mr. Antinori's
employment without cause, under circumstances in which Mr. Antinori is not
entitled to Termination Payments, or is entitled to Termination Payments that
in the aggregate are less than a lump-sum severance payment consistent with
Carreker's standard severance payment policy, if any, as may be in effect at
the time of termination, determined with applicable credit for Mr. Antinori's
time of service with Antinori Software, Inc., then Mr. Antinori shall be
entitled to such lump-sum severance payment. (For purposes of reference and
example only, Carreker's standard severance payment policy as of the date of
this Agreement provides for the payment of one week's salary at the time of
termination for each year of service as an employee.) Carreker and Mr.
Antinori agree that, in view of the nature of the issues likely to arise in
the event of such a termination, it would be impracticable or extremely
difficult to fix the actual damages resulting from such termination and
proving actual damages, causation and foreseeability in the case of such
termination would be costly, inconvenient and difficult. In requiring
Carreker to make the Termination Payments as set forth herein, it is the
intent of the parties to provide, as of the date of this Agreement, for a
liquidated amount of damages to be paid by Carreker to Mr. Antinori. Such
liquidated amount shall be deemed full and adequate damages for such
termination and is not intended by either party to be a penalty.
(d) UPON DEATH. If Mr. Antinori dies during the term of this
Agreement, then Carreker will pay his estate an amount equal to all salary
accrued, bonuses (if any) accrued and payable and benefits accrued as of the
date of his death.
(e) SURVIVAL. Mr. Antinori's and Carreker's obligations under
Sections 7, 8 and 9(i) of this Agreement will survive the termination of
Carreker's employment of Mr. Antinori.
(f) CAUSE. As used in this Agreement the term "with cause" shall
mean and be limited to: (i) a material breach of this Agreement by Mr.
Antinori that is not corrected within thirty (30) days after written notice
of same from the board of directors of Carreker to Mr. Antinori; (ii) gross
and willful neglect by Mr. Antinori of his duties and responsibilities
hereunder; (iii) fraud, criminal misconduct, breach of fiduciary duty,
dishonesty, or gross and willful misconduct by Mr. Antinori in connection
with the performance of his duties and responsibilities hereunder; (iv) Mr.
Antinori being under the influence of alcohol or drugs during business hours,
or being habitually drunk or addicted to drugs; (v) the commission by Mr.
Antinori of any crime of moral turpitude; (vi) material breach by Mr.
Antinori of his obligations under any assignment of copyright and other
intellectual property rights, noncompetition agreement, trade secret
agreement or confidentiality agreement, which breach is not cured within
thirty (30) days after written notice of same from the board of directors of
Carreker to Mr. Antinori; or (vii) habitual breach by Mr. Antinori of any of
the material provisions of this Agreement or such other assignment or
agreements (regardless of any prior cure thereof).
EMPLOYMENT AGREEMENT - Page 4
<PAGE>
9. MISCELLANEOUS.
(a) NOTICES. Any and all notice 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, 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 9(a):
(i) If to Carreker: The Carreker Group, Inc.
14001 North Dallas Parkway, Suite 1100
Dallas, Texas 75240
Attention: J. D. Carreker, 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. Antinori: Ronald R. Antinori
238 15th Street #12
Atlanta, Georgia 30309
Phone: (404) 876-2762
with a copy to:
Morris, Manning & Martin
A Limited Liability Partnership
3343 Peachtree Road, N.E., Suite 1600
Atlanta, Georgia 30326
Attention: Charles R. Beaudrot, Jr.
Phone: (404) 233-7000
Fax: (404) 365-9532
(b) AMENDMENTS. This Agreement, including the Attachments hereto,
contains the entire agreement and supersedes and replaces all prior agreements
between Carreker and Mr. Antinori, or between Antinori Software, Inc. and Mr.
Antinori, concerning Mr. Antinori's
EMPLOYMENT AGREEMENT - Page 5
<PAGE>
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. Antinori or Carreker, except that the rights and obligations of
Carreker under this Agreement may be assigned to a corporation which succeeds
Carreker as the result of a merger or other corporate reorganization and which
continues the business of Carreker, or a subsidiary of Carreker, provided that
Carreker guarantees the performance by such assignee of Carreker'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 hereof 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 hereof 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. Antinori and Carreker recognize that the
limitations contained in this Agreement are reasonably and properly required
for the adequate protection of the interests of Carreker. 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) EFFECT OF AGREEMENT. This Agreement will be void and have no
effect if the Effective Date does not occur on or before February 1, 1997.
(i) 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")
EMPLOYMENT AGREEMENT - Page 6
<PAGE>
then in effect. 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.
(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 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. Carreker and Mr. Antinori 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; provided, however, that the
prevailing party in any arbitration will be entitled to an award of
attorneys' fees and costs, and all costs of arbitration, including those
provided for above, will be paid by the non-prevailing party, and the
arbitrator will be authorized to make such determinations.
(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.
EMPLOYMENT AGREEMENT - Page 7
<PAGE>
(viii) NATURE OF REMEDY. Except as specifically otherwise
provided in this Agreement, 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 9(i) 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.
(j) TAX AUDIT AGREEMENT. If, following the Closing, Ronald R.
Antinori receives notice of any audit or examination by any taxing authority
of any tax return for Antinori for any period prior to, or prior to and
including, the Closing, then Ronald R. Antinori shall promptly notify
Carreker of such notice and Carreker at its own expense may participate in
such audit or examination and shall be kept apprised by Ronald R. Antinori of
the progress of such audit or examination. Ronald R. Antinori agrees that he
will not agree to any audit adjustment or revision that would adversely
affect Carreker without Carreker's approval or agreement, which approval or
agreement shall not be unreasonably withheld.
[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 Effective Date.
/s/ Ronald R. Antinori
THE CARREKER GROUP, INC. RONALD R. ANTINORI
By: /s/ J.D.Carreker
J.D. Carreker
Chairman and Chief
Executive Officer
EMPLOYMENT AGREEMENT - Page 9
<PAGE>
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "AGREEMENT") is entered into on this 12th
day of March 1998 between Carreker-Antinori, Inc., a Texas corporation (the
"COMPANY"), and Wyn P. Lewis ("MR. LEWIS").
RECITALS
This Agreement sets forth in definitive form the terms of Mr. Lewis'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. Lewis hereby
agree as follows:
1. EMPLOYMENT. The Company will employ Mr. Lewis and Mr. Lewis accepts
employment with the Company for a period of three years beginning on the date
of this Agreement (the "INITIAL PERIOD"). Mr. Lewis'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. Lewis 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. Lewis's employment, regardless of reason.
2. RESIDENCE AND BUSINESS TRAVEL. Each of the parties agrees that the
primary location at which Mr. Lewis will be expected to render services
hereunder will be in Dallas, Texas or its environs, but that Mr. Lewis 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. As of the date of this Agreement, Mr. Lewis is employed as
Executive Vice President and Managing Director - Yield Management Group of the
Company, reporting to the President and Chief Operating Officer of the Company.
In such capacity, Mr. Lewis shall be responsible for the performance,
management, supervision and function of the Yield Management Group of the
Company.
Mr. Lewis agrees that, to the best of his ability and experience, he will
at all times conscientiously (a) perform the foregoing duties and
responsibilities, or such other or additional duties and responsibilities,
and/or (b) hold such other or additional offices, as in either case may be
assigned to him from time to time by the Company's Chief Executive Officer, the
Company's President and Chief Operating Officer or the Company's Board of
Directors.
In discharging his duties, Mr. Lewis shall have such authority as is
reasonably necessary to perform such duties.
<PAGE>
4. FULL-TIME EMPLOYMENT. Mr. Lewis'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. Lewis 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. Lewis
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 or her 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. Lewis's obligations to the Company. Mr. Lewis 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. Lewis may make personal investments in publicly traded corporations
regardless of the business they are engaged in, provided that Mr. Lewis 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. Lewis's
annual base salary for the Initial Period will be not less than $300,000. 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. Lewis 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) of up to seventy percent (70%) of Mr. Lewis'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. Lewis acknowledges that the Company's Board of
Directors has complete and sole discretion 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. Lewis.
The Company, acting through its Chief Executive Officer or its Chief
Operating Officer and President or his or her respective designee, shall
provide to Mr. Lewis, and provide Mr. Lewis the opportunity to participate in,
an employment performance review not less frequently than annually.
6. BENEFITS. Mr. Lewis 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 policies in effect
from time to time with respect to executive officers. Mr. Lewis
EMPLOYMENT AGREEMENT - Page 2
<PAGE>
acknowledges receipt of a summary of the Company's employee benefits policies
in effect as of the date of this Agreement.
7. REIMBURSEMENT OF NORMAL BUSINESS EXPENSES. The Company will, in
accordance with the Company's policies in effect from time to time, reimburse
Mr. Lewis for all out-of-pocket reasonable business expenses incurred by Mr.
Lewis 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. Lewis 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. Lewis's employment at any time during the Initial Period, with
or without cause, upon written notice to Mr. Lewis.
(b) BY MR. LEWIS. During the Initial Period, Mr. Lewis may
terminate his employment upon written notice to the Company only if the
Company is in material breach of this Agreement; PROVIDED, HOWEVER, that such
termination will become effective only upon the expiration of 30 days
following such notice and then only if the breach remains uncured as of the
effective time of such termination. Such termination shall be deemed a
termination by the Company of Mr. Lewis's employment under Section 9(a),
without cause, for which Mr. Lewis shall have the remedy set forth in Section
9(c).
(c) REMEDY. Upon termination of Mr. Lewis's employment during the
Initial Period without cause pursuant to Section 9(a), 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. Lewis on the
Company's regular payroll dates and less required withholdings, base salary
(but not bonuses or other incentive compensation, for periods before or after
such termination) at the rate paid to Mr. Lewis immediately prior to such
termination for the remaining balance of the Initial Period; and (ii) provide
Mr. Lewis, for a period coterminous with such payments, with major medical
health and dental insurance reasonably comparable to employee insurance
benefits then provided to the Company's executive officers in accordance with
the Company's employee insurance benefits policies.
If the Company terminates Mr. Lewis's employment with cause, or if Mr.
Lewis terminates his employment in circumstances constituting a breach by him
of this Agreement, then none of the foregoing post-termination payments or
insurance benefits, or any other post-termination or severance payments or
benefits, shall be made or provided to Mr. Lewis.
EMPLOYMENT AGREEMENT - Page 3
<PAGE>
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. Lewis, 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 insurance
benefits), if any, pursuant to this Section 9(c) is subject to the condition
that Mr. Lewis 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. Lewis as a result of the termination of Mr. Lewis'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. Lewis 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. Lewis'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. Lewis's employment with the Company.
10. MISCELLANEOUS.
(a) NOTICES. Any and all notice 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, 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):
EMPLOYMENT AGREEMENT - Page 4
<PAGE>
(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. Lewis: Wyn P. Lewis
121 Rubicon Peak
Incline Village, Nevada 89451
Phone: (702) 831-9554
Fax: (702) 832-6066
with a copy to:
Frank Spees
Attorney at Law
713 Joyce
P.O. Box 3464
Incline Village, NV 89450
Attention:
Phone: (702) 832-7006
Fax: (702) 832-5647
(b) AMENDMENTS. This Agreement, including the Attachments hereto,
contains the entire agreement and supersedes and replaces all prior agreements
between the Company and Mr. Lewis concerning Mr. Lewis's employment and
employment benefits. (PROVIDED, HOWEVER, that this Agreement does not so
supersede or replace any (i) agreements with respect to stock options
previously granted to Mr. Lewis or (ii) agreements between Mr. Lewis and the
Company, or among Mr. Lewis, the Company and others, establishing rights of
first refusal and/or similar rights with respect to such stock.) 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. Lewis 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
EMPLOYMENT AGREEMENT - Page 5
<PAGE>
merger or other corporate reorganization and which continues the business of
the Company, or 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. Lewis 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
EMPLOYMENT AGREEMENT - Page 6
<PAGE>
determined by the parties or by the American Arbitration Association, but
based upon reasonable 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. Lewis 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 7
<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/ Wyn P. Lewis
------------------------------ ---------------------------------
J.D. Carreker Wyn P. Lewis
Chairman of the Board and
Chief Executive Officer
EMPLOYMENT AGREEMENT - Page 8
<PAGE>
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "AGREEMENT") is entered into on this 10th
day of March 1998, to be effective for all purposes as of December 15, 1996,
between Carreker-Antinori, Inc., a Texas corporation formerly named The Carreker
Group, Inc. (the "COMPANY"), and Richard L. Linting ("MR. LINTING").
RECITALS
Mr. Linting commenced employment by the Company effective December 15,
1996, pursuant to a letter agreement between Mr. Linting and the Company dated
December 18, 1996.
This Agreement sets forth in definitive form the terms of Mr. Linting's
employment by the Company. As such, this Agreement supersedes the letter
agreement in its entirety.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
of the parties contained herein, the Company and Mr. Linting hereby agree as
follows:
1. EMPLOYMENT. The Company will employ Mr. Linting and Mr. Linting
accepts employment with the Company for a period of three years beginning
December 15, 1996 (the "INITIAL PERIOD"). Mr. Linting's employment may continue
after the Initial Period but will then be terminable by either party at will,
with or without cause; PROVIDED, HOWEVER, that during such "at will" period, the
Company may terminate Mr. Linting's employment only after providing Mr. Linting
not less than two weeks prior notice of such termination; PROVIDED FURTHER,
HOWEVER, that during such "at will" period the Company need not provide such two
weeks prior notice if such termination is for cause. The obligations of the
Company and Mr. Linting 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. Linting's employment,
regardless of reason.
During the period of the Company's employment of Mr. Linting, the Company
shall use its reasonable best efforts to nominate and secure the election of Mr.
Linting to the Company's Board of Directors and any executive or similar
committee of the Company's Board of Directors. Mr. Linting acknowledges that
the Company does not have the right, by itself, to secure such election, and
also that a director's fiduciary duty, and possibly in certain cases a
shareholder's fiduciary duty, in either case exercised in good faith, may in
remote circumstances preclude such election, in which event the Company's
obligations set forth in the foregoing sentence shall not be deemed breached.
2. RESIDENCE AND BUSINESS TRAVEL. The Company acknowledges that Mr.
Linting intends to maintain his principal residence in Bozeman, Montana during
the Initial Period. Mr. Linting acknowledges and agrees that the primary
location of his employment will be in Dallas, Texas or its environs, that he
will spend substantial time in Dallas, Texas and other locations where the
Company transacts (or proposes to transact) business and undertake such business
travel
<PAGE>
as is reasonably required in the discharge of his duties set forth below and
for the successful operation of the Company.
3. DUTIES. Mr. Linting was employed initially as the President and Chief
Operating Officer of the Company's consulting and management services group.
The parties acknowledge that, subsequent to the effective date of this
Agreement, Mr. Linting was elected to serve as the President and Chief Operating
Officer of the Company. With the exception of certain administrative
responsibilities currently handled by Mr. Terry Gage, Mr. Linting shall be
responsible for the operation of the Company's consulting and management
services group and software group, and shall have such authority as is
reasonably necessary to perform his duties.
Mr. Linting 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, consistent with his position, by the Company's Chief Executive
Officer or the Company's Board of Directors.
4. FULL-TIME EMPLOYMENT. Mr. Linting's employment will be on a full-time
basis, in accordance with standard employee policies of the Company. In
addition to such restrictions as are set forth in the Noncompetition, Property
Rights and Trade Secrets Agreement referenced herein, Mr. Linting 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. Linting may (a) provide incidental
assistance to family members on matters of family business; (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, sit on the board of directors of corporations and other business
organizations that, in any and all cases, do not compete with the Company;
provided in each case that such activities do not conflict with or interfere
with Mr. Linting's normal full-time and first priority obligations to the
Company. Mr. Linting may make personal investments in non-publicly traded
corporations, partnerships or other entities that, to the knowledge of the
Company, are not at the time of such investment engaged in any business
activities competitive with the Company. Notwithstanding anything to the
contrary contained in this Agreement, Mr. Linting may make personal investments
in publicly traded corporations regardless of the business they are engaged in,
provided that Mr. Linting does not at any time own in excess of two percent (2%)
of the issued and outstanding stock of any such corporation.
5. SALARY; POTENTIAL INCENTIVE COMPENSATION; STOCK OPTIONS.
(a) SALARY AND POTENTIAL INCENTIVE COMPENSATION. Mr. Linting's
annual base salary for the Initial Period will be not less than $350,000. 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. Linting 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
(which criteria shall take into consideration that Mr. Linting's
responsibilities
EMPLOYMENT AGREEMENT - Page 2
<PAGE>
increased during the fiscal year ending January 31, 1998), incentive
compensation equal to seventy percent (70%) of Mr. Linting's annual base
salary on terms no less favorable than those applicable to other high level
officers of the Company (e.g., its Chairman, Vice-Chairman, Chief Executive
Officer and Chief Financial Officer). Mr. Linting 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. Linting.
(b) STOCK OPTIONS. The Company has heretofore granted, effective as
of December 15, 1996, Mr. Linting options to purchase up to 40,000 shares of the
Company's Class B Non-Voting Common Stock at an exercise price of $19.87 per
share. Such options, which are incentive stock options with respect to 15,000
shares and non-qualified options with respect to 25,000 shares, shall each vest
one-third as of the effective day of the grant, one-third on December 15, 1997
and the remaining one-third on December 15, 1998. The Company has also
heretofore granted, effective as of August 1, 1997, Mr. Linting options to
purchase up to 20,000 shares of the Company's Class B Non-Voting Common Stock at
an exercise price of $28.26 per share. Such options, which are non-qualified
options, shall each vest one-third as of the effective day of the grant,
one-third on August 1, 1998, and the remaining one-third on August 1, 1999. All
unvested options shall vest immediately, however, upon the occurrence of any of
the following: a Change of Control (as defined below), the termination by the
Company of Mr. Linting's employment without cause, Mr. Linting's resignation
pursuant to Section 9(b) of this Agreement, Mr. Linting's permanent disability,
or Mr. Linting's death. Each such option shall be issued under and pursuant to
the Company's 1994 Amended and Restated Long Term Incentive Plan, with terms and
conditions as provided therein except as expressly provided herein. In addition
to the above stock options, Mr. Linting may also be eligible to receive such
other options that the Company's Board of Directors shall, in its sole
discretion, hereafter determine to grant to him.
For purposes of this Agreement, a Change of Control shall have occurred if,
as the result of a completed tender offer, merger, consolidation, sale of
assets, acquisition of shares or contested election, or any combination of the
foregoing transactions, (a) any person (other than J.D. Carreker, his heirs,
Crow Family Partnership, L.P., Science Applications International Corporation or
affiliates of any of them) shall become the owner, beneficially or of record, of
more than fifty percent (50%) of the aggregate voting power of the Company, or
(b) during any period of two consecutive years, individuals who at the beginning
of such period constituted the Board of Directors of the Company (together with
any new directors whose election to such board or whose nomination for election
by the shareholders of the Company was approved by the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease to
constitute a majority of the Board of Directors of the Company.
6. BENEFITS. Mr. Linting 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 the Chairman of the
Company) in accordance with the Company's standard employee policies in effect
from time to time. Mr. Linting acknowledges receipt of a
EMPLOYMENT AGREEMENT - Page 3
<PAGE>
summary of the Company's standard employee benefits policies in effect as of
the date of this Agreement.
7. REIMBURSEMENT OF SPECIAL EXPENSES AND NORMAL BUSINESS EXPENSES. The
Company agrees to reimburse Mr. Linting in an aggregate amount of up to $48,000
per year (with each such year commencing on December 15th) for his out-of-pocket
expenses incurred in connection with an apartment in Dallas, Texas with health
club facilities, an automobile and furnishings.
Mr. Linting's expenses incurred in travelling to and from Bozeman, Montana,
Laguna Beach, California or any other primary or secondary residences of Mr.
Linting (each, a "residence") shall be reimbursed to Mr. Linting only to the
extent that, in connection with travel on Company business, airfare expenses
incurred by Mr. Linting in (a) such travel that includes making an intermediate
stop (i.e., a "layover") in such residence do not exceed the comparable airfare
expenses that would have been incurred BUT FOR the intermediate stop and (b)
round-trip travel from a residence to a location other than Dallas, Texas do not
exceed comparable airfare expenses of round-trip travel to such location from
Dallas, Texas.
The Company will, but in accordance with the Company's policies in effect
from time to time, reimburse Mr. Linting for all other out-of-pocket reasonable
business expenses incurred by Mr. Linting 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. Linting agrees to execute and deliver 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) THE COMPANY. Notwithstanding Section 1, the Company may
terminate Mr. Linting's employment at any time during the Initial Period with or
without cause upon written notice to Mr. Linting.
(b) BY MR. LINTING. During the Initial Period, Mr. Linting may
terminate his employment upon written notice to the Company if the Company is
then in material breach of this Agreement; provided, however, that such material
breach shall permit such termination only if the Company shall have been
provided at least 30 days' prior notice and opportunity to cure such material
breach. Any such termination shall be deemed a termination by the Company of
Mr. Linting's employment under Section 9(a) for which Mr. Linting shall have the
remedy set forth in Section 9(c).
(c) REMEDY. Upon termination of Mr. Linting's employment during the
Initial Period without cause pursuant to Section 9(a) or pursuant to Section
9(b) only (at which time he
EMPLOYMENT AGREEMENT - Page 4
<PAGE>
shall cease to be an employee of the Company for all purposes), the Company
will (i) pay to Mr. Linting, for two years, on the Company's regular payroll
dates and less required withholdings, base salary at the rate paid to Mr.
Linting immediately prior to such termination; (ii) provide Mr. Linting, for
a period coterminous with such payments, with major medical health and dental
insurance reasonably comparable to employee benefits then provided to the
Company's senior officers in accordance with the Company's standard employee
benefits policies; and (iii) pay to Mr. Linting, as and when the same would
be otherwise payable, any incentive compensation for the balance of the
Initial 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. Linting had remained an employee
of the Company hereunder. Without limiting the foregoing sentence, the
$48,000 per year reimbursement allowance provided for above shall not survive
termination. In addition to the benefits described above, all stock options
granted to Mr. Linting in accordance with Section 5(b) shall become fully
vested and, subject to their stated term, exercisable on and after such date
of termination of employment (whether or not previously vested or
exercisable).
If the Company terminates Mr. Linting's employment with cause, then none of
the foregoing post-termination payments or benefits, or any other
post-termination or severance payments or benefits, shall be made or provided
to Mr. Linting.
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. Linting, 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 in lieu of any damages and any other payment or
other benefits that the Company might otherwise be obligated to pay Mr. Linting
as a result of the termination of Mr. Linting's employment with the Company
(including for claims of employment discrimination, wrongful termination or
breach of this Section 9). The Company and Mr. Linting agree that, in view of
the nature of the issues likely to arise in the event of such a termination, it
would be impracticable or extremely difficult to fix the actual damages
resulting from such termination and proving actual damages, causation and
foreseeability in the case of such termination would be costly, inconvenient and
difficult. In requiring the Company to make the payments (and provide the
benefits) as set forth herein, it is the intent of the parties to provide, as of
the date of this
EMPLOYMENT AGREEMENT - Page 5
<PAGE>
Agreement, for a liquidated amount of damages to be paid by the Company to
Mr. Linting. Such liquidated amount shall be deemed full and adequate
damages for such termination and is not intended by either party to be a
penalty.
(d) UPON DEATH. Except as otherwise provided for in this Agreement,
if Mr. Linting 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) RESIGNATION AS DIRECTOR. If Mr. Linting ceases to be a full-time
employee of the Company when he is serving as a director of the Company, then
Mr. Linting agrees to promptly resign as a director of the Company.
(f) SURVIVAL. Mr. Linting's and the Company's obligations under
Sections 8, 9 and 12(h) of this Agreement and, to the extent that any
reimbursable expenses have not been reimbursed as of the time of such
termination, under Section 7 of this Agreement, will survive the termination of
Mr. Linting's employment with the Company.
10. OTHER PAYMENTS. The Company will reimburse Mr. Linting for reasonable
out-of-pocket expenses incurred in moving his furnishings from his residence in
Montana or California to the Dallas, Texas area. In addition, the Company will
reimburse Mr. Linting for up to $5,000 in legal fees in connection with (a) the
review of the letter agreement referenced in the recitals to this Agreement, the
Company's benefits and compensation plans and the documentation relating to the
merger between the Company and Antinori Software, Inc. and (b) the review and
negotiation of this Agreement.
11. FUTURE SHARE SALES. The Company agrees to take into consideration in
any sale of the Company's capital stock the valuations and projections reviewed
prior to December 18, 1996 by Mr. Linting and Mr. J.D. Carreker; PROVIDED,
HOWEVER, that Mr. Linting acknowledges that (a) such valuations and projections,
although prepared in good faith, were based on reasonable assumptions in light
of conditions in effect on the date prepared and (b) that such valuations and
projections and this Section 11 do not constitute a representation, warranty or
create any obligation of the Company with respect to the value or future value
of shares of the Company's capital stock.
12. MISCELLANEOUS.
(a) NOTICES. Any and all notice 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, 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
12(a):
EMPLOYMENT AGREEMENT - Page 6
<PAGE>
(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. Linting: Richard L. Linting
4567 Star Ridge Road
Bozeman, MT 59715
Phone: (406) 587-4281
Fax: (406) 586-1869
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Thomas R. Roberts, Larry A. Barden
Phone: (312) 853-7069
Fax: (312) 853-7036
(b) AMENDMENTS. This Agreement, including the Attachments hereto,
contains the entire agreement and supersedes and replaces all prior agreements
between the Company and Mr. Linting concerning Mr. Linting's employment and
employment benefits (including, without limitation, the letter agreement
referenced in the recitals to this Agreement). 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. Linting 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 a subsidiary of the Company, provided
that the Company guarantees the performance by such assignee of the Company's
obligations hereunder.
EMPLOYMENT AGREEMENT - Page 7
<PAGE>
(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. Linting 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. 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 hourly or daily consulting
rates for the arbitrator if the parties are not able to agree upon his or her
rate of compensation.
EMPLOYMENT AGREEMENT - Page 8
<PAGE>
(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. The Company and Mr. Linting 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 12(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 9
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of December 15, 1996.
CARREKER-ANTINORI, INC. EMPLOYEE
By: /s/ J.D. Carreker /s/ Richard L. Linting
---------------------------- -----------------------------------
J.D. Carreker Richard L. Linting
Chairman of the Board and
Chief Executive Officer
EMPLOYMENT AGREEMENT - Page 10
<PAGE>
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "AGREEMENT") is entered into on this 13th
day of March 1998 between Carreker-Antinori, Inc., a Texas corporation (the
"COMPANY"), and Royce Brown ("MR. BROWN").
RECITALS
This Agreement sets forth in definitive form the terms of Mr. Brown'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. Brown hereby
agree as follows:
1. EMPLOYMENT. The Company will employ Mr. Brown and Mr. Brown
accepts employment with the Company for a period of three years beginning on
the date of this Agreement (the "INITIAL PERIOD"). Mr. Brown'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.
Brown 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. Brown's employment, regardless
of reason.
2. RESIDENCE AND BUSINESS TRAVEL. Each of the parties agrees that the
primary location at which Mr. Brown will be expected to render services
hereunder will be in Dallas, Texas or its environs, but that Mr. Brown 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. As of the date of this Agreement, Mr. Brown is employed as
Executive Vice President and Managing Director - Payment Systems Group of the
Company, reporting to the President and Chief Operating Officer of the
Company. In such capacity, Mr. Brown shall be responsible for the
performance, management, supervision and function of the Payment Systems
Group of the Company.
Mr. Brown agrees that, to the best of his ability and experience, he
will at all times conscientiously (a) perform the foregoing duties and
responsibilities, or such other or additional duties and responsibilities,
and/or (b) hold such other or additional offices, as in either case may be
assigned to him from time to time by the Company's Chief Executive Officer,
the Company's President and Chief Operating Officer or the Company's Board of
Directors.
In discharging his duties, Mr. Brown shall have such authority as is
reasonably necessary to perform such duties.
<PAGE>
4. FULL-TIME EMPLOYMENT. Mr. Brown'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. Brown 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. Brown 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 or her 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. Brown's obligations to the Company. Mr. Brown 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. Brown may make personal investments in publicly traded
corporations regardless of the business they are engaged in, provided that
Mr. Brown 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.
Brown's annual base salary for the Initial Period will be not less than
$240,000. 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. Brown 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) of up to seventy percent (70%) of Mr. Brown'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. Brown acknowledges that
the Company's Board of Directors has complete and sole discretion 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. Brown.
The Company, acting through its Chief Executive Officer or its Chief
Operating Officer and President or his or her respective designee, shall
provide to Mr. Brown, and provide Mr. Brown the opportunity to participate
in, an employment performance review not less frequently than annually.
6. BENEFITS. Mr. Brown 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 policies in effect
from time to time with respect to executive officers. Mr. Brown
EMPLOYMENT AGREEMENT - Page 2
<PAGE>
acknowledges receipt of a summary of the Company's employee benefits policies
in effect as of the date of this Agreement.
7. REIMBURSEMENT OF NORMAL BUSINESS EXPENSES. The Company will, in
accordance with the Company's policies in effect from time to time, reimburse
Mr. Brown for all out-of-pocket reasonable business expenses incurred by Mr.
Brown 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. Brown 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. Brown's employment at any time during the Initial Period, with
or without cause, upon written notice to Mr. Brown.
(b) BY MR. BROWN. During the Initial Period, Mr. Brown may
terminate his employment upon written notice to the Company only if the
Company is in material breach of this Agreement; PROVIDED, HOWEVER, that such
termination will become effective only upon the expiration of 30 days
following such notice and then only if the breach remains uncured as of the
effective time of such termination. Such termination shall be deemed a
termination by the Company of Mr. Brown's employment under Section 9(a),
without cause, for which Mr. Brown shall have the remedy set forth in Section
9(c).
(c) REMEDY. Upon termination of Mr. Brown's employment during the
Initial Period without cause pursuant to Section 9(a), 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. Brown on the
Company's regular payroll dates and less required withholdings, base salary
(but not bonuses or other incentive compensation, for periods before or after
such termination) at the rate paid to Mr. Brown immediately prior to such
termination for the remaining balance of the Initial Period; and (ii) provide
Mr. Brown, for a period coterminous with such payments, with major medical
health and dental insurance reasonably comparable to employee insurance
benefits then provided to the Company's executive officers in accordance with
the Company's employee insurance benefits policies.
If the Company terminates Mr. Brown's employment with cause, or if Mr.
Brown terminates his employment in circumstances constituting a breach by him
of this Agreement, then none of the foregoing post-termination payments or
insurance benefits, or any other post-termination or severance payments or
benefits, shall be made or provided to Mr. Brown.
EMPLOYMENT AGREEMENT - Page 3
<PAGE>
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. Brown, 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 insurance
benefits), if any, pursuant to this Section 9(c) is subject to the condition
that Mr. Brown 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. Brown as a result of the termination of Mr. Brown'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. Brown 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. Brown'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. Brown's employment with the Company.
10. MISCELLANEOUS.
(a) NOTICES. Any and all notice 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, 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):
EMPLOYMENT AGREEMENT - Page 4
<PAGE>
(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. Brown: Royce Brown
2512 Rotland
Plano, Texas 75023
Phone: (972) 618-1598
Fax: ( ) -
with a copy to:
Attention:
Phone: ( ) -
Fax: ( ) -
(b) AMENDMENTS. This Agreement, including the Attachments hereto,
contains the entire agreement and supersedes and replaces all prior
agreements between the Company and Mr. Brown concerning Mr. Brown's
employment and employment benefits. (PROVIDED, HOWEVER, that this Agreement
does not so supersede or replace any (i) agreements with respect to stock
options previously granted to Mr. Brown or (ii) agreements between Mr. Brown
and the Company, or among Mr. Brown, the Company and others, establishing
rights of first refusal and/or similar rights with respect to such stock.)
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. Brown 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
EMPLOYMENT AGREEMENT - Page 5
<PAGE>
merger or other corporate reorganization and which continues the business of
the Company, or 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. Brown 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
EMPLOYMENT AGREEMENT - Page 6
<PAGE>
determined by the parties or by the American Arbitration Association, but
based upon reasonable 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. Brown 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 7
<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/ Royce Brown
---------------------------- ----------------------------
J.D. Carreker Royce Brown
Chairman of the Board and
Chief Executive Officer
EMPLOYMENT AGREEMENT - Page 8
<PAGE>
Exhibit 10.11
MANAGEMENT SERVICES AGREEMENT
This MANAGEMENT SERVICES AGREEMENT ("Agreement") is made as of November 18,
1993 by and between J.D. Carreker and Associates, Inc. ("JDCA") and PAYMENT
SYSTEMS NETWORK INC., a Delaware corporation ("PSN").
WHEREAS, PSN has been established for the purpose of engaging in the
business of providing services to depository institutions and other customers
relating to electronic check presentment, the related transportation of physical
checks and other related check collection functions.
WHEREAS, JDCA will assign to PSN certain contracts referenced in Exhibit A
to this Agreement (i) between JDCA and depository institutions relating to the
services to be provided by PSN ("Customer Contracts") and (ii) between JDCA and
several companies which will enable PSN to provide its services to depository
institution and other customers ("Remarketing Contracts").
WHEREAS, PSN desires that JDCA provide, and JDCA is willing to provide,
certain management services to PSN during the term of this Agreement.
WITNESSETH:
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. SERVICES TO BE PROVIDED. JDCA agrees to render the services and
undertake the duties set forth in Sections 3 and 4 of this Agreement, for the
compensation and on the terms herein provided.
2. DELIVERY OF DOCUMENTS. Each of the parties will make, execute,
acknowledge and deliver such other instruments and documents, and take all such
other actions, as the other party may reasonably request and as may reasonably
be required in order to effectuate the purposes of this Agreement and to carry
out the terms hereof.
3. MANAGEMENT SERVICES. Subject to the supervision and direction of
the Board of Directors and/or the management Committee of PSN and in accordance
with JDCA's best judgment, JDCA will operate, manage, direct and supervise the
ongoing conduct of PSN's day-to-day business from and after the effective date
of this Agreement. During the term of this Agreement, JDCA shall have authority
to make any and all decisions with respect to the day-to-day operations of PSN,
except as otherwise provided in this Agreement, including without limitation the
following:
1
<PAGE>
(a) Contracting for and purchasing on behalf of PSN all services
and goods to be used in connection with the operation of PSN's business;
(b) Putting into effect all advertising or other business
solicitation activities and all business policies with respect to such
advertising or solicitation activities;
(c) Obtaining on behalf of PSN all licenses, permits and
authorizations from any governmental authorities which are necessary for the
conduct of PSN's business;
(d) Negotiating and entering into contracts on behalf of PSN
with such other service providers and independent contractors as JDCA deems
necessary to perform services for PSN in connection with the operation of PSN's
business, consistent with the Business Plan approved by the Board of Directors
of PSN as defined below, and supervising the administration and monitoring the
performance of all work performed and services rendered under all such contracts
and Remarketing Contracts;
(e) Negotiating and entering into contracts on behalf of PSN
with depository institutions and other customers whereby PSN contracts to
provide electronic check presentment and related services to such customers and
supervising the administration and monitoring the performance of all work
performed and rendered under such contracts and the Customer Contracts;
(f) Maintaining office facilities for PSN (which may be in the
offices of JDCA);
(g) Furnishing statistical and research data, data processing
services, clerical services, internal executive and administrative services,
stationery and office supplies;
(h) Furnishing corporate secretarial services, including
coordinating the preparation and distribution of materials for meetings of the
Board of Directors and committees thereof, as well as advisory groups or
committees;
(i) Furnishing financial advice and services, including
preparation of operating budgets for PSN, effecting loans and investments on
behalf of PSN, and assistance with respect to cash management, insurance and
risk management advice and services;
(j) Establishing pricing and packaging for PSN services;
(k) Providing bookkeeping and accounting services, including
developing a centralized billing process, and preparing monthly financial
reports;
(l) Administering and/or operating accounting systems and
programs (such as salaried payrolls, general ledgers and budgets, and accounts
payable);
2
<PAGE>
(m) Providing the services of certain persons who may be
appointed as officers of PSN by PSN's Board of Directors;
(n) Coordinating the provision of legal advice and counsel to
PSN;
(o) Coordinating the preparation of reports to PSN's
shareholders of record;
(p) Providing strategic market advice and service direction for
each PSN line of business;
(q) Providing sales and sales support resources to achieve PSN
revenue objectives;
(r) Coordinating implementation, including project planning,
ordering and installation support, among vendors, depository institutions and
other customers and PSN:
(s) Coordinating line engineering support services to facilitate
the optimal configurations for dated communication installation;
(t) Providing a help desk to resolve issues not resolved by
primary service vendors;
(u) Planning product and service enhancements and preparing
business proposals to be presented to the Board of Directors, committees of the
Board, and officers of PSN;
(v) Acting as PSN's agent, including entering into binding
contracts on behalf of PSN with respect to matters of every kind and nature; and
(w) Generally assisting in all aspects of PSN's operations.
4. PERFORMANCE REQUIREMENTS.
(a) In performing all services under this Agreement, JDCA shall
(i) act in conformity with PSN's certificate of incorporation and bylaws, as the
same may be amended from time to time, and subject to the supervision and
direction of the Board of Directors and/or the Management Committee of PSN; (ii)
consult and coordinate with legal counsel for PSN, as necessary and appropriate,
and (iii) advise and report to PSN and its legal counsel, as necessary or
appropriate, with respect to any compliance or other matters that come to its
attention.
(b) JDCA shall consult with and keep PSN advised concerning all
material aspects of JDCA's activities with respect to the management and
operation of PSN. JDCA shall keep, maintain and make available for inspection
by PSN, sufficient books of account reflecting accurately all income and
expenditures resulting from the conduct of PSN's business. JDCA shall provide
and meet all reasonable financial and management information
3
<PAGE>
reporting requests made by the Board of Directors or the Management Committee
of PSN.
(c) JDCA may submit proposals for its services to be remarketed
through PSN to PSN's Board of Directors or Management Committee and shall
abstain from voting with respect to such proposals.
(d) JDCA shall hire one or more full-time employee(s) fully
dedicated to PSN when, in JDCA's sole reasonable judgment, such employee(s)
become appropriate or necessary in order to conduct the operations of PSN.
(e) JDCA shall place appropriate emphasis on cash management
within PSN to minimize the need for additional working capital.
(f) Each year JDCA shall prepare an annual business plan and
operating budget ("Business Plan") to be approved by the Board of Directors of
PSN. JDCA shall prepare quarterly operating budgets for PSN for the first year
of the term of this Agreement, which shall be consistent with the Business Plan,
to be approved by the Board of Directors of PSN. After the first year of the
term of this Agreement, the timing and frequency of budget reporting by JDCA
will be determined jointly by JDCA and PSN's Management Committee. Modification
of the Business Plan and/or operating budgets may be made quarterly if approved
by the Board of Directors or Management Committee of PSN, as appropriate.
(g) JDCA shall use its reasonable best efforts to conform with
the budgeted expense levels approved by the Board of Directors of PSN. If a
significant negative variance between actual and budgeted net profits occurs,
JDCA will develop a revenue enhancement and/or expense reduction and
implementation plan and submit such plan to Management Committee of PSN for its
review and approval.
COMPENSATION. For the services to be rendered and the facilities to
be furnished by JDCA, as provided for in this agreement, JHDCA shall be
compensated by PSN in accordance with the following terms:
(a) PSN shall pay to JDCA each month a Management Fee equal to
JDCA's Fully Loaded Transfer Cost plus 20% of PSN's total direct operating
expenses ("PSN Operating Expenses") for that month. PSN shall also pay to JDCA
an Incentive Fee for
4
<PAGE>
each fiscal year in which 25% of PSN's pre-tax, pre-Management Fee net profits
for that year exceeds 20% of PSN Operating Expenses for such year. The
Incentive Fee shall be payable as soon as reasonably possible following the end
of each fiscal year and shall be equal to the amount by which 25% of PSN's
pre-tax net profits for the year exceeds 20% of PSN Operating Expenses for
such year, provided that the Incentive Fee shall not exceed up to 40% of
total PSN Operating Expenses. "Fully Loaded Transfer Cost" shall include the
actual hourly compensation cost of any employee who performs services for
PSN, grossed up by a calculated percentage to reimburse JDCA for the various
direct and overhead expenses attributable to the general day-to-day business
operations of JDCA ("JDCA Expenses"). The Fully Loaded Transfer Cost shall
be calculated as illustrated in Exhibit B to this Agreement and JDCA's
calculation of the Fully Loaded Transfer Cost shall be subject to the
performance of certain agreed-upon audit procedures performed annually by an
independent public accountant. JDCA's Fully Loaded Transfer Cost shall
include: administrative department salaries; all employee-related benefits
and taxes; office rent; general office supplies; telephone; secretarial;
human resource department-related; general insurance; general computer;
furniture and equipment depreciation in the conduct of PSN's business. JDCA
Expenses and Transfer Cost methodology shall be calculated in accordance with
industry standards and Generally Accepted Accounting Principles. If a
significant event or change in circumstances causes such expenses to
materially exceed industry standards, JDCA and PSN may agree to readjust the
calculation of the Fully Loaded Transfer Cost or any JDCA Expense. The
percentage of JDCA Expense includable in calculating the Fully Loaded
Transfer Cost shall be determined on a fiscal year quarterly basis one
quarter in arrears. PSN Operating Expenses shall be accounted for separately
and shall consist of the operating expenses set forth on Exhibit C to this
Agreement, including, but not limited to, expenses of PSN relating to: sales
travel; commissions; contract negotiation and legal fees; JDCA's services
pursuant to this Agreement; salaries; PSN's overhead expenses and staff
bonuses; interest on borrowed money; taxes and fees payable to Federal state
and other governmental agencies; outside auditing expenses; and other
expenses not specified which are properly payable by PSN.
(b) PSN shall reimburse JDCA on a monthly basis for any PSN
Operating Expenses paid by JDCA and/or its employees. A policy shall be
developed jointly by PSN and JDCA to establish guidelines for the reimbursement
of PSN Operating Expenses paid by JDCA and/or its employees. Such policy shall
generally provide for reimbursement of: reasonable air and ground
transportation, including tolls, parking, taxi, bus or auto rental; expenses for
lodging and meals (provided, however, that personal expenses charged against a
hotel room or separately will not be reimbursed); reasonable valet and laundry
charges for
5
<PAGE>
trips of more than three (3) days duration; necessary business calls; and
reasonable tipping.
(c) JDCA shall submit to PSN a monthly invoice during the first
week of each month which shall be in the format generally set forth in Exhibit D
to this Agreement. PSN shall pay the invoiced amount within thirty (30) days of
the invoice date. All past due amounts shall accrue interest at the prime rate
plus one percent (1%) divided by twelve per each thirty (30) days past due.
(d) JDCA will from time to time employ or associate with itself
such person or persons as JDCA may believe to be particularly suited to assist
it in performing services under this Agreement. Such person or persons may be
officers and employees who are employed by both JDCA and PSN.
6. LIMITATION OF LIABILITIES; INDEMNIFICATION.
(a) JDCA shall not be liable for any error of judgment or mistake of
law or for any loss suffered by PSN in connection with the performance of JDCA's
obligations and duties under this Agreement, except a loss resulting from JDCA's
willful misconduct, bad faith or gross negligence in the performance of such
obligations and duties, or by reason of its reckless disregard thereof. Any
person, even though also an officer, director, partner, employee or agent of
JDCA, shall be deemed, when rendering services to PSN or acting on any business
of PSN (other than services or business in connection with JDCA's duties
hereunder), to be acting solely for PSN and not as an officer, director,
partner, employee or agent or one under the control or discretion of JDCA even
though paid by JDCA. JDCA shall not be liable for any action taken or omitted
in good faith at the request or direction of the Board of Directors of PSN or
any committee thereof in connection with the performance of JDCA's duties under
this Agreement. JDCA also shall not be liable for actions taken or omitted in
good faith in reliance on advice received from its or PSN's legal counsel,
independent public accountants or other professional advisors. JDCA shall not
be liable for any special or consequential damages arising in connection with
the performance of JDCA's obligations and duties under this Agreement.
(b) Notwithstanding any other provision of this Agreement, JDCA shall
not be liable for any loss suffered by PSN in connection with the performance of
JDCA's obligations and duties under this Agreement unless PSN has initiated a
legal or arbitration proceeding with respect to such loss within three (3) years
of the occurrence of the event, action or failure to act giving rise to such
loss.
(c) Any dispute or controversy arising between JDCA and PSN in
connection with the interpretation of this Agreement shall be settled
exclusively by binding arbitration in Dallas, Texas in
6
<PAGE>
accordance with the rules of the American Arbitration Association then in effect
and judgment upon the award rendered may be entered in any court having
jurisdiction thereof.
(d) PSN will indemnify JDCA against and hold it harmless from any and
all losses, claims, damages, liabilities or expenses (including counsel fees and
expenses) resulting from any claim, demand, action or suit relating to the
operation of PSN, unless (i) such loss, claim, damage, liability or expense
results from the willful misconduct, bad faith or gross negligence of JDCA in
the performance of such obligations and duties or by reason of its reckless
disregard thereof and (ii) a legal or arbitration proceeding has been initiated
within three (3) years of the occurrence of the event, action or failure to act
giving rise to such loss, claim, damage, liability or expense. JDCA shall
promptly notify PSN in writing of: the assertion against JDCA of any claim or
potential liability with respect to which indemnity may be sought hereunder; the
discovery of any such potential liability; or the commencement of any action or
proceeding with respect to which indemnity may be sought hereunder; PROVIDED,
that the failure promptly to give such notice shall not affect JDCA's rights
hereunder except to the extent that such failure shall actually materially and
adversely affect PSN or its rights hereunder. JDCA shall not confess,
compromise or settle any claim indemnifiable hereunder without the prior written
consent of PSN. PSN shall have the right to control the defense against any
claim or liability indemnifiable hereunder if (i) PSN notifies JDCA, within
thirty (30) days after receiving written notice from JDCA of an indemnifiable
claim or liability, that PSN intends to defend against such claim or liability,
or, if required in a shorter time than thirty (30) calendar days, PSN makes the
requisite response to such claim or liability asserted and (ii) PSN diligently
pursues the defense against such claim or liability.
7. TERM; RENEWAL/TERMINATION.
(a) This Agreement shall become effective on November 18, 1993 and
shall remain in full force and effect for a term of five (5) years from the
effective date unless terminated early pursuant to the provisions of subsection
(c) of this Section 7.
(b) Prior to the end of the four (4) years from the effective date of
this Agreement, JDCA and PSN will convene negotiations in good faith to extend
or modify this Agreement unless this Agreement has been terminated early
pursuant to the provisions of subsection (c) of this Section 7. If such
negotiations do not conclude within six (6) months of the expiration of the term
of this Agreement, JDCA and PSN may agree to extend this Agreement on a
month-to-month basis until negotiations reach a conclusion.
7
<PAGE>
(c) This Agreement is subject to early termination (i) upon the
mutual agreement of the parties; (ii) by PSN with thirty (30 days' prior written
notice upon the commission of willful misconduct, gross negligence or fraud by
JDCA; (iii) by PSN with thirty (30) days' prior written notice upon JDCA's
failure to begin to implement within 60 calendar days agreed-upon expense
reduction initiatives as provided at subsection (e) of Section 4 of this
Agreement; or (iv) pursuant to Section 8 hereof. The terms and provisions of
Sections 6, 10 and 11 shall survive any such early termination of this
Agreement.
(d) In the event of any termination pursuant to this Section 7, JDCA
shall be entitled to a pro rata portion of (i) the Management Fee otherwise
payable at the end of the month during which such termination occurs and (ii)
the Incentive Fee, if any, otherwise payable at the end of the fiscal year
during which such termination occurs; provided, however, that the determination
of whether any Incentive Fee is payable, and the calculation of the amount of
the Incentive Fee, shall be based upon the amount of PSN's pre-tax net profits
and PSN Operating Expenses for the portion of the fiscal year before termination
occurred. Upon any termination, each party shall deliver to the other party all
property, documents, books and records, including related software, of the other
party then in its custody or possession. JDCA shall cooperate with PSN and any
successor provider of management services selected by PSN in the orderly
transfer and assumption of the management responsibilities of PSN.
(e) Upon any termination pursuant to Section 7(c) or in the event
this Agreement terminates upon the expiration of its initial five (5) year term
as provided in Section 7(a), JDCA shall have the right to require PSN to
purchase from JDCA up to seventy-five percent (75%) of the securities of PSN
help by JDCA, except as provided in the third sentence of this subsection. JDCA
shall notify PSN of JDCA's decision to seek such a purchase by PSN within sixty
(60) days of the effective date of such termination. To the extent that any
securities sought to be sold by JDCA to PSN hereunder would require one or more
holders of securities of PSN ("Stockholders") to obtain the prior approval of
the Federal Reserve Board under Section 4 of the Bank Holding Company Act and
such Stockholder(s) is unable after using its best efforts to obtain, or is in
good faith unwilling to seek, such Federal Reserve Board approval, JDCA will not
have the right to require PSN to purchase such securities and JDCA and the Board
of Directors of PSN will in good faith negotiate to provide JDCA with an
economic result substantially comparable to the purchase by PSN of such
securities. To the extent that PSN is required hereunder to purchase securities
held by JDCA, PSN shall be required to consummate such purchase within 120 days
of such notice. Unless otherwise agreed to by JDCA and PSN within ten (10) days
of the provision of notice by JDCA, the purchase price to be paid by PSN for
such securities shall be the value of the securities as determined by a mutually
acceptable nationally
8
<PAGE>
recognized investment banking or accounting firm. If the parties shall fail to
agree on the selection of an investment banking or accounting firm, then each
shall select one such firm (and each shall pay any fees charged by the firm it
selects) and such firms shall agree to, as promptly as practicable thereafter, a
nationally recognized investment banking or accounting firm to determine the
value of the securities. PSN and JDCA shall each pay one-half of the expenses
of the investment banking or accounting firm making the determination as to such
value. PSN may pay the purchase price in a lump sum or in equal annual
installments over five (5) years. All determinations made pursuant to this
subsection shall be final, conclusive and binding on the parties.
(f) JDCA and PSN agree that Section 7(e) of this Agreement supersedes
the rights and obligations of JDCA and PSN as between each other pursuant to
Section 5.4 of the Payment Systems Network Inc. Stockholders' Agreement dated
November 18, 1993 (Stockholders' Agreement) and that the understanding of the
parties with respect to the subject matter of Section 7(e) of this Agreement
shall be interpreted without regard to any inconsistent provision contained in
Section 5.4 of the Stockholders' Agreement.
8. DEFAULT, BANKRUPTCY, ETC. OF EITHER PARTY. For the purposes of
Section 7 hereof, either party to this Agreement defaults if such party:
(a) materially breaches any material provision of this Agreement and,
after notice of such breach, shall have failed to cure such breach within thirty
(30) days after notice of such breach is given to the breaching party; or
(b) has a petition filed against it for an involuntary proceeding
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, and such petition shall not have been dismissed within
sixty (60) days of filing; or a court having jurisdiction shall have appointed a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official of such party for any substantial portion of its property, or ordered
the winding up or liquidation of its affairs; or
(c) commences a voluntary proceeding under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or shall
have made any general assignment for the benefit of creditors, or shall have
failed generally to pay its debts as they became due.
9
<PAGE>
The defaulting party agrees that, if any of the events specified in subsections
(b) or (c) of this Section 8 shall occur, it shall give written notice thereof
to the other party within seven (7) days following occurrence of such event.
Upon receipt of such notice, or upon becoming aware of a default the other party
may, in its sole discretion, terminate this Agreement immediately upon delivery
of a written notice of such termination to the defaulting party.
9. AMENDMENTS. No provision of this Agreement may be changed, discharged
or terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, discharge or termination is sought.
10. CONFIDENTIALITY. All books, records, information and data pertaining
to the business of PSN and PSN's prior, present or potential shareholders and
customers that are exchanged or received pursuant to the performance of JDCA's
duties under this Agreement shall remain confidential and shall not be disclosed
to any other person, except as specifically authorized by PSN or as may be
required by law.
11. PROPERTY RIGHTS. JDCA and PSN agree that all systems; designs;
programming materials; flowcharts; computer programs; techniques, inventions or
discoveries developed in the context of JDCA's services for PSN pursuant to this
Agreement; and other materials developed or originated by JDCA for PSN pursuant
to this Agreement ("Work Product"), shall be the property of, and are hereby
assigned to, PSN. JDCA and PSN further agree that nothing in this Agreement
shall be deemed to preclude JDCA or PSN from using any ideas, know how or other
information or knowledge ("Ideas") utilized by JDCA in developing the Work
Product, subject to the restrictions of Section 12 of this Agreement. Any Ideas
generated by JDCA other than in the course of performing services for PSN under
this Agreement shall be the exclusive property of JDCA and any Ideas generated
by PSN employees not employed by JDCA shall be the exclusive property of PSN.
12. OTHER BUSINESS AND ACTIVITIES OF JDCA. Except to the extent necessary
to perform JDCA's obligations under this Agreement, nothing herein shall be
deemed to limit or restrict the right of JDCA or any employee of JDCA to engage
in any other business or to devote time and attention to the management or other
aspects of any other business, whether of a similar or dissimilar nature, or to
render services of any kind to any other corporation, firm, individual or
association; provided, however, that during the term of this Agreement, JDCA
agrees not to engage in any activities which are functionally competitive with
the electronic check presentment and related services to be provided by PSN.
PSN acknowledges that, except as provided in subsection (d) of Section 4 of this
Agreement, the persons employed by JDCA to assist in the performance of JDCA's
duties under this Agreement are not required to devote their full time to such
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<PAGE>
service and nothing contained in this Agreement shall be construed to the
contrary.
13. NEGATION OF PARTNERSHIP OR JOINT VENTURE. Nothing contained in this
Agreement shall constitute, or be construed to be or to create, a partnership,
joint venture or lease between JDCA and PSN.
14. MISCELLANEOUS.
(a) Any notice or other instrument authorized or required by this
Agreement to be given in writing to PSN or JDCA shall be sufficiently given if
addressed to that party and received by it at its office set forth below or at
such other place as it may from time to time designate in writing.
To PSN:
NationsBank
411 N. Akard TX1-945-06-02
Dallas, Tx 75283-1000
Attention: Dr. Sydney Smith Hicks
To JDCA:
J.D. Carreker and Associates, Inc.
5550 LBJ Freeway, Suite 700
Dallas, Texas 75240
Attention: Royce D. Brown
Managing Director
(b) This Agreement shall extend to and shall be binding upon the
parties hereto and their respective successors and permitted assigns; PROVIDED,
HOWEVER, that this Agreement shall not be assignable without the written consent
of the other party.
(c) This Agreement shall be construed in accordance with the laws of
the State of Texas.
(d) This Agreement may be executed in any number of counterparts each
of which shall be deemed to be an original and which collectively shall be
deemed to constitute only one instrument.
(e) The captions of this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
(f) This Agreement constitutes the entire agreement between the
parties hereto with respect to the matters described herein.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed and delivered by their duly authorized officers as of the date
first written above.
J.D. CARREKER AND ASSOCIATES, INC. PAYMENT SYSTEMS NETWORK, INC.
By: /s/ J.D. Carreker By: /s/ Dr. Sydney Smith Hicks
----------------------------- ------------------------------
Name: J.D. Carreker Name: Dr. Sydney Smith Hicks
Title: President Title: Chairman
12
<PAGE>
Exhibit B
JDCA
Computation of Fully Loaded Cost -- Example
Quarter Ended
-----------------------
<TABLE>
- -----------------------------------------------------------------------------------------------
Expense amounts to be included in calculation: MO 1 MO 2 MO 3 TOTAL
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Computer related (excluding Data Dallas billings) XXXX XXXX XXXX XXXX
Occupancy and telephone XXXX XXXX XXXX XXXX
Depreciation XXXX XXXX XXXX XXXX
Interest XXXX XXXX XXXX XXXX
Office supplies XXXX XXXX XXXX XXXX
Corporate legal and professional XXXX XXXX XXXX XXXX
Other XXXX XXXX XXXX XXXX
Administrative salaries (excluding JA, JG, & JDC) XXXX XXXX XXXX XXXX
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Salaries
Benefits
- -----------------------------------------------------------------------------------------------
20.33% 19.74% 22.56% 20.91%
- -----------------------------------------------------------------------------------------------
Salaries
Administrative expenses
- -----------------------------------------------------------------------------------------------
33.20% 40.83% 37.94% 37.41%
- -----------------------------------------------------------------------------------------------
</TABLE>
Note:
JA - John Archer, CFO
JG - Judy Grooters, Controller
JDC - Denny Carreker, President
PSN Fully Loaded Cost Example
<TABLE>
<S> <C> <C>
JDCA Employee A Annual Salary $80K
Hourly Rate (Salary DIVIDED BY 2000) $40.00
Benefit Rate ($40 x 20.9% as calculated on the
Attached schedule) 8.36
Administrative ($40 X 37.4% as calculated on the
& Overhead attached schedule) 14.96
------
Total Billing Rate to PSN $63.32
------
</TABLE>
<PAGE>
Exhibit C
Example Operating Expense Base
<TABLE>
1993 1993
- -----------------------------------------------------------------------------------
QTR 1 QTR 2 QTR 3 QTR 4 YR 1
TOTAL
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SOURCES OF REVENUE
Data Communications
-------------------
Installation
Monthly Flat Fee
Monthly Traffic
Store & Forward
Physical Handling
-----------------
PM
AM
Software Remarketing
--------------------
Telco Software
Checidink
Downstream Software Usage
Future Products
---------------
Travelers Checks
Corporate Products
EDI
International
- -----------------------------------------------------------------------------------
TOTAL REVENUE $0 $0 $132,230 $361,045 $483,273
- -----------------------------------------------------------------------------------
COST OF GOODS SOLD
------------------
Installation 0 0 45,000 63,000 106,000
Monthly Flat Fee 0 0 43,275 152,431 195,709
Monthly Traffic 0 0 12,974 46,375 59,349
Store & Forward 0 0 0 0 0
PM 0 0 5,017 13,378 16,395
AM 0 0 799 2,132 2,931
Other Functional Partners 0 0 0 0 0
Telco Software 0 0 0 0 0
Downstream Software Usage 0 0 0 0 0
Other Products 0 0 0 0 0
- -----------------------------------------------------------------------------------
TOTAL GOODS $0 $0 $107,088 $277,316 $364,364
- -----------------------------------------------------------------------------------
GROSS PROFIT
GROSS MARGIN %
OPERATING EXPENSES
------------------
Sales Travel
Commissions
Contract Negot. & Legal Fees
JDCA Mgt. Services
Salaries:
Admin.
Data Communications:
Admin/Prod. Mgmt.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Help Desk
SE/Install
Physical Handling:
Admin/Prod. Mgmt
Transportation
Customer Service
TOTAL SALARIES
PSN overhead expenses
PSN Staff Bonus
- -----------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES
- -----------------------------------------------------------------------------------
______ ACTUAL COST OVERHEAD
INC BEFORE TAX & PROFIT PART
JDCA MGT. FEE OR PROFIT PARTIC.
INCOME BEFORE TAX
INCOME TAXES @33.7%
- -----------------------------------------------------------------------------------
NET INCOME
PROFIT MARGIN %
- -----------------------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit D
Example JDCA Invoice to PSN
J.D. Carreker and Associates, inc.
PSN, Inc.
5550 LBJ Freeway, Suite #700
Dallas, Texas 75240
July billing for services rendered under the terms of the management contract
dated __________________.
<TABLE>
<S> <C>
Management Time:
Denny Carreker xxx Hours
Royce Brown xx Hours
Victoria Bond xx Hours
Sylvie Tomich xx Hours
Total xxx Hours $xxx,xxx
Direct Operating Expenses Paid on Behalf of PSN:
Legal Fees xx,xxx
Travel Expenses xx,xxx
Other xx,xxx
------
Sub-Total $xxx,xxx
Management Fee xx,xxx
------
Total July Billing Amount $xxx,xxx
Less amounts previously advanced for anticipated
man-time costs (xxx,xxx)
Plus 50% of the projected August man-time expense xx,xxx
------
Total amount due with this invoice $xxx,xxx
--------
</TABLE>
<PAGE>
FIRST AMENDMENT TO MANAGEMENT SERVICES AGREEMENT
This FIRST AMENDMENT TO MANAGEMENT SERVICES AGREEMENT ("First
Amendment") is made as of January 31, 1995 by and between J.D. CARREKER AND
ASSOCIATES, INC. ("JDCA") and PAYMENT SYSTEMS NETWORK, INC. ("PSN").
WHEREAS, JDCA and PSN are parties to a Management Services Agreement
(the "Agreement") dated as of November 18, 1993; and
WHEREAS, JDCA and PSN wish to amend the Agreement, effective as of the
date of this First Amendment.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. CAPITALIZED TERMS. Capitalized terms used but not defined herein
shall has the meanings given them in the Agreement.
2. SECTION 4. - PERFORMANCE REQUIREMENTS.
(a) The words "for PSN" at the beginning of the seventh line of
paragraph (a) shall be deleted and replaced with the words "for PSN and
Visa U.S.A., Inc. ("Visa")," and the words "report to PSN and its legal
counsel" at the beginning of the eighth line of paragraph (a) shall be
replaced with the words "report to PSN and Visa and their respective legal
counsel."
(b) The word "PSN" in the first line of paragraph (b) shall be
deleted and replaced with the words "PSN's Board of Directors."
(c) A new sentence shall be added to the end of paragraph (b) as
follows:
"In addition, PSN and its accountants shall have the right to audit
and copy the books of account and records relating to JDCA's
activities with respect to the management and operation of PSN."
(d) A new sentence shall be added to the end of paragraph (d) as
follows:
"Notwithstanding the foregoing, the Board of Directors of PSN, upon
the vote of 75% of the Directors voting at a meeting where a quorum is
present, may require the employment by PSN of a Chief Executive
Officer, a Chief Financial Officer or both."
(e) The words "jointly by JDCA and PSN's Management Committee" at the
beginning of the ninth line of paragraph (f)
<PAGE>
shall be deleted and replaced by the words "by PSN's Board of Directors."
(f) A new subparagraph (h) shall be added as follows:
"(h) At PSN's request and expense, JDCA will arrange for
insurance or bonding of employees designated by PSN."
3. SECTION 5 - COMPENSATION.
(a) The phrase "which are reasonable in amount and which do not
include expenses reimbursed by PSN to JDCA" shall be inserted in the third
line of paragraph (a) after the words "total direct operating expenses."
(b) The words "pre-tax, pre-Management Fee not profits" in the fifth
line of paragraph (a) shall be replaced with the words "pre-tax,
pre-membership fee (expressly excluding membership fees or portions
thereof reasonably imputable to operating revenue), pre-management fee net
operating profits."
4. SECTION 6 - LIMITATION OF LIABILITIES; INDEMNIFICATION.
(a) The word "Notwithstanding" at the start of paragraph (b) shall be
replaced with the phrase "Except as otherwise provided in this paragraph
(b), and notwithstanding." The following provisions shall then be added to
the end of paragraph (b):
"However, if after the end of such three year period, PSN suffers
damages in any calendar year in excess of $100,000 in connection
with the services provided by JDCA hereunder, then PSN may
request, in writing, that JDCA reimburse PSN for the amount of
such damage. Upon receipt of such request from PSN, JDCA may, in
its sole discretion, reimburse PSN for the requested amount,
dispute the requested amount, or refuse to pay the requested
amount. If JDCA elects to dispute the requested amount, then
such dispute shall be resolved in accordance with the procedures
set forth in Section 9.5(e) of the Agreement and Plan of Merger
among PSN, JDCA, and certain other parties dated January 31,
1995, and if the amount of damages is so determined to be less
than $100,000, then PSN shall cease to pursue such reimbursement.
If the amount of damages is so determined to $100,000 or more,
then PSN may request, in determined to be writing, that JDCA
reimburse PSN for the amount of such damages. Upon receipt of
such request from PSN, JDCA may, in its sole discretion,
reimburse PSN for the requested amount, or refuse to pay the
requested amount. If
-2-
<PAGE>
JDCA elects to refuse to pay the requested amount, JDCA shall so
notify PSN in writing, and JDCA shall have no liability
whatsoever to PSN for such amount, but PSN may terminate this
Agreement on not less than thirty (30) days' written notice to
JDCA.
(b) The following provisions shall be inserted between the first and
second sentences of paragraph (d):
"However, if after the end of such three year period, PSN suffers
damages in any calendar year in excess of $100,000 in connection
with the services provided by JDCA hereunder, then PSN may
request, in writing, that JDCA reimburse PSN for the amount of
such damages. Upon receipt of such request from PSN, JDCA may,
in its sole discretion, reimburse PSN for the requested amount,
dispute the requested amount, or refuse to pay the requested
amount. If JDCA elects to dispute the requested amount, then
such dispute shall be resolved in accordance with the procedures
set forth in Section 9.5(e) of the Agreement and Plan of Merger
among PSN, JDCA, and certain other parties dated January 31,
1995, and if the amount of damages is so determined to be less
than $100,000, then PSN shall cease to pursue such reimbursement.
If the amount of damages is so determined to be $100,000 or more,
then PSN may request, in writing, that JDCA reimburse PSN for the
amount of such damages. Upon receipt of such request from PSN,
JDCA may, in its sole discretion, reimburse PSN for the requested
amount, or refuse to pay the requested amount. If JDCA elects to
refuse to pay the requested amount, JDCA shall so notify PSN in
writing, and JDCA shall have no liability whatsoever to PSN for
such amount, but PSN may terminate this Agreement on not less
than thirty (30) days' written notice to JDCA.
5. SECTION 7 - TERMS, RENEWAL, TERMINATION.
(a) The words "from the effective date" shall be deleted from the
third line of paragraph (a) and replaced with the words "from the date of
this First Amendment."
(b) Paragraph (b) shall be deleted in its entirety and replaced with
the following:
This Agreement will be automatically renewed for successive
60-month terms at the end of the term and each subsequent term
unless (i) JDCA notifies PSN no later than one hundred eighty
(180) days prior to the end of the term that JDCA does not desire
to renew this Agreement, in which event this
-3-
<PAGE>
Agreement will terminate at the end of its then current term,
(ii) at the time of renewal JDCA is not competitive in either
price or quality with respect to the provision of the services,
in which event (if JDCA, after being given a reasonable
opportunity to demonstrate that it is competitive in price and
quality, fails to do so), PSN may, terminate this Agreement on
one hundred eighty (180) days prior notice to JDCA or (iii) the
PSN Board of Directors determines that it is in the best interest
of PSN to hire employees for PSN to perform such services. For
the purposes of the preceding sentence, differences in price
shall be considered only with respect to services of
substantially similar nature and quality.
(c) Paragraphs (e) and (f) shall be deleted in their entirety.
IN WITNESS WHEREOF, the parties hereto have duly executed this First
Amendment as of the day and year first above written.
"JDCA" "PSN"
JD CARREKER AND ASSOCIATES PAYMENT SERVICES NETWORK, INC.
By: /s/ J.D. Carreker By: /s/ Sidney S. Hicks
----------------------- -----------------------
Its: Chairman of the Board Its: Chairman of the Board
-4-
<PAGE>
Exhibit 10.12
MANAGEMENT SERVICES AGREEMENT
OF
INFITEQ, LLC
<PAGE>
TABLE OF CONTENTS
Section 1: Definition of Terms
Section 2: Services to be Provided
Section 3: Delivery of Documents
Section 4: Management Services
Section 5: Performance Requirements
Section 6: Compensation
Section 7: Integration and Bundling of INFITEQ Functional Member Services
Section 8: Limitation of Liabilities, Indemnification
Section 9: Term, Renewal
Section 10: Termination for Convenience
Section 11: Termination for Cause
Section 12: Amendments
Section 13: Confidentiality
Section 14: Other Business and Activities of Carreker
Section 15: Negation of Membership or Joint Venture
Section 16: Miscellaneous
LIST OF EXHIBITS
Exhibit A: Delineation of Carreker Management Services and INFITEQ
Operating Expenses
Exhibit B(i): Management Services Compensation - Fee Schedule
Exhibit B(ii): Management Services Compensation - Service Tiers
Exhibit C: Ramp-up Phase Governance Criteria
Exhibit D(i): Ramp-up Phase Revenue Distribution
Exhibit D(ii): Revenue Flow Model - General
Exhibit E: Customer Service Model
i
<PAGE>
MANAGEMENT SERVICES AGREEMENT
This MANAGEMENT SERVICES AGREEMENT ("Agreement") is made as of the 15th
day of January, 1998, between Carreker - Antinori, Inc. ("Carreker"), a Texas
Corporation, and INFITEQ, LLC. ("INFITEQ"), a Delaware limited liability
corporation.
RECITALS
WHEREAS, INFITEQ has been established for the purpose of engaging in the
business of providing services to depository institutions relating to cash
management and other related check processing and check collection functions;
and INFITEQ will not engage in any business or activity not authorized for a
bank holding company.
WHEREAS, INFITEQ desires that Carreker provide, and Carreker is willing
to provide, certain management services to INFITEQ during the term of this
Agreement; NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as
follows:
1. DEFINITION OF TERMS. The following terms used in this Agreement
shall have the following meanings (unless otherwise
expressly provided herein).
(a) "BOARD OF MANAGERS" shall mean the Board of Managers of
INFITEQ.
(b) "BUSINESS PLAN" shall mean the annual projected
revenues, expenses, and general volume, customer, and
product assumptions that comprise the operating budget
of INFITEQ as approved by the Board of Managers.
(c) "CUSTOMER CONTRACT" shall mean the master agreement
between INFITEQ and the respective customer for
services.
(d) "EXECUTIVE COMMITTEE" shall mean the Executive
Committee of INFITEQ.
(e) "FUNCTIONAL MEMBER" shall mean any institution that is
performing a Board of managers approved functional role
for, or service through, INFITEQ. Functional Members
may also be referred to as "Owner Providers" in the
exhibits to this Agreement.
(f) "SPONSOR MEMBER" shall mean Carreker, Fiserv, UPS WWL,
or NPC.
(g) "MANAGEMENT SERVICES" shall mean those services
provided pursuant to the management and operation of
INFITEQ's day-to-day business as more fully set forth
in Section 4 and in Exhibit A of this Agreement.
(h) "OPERATING EXPENSES" shall mean those expenses,
separately accounted for and payable by INFITEQ,
associated with the operation of INFITEQ as
specifically set forth in EXHIBIT A to this Agreement.
1
<PAGE>
(i) "MANAGEMENT FEE" shall mean those fees, separately
accounted for and payable by INFITEQ, associated with
the management of INFITEQ as specifically set forth in
EXHIBIT B(i) to this Agreement.
(j) "RAMP-UP PHASE" shall mean the interim period after
formation where INFITEQ revenues will not be sufficient
to cover expenses incurred to provide adequate
Management Services under contract, as specifically set
forth in EXHIBIT C to this Agreement.
(k) "REVENUE FLOW MODEL" shall mean the method of revenue
distribution within INFITEQ as set forth in EXHIBIT
D(i).
(l) "WORKING AGREEMENTS" shall mean the multi-party service
level agreements that are anticipated to be put in
place with each Customer Contract.
2. SERVICES TO BE PROVIDED. Carreker agrees to render the services
and undertake the duties set forth in Sections 4 and 5 of
this Agreement, for the compensation and on the terms herein
provided.
3. DELIVERY OF DOCUMENTS. Each of the parties will make, execute,
acknowledge and deliver such other instruments and
documents, and take all such other actions, as the other
party may reasonably request and as may reasonably be
required in order to effectuate the purposes of this
Agreement and to carry out the terms hereof.
4. MANAGEMENT SERVICES. Subject to the supervision, direction, and
approval of the Board of Managers and/or the Executive
Committee of INFITEQ, Carreker will operate, manage, direct
and supervise the ongoing conduct of INFITEQ's day-to-day
business from and after the effective date of this Agreement
including without limitation to the following:
(a) Contracting for and purchasing on behalf of INFITEQ all
services and goods to be used in connection with the
operation of INFITEQ's business;
(b) With written Functional Member consent, putting into
effect all advertising or other business solicitation
activities and all business policies with respect to
such advertising or solicitation activities;
(c) Negotiating and entering into contracts on behalf of
INFITEQ with such other service providers and
independent contractors to perform services for INFITEQ
in connection with the operation of INFITEQ's business,
consistent with Section 10.12 of the Limited Liability
Company Operating Agreement and subject to exclusive
right of first refusal by current Sponsor Members
performing like services, and supervising the
administration and monitoring the performance of all
work performed and
2
<PAGE>
services rendered by such other service providers and
independent contractors under all such contracts;
(d) Negotiating and entering into contracts on behalf
INFITEQ with depository institutions whereby INFITEQ
contracts to provide funds management and related
services to such customers and supervising the
administration and monitoring the performance of all
work performed and rendered under such contracts and
the Customer Contracts;
(e) Establishing pricing and packaging for INFITEQ
services;
(f) Undertaking general product development and management
responsibilities of integrated INFITEQ product
offerings, including planning product and services
enhancements and preparation of business proposals to
be presented to the Board of Managers, Executive
Committee, and pertinent standing committees of
INFITEQ, but excluding product development and/or
management of individual functional Member products;
(g) Providing general relationship management of INFITEQ
client base to ensure continuity of quality and
service;
(h) Providing strategic market advice and service direction
for each INFITEQ line of business;
(i) Providing sufficient sales and sales support resources
to achieve INFITEQ revenue and profit objectives as
stipulated in the INFITEQ Business Plan. Carreker will
produce a Monthly Sales Report, Prospective Business
Report and Report of sales activities which will be
provided to each INFITEQ partner. These reports will
include completed sales, identified prospects and
projected value of sales from each. The Report of
Sales Activities will be a summary of sales calls by
sales representative.
Carreker will establish sales objectives for each sales
representative for each of the services offered by the
INFITEQ partners. These sales objectives will be
consistent with the INFITEQ Business Plan and will be
provided to the INFITEQ partners.
(j) Coordinating implementation of Customer Contracts,
including project planning among Functional Members,
depository institutions and customers and INFITEQ;
(k) Preparing and executing contingency plans as required;
3
<PAGE>
(l) Providing customer service as a central point of
contact for INFITEQ customers to resolve issues not
resolved by primary service vendors as set forth in
EXHIBIT E in this Agreement;
(m) Monitoring the performance quality of Functional
Members and recommending any needed changes to Customer
Contract(s) and/or Working Agreements to the Executive
Committee;
(n) Maintaining office facilities for INFITEQ (which may be
in the offices of Carreker);
(o) Coordinating the preparation and distribution of
materials for meetings of the Board of Managers and
committees thereof, as well as advisory groups or
committees;
(p) Furnishing financial advice and services, including
preparation of operating budgets for INFITEQ;
(q) Providing a centralized billing process, and preparing
monthly financial reports;
(r) Coordinating the provision of legal advice and counsel
to INFITEQ;
(s) Coordinating the preparation of reports to INFITEQ's
shareholders of record; and
(t) Generally assisting in all aspects of INFITEQ's
operations.
5. PERFORMANCE REQUIREMENTS.
(a) In performing all services under this Agreement,
Carreker shall (i) act subject to the supervision and
direction of the Board of Managers and/or the Executive
Committee; (ii) consult and coordinate with legal
counsel for INFITEQ, as necessary and appropriate, and
(iii) advise and report to INFITEQ and its legal
counsel, as necessary or appropriate, with respect to
any compliance or other matters that come to its
attention.
(b) Carreker shall consult with the keep INFITEQ advised
concerning all material aspects of Carreker's
activities with respect to the management and operation
of INFITEQ. Carreker shall cause INFITEQ to prepare
and furnish to each Member financial statements of
INFITEQ including a balance sheet as of the end of each
calendar quarter, a statement of income for such
calendar quarter, and statements of Members' equity and
changes in financial position. Such statements will be
audited on an annual basis by INFITEQ's independent
audit firm.
4
<PAGE>
(c) Carreker may submit proposals for its services to be
remarketed through INFITEQ to the Board of Managers or
Executive Committee and shall abstain form voting with
respect to such proposals.
(d) Carreker shall hire full-time employee(s) as such
employee(s) become appropriate or necessary in order to
conduct the operations of INFITEQ, subject to Executive
Committee approval during the Ramp-up Phase.
(e) Each year, Carreker shall prepare a business Plan and
operating budget to be approved by the Board of
Managers. Carreker shall prepare monthly operating
budgets for INFITEQ for the first year of the term of
this Agreement, which shall be consistent with the
Business Plan, to be approved by the Board of Managers.
Included in the Business Plan will be sales object by
product with the expected revenues for the year for
each product. It will also include the sales staffing,
training, promotion, advertising and trade show plans
for the INFITEQ sales force that will be required to
meet the objectives. Also included in the Business
Plan will be a list of speeches and trade show
visibility programs that support sales of INFITEQ
partner services. Carreker will provide each INFITEQ
partner with a list of required marketing collateral
with sufficient lead-time to supply such materials to
support trade shows and other events.
During the term of this Agreement, the timing and
frequency of reporting by Carreker will be determined
by the Executive Committee. Modification of the
Business Plan and/or operating budgets may be made
quarterly and approved by the Board of Managers or
Executive Committee, as appropriate.
6. COMPENSATION. For the services to be rendered and the facilities
to be furnished by Carreker, as provided for in this
Agreement, Carreker shall be compensated by INFITEQ in
accordance with the following terms:
(a) During the Ramp-up Phase, INFITEQ shall pay to Carreker
each month a Management Fee as set forth in Exhibit C.
Carreker may request m0onthly run-rate adjustments from
the Executive Committee as warranted by increased
business activity within INFITEQ. The monthly
Management Fee is subject to the provisions set forth
in EXHIBIT C to this Agreement. In addition to the
monthly Management Fee, incremental revenues above
Functional Member delivery prices to INFITEQ will be
distributed according to the guidelines set forth in
EXHIBIT D(i).
(b) After the Ramp-up Phase of INFITEQ, this Agreement will
convert fully to the "percent of revenue" Management
Fee Compensation Schedule as set forth in EXHIBIT B(i)
to this Agreement. After the Ramp-up Phase,
5
<PAGE>
incremental revenues above Functional Member prices to
INFITEQ will be distributed according to the guidelines
set forth in Exhibit D(ii).
(c) All INFITEQ Operating Expenses will be a part of the
budget submitted for approval to the Board of Managers,
by Carreker, under Section 5 of this agreement.
Expenses incurred by Carreker, without such Board
approval, which would cause INFITEQ to be in a negative
equity position, shall be the responsibility of
Carreker.
Carreker shall also submit an invoice and supporting
documentation for any INFITEQ Operating Expenses
directly incurred in the prior month for immediate
reimbursement. The Invoice for prior month's Operating
Expenses to be reimbursed and current month Management
Fees will coincide.
(d) In addition to the amounts described above, Carreker
shall be paid a 10% commission fee on any additional
capital raised from all new Board of Manager approved
Functional Members.
(e) In the event of any alteration in the Revenue Flow
Model, compensation and revenue flows for Customer
Contracts in place at the time such resolution is
approved by the Board of Managers shall remain in
effect.
(f) For its pre-formation activities between July 1, 1997,
and November 30, 1997, INFITEQ shall pay to Carreker a
one-time fee of $277,500, which will be payable within
30 days of formation, provided that INFITEQ funds are
available.
7. INTEGRATION AND BUNDLING OF INFITEQ FUNCTIONAL MEMBER SERVICES.
to maximize INFITEQ revenue potential, Carreker, or a
subsidiary or affiliate of Carreker, will seek to
integrate and bundle various INFITEQ Functional Member
services. Carreker will identify INFITEQ integration
investment requirements to the Functional Members for
both individual and collective development
opportunities. If, upon formal presentation of the
proposed investment required, the INFITEQ Functional
Member(s) decline(s) to invest or, within 30 days, have
not stated an intention to participate, then Carreker
can seek outside capital investment, subject to
approval by the Board of Managers. Such investors will
have full claim on any incremental profits generated
from the integrated capabilities in accordance with the
INFITEQ Revenue Flow Model set forth in EXHIBIT D(ii)
to this Agreement.
8. LIMITATION OF LIABILITIES; INDEMNIFICATION.
(a) INFITEQ shall indemnify, defend and hold Carreker
harmless from and against any losses arising out of or
relating to (i) any default, breach, violation or non-
performance by INFITEQ of any covenant, condition or
6
<PAGE>
agreement of INFITEQ contained in this Agreement, (ii)
any breach of the representation and warranties of
INFITEQ contained in this Agreement, or any document,
undertaking or certificate required by INFITEQ pursuant
hereto, (iii) any negligent acts or omissions or
willful misconduct by or on behalf of INFITEQ in the
course of fulfilling the obligations of INFITEQ
hereunder, (iv) subject to the terms of this Agreement,
any and all payments made by Carreker to third parties
on behalf of INFITEQ, and (v) all reasonable fees and
expenses incurred in the enforcement of this indemnity
by Carreker; provided that INFITEQ shall not be
required to indemnify Carreker for any losses to the
extent that they are caused by the willful misconduct,
bad faith, or gross negligence of Carreker in
connection with the performance of its services under
this Agreement. Carreker shall not be liable for any
action taken or omitted in good faith at the request or
direction of the Board of Managers of INFITEQ or any
committee thereof in connection with the performance of
Carreker's duties under this Agreement. Carreker shall
also not be liable for actions taken or omitted in good
faith in reliance on advice received from its or
INFITEQ's legal counsel, independent public accountants
or other professional advisors.
(b) Carreker shall indemnify, defend and hold INFITEQ
harmless from and against any losses arising out of or
relating to (1) any default, breach, violation or non-
performance by Carreker of any covenant, obligation,
condition or agreement of Carreker contained in this
Agreement, (ii) any breach of the representations and
warranties of Carreker contained in this Agreement, or
in any document, undertaking or certificate required by
Carreker pursuant hereto, (iii) any negligent acts or
omissions or willful misconduct by or on behalf of
Carreker in the course of fulfilling the obligations of
Carreker hereunder, and (iv) all reasonable fees and
expenses incurred in the enforcement of this indemnity
by INFITEQ, provided that Carreker shall not be
required to indemnify INFITEQ for any losses to the
extent that they are caused by the willful misconduct,
bad faith or gross negligence of INFITEQ.
(c) Each party's indemnification rights shall be their sole
remedy with respect to a party's losses resulting from
third party liabilities. Each party's right to damages
shall be limited to compensatory damages, and no party
to this Agreement shall be liable for any indirect,
special, punitive or consequential damages.
(d) Notwithstanding any other provisions of this Agreement,
Carreker shall not be liable for any loss suffered by
INFITEQ in connection with the performance of
Carreker's obligations and duties under this Agreement
unless INFITEQ has initiated a legal or arbitration
proceeding with respect to such loss within three (3)
years of the occurrence of the event, action or failure
to act giving rise to such loss.
7
<PAGE>
(e) Any dispute or controversy arising between Carreker and
INFITEQ in connection with the interpretation or
enforcement of this Agreement shall be settled
exclusively by binding arbitration in Dallas, Texas in
accordance with the rules of the American Arbitration
Association then in effect and judgment upon the award
rendered may be entered in any court having
jurisdiction thereof.
9. TERM, RENEWAL. Subject to earlier termination as provided in
this Agreement, this Agreement shall become effective on the
date herein and shall remain in force and effect for a term of
ten (10) years, and shall automatically renew thereafter for
successive two (2) year periods, subject to termination by
either party at the end of the original term or any extension
thereof by the giving of written notice of nonrenewal at least
120 days prior to the end of the original term or the extension
thereof, as applicable.
10. TERMINATION FOR CONVENIENCE.
(a) During the Ramp-up Phase, INFITEQ shall not be able to
terminate this Agreement except for cause as provided
in Section 11.
(b) After the Ramp-up Phase, either party may terminate
this Agreement, with or without cause, upon not less
than 180 days prior written notice to the other party.
In no event shall INFITEQ terminate this Agreement for
convenience prior to one year after the effective date
of formation, as defined in the Limited Liability
Company Operating Agreement.
(c) In the event of any termination of INFITEQ pursuant to
this Section 10, in addition to all other amounts owing
to Carreker through the date of termination as provided
herein, Carreker shall be entitled to reimbursement for
any reasonable and documented expenses actually incurred
in connection with a mutually agreed upon unwind period.
Carreker shall use its commercially reasonable efforts to
mitigate all reasonable and documented expenses. Carreker
shall additionally be entitled to continue to receive any
management services revenue in accordance with the Revenue
Flow Model as described in Exhibit D(ii), for any Customer
Contracts as long as those Customer Contracts are in effect.
The provisions set forth in this paragraph apply to all
parts of Section 10 and a termination pursuant to
Section 11(e).
(d) In the event of termination by Carreker pursuant to this
Section 10, INFITEQ shall be entitled to reimbursement for
any reasonable and documented expenses actually incurred in
connection with a mutually agreed upon unwind period.
INFITEQ shall use its commercially reasonable efforts to
mitigate, and permits Carreker as INFITEQ's agent to
mitigate, all reasonable and documented expenses.
8
<PAGE>
(e) Upon any termination hereunder, each party shall deliver to
the other party all property, documents, books and records,
including related software, of the other party then in its
custody or possession. Carreker shall cooperate with
INFITEQ and any successor provider of management services
selected by INFITEQ in the orderly transfer and assumption
of the management responsibilities of INFITEQ.
(f) Except as provided in the Limited Liability Company
Operating Agreement of INFITEQ, the rights and obligations
of Carreker as a Functional Member of INFITEQ shall not be
affected by the termination of this Agreement.
(g) Carreker agrees that subsequent to the expiration of this
Agreement, Carreker shall provide, for a reasonable period
of time, but not to exceed six (6) months without being
subjected to additional premium, such management services
as are reasonably requested by INFITEQ, at a fee to be
mutually agreed upon by INFITEQ and Carreker.
(h) In the event of the acquisition of substantially all
other assets or voting securities of INFITEQ by another
entity, this Agreement shall remain in full force and
effect.
11. TERMINATION FOR CAUSE. Either party may terminate this Agreement
for cause if the other party:
(a) materially breaches any material provision of this
Agreement and, after notice of such breach, shall have
failed to cure such breach within thirty (30) days after
notice of such breach is given to the breaching party; or
(b) commits an act of willful misconduct, gross negligence or
fraud. Such termination may be effected by giving the other
party written notice of termination, which notice shall
specifically identify the act upon which termination is
based; or
(c) has a petition filed against it for an involuntary
proceeding under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, and such
petition shall not have been dismissed within sixty (670)
days of filing; or a court having jurisdiction shall have
appointed a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official of such party for
any substantial portion of its property, or ordered the
winding up or liquidation of its affairs; or
(d) commences a voluntary proceeding under any applicable
bankruptcy, insolvency or other similar law now or
hereafter in effect, or shall have made any general
assignment for the benefit of creditors, or shall have
9
<PAGE>
failed generally to pay its debts as they became due.
The defaulting party agrees that, if any of the events
specified in subsections (b) or (c) of this Section 11
shall occur, it shall give written notice thereof to the
other party within seven (7) days following occurrence of
such event. Upon receipt of such notice, or upon becoming
aware of a default the other party may, in its sole
discretion, terminate this Agreement immediately upon
deliver of a written notice of such termination to the
defaulting party; or
(e) in the case of Carreker, in the event of a merger or
acquisition by a entity resulting in a change of control
in Carreker (a change of control shall occur if the merger
or acquisition results in a significant change of the
current management structure and in the acquiring entity
owning 51% or more of the total stock of Carreker); Carreker
shall use its best efforts to notify the Board prior to any
such change of control; the Board shall then have not more
than 15 days from the date of notification to decide whether
to terminate this Agreement pursuant this clause (e);
provided, however, that a termination pursuant to this
clause shall require the affirmative vote of at lest
two-thirds of the Board of Managers; and provided, further,
Carreker becoming a publicly held company will not be
considered a change of control; or
(f) in the event this Agreement is terminated by INFITEQ
pursuant to this Section 11, Carreker shall be entitled
to costs for services expended through the effective
date of such termination. Termination of Carreker
Management Services shall be separate and apart from
the Customer Contracts and associated revenues Carreker
has as a Functional Member.
12. AMENDMENTS. No provision of this Agreement may be changed,
discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the
change discharge or termination is sought.
13. CONFIDENTIALITY. All books, records, information and data
pertaining to the business of INFITEQ and INFITEQ's prior,
present or potential shareholders and customers that are
exchanged or received pursuant to the performance of Carreker's
duties under this Agreement shall remain confidential and shall
not be disclosed to any other person, except as specifically
authorized by INFITEQ or as may be required by law.
14. OTHER BUSINESS AND ACTIVITIES OF CARREKER. Except to the extent
necessary to perform Carreker's obligations under this Agreement,
nothing herein shall be deemed to limit or restrict the right of
Carreker or any employee of Carreker to engage in any other
business or to devote time and attention to the management or
other aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any
other corporation, firm, individual or association; provided,
however, that during the term of this Agreement, Carreker agrees
not to engage in any activities which are functionally
competitive with the
10
<PAGE>
services to be provided by INFITEQ. INFITEQ acknowledges that
the persons employed by Carreker to assist in the performance
of Carreker's duties under this Agreement are not required to
devote their full time to such service and nothing contained in
this Agreement shall be construed to the contrary.
15. NEGATION OF MEMBERSHIP OR JOINT VENTURE. Nothing contained in
this Agreement shall constitute, or be construed to be or to
create, a partnership, joint venture or lease between Carreker
and INFITEQ.
16. MISCELLANEOUS.
(a) Any notice or other instrument authorized or required
by this Agreement to be given in writing to INFITEQ or
Carreker shall be sufficiently given if addressed to be
that party and received by it at its office set forth
below or at such other place as it may from time to
time designate in writing.
Attention:
To INFITEQ: To Carreker:
___________________ Carreker - Antinori, Inc.
___________________ 14001 N. Dallas Parkway, Suite 1100
___________________ Dallas, Texas 75240
(b) This Agreement shall extend to and shall be binding
upon the parties hereto and their respective successors
and permitted assigns; PROVIDED, HOWEVER, that this
Agreement shall not be assignable without the written
consent of the other party; except that Carreker shall
have the absolute right to assign this Agreement to a
subsidiary or affiliate. In the event that Carreker
assigns this Agreement to an affiliate or subsidiary,
there shall be no unaffiliated third-party owner in
such entity without the written consent of the Board of
Managers of INFITEQ.
(c) This Agreement shall be construed in accordance with
the laws of the State of Texas.
(d) This Agreement may be executed in any number of
counterparts each of which shall be deemed to be a
original and which collectively shall be deemed to
constitute only one instrument.
(e) The captions of this Agreement are included for
convenience of reference only and in no way define or
limit any of the provisions hereof or otherwise affect
their construction or effect.
(f) Sections 8, 10(c), 10(e), 10(g), 11(f), 13, and 16 shall
survive termination of this Agreement.
11
<PAGE>
(g) This Agreement constitutes the entire agreement between the
parties hereto with respect to the matters described herein.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed and delivered by their duly authorized officers as of the
date first written above.
INFITEQ, LLC
Carreker-Antinori, Inc. Fiserv Solutions, Inc.
By: /s/ J.D. Carreker By: /s/ Norman J. Baltmasar
- ------------------------------ ----------------------------------
Name: J.D. Carreker Name: Norman J. Baltmasar
- ------------------------------ -------------------------------
Title: Chairman Title: Executive Vice President
- ------------------------------ ------------------------------
Carreker-Antinori, Inc., as Member
By: /s/ J.D. Carreker
---------------------------------
Name: J.D. Carreker
------------------------------
Title: Chairman
------------------------------
UPS Worldwide Logistics, Inc., as member
By: /s/ Danise P. Magio
---------------------------------
Name: Danise P. Magio
Title: SVP Chief Operating Officer
------------------------------
National Processing Company, as member
By: /s/ David R. Zork
---------------------------------
Name: David R. Zork
Title: Executive Vice President
------------------------------
12
<PAGE>
Exhibit A
DELINEATION OF CARREKER MANAGEMENT SERVICES
AND INFITEQ OPERATING EXPENSES
<TABLE>
Management Services INFITEQ Operating Expenses
------------------- --------------------------
<S> <C> <C> <C>
(1) Buyer/Seller of INFITEQ Services (1) Financial Mgmt/Reporting
(2) Functional Partner (2) CEO/CFO Allocations
Development/Management (3) Audit/Tax
(3) Product Development/Mgmt (4) INFITEQ Legal
(4) Relationship Management (5) Insurance/Risk Management
(5) General Sales (6) Marketing and Promotion
(6) Sales Support of INFITEQ - Tradeshows/Public Relations
Customer Base - Brochures/Collateral
(7) Customer Service - Internet/Intranet Development
(8) Implementation Support/Mgmt
(9) Performance Tracking
(10) Billing/Collections
(11) General Management Duties for
Day-to-Day Operations
</TABLE>
Notes:
- - Management Services Fees shall be paid as set forth in exhibit B(i)
- - INFITEQ Operating Expenses, as approved by the Executive Committee, shall
be paid directly from an INFITEQ account specifically designated for
this purpose. As the paying agent, Carreker shall provide a detailed
accounting of all Operating Expenses on a monthly basis.
- - During the Ramp-up phase, INFITEQ Operating Expenses will be paid from
funds held in the INFITEQ capital account.
- - The intent of the methods stated above is to equitably allocate INFITEQ
Operating Expenses amongst Functional Members relative to the benefit
received; however, the Executive Committee may review at any time
these methods in their entirety, or for specific situations, and
implement alternate methods as it sees fit.
13
<PAGE>
Exhibit B(i)
MANAGEMENT SERVICES COMPENSATION
- FEE SCHEDULE
<TABLE>
Projected Categories of
Management Services Requirements Percent of Provider Revenue
-------------------------------- ---------------------------
<S> <C> <C>
I. "Off-the-Shelf" Customer 4%-Management content illustrated
Contracts in Exhibit B(ii)
3%-Discounted Provider pricing
and/or minimal Carreker
management content.
II. Integrated Customer Contracts 7%-Management content illustrated
in Exhibit B(ii)
5%-Discounted Provider pricing
and/or reduced Carreker
management content
III. Product Development/Integration by Compensation for Carreker Product
Management Services to be determined
on a project-by-project basis.
IV. Service Warehouse Development Compensation for Carreker Management
Services to be determined on a
project-by-project basis. Members
may or may not elect to participate
in the funding of the Service
Warehouse development.
</TABLE>
NOTES:
- - DISCOUNTED PROVIDER PRICING is defined as less than acceptable minimum
Provider margins (e.g. 10%) for services in a given Customer Contract.
- - "OFF-THE-SHELF" Customer Contracts, as illustrated in Exhibit B(ii), are
defined as single Provider Customer Contracts where mark-up opportunities
are considered minimal.
- - INTEGRATED Customer Contracts, as illustrated in Exhibit B(ii), are defined
as multi-Provider Customer Contracts where Carreker has bundled services
from two or more Providers of INFITEQ including additional tangible
services and/or software, consulting, or training services to be provided
to a Customer or Client Bank. Integrated Customer Contracts will require
more Carreker management Services, and thus entail higher management
compensation rates.
14
<PAGE>
Exhibit B(i)
- - Providers will contribute the percent of revenue stated above only to the
extent that INFITEQ mark-up over cost of service from the Provider does not
meet the agreed upon rate of compensation.
- - SERVICE WAREHOUSE is defined as the information management system which
will support INFITEQ service offerings. The Service Warehouse will be
funded out of additional capital raised from Sponsor Members and new
Functional Members that elect to participate in its funding.
15
<PAGE>
Exhibit B(ii)
MANAGEMENT SERVICES COMPENSATION
- SERVICE TIERS
Select participation
of investment by
partners Service Warehouse
Development
Project Product Development/
Budget Integration by Product
TBD (MORE PARTNER SPECIFIC)
5-7% of
Provider Revenue
--------------------------------------------------------------
More Integrated Customer Contracts - Mgmt Services
-------------------------------------------------------
- Product Development/Mgmt - Implementation
- Sales Support of INFITEQ Support/Mgmt
Customers - Customer Service
- Financial Partner Mgmt - Buyer/Seller of Services
--------------------------------------------------------------
3 - 4% of
Provider
Revenue
--------------------------------------------------------------------------
"Off-the-Shelf" Customer Contracts - Management Services
--------------------------------------------------------
- General Sales Lead Dev. - Billing/Collection - Marketing/PR
- Relationship Mgmt - Performance Tracking (Dev./Mantime)
- General Management - Product Packaging
- Customer Service (minimal)
--------------------------------------------------------------------------
16
<PAGE>
RAMP-UP PHASE GOVERNANCE CRITERIA
- - Commencing December 1997 and continuing through the Ramp-up Phase.
INFITEQ shall pay to Carreker each month a Management Fee equal to $45,000
per month to be paid the first week of each month. Carreker will also be
reimbursed for out-of-pocket expenses up to $10,000 per month. Expenses
exceeding $10,000 per month shall require prior Executive Committee
pproval.
- - In general, the Ramp-up Phase is the pre-defined period of time where
INFITEQ revenues will not be sufficient to cover required Operating
Expenses and management Services Fees.
- - The Executive Committee can authorize either termination of the Ramp-up
Phase or adjustments to the INFITEQ Operating Budget based on any of the
following criteria:
- INFITEQ revenues are sufficient to cover Carreker Management Services
Fees (a minimum of $75,000 per month) and INFITEQ Operating Expenses
- INFITEQ capital account balance has no remaining working capital
- Twenty-four months has expired since the date of formation of INFITEQ
- - Ramp-up Phase operating budget will be reviewed monthly by the Executive
Committee of INFITEQ.
- - Working capital requirements during the Ramp-up Phase will be determined
by the following calculation:
(A) INFITEQ Cost of Goods Sold {Provider Price(s)}
(B) Carreker Management Services Fees
(C) INFITEQ Operating Expenses
INFITEQ REVENUE - (A) - (B) - (C) = RAMP-UP PHASE MONTHLY
WORKING CAPITAL REQUIREMENT
17
<PAGE>
RAMP-UP PHASE REVENUE DISTRIBUTION
Scenario Scenario B Scenario C
-------- ---------- ----------
Off-the-Shelf Integrated (Mark-Up) Integrated (Value Based)
[GRAPH]
SCENARIO A SCENARIO B SCENARIO C
---------- ---------- ----------
- Scenario A - Scenario B - Scenario C
represents a revenue represents a revenue represents a revenue
stream from a stream from a stream from a
Customer Contract Customer Contract Customer contract
where Carreker may where Carreker has where Carreker has
not be able to mark bundled services bundled services
up services from one from 2 Providers, from two Providers
Provider due to but is not able to and provided
price sensitivities mark up the training and
in the market. Any aggregate Provider implementation
mark-up over the Prices more than 5% support as part of
Provider price due to price the aggregate
Carreker is able to sensitivities in the Provider Price to
achieve will flow market. INFITEQ.
directly to
Carreker.
18
<PAGE>
SCENARIO A SCENARIO B SCENARIO C
(CONTINUED) (CONTINUED) (CONTINUED)
----------- ----------- -----------
- Management - Revenues from the - Carreker is able
Services Fees are 5% mark-up flow to mark up the
for "off-the-shelf" directly to Carreker aggregate Provider
scope, and will be for Management Price by 4% to the
4% of Provider Services Fees. INFITEQ customer.
revenue as set forth In addition to the
in EXHIBIT B(i). - In order to 4% mark-up, Carreker
Providers distribute satisfy the "% of is able to develop a
rebates equivalent Revenue" Management float sharing
to 4% of Provider Fee compensation arrangement with the
revenue to Carreker requirements set INFITEQ customer
during the Ramp-up forth in EXHIBIT because of
Phase. B(i), Providers, at significant value
their option, may associated with the
either: (a) integrated offering
distribute rebates (e.g. significant
equivalent to 2% of revenue increase
Provider revenue to opportunities).
Carreker, (b) offer
INFITEQ reduced - Revenues from the
processing fees for 4% mark-up and float
this particular flow directly to
transaction which Carreker. Revenues
may be acceptable to from the Carreker
the customer and Provider Services of
INFITEQ, but may training and
still result in a implementation
lower margin to support also flow
INFITEQ than 5%, or directly to
(c) decline to bid. Carreker.
- "% of Revenue"
Management Fee
compensation
requirements for
integrated services
(i.e. 7% of Provider
Revenue as set forth
in EXHIBIT B(i)) are
met because of
additional float
sharing revenue
Carreker is able to
negotiate with the
INFITEQ customer as
part of contract
term
19
<PAGE>
Exhibit D(ii)
REVENUE FLOW MODEL - GENERAL
[GRAPH]
20
<PAGE>
Exhibit E
CUSTOMER SERVICE MODEL
[GRAPH]
21
<PAGE>
STRATEGIC ALLIANCE AGREEMENT
THIS STRATEGIC ALLIANCE AGREEMENT ("AGREEMENT"), is made effective as of
October 1996, by and between SCIENCE APPLICATIONS INTERNATIONAL CORPORATION,
a Delaware corporation ("SAIC"), and THE CARREKER GROUP, INC., a Texas
corporation ("CARREKER"), who agree as follows:
1. RECITALS. This Agreement is entered into in contemplation of the
following facts and circumstances:
1.1 OBJECTIVES. Carreker and SAIC desire to establish an
arrangement whereby they can in the future jointly offer such services,
products and technology as they may possess to prospective users of the
services, products and/or technology the parties may offer with particular
emphasis on commercial financial institutions and federal government
agencies ("CUSTOMERS") pursuant to terms, conditions and prices mutually
agreed upon by the parties in advance of entering any contract with a
Customer. The parties also anticipate that each may identify opportunities
which they do not pursue jointly, but with respect to which the services,
products and/or technology of the other party may be marketed and sold to a
Customer. This Agreement pertains only to the SAIC Financial Services
Practice within SAIC's Technology Solutions Sector (the "SAIC FINANCIAL
SERVICES PRACTICE").
1.2 PURPOSE. This Agreement (a) sets forth (i) the provisions and
conditions pursuant to which either party may identify and advise the other
party of a mutually beneficial business opportunity and (ii) the
circumstances under which parties may pursue the opportunity jointly, and
(b) establishes the basis of payments to a party that introduces an
opportunity which is not pursued jointly but with respect to which the
other party successfully markets and sells its services, products and/or
technology.
2. SCOPE OF AGREEMENT. The parties specifically acknowledge and agree
that this Agreement shall not apply to any work or contracts that commenced
prior to the date of this Agreement, unless the parties otherwise agree in
writing. This Agreement is not an exclusive dealings agreement and each party
is free to do business with others with respect to Customers or otherwise;
PROVIDED, HOWEVER, during the first three (3) years of this Agreement, Carreker
shall provide SAIC with a preferential opportunity to provide services, products
and/or technology to each prospective Customer that Carreker solicits in those
instances where it appears to Carreker that a teaming relationship is necessary
and that SAIC could provide the services, products and/or technology that is the
subject matter of the solicitation.
3. MUTUAL BUSINESS OPPORTUNITIES.
3.1 REPRESENTATIVES. Each party shall designate one or more
authorized representatives to interact with the other for purposes hereof
("REPRESENTATIVE") until such time as either party notifies the other of
its decision to designate a new Representative.
<PAGE>
3.2 REVIEW OF OPPORTUNITIES. The parties' Representatives may
select and submit to the other for its consideration such business
opportunities identified by a party that the party believes may be of
mutual interest and the Representatives shall jointly determine whether to
pursue such business opportunity together. If the parties determine to
pursue an opportunity jointly, they also shall determine the terms,
conditions and prices that will be offered to the prospective Customer and
the strategy by which the parties will attempt to acquire the business
(including, without limitation, designation of the party which shall serve
as the prime contractor, the party which will perform the necessary
services and provide the appropriate products and/or technology, and the
party which will assume responsibility for presentation of the parties'
proposal). The Representatives shall meet and confer, either in person or
by teleconference, at least once monthly, to discuss prospective business
opportunities and performance with respect to existing accounts.
3.3 COOPERATION. If the parties pursue a business opportunity
jointly, each party shall utilize commercially reasonable efforts to market
and obtain the targeted business; PROVIDED, HOWEVER, that the parties shall
coordinate their activities so as to provide a unified presentation to the
prospective Customer.
4. TRANSACTIONS.
4.1 JOINT TRANSACTIONS. Whenever a mutually satisfactory contract
to perform or provide services, products and/or technology to a Customer
has been obtained due to the active and substantial marketing and sales
efforts of both parties, Carreker will have the right to provide services,
products and/or technology having a value up to fifty percent (50%) of the
estimated value of the contract and Carreker shall be entitled to its
proportion of the revenue derived from the services, products and/or
technology provided by Carreker. SAIC shall provide or obtain all
services, products and/or technology not provided by Carreker and shall
receive the revenue represented by the proportion of the revenue derived
from the services, products and/or technology provided by SAIC.
4.2 SOLE EFFORTS TRANSACTIONS. Whenever a mutually satisfactory
contract to provide services, products and/or technology to a Customer has
been obtained by the sole marketing and sales efforts of such party, the
contracting party shall make a commercially reasonable good faith effort to
enter into a subcontract or other arrangement to have the other party
provide up to five percent (5%) of the services, products and/or technology
required under the contract and the non-contracting party shall receive its
share of revenues accordingly.
4.3 FACILITATING TRANSACTIONS. Whenever a mutually satisfactory
contract to provide services, products and/or technology to a Customer has
been obtained by a party and the other party has provided limited
solicitation assistance, such as by way of introduction, endorsement,
referral or similar facilitating activity ("FACILITATING EFFORT"), the
contracting party shall make a commercially reasonable good faith effort to
enter into
2
<PAGE>
a subcontract or other arrangement to have the party providing the
Facilitating Effort to provide up to five percent (5%) of the services,
products and/or technology required under the contract and the party
providing the Facilitating Effort shall receive its share of the revenues
accordingly; PROVIDED, HOWEVER, that any contract under this Section 4.3
entered into must have been entered into within one (1) year of the
performance of the initial Facilitating Effort.
4.4 LIMITATION. Notwithstanding the foregoing, should it be
discovered that any SAIC organization or affiliate other than the SAIC
Financial Services Practice is marketing, performing or providing services,
products and/or technology independently of the relationship described in
this Agreement, no subcontracting shall be required by the other SAIC
organization or affiliate with Carreker.
5. BUSINESS DEVELOPMENT COMMITMENT.
5.1 During the first two (2) years of this Agreement, Carreker and
SAIC agree to confer, develop, fund (either through the utilization of
internal personnel, resources, facilities, equipment, products and/or other
assets or by contributing cash) and implement mutually acceptable business
development plans approved in advance in writing by Carreker's President
and SAIC's Technology Solutions Sector Manager and which will consist of
(a) a public relations promotional program (the "PR PROGRAM") and (b) the
development of a joint marketing and sales plan such as, but not limited to
an electronic commerce strategic plan.
5.2 Each party shall equally contribute up to Twenty Thousand
Dollars ($20,000) in value per year to fund the PR Program, subject to a
maximum total contribution by each party of Forty Thousand Dollars
($40,000).
5.3 Each party shall equally contribute up to One Hundred Thousand
Dollars ($100,000) in value per year to fund the marketing and sales plan
agreed mutually upon and referred to in Section 5.1 above, subject to a
maximum total contribution by each party of Two Hundred Thousand Dollars
($200,000).
6. CONTRACTING.
6.1 With respect to any undertaking proposed under this Agreement,
the parties shall confer and determine which of them should be the party
contracting with the Customer (the "PROJECT LEADER").
6.2 Each party shall (i) provide appropriate information and
personnel and use commercially reasonable good faith efforts to timely
prepare and submit to the Project Leader such data as are required for use
in preparation of that part of the proposal to be submitted to the Customer
and the services, products and/or technology to be provided
3
<PAGE>
to the Customer and (ii) provide all other reasonable assistance to the
Project Leader in preparation of a proposal.
6.3 The Project Leader shall prepare the proposal, integrate the
information and data provided by the parties, submit the proposal to the
other party for advance review and written approval and submit the
resulting proposal to the Customer.
6.4 The Project Leader shall propose and promote the other party
as the subcontractor for the services, products and/or technology to be
provided under the contract with the Customer by such party.
6.5 The parties shall perform such additional effort subsequent to
submittal of the proposal to the Customer as appears reasonable to obtain
the contract with the Customer.
6.6 Each party shall perform its respective obligations described
in the contract with the Customer in a proper and workmanlike manner and in
accordance with the specifications, terms and conditions of the contract
with the Customer.
6.7 Any and all costs, expense or liability of either party caused
by or arising out of this Agreement, its implementation, amendment, or
expansion, shall be borne by each party separately and individually and
neither party shall be liable or obligated to the other for any such cost,
expense or liability except to the extent that such costs, expense, or
liabilities are reimbursed, paid or provided for, under a written agreement
entered into between the parties.
7. COMPLIANCE WITH LAW. Each Party agrees that in carrying out its
duties and responsibilities under this Agreement, it will neither undertake, nor
cause nor permit to be undertaken any activity which either (a) is illegal under
any laws, decrees, rules or regulations in effect in the United States, any
state or territory or in any other applicable jurisdiction, or (b) would have
the effect of causing the other party to be in violation of any laws, decrees,
rules or regulations in effect in the United States, any state or territory or
in any other applicable jurisdiction. Each party further acknowledges and
agrees that if either party breaches this Paragraph 7: (i) the non-breaching
party shall have the immediate right to terminate this Agreement; and (ii) the
breaching party shall indemnify the non-breaching party for any penalty, loss or
expenses incurred by the non-breaching party as a result of any such breach.
8. OWNERSHIP OF PRODUCTS AND WORK PRODUCT. Any patent, trademark,
copyright or intellectual property right in any software, software enhancements,
products, services, technology, inventions, proprietary information or work
product ("PRODUCTS") produced or created solely by one party as a result of the
activities contemplated by this Agreement shall be the sole and exclusive
property of such party. With respect to Products that are created directly as a
result of the combined work efforts of both parties (and not merely because the
4
<PAGE>
contract with the Customer was jointly solicited), unless otherwise agreed in
advance in a document signed by Carreker's President and SAIC's Technology
Solutions Sector Manager, each party shall have a one-half (1/2) undivided
interest in the Products without a duty to account to the other, provided
that the Products are created or developed solely by the combined work
efforts of the parties and not merely because the contract was jointly
solicited.
9. CONFIDENTIAL AND/OR PROPRIETARY INFORMATION.
9.1 The parties anticipate that under this Agreement it may be
necessary for either to transfer to the other information of a confidential
and/or proprietary nature ("CONFIDENTIAL INFORMATION"). Confidential
Information shall be clearly identified by the disclosing party at the time
of disclosure either by being marked with a legend clearly indicating that
it is confidential or proprietary and all oral information that is reduced
to writing and is identified as being confidential or proprietary and such
writing is given to the recipient within fifteen (15) days of the date of
the oral disclosure. Any information otherwise provided shall be deemed to
not be confidential or proprietary.
9.2 Each of the parties agree that it will use the same efforts to
protect such Confidential Information as are used to protect its own
Confidential Information. Disclosures of such Confidential Information
shall be restricted to those individuals who are directly participating in
the proposal and contracting efforts hereunder.
9.3 Neither party shall make any reproductions, disclosure or use
of such Confidential Information except in performing its obligations under
this Agreement and as are set forth in the proposal to the Customer, with
appropriate restrictive legends to the extent that either party
specifically requests, and such legends as are permitted by the Customer's
regulations.
9.4 The limitations on reproduction, disclosure or use of
Confidential Information shall not apply to, and neither party shall be
liable for reproduction, disclosure or use of Confidential Information with
respect to which any of the following conditions exist:
(a) If, prior to the receipt thereof under this Agreement,
it has been developed independently by the party receiving it, or was
lawfully known to the party receiving it, or has been lawfully
received from other sources, including the Customer, provided such
other source did not receive it due to a breach of this Agreement;
(b) If, subsequent to the receipt thereof under this
Agreement, (i) it is published by the party furnishing it or is
disclosed by the party furnishing it to others, including the
Customer, without restriction, or (ii) it has been lawfully obtained
by the party receiving it from other sources, including the Customer,
5
<PAGE>
provided such other source did not receive it due to a breach of this
Agreement, or (iii) if such information otherwise comes within the
public knowledge or becomes generally known to the public; or
(c) If any part of the Confidential Information has been or
hereafter shall be disclosed in a United States patent issued to the
party furnishing the Confidential Information hereunder, then, after
the issuance of said patent, the limitations on such Confidential
Information as disclosed in the patent shall be only that afforded by
the United States Patent Laws.
9.5 Neither the execution and delivery of this Agreement, nor the
furnishing of any Confidential Information by either party shall be
construed as granting to the other party either expressly, by implication,
estoppel, or otherwise, any license under any invention, patent, trademark,
or copyright now or hereafter owned or controlled by the party furnishing
same.
9.6 Notwithstanding the expiration of the other portions of this
Agreement, the obligations and provisions of this Article 9 shall continue
until terminated by either party upon five (5) days written notice to the
other; PROVIDED, HOWEVER, that the terms and conditions of this Article
shall continue to apply to all Confidential Information disclosed prior to
the effective date of such termination.
9.7 Each of the parties shall identify a person responsible for
receipt of Confidential Information subject to this Article.
10. RELATIONSHIP OF PARTIES.
10.1 INDEPENDENT CONTRACTORS. The parties hereto intend that the
relationship between them created by this Agreement shall be that of
independent contractors and that the relationship shall continue as such as
long as this Agreement remains in effect. Nothing contained in this
Agreement shall be construed to constitute either party as a partner,
employee or agent of the other, and no employee or agent of either party
shall be or be deemed to be the employee or agent of the other.
10.2 SCOPE OF AGREEMENT. Neither party shall have the authority to
make any agreement or commitment, or incur any liability on behalf of the
other party, nor shall either party be liable for any acts, omissions to
act, contracts, commitments, promises or representations made by the other,
except as specifically authorized in this Agreement or as the parties
hereafter may agree in writing.
11. INDEMNIFICATION. Each party shall be solely responsible for the
performances of its acts, duties and responsibilities under this Agreement and
for the acts, duties and responsibilities of its officers, employees and agents;
and each party agrees to indemnify the
6
<PAGE>
other, its officers, employees and agents, and to hold harmless the other,
its officers, employees and agents, and, at the indemnifying party's sole
expense, to defend the indemnified party, its officers, employees and agents,
from and against any claims, demands, causes of action, loss, cost and
expense, arising from, in connection with or based upon the actions or
omissions of the indemnifying party, its officers, employees or agents
pursuant to or in contravention of the provisions of this Agreement.
12. TERMINATION. This Agreement shall have an initial term of three (3)
years. Thereafter, except as to any contracts entered into with Customers
hereunder, either party shall have the right to terminate this Agreement at any
time, with or without cause, effective upon thirty (30) day's written notice to
the other party. Any amounts earned by either party as of the date of notice of
termination shall survive termination and shall continue to be payable, but
neither party shall be entitled to receive or obligated to pay any damages in
connection with such termination.
13. ARBITRATION OF DISPUTES. The parties agree that any controversy or
claim (whether such controversy or claim is based upon or sounds in statute,
contract, tort or otherwise) arising out of or relating to this Agreement, any
performance or dealings between the parties, or any dispute arising out of the
interpretation or application of this Agreement, which the parties are not able
to resolve, shall be settled exclusively by arbitration in Dallas, Texas by a
single arbitrator pursuant to the American Arbitration Association's Commercial
Arbitration Rules then obtaining and judgment upon the award rendered by the
arbitrator shall be entered in any court having Jurisdiction thereof and such
arbitrator shall have the authority to grant injunctive relief in a form similar
to that which a court of law would otherwise grant. The arbitrator shall be
chosen from a panel of licensed attorneys familiar with the subject matter of
this Agreement and shall be appointed within thirty (30) days of the date the
demand for arbitration was sent to the other party. Discovery shall be
permitted in accordance with the Federal Rules of Civil Procedure. If an
arbitration proceeding is brought pursuant to this Agreement, the prevailing
party shall be entitled to recover reasonable attorneys' fees, costs and
necessary disbursements incurred in addition to any other relief to which such
party may be entitled.
14. CHOICE OF LAW. The Agreement and the performance or breach thereof
shall be governed by and interpreted as to substantive matters in accordance
with the applicable laws of the State of Texas (excluding its choice of law
rules).
15. ASSIGNMENT. No portion of this Agreement or any right or obligation
hereunder can be assigned, in whole or in part, by either party hereto without
the prior written consent of the other party.
16. ENTIRE AGREEMENT. This Agreement contains the final, complete and
exclusive agreement of the parties with respect to the subject matter hereof and
supersedes all previous verbal and written agreements. This Agreement cannot be
amended, in whole or in part, without a written instrument signed by both of the
parties hereto.
7
<PAGE>
17. WAIVER. No waiver of, no delay in the exercise of, and no omission to
exercise any rights or remedies by either party shall be construed as a waiver
by such party of any other rights or remedies that such party may have under
this Agreement.
18. NOTICE. Unless otherwise specified herein, any notice required or
permitted to be given under this Agreement shall be sufficient, if in writing,
and shall be deemed to be fully given if personally delivered, if sent by
registered mail, by facsimile with an original copy by regular mail, or by telex
with receipt acknowledged, to the following addresses:
(a) If to SAIC, to:
Kevin E. Murphy
Science Applications International Corporation
1299 Prospect St., Suite 303
La Jolla CA 92037
With a copy to:
Kevin A. Werner, Esq.
Corporate Counsel
Science Applications International Corporation
10260 Campus Point Drive, M/S F3
San Diego CA 92121
(b) If to Carreker, to:
Douglas Eubanks
Executive Vice President
The Carreker Group, Inc.
14001 North Dallas Parkway, Suite 1100
Dallas TX 75240
The foregoing addresses and individuals may be changed by either party by giving
to the other party prior written notice of any such change.
19. COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
20. THIRD PARTIES. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any person or corporation other than the parties hereto
and their successors or assigns, any rights or remedies under or by reason of
this Agreement.
8
<PAGE>
21. FURTHER ASSURANCES. Each of the parties hereto agrees that from time
to time, at the request of any of the other parties hereto and without further
consideration, it will execute and deliver such other documents and take such
other action as such other party may reasonably request in order to consummate
more effectively the transactions contemplated hereby.
IN WITNESS WHEREOF, as of the day first above written, the SAIC and
Carreker have caused this Agreement to be signed by their respective duly
authorized officer.
SCIENCE APPLICATIONS
INTERNATIONAL CORPORATION,
a Delaware corporation
By: /s/ Kevin Werner
---------------------------------------
Name: Kevin Werner
-------------------------------------
Title: Corp. Vice President
------------------------------------
THE CARREKER GROUP, INC.,
a Texas corporation
By: /s/ J.D. Carreker
---------------------------------------
Name: J.D. Carreker
-------------------------------------
Title: President
------------------------------------
9
<PAGE>
EXHIBIT 10.15
SETTLEMENT AGREEMENT
This Settlement Agreement (this "Agreement"), dated as of January 29,
1998, is between Ronald R. Antinori, an individual ("Mr. Antinori"), and
Carreker-Antinori, Inc., a Texas corporation (the "Company").
RECITALS
Mr. Antinori was the majority shareholder of Antinori Software, Inc., a
Georgia corporation ("ASI"). On January 31, 1997, a wholly-owned subsidiary of
the Company merged with and into ASI, with the result that ASI then became a
wholly-owned subsidiary of the Company (the "Merger").
The Merger occurred pursuant to that certain Agreement and Plan of Merger
dated as of January 29, 1997 between the Company (then named The Carreker
Group, Inc.), such wholly-owned subsidiary and ASI (the "Merger Agreement").
In the Merger, Mr. Antinori received 458,007 shares of the Company's Class
A Voting Common Stock.
Pursuant to that certain Escrow Agreement entered into as of January 31,
1997 among the Company, Mr. Antinori, Susan Antinori (Mr. Antinori's spouse),
Michael Israel and U.S. Trust Company of Texas, N.A., as escrow agent (the
"Antinori Escrow Agreement"), Mr. Antinori placed 22,873 shares of the
Company's Class A Voting Common Stock into an escrow account to secure
indemnification obligations to the Company and other Indemnified Persons (as
defined in Section 10.2 of the Merger Agreement).
Subsequent to the Merger the parties have decided that an adjustment to
the relative valuation of ASI and the Company is appropriate for reasons
including, but not limited to, the developmental status of the "ASI 17" and
"Odyssey" products as of the closing date of the Merger. Mr. Antinori and the
Company also desire to fully and finally settle certain claims, to avoid
continued or future disputes and controversies regarding those claims, to
provide peace of mind for both parties, and to eliminate and forego the
nuisance of possible litigation and the financial costs of such litigation.
In consideration of the foregoing recitals and other good and valuable
consideration, the receipt and sufficiency of which the parties acknowledge,
the parties agree as follows:
1. CANCELLATION; RELEASE FROM ESCROW. The 22,873 shares of the Company's
Class A Voting Common Stock that Mr. Antinori placed into the escrow
established by the Antinori Escrow Agreement shall be released to the Company,
for cancellation pursuant to the terms thereof. An original or photocopy of
this Agreement, delivered to U.S. Trust Company of Texas, N.A., shall
constitute joint notice by the Company and Mr. Antinori, and direction to U.S.
Trust Company of Texas, N.A. per Section 4(b) of the Antinori Escrow Agreement,
that such 22,873
<PAGE>
shares are to be released to the Company, for cancellation.
In addition to the foregoing shares to be released from escrow, Mr.
Antinori, as the principal shareholder of ASI prior to the Merger, agrees to
return to the Company, on the earlier to occur of (a) Lawrence D. Duckworth's
exercise of his options on Company stock held by Mr. Antinori, as described in
Section 8, and (b) March 31, 1998, in either case for cancellation, an
additional 18,300 shares of the Company's Class A Voting Common Stock. Such
shares, when combined with the shares to be released from escrow (as referred
to in the foregoing paragraph) by Mr. Antinori and two other former ASI
shareholders, in all cases valued at the per share value determined as of the
time of the Merger, are intended to effectuate an adjustment to reflect the
relative values of ASI and the Company at the time of the Merger.
2. RELEASE FROM ESCROW TO J.D. CARREKER. In connection with Merger
Agreement, J.D. Carreker deposited 25,700 shares of the Company's Class A
Voting Common Stock into an escrow pursuant to that certain Escrow Agreement
entered into as of January 31, 1997 among the Company, Mr. Carreker and U.S.
Trust Company of Texas, N.A., as escrow agent (the "Carreker Escrow
Agreement"). An original or photocopy of this Agreement, delivered to U.S.
Trust Company of Texas, N.A., shall constitute joint notice by the Company and
Mr. Carreker, and direction to U.S. Trust Company of Texas, N.A. per Section
4(b) of the Antinori Escrow Agreement, that such 25,700 shares are to be
released to Mr. Carreker.
3. RECIPROCAL RELEASES. In consideration of Mr. Antinori's agreements
made in this Agreement, the Company knowingly, voluntarily, and intentionally
agrees to, and does, settle, release, waive, and discharge Mr. Antinori and his
past, present and future affiliates, assigns, accountants, attorneys,
consultants and other representatives (collectively, the "Antinori Released
Parties"), from any and all claims and causes of action, whether legal,
equitable, or administrative, whether presently known or not known to the
Company, and whether fixed or contingent, that the Company and/or its
successors, assigns and/or any person on its behalf now holds, may ever hold or
has held, known or unknown and may have or claim to have now or in the future
against any one or more of the Antinori Released Parties, concerning any and
all matters arising in connection with or under the Merger Agreement and/or the
Antinori Escrow Agreement or by reason of the Merger; PROVIDED, HOWEVER, that
the foregoing shall not constitute a settlement, release, waiver, or discharge
of the Company's rights or obligations under (1) this Agreement, (2) that
certain Employment Agreement dated January 31, 1997 between Mr. Antinori and
the Company (as such Employment Agreement is amended as provided below) ("Mr.
Antinori's Employment Agreement"), (3) that certain Non-Competition Agreement
dated January 31, 1997 between Mr. Antinori and the Company, (4) that certain
Employee Confidentiality Agreement dated January 31, 1997 between Mr. Antinori
and the Company and (5) that certain Shareholders Agreement dated as of January
31, 1997 among the Company, Mr. Antinori and others (the "Shareholders
Agreement"), each of which shall survive this Agreement in accordance with its
terms.
In consideration of the Company's agreements made in this Agreement, Mr.
Antinori
SETTLEMENT AGREEMENT - Page 2
<PAGE>
knowingly, voluntarily, and intentionally agrees to, and does, settle,
release, waive, and discharge the Company, its predecessors, successors and
past, present and future affiliates, employees, officers, directors,
shareholders, partners, assigns, accountants, attorneys, consultants, other
representatives, employee retirement, health and welfare benefit plans and
the fiduciaries thereof and agents (collectively, the "Company Released
Parties"), from any and all claims and causes of action, whether legal,
equitable, or administrative, whether presently known or not known to Mr.
Antinori, and whether fixed or contingent, that Mr. Antinori and/or his
spouse, dependents, heirs, successors, and assigns and/or any person on his
behalf now holds, may ever hold or has held, known or unknown and may have or
claim to have now or in the future against any one or more of the Company
Released Parties, concerning any and all matters arising in connection with
or under the Merger Agreement and/or the Carreker Escrow Agreement or by
reason of the Merger; PROVIDED, HOWEVER, that the foregoing shall not
constitute a settlement, release, waiver, or discharge of Mr. Antinori's
rights or obligations under (1) this Agreement, (2) Mr. Antinori's Employment
Agreement (as amended as provided below), (3) that certain Non-Competition
Agreement dated January 31, 1997 between Mr. Antinori and the Company, (4)
that certain Employee Confidentiality Agreement dated January 31, 1997
between Mr. Antinori and the Company and (5) that certain Shareholders
Agreement dated as of January 31, 1997 among the Company, Mr. Antinori and
others (the "Shareholders Agreement"), each of which shall survive this
Agreement in accordance with its terms.
4. AMENDMENT OF SECTION 1 OF MR. ANTINORI'S EMPLOYMENT AGREEMENT. The
first sentence of Section 1 of Mr. Antinori's Employment Agreement is hereby
amended and restated to provide in its entirety as follows:
"Carreker will employ Mr. Antinori and Mr. Antinori accepts
employment with Carreker for a period of two years from January 31,
1997 (such two year period being the "INITIAL PERIOD")."
In addition, references in Section 8 to an Initial Period of two or three years
are hereby amended to be references to an Initial Period of two years,
consistent with the foregoing amendment above.
5. AMENDMENT OF SECTION 4 OF MR. ANTINORI'S EMPLOYMENT AGREEMENT.
Section 4 of Mr. Antinori's Employment Agreement is hereby amended and restated
to provide in its entirety as follows:
"Mr. Antinori's salary for the first year of the Initial Period
will be not less than $350,000. Mr. Antinori shall be entitled to a
salary increase in the second year of the Initial Period if
Carreker's board of directors so determines or if Mr. J.D. Carreker
receives a salary increase in respect of such second year (in which
event the salary increases shall be matched on a dollar-for-dollar
basis), but not otherwise. All salary is payable on Carreker's
regular payroll dates, less required withholdings. Mr. Antinori
acknowledges that determinations of salary increases, if any, are
within the sole and complete discretion of Carreker's board of
directors.
SETTLEMENT AGREEMENT - Page 3
<PAGE>
Mr. Antinori shall not receive a bonus for the fiscal year
ending January 31, 1998 unless Mr. J.D. 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 fiscal
year. If and to the extent the board of directors of Carreker
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, if any, of his bonus to be determined based upon the
bonus paid to Mr. J.D. Carreker in respect of such fiscal year, in
which case their bonuses shall be in the same proportion as are their
salaries. In determining Mr. Antinori's bonuses, if any, credit will
be given to Company contributions to his profit-sharing account, if
any. Mr. Antinori acknowledges that the establishment of a bonus
pool is within the sole and complete discretion of Carreker's board
of directors.
To the extent that the state tax liability of Mr. Antinori is
reduced as a result of the agreement by the parties to file ASI state
tax returns on a multistate apportionment basis as provided in
Section 7 of that certain Settlement Agreement of even date herewith
between the parties, then the Company shall be entitled to reduce
bonus payments otherwise payable to Mr. Antinori by the amount of any
such reduction. Such reduction shall be determined on an annual
basis during each fiscal year of this Agreement. If Mr. Antinori
receives a reduction of his state tax liability after all bonuses
have been paid pursuant to this Agreement, or if such reduction
exceeds the bonuses owing pursuant to this Agreement, then Mr.
Antinori shall pay the amount of such reduction (or the amount of
such excess) to the Company promptly. The provisions of this Section
4 shall survive the termination of this Agreement."
6. LAPSE OF RESTRICTIONS ON STOCK HELD BY ISRAEL. Pursuant to a letter
agreement between ASI and Michael Israel dated December 20, 1994, ASI issued to
Mr. Israel, on a restricted basis, one percent (1%) of ASI's outstanding
shares. The Company agrees to not take a tax reporting position on its income
tax returns that conflicts with Mr. Antinori's taking a tax deduction based on
the lapse of restrictions on such shares. However, if on June 1, 1999, Mr.
Antinori (either directly, or indirectly through ASI) has not taken such tax
deduction, or has taken a tax reporting position that conflicts with his taking
such tax deduction, then, as between Mr. Antinori and the Company, the Company
may take such tax deduction, and Mr. Antinori agrees to not take, on and after
June 1, 1999, a tax reporting position on his income tax returns that conflicts
with the Company's taking of such deduction. The party taking the foregoing
tax deduction in accordance with this Section 6 shall bear any tax preparation
costs, or any other costs, associated with this benefit to him or it,
respectively.
7. STATE TAX MATTERS. The parties agree that (a) beginning with the tax
year ending December 31, 1996 and ending with the tax period ending on or
before the effective date of the Merger, all state tax returns of ASI shall be
filed on a multistate apportionment basis, (b) amended state tax returns of ASI
for Georgia for tax years ending December 31, 1994 and
SETTLEMENT AGREEMENT - Page 4
<PAGE>
December 31, 1995 shall be filed allocating income to Georgia on a multistate
apportionment basis, and (c) state tax returns for North Carolina (and any
other state as determined in the sole discretion of the Company) shall be
filed on a multistate apportionment basis for the tax year ending December
31, 1996 (and any other year or other period as determined in the sole
discretion of the Company). The Company agrees to assume the defense of and
shall have complete control of any audit of any state tax return or any other
proceeding instituted by any state taxing authority with respect to income
tax liability of ASI (or Antinori, if the same relates to the business
operations of ASI). The Company agrees to indemnify and hold Antinori
harmless from any tax liability and expenses relating to any audit or other
proceeding instituted by any state taxing authority to the extent that such
liability (i) exceeds Antinori's tax liability as reported on any tax return
for such state, or (ii) relates to any state tax liability if no state tax
return in respect of such liability was filed by ASI prior to January 31,
1997; PROVIDED, HOWEVER, that the Company shall have no liability to
indemnify or hold Antinori harmless unless the tax liability relates to the
business operations of ASI. Antinori will fully cooperate with the Company
(i) in filing state tax returns and amendments thereto in a manner consistent
with this Section 7 and (ii) in connection with any audit or other proceeding
instituted by a state taxing authority.
The foregoing indemnity shall not apply to the extent that ASI (and/or Mr.
Antinori, in respect of the business operations of ASI) has liability to
Georgia for taxes in excess of taxes reported and paid to Georgia for tax years
through and including December 31, 1995 and, for the tax year ended December
31, 1996, to the extent that such liability to Georgia for taxes is in excess
of the amount of taxes that would have been reported and paid to Georgia if the
applicable tax returns had not been prepared on a multistate apportionment
basis.
Mr. Antinori represents that as of the date of this Agreement he has fully
and completely disclosed, and in the future will fully and completely disclose,
the status of all pertinent tax matters, including (a) responses and other
negotiations and communications to and from taxing authorities and (b) the
nature and status of all tax liabilities and tax refunds, and will cause his
professional tax advisors to make themselves reasonably available, at no
expense to the Company, to provide such information with respect to the
foregoing when and as requested by the Company.
8. DUCKWORTH OPTION ON ANTINORI SHARES. Mr. Antinori and the Company
agree to cooperate, through the use of reasonable commercial efforts, to cause
Lawrence D. Duckworth's exercise of his options on shares of Company stock held
by Mr. Antinori to occur prior to the expiration thereof on March 30, 1998, as
to 24,445 such shares. Mr. Antinori hereby acknowledges that such options are
exercisable by Mr. Duckworth, and that the total number of such options
exercisable after the adjustments triggered by reason of the first paragraph of
Section 1 hereof is 48,889. Nothing herein shall modify the terms and
conditions of such options, specifically including the purchase price thereof
of $4.3816 per share and the expiration date thereof of March 30, 1998.
SETTLEMENT AGREEMENT - Page 5
<PAGE>
9. NO ADMISSION OF WRONG-DOING. Entry into this Agreement does not, in
any way, constitute an admission of improprieties or other wrong-doing by any
party hereto.
10. FULL DISCLOSURE OF AGREEMENTS WITH LAWRENCE D. DUCKWORTH. Mr.
Antinori represents to the Company that there are no agreements, arrangements
or understandings between Mr. Antinori and Lawrence D. Duckworth, or between
Mr. Duckworth and/or his affiliates, considered as one party in interest, and
Mr. Antinori and/or his affiliates, considered as another party in interest, in
both cases whether formal or informal, oral or in writing, except as disclosed
to the Company previously, in writing, by Mr. Antinori and attached to this
Agreement as ATTACHMENT A.
11. SURVIVAL. This Agreement, together with the agreements referenced in
the provisos of Section 3 above as not being settled, waived, released or
discharged, contains all of the terms, provisions, and understandings between
Mr. Antinori and the Company. No modification of this Agreement can be made
except in writing and signed by both parties.
12. ARBITRATION. Any Dispute (as defined in the Merger Agreement)
arising in connection with this Agreement will be subject to arbitration in the
same manner as a Dispute arising in connection with the Merger Agreement, i.e.,
as provided in Section 11.1 of the Merger Agreement.
13. MISCELLANEOUS. This Agreement is binding on the parties and their
representatives, heirs, and successors and assigns. This Agreement shall be
governed by and interpreted under the laws of the State of Texas, without
regard to conflict of laws. Mr. Antinori acknowledges that the Company makes
no representation whatsoever concerning the tax consequences, if any, of this
Agreement to him. Each party agrees that, except as expressly provided to the
contrary in Section 7, such party is solely responsible for payment of all of
such party's federal, state, and local taxes, interest and penalties, if any,
which are or may become due on account of this Agreement and agrees to
indemnify, defend and hold harmless the other party from any liability for such
amounts. Each party represents and warrants to the other party that no claims
settled, released, waived or discharged herein have been previously conveyed,
assigned, or transferred in any manner, whether in whole or in part, to any
person, entity, or other third party. Each party represents to the other that
such party is relying on its or his, as applicable, own judgment in entering
into this Agreement, and is not relying (and has not relied) on any statement
or representation, not expressly set forth herein, of such other party (or any
agent or affiliate of such other party). Mr. Antinori expressly represents
that he is competent and authorized to release and/or waive any claims he may
have against the Company that are released and/or waived hereby. If any
portion of this Agreement (other than Section 1 hereof) is deemed
unenforceable, void, voidable, or of no force and effect, then no other portion
will be thereby affected, and the remainder of this Agreement will continue in
full force and effect. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument; but in pleading or
proving this Agreement, or any provision hereof, it shall not be necessary to
produce or introduce any more than one of
SETTLEMENT AGREEMENT - Page 6
<PAGE>
such counterparts. MR. ANTINORI ACKNOWLEDGES AND AGREES THAT HE HAS THE
RIGHT TO DISCUSS ALL ASPECTS OF THIS AGREEMENT WITH A PRIVATE ATTORNEY, HAS
BEEN ENCOURAGED TO DO SO BY THE COMPANY, AND HAS DONE SO TO THE EXTENT HE
DESIRES. MR. ANTINORI REPRESENTS AND AGREES THAT HE HAS THOROUGHLY AND
CAREFULLY READ THIS AGREEMENT IN ITS ENTIRETY, THAT HE HAS HAD A REASONABLE
TIME TO CONSIDER ITS TERMS, THAT HE FULLY UNDERSTANDS ALL OF ITS TERMS, AND
THAT HE HAS NOT RELIED UPON ANY REPRESENTATIONS OR STATEMENTS, WHETHER
WRITTEN OR ORAL, NOT SET FORTH IN THIS AGREEMENT.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
CARREKER-ANTINORI, INC.
By: /s/ J.D. Carreker
J.D. Carreker
Chief Executive Officer
/s/ Ronald R. Antinori
RONALD R. ANTINORI
Acknowledged as of the date
first written above.
/s/ Lawrence D. Duckworth
LAWRENCE D. DUCKWORTH
SETTLEMENT AGREEMENT - Page 7
<PAGE>
ATTACHMENT A
- - Letter of Agreement dated October 24, 1995, as amended by that certain
Amendment to Letter Agreement dated January 31, 1997 among ASI, Lawrence D.
Duckworth and Mr. Antinori.
- - Lawrence D. Duckworth and Mr. Antinori have agreed that Mr. Duckworth's
option to purchase shares of Company stock held by Mr. Antinori is cancelled to
the extent of 24,444 of such shares (being the difference between the 48,889
total shares subject to such option, after giving effect to the adjustment
triggered by reason of the first paragraph of Section 1 hereof, and the 24,445
shares to be purchased by Mr. Duckworth as provided in Section 8 above) and
that Mr. Duckworth will exercise his option as to such 24,445 shares at a price
of $4.3816 per share for a total of $107,108.02 on or before March 31, 1998.
- - Release Agreement dated on or about the date hereof between Mr. Duckworth and
Mr. Antinori.
- - The Shareholders Agreement.
- - None other.
Acknowledged as of the date
first written above.
/s/ Lawrence D. Duckworth
LAWRENCE D. DUCKWORTH
SETTLEMENT AGREEMENT - Page 8
<PAGE>
EXHIBIT 10.16
SETTLEMENT AGREEMENT
This Settlement Agreement (this "Agreement"), dated as of January 29,
1998, is between Susan Antinori, an individual ("Mrs. Antinori"), and Carreker-
Antinori, Inc., a Texas corporation (the "Company").
RECITALS
Mrs. Antinori was a shareholder of Antinori Software, Inc., a Georgia
corporation ("ASI"). On January 31, 1997, a wholly-owned subsidiary of the
Company merged with and into ASI, with the result that ASI then became a wholly-
owned subsidiary of the Company (the "Merger").
The Merger occurred pursuant to that certain Agreement and Plan of Merger
dated as of January 29, 1997 between the Company (then named The Carreker
Group, Inc.), such wholly-owned subsidiary and ASI (the "Merger Agreement").
In the Merger, Mrs. Antinori received 51,461 shares of the Company's Class
A Voting Common Stock.
Pursuant to that certain Escrow Agreement entered into as of January 31,
1997 among the Company, Mrs. Antinori, Ronald R. Antinori (Mrs. Antinori's
spouse), Michael Israel and U.S. Trust Company of Texas, N.A., as escrow agent
(the "Antinori Escrow Agreement"), Mrs. Antinori placed 2,570 shares of the
Company's Class A Voting Common Stock into an escrow account to secure
indemnification obligations to the Company and other Indemnified Persons (as
defined in Section 10.2 of the Merger Agreement).
Subsequent to the Merger the parties have decided that an adjustment to
the relative valuation of ASI and the Company is appropriate for reasons
including, but not limited to, the developmental status of the "ASI 17" and
"Odyssey" products as of the closing date of the Merger. Mrs. Antinori and the
Company also desire to fully and finally settle certain claims, to avoid
continued or future disputes and controversies regarding those claims, to
provide peace of mind for both parties, and to eliminate and forego the
nuisance of possible litigation and the financial costs of such litigation.
In consideration of the foregoing recitals and other good and valuable
consideration, the receipt and sufficiency of which the parties acknowledge,
the parties agree as follows:
1. CANCELLATION; RELEASE FROM ESCROW. The 2,570 shares of the Company's
Class A Voting Common Stock that Mrs. Antinori placed into the escrow
established by the Antinori Escrow Agreement shall be released to the Company,
for cancellation pursuant to the terms thereof. An original or photocopy of
this Agreement, delivered to U.S. Trust Company of Texas, N.A., shall
constitute joint notice by the Company and Mrs. Antinori, and direction to U.S.
Trust Company of Texas, N.A. per Section 4(b) of the Antinori Escrow Agreement,
that such 2,570 shares are to be released to the Company, for cancellation.
<PAGE>
2. RELEASE FROM ESCROW TO J.D. CARREKER. In connection with Merger
Agreement, J.D. Carreker deposited 25,700 shares of the Company's Class A
Voting Common Stock into an escrow pursuant to that certain Escrow Agreement
entered into as of January 31, 1997 among the Company, Mr. Carreker and U.S.
Trust Company of Texas, N.A., as escrow agent (the "Carreker Escrow
Agreement"). An original or photocopy of this Agreement, delivered to U.S.
Trust Company of Texas, N.A., shall constitute joint notice by the Company and
Mr. Carreker, and direction to U.S. Trust Company of Texas, N.A. per Section
4(b) of the Antinori Escrow Agreement, that such 25,700 shares are to be
released to Mr. Carreker.
3. RECIPROCAL RELEASES. In consideration of Mrs. Antinori's agreements
made in this Agreement, the Company knowingly, voluntarily, and intentionally
agrees to, and does, settle, release, waive, and discharge Mrs. Antinori and
her past, present and future affiliates, assigns, accountants, attorneys,
consultants and other representatives (collectively, the "Antinori Released
Parties"), from any and all claims and causes of action, whether legal,
equitable, or administrative, whether presently known or not known to the
Company, and whether fixed or contingent, that the Company and/or its
successors, assigns and/or any person on its behalf now holds, may ever hold or
has held, known or unknown and may have or claim to have now or in the future
against any one or more of the Antinori Released Parties, concerning any and
all matters arising in connection with or under the Merger Agreement and/or the
Antinori Escrow Agreement or by reason of the Merger; PROVIDED, HOWEVER, that
the foregoing shall not constitute a settlement, release, waiver, or discharge
of the Company's rights or obligations under (1) this Agreement, (2) that
certain Non-Competition Agreement dated January 31, 1997 between Mrs. Antinori
and the Company, and (3) the Shareholders Agreement, each of which shall
survive this Agreement in accordance with its terms.
In consideration of the Company's agreements made in this Agreement, Mrs.
Antinori knowingly, voluntarily, and intentionally agrees to, and does, settle,
release, waive, and discharge the Company, its predecessors, successors and
past, present and future affiliates, employees, officers, directors,
shareholders, partners, assigns, accountants, attorneys, consultants, other
representatives, employee retirement, health and welfare benefit plans and the
fiduciaries thereof and agents (collectively, the "Company Released Parties"),
from any and all claims and causes of action, whether legal, equitable, or
administrative, whether presently known or not known to Mrs. Antinori, and
whether fixed or contingent, that Mrs. Antinori and/or her spouse, dependents,
heirs, successors, and assigns and/or any person on her behalf now holds, may
ever hold or has held, known or unknown and may have or claim to have now or in
the future against any one or more of the Company Released Parties, concerning
any and all matters arising in connection with or under the Merger Agreement
and/or the Carreker Escrow Agreement or by reason of the Merger; PROVIDED,
HOWEVER, that the foregoing shall not constitute a settlement, release, waiver,
or discharge of Mrs. Antinori's rights or obligations under (1) this Agreement,
(2) that certain Non-Competition Agreement dated January 31, 1997 between Mrs.
Antinori and the Company, and (3) that certain Shareholders Agreement dated as
of January 31, 1997 among the Company, Mrs. Antinori and others (the
"Shareholders Agreement"), each of which shall survive this Agreement in
accordance with its terms.
SETTLEMENT AGREEMENT - Page 2
<PAGE>
4. NO ADMISSION OF WRONG-DOING. Entry into this Agreement does not, in
any way, constitute an admission of improprieties or other wrong-doing by any
party hereto.
5. SURVIVAL. This Agreement, together with the agreements referenced in
the provisos of Section 3 above as not being settled, waived, released or
discharged, contains all of the terms, provisions, and understandings between
Mrs. Antinori and the Company. No modification of this Agreement can be made
except in writing and signed by both parties.
6. ARBITRATION. Any Dispute (as defined in the Merger Agreement) arising
in connection with this Agreement will be subject to arbitration in the same
manner as a Dispute arising in connection with the Merger Agreement, i.e., as
provided in Section 11.1 of the Merger Agreement.
7. MISCELLANEOUS. This Agreement is binding on the parties and their
representatives, heirs, and successors and assigns. This Agreement shall be
governed by and interpreted under the laws of the State of Texas, without
regard to conflict of laws. Mrs. Antinori acknowledges that the Company makes
no representation whatsoever concerning the tax consequences, if any, of this
Agreement to her. Each party agrees that such party is solely responsible for
payment of all of such party's federal, state, and local taxes, interest and
penalties, if any, which are or may become due on account of this Agreement and
agrees to indemnify, defend and hold harmless the other party from any
liability for such amounts. Each party represents and warrants to the other
party that no claims settled, released, waived or discharged herein have been
previously conveyed, assigned, or transferred in any manner, whether in whole
or in part, to any person, entity, or other third party. Each party represents
to the other that such party is relying on its or her, as applicable, own
judgment in entering into this Agreement, and is not relying (and has not
relied) on any statement or representation, not expressly set forth herein, of
such other party (or any agent or affiliate of such other party). Mrs.
Antinori expressly represents that she is competent and authorized to release
and/or waive any claims she may have against the Company that are released
and/or waived hereby. If any portion of this Agreement (other than Section 1
hereof) is deemed unenforceable, void, voidable, or of no force and effect,
then no other portion will be thereby affected, and the remainder of this
Agreement will continue in full force and effect. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument; but in pleading or proving this Agreement, or any provision hereof,
it shall not be necessary to produce or introduce any more than one of such
counterparts. MRS. ANTINORI ACKNOWLEDGES AND AGREES THAT SHE HAS THE RIGHT TO
DISCUSS ALL ASPECTS OF THIS AGREEMENT WITH A PRIVATE ATTORNEY, HAS BEEN
ENCOURAGED TO DO SO BY THE COMPANY, AND HAS DONE SO TO THE EXTENT SHE DESIRES.
MRS. ANTINORI REPRESENTS AND AGREES THAT SHE HAS THOROUGHLY AND CAREFULLY READ
THIS AGREEMENT IN ITS ENTIRETY, THAT SHE HAS HAD A REASONABLE TIME TO CONSIDER
ITS TERMS, THAT SHE FULLY UNDERSTANDS ALL OF ITS TERMS, AND THAT SHE HAS NOT
RELIED UPON ANY REPRESENTATIONS OR STATEMENTS, WHETHER WRITTEN OR ORAL, NOT SET
FORTH IN THIS AGREEMENT.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date
SETTLEMENT AGREEMENT - Page 3
<PAGE>
first written above.
CARREKER-ANTINORI, INC.
By: /s/ J.D. Carreker
J.D. Carreker
Chief Executive Officer
/s/ Susan Antinori
SUSAN ANTINORI
SETTLEMENT AGREEMENT - Page 4
<PAGE>
EXHIBIT 10.17
SETTLEMENT AGREEMENT
This Settlement Agreement (this "Agreement"), dated as of January 29,
1998, is between Lawrence D. Duckworth, an individual ("Mr. Duckworth"), and
Carreker-Antinori, Inc., a Texas corporation (the "Company").
RECITALS
Mr. Duckworth was formerly employed by the Company as the president of its
Software Group, and as a member of its board of directors.
Mr. Duckworth subsequently resigned from the Company's employment and from
all other positions with the Company.
Mr. Duckworth and the Company desire to fully and finally settle certain
claims, to avoid continued or future disputes and controversies regarding those
claims, to provide peace of mind for both parties, and to eliminate and forego
the nuisance of possible litigation and the financial costs of such litigation.
In consideration of the foregoing recitals and other good and valuable
consideration, the receipt and sufficiency of which the parties acknowledge,
the parties agree as follows:
1. CANCELLATION OF STOCK OPTIONS. Outstanding stock options in favor of
Mr. Duckworth with respect to 33,300 shares of Class B Non-Voting Common Stock
of the Company, which options were granted on January 31, 1997, are hereby
cancelled, and the related stock option agreements, also dated January 31,
1997, are hereby terminated.
2. RECIPROCAL RELEASES. In consideration of Mr. Duckworth's agreements
made in this Agreement, the Company knowingly, voluntarily, and intentionally
agrees to, and does, settle, release, waive, and discharge Mr. Duckworth and
his past, present and future affiliates, assigns, accountants, attorneys,
consultants and other representatives (collectively, the "Duckworth Released
Parties"), from any and all claims and causes of action, whether legal,
equitable, or administrative, whether presently known or not known to the
Company, and whether fixed or contingent, that the Company and/or its
successors, assigns and/or any person on its behalf now holds, may ever hold or
has held, known or unknown and may have or claim to have now or in the future
against any one or more of the Duckworth Released Parties, concerning any and
all matters arising up through the date of this Agreement; PROVIDED, HOWEVER,
that the foregoing shall not constitute a settlement, release, waiver, or
discharge of the Company's rights or obligations under (1) this Agreement, (2)
that certain separation letter agreement dated August 4, 1997 between Mr.
Duckworth and the Company (as the same is modified by this Agreement), (3) that
certain Non-Competition Agreement dated January 31, 1997 between Mr. Duckworth
and the Company, (4) that certain Employee Confidentiality Agreement dated
January 31, 1997 between Mr. Duckworth and the Company, and (5) that certain
Shareholders Agreement dated as of January 31, 1997 among the Company, Mr.
Duckworth and others (the "Shareholders
<PAGE>
Agreement"), each of which shall survive this Agreement in accordance with
its terms.
In consideration of the Company's agreements made in this Agreement, Mr.
Duckworth knowingly, voluntarily, and intentionally agrees to, and does,
settle, release, waive, and discharge the Company, its predecessors, successors
and past, present and future affiliates, employees, officers, directors,
shareholders, partners, assigns, accountants, attorneys, consultants, other
representatives, employee retirement, health and welfare benefit plans and the
fiduciaries thereof and agents (collectively, the "Company Released Parties"),
from any and all claims and causes of action, whether legal, equitable, or
administrative, whether presently known or not known to Mr. Duckworth, and
whether fixed or contingent, that Mr. Duckworth and/or his spouse, dependents,
heirs, successors, and assigns and/or any person on his behalf now holds, may
ever hold or has held, known or unknown and may have or claim to have now or in
the future against any one or more of the Company Released Parties, concerning
any and all matters arising up through the date of this Agreement including,
without limitation:
A. claims arising from Mr. Duckworth's employment by the Company, including
under his employment agreement with the Company;
B. claims arising from Mr. Duckworth's resignation and separation from the
Company;
C. claims for Mr. Duckworth's salary, back pay, future pay, vacation pay,
sick pay, severance pay, bonuses, all other compensation, past and future
employee retirement, health and welfare benefits, and all other employee
benefits;
D. claims for Mr. Duckworth's actual damages, compensatory damages, punitive
damages, liquidated and unliquidated damages, attorneys' fees, costs, and
expenses;
E. claims for all other injuries, losses, liabilities, or damages of any kind
whatsoever allegedly caused to or suffered by Mr. Duckworth as a result of
any alleged actions or inactions of the Company and/or the Company Released
Parties;
F. claims which Mr. Duckworth raised or could have raised in a charge filed
with the Equal Employment Opportunity Commission;
G. claims which Mr. Duckworth asserted or could have asserted arising under
federal, state or local law, including, without limitation:
1. Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C.
Section 2000 ET SEQ., and other civil rights laws;
2. The Texas Commission on Human Rights Act, Tex. Labor Code Ann.
Section 21.001 ET SEQ.;
3. The Americans with Disabilities Act, 42 U.S.C. Section 12101 ET
SEQ.;
4. The Age Discrimination in Employment Act, as amended;
SETTLEMENT AGREEMENT - Page 2
<PAGE>
5. The Equal Pay Act, 29 U.S.C. Section 206(d);
6. Chapter 451 of the Texas Workers' Compensation Act, Tex. Labor
Code Ann. Section Section 451.001-451.003, Article 8307c of the
Texas Revised Civil Statutes, Tex. Rev. Civ. Stat. Ann. art.
8307c, and any other states' laws (including, without limitation,
the laws of the state of Georgia);
7. The Family and Medical Leave Act;
8. The Employee Retirement Income Security Act, 29 U.S.C.
Section 1001 ET SEQ.; and
9. All wrongful discharge claims, all tort, intentional tort, and
contract claims.
PROVIDED, HOWEVER, that the foregoing shall not constitute a settlement,
release, waiver, or discharge of Mr. Duckworth's rights or obligations under
(1) this Agreement, (2) that certain separation letter agreement dated August
4, 1997 between Mr. Duckworth and the Company (as the same is modified by this
Agreement), (3) that certain Non-Competition Agreement dated January 31, 1997
between Mr. Duckworth and the Company, (4) that certain Employee
Confidentiality Agreement dated January 31, 1997 between Mr. Duckworth and the
Company and (5) the Shareholders Agreement, each of which shall survive this
Agreement in accordance with its terms.
3. EMPLOYMENT REFERENCES. The Company will provide the following
information concerning Mr. Duckworth in response to employment references: (a)
dates of employment; (b) positions held; (c) that during his employment by the
Company he exhibited a high level of energy, integrity and dedication to his
work; (d) that, at Antinori Software, Inc., he played a crucial role in the
negotiation and successful completion of the merger, (e) that during and after
the merger, he had been very valuable in fostering cooperation among the merged
companies and integrating the two organizations, (f) that he resigned; (g) that
he handled the post-resignation leadership transition in a positive manner; and
(h) such other information as he and the Company mutually agree, in writing, to
disclose.
4. NO ADMISSION OF WRONG-DOING. The Company acknowledges that Mr.
Duckworth's entry into this Agreement does not, in any way, constitute an
admission of improprieties or other wrong-doing.
5. FULL DISCLOSURE OF AGREEMENTS WITH RONALD R. ANTINORI. Mr. Duckworth
represents to the Company that there are no agreements, arrangements or
understandings between Ronald R. Antinori and Larry Duckworth, or between
Ronald R. Antinori and/or his affiliates, considered as one party in interest,
and Mr. Duckworth and/or his affiliates, considered as another party in
interest, in both cases whether formal or informal, oral or in writing, except
as disclosed to the Company previously, in writing, by Mr. Duckworth and
attached to this Agreement as ATTACHMENT A.
6. SURVIVAL. This Agreement, together with the agreements referenced in
the provisos of Section 2 above as not being settled, waived, released or
discharged, contains all of the terms, provisions, and understandings between
Mr. Duckworth and the Company. No modification of
SETTLEMENT AGREEMENT - Page 3
<PAGE>
this Agreement can be made except in writing and signed by both parties.
7. CONFIDENTIALITY. Mr. Duckworth and the Company agree to keep the
terms of this Agreement, as well that a settlement was achieved, wholly and
completely confidential, excluding only any disclosure (a) required by law
(including disclosure obligations under applicable securities laws) and/or (b)
by a party to its bankers (including investment bankers), accountants and
counsel. Further, except as provided in Section 3, the parties agree to not
disclose the facts, circumstances, and allegations that led to this Agreement,
to any person or persons, excluding only any disclosure (a) required by law
(including disclosure obligations under applicable securities laws) and/or (b)
by a party to its bankers (including investment bankers), accountants and
counsel.
8. MISCELLANEOUS. This Agreement is binding on the parties and their
representatives, heirs, and successors and assigns. This Agreement shall be
governed by and interpreted under the laws of the State of Texas, without
regard to conflict of laws. Mr. Duckworth acknowledges that the Company makes
no representation whatsoever concerning the tax consequences, if any, of this
Agreement to him. Mr. Duckworth agrees that he is solely responsible for
payment of all of his federal, state, and local taxes, interest and penalties,
if any, which are or may become due on account of this Agreement and agrees to
indemnify, defend and hold harmless the Company from any liability for taxes
that Mr. Duckworth owes or will owe on account of this Agreement. Each party
represents and warrants to the other party that no claims settled, released,
waived or discharged herein have been previously conveyed, assigned, or
transferred in any manner, whether in whole or in part, to any person, entity,
or other third party. Each party represents to the other that such party is
relying on its or his, as applicable, own judgment in entering into this
Agreement, and is not relying (and has not relied) on any statement or
representation, not expressly set forth herein, of such other party (or any
agent or affiliate of such other party). Mr. Duckworth expressly represents
that he is competent and authorized to release and/or waive any claim he may
have against the Company. If any portion of this Agreement is deemed
unenforceable, void, voidable, or of no force and effect, then no other portion
will be thereby affected, and the remainder of this Agreement will continue in
full force and effect. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument; but in pleading or
proving this Agreement, or any provision hereof, it shall not be necessary to
produce or introduce any more than one of such counterparts. MR. DUCKWORTH
ACKNOWLEDGES AND AGREES THAT HE HAS THE RIGHT TO DISCUSS ALL ASPECTS OF THIS
AGREEMENT WITH A PRIVATE ATTORNEY, HAS BEEN ENCOURAGED TO DO SO BY THE COMPANY,
AND HAS DONE SO TO THE EXTENT HE DESIRES. MR. DUCKWORTH REPRESENTS AND AGREES
THAT HE HAS THOROUGHLY AND CAREFULLY READ THIS AGREEMENT IN ITS ENTIRETY, THAT
HE HAS HAD A REASONABLE TIME TO CONSIDER ITS TERMS, THAT HE FULLY UNDERSTANDS
ALL OF ITS TERMS, AND THAT HE HAS NOT RELIED UPON ANY REPRESENTATIONS OR
STATEMENTS, WHETHER WRITTEN OR ORAL, NOT SET FORTH IN THIS AGREEMENT.
SETTLEMENT AGREEMENT - Page 4
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
CARREKER-ANTINORI, INC.
By: /s/ J.D. Carreker
J.D. Carreker
Chief Executive Officer
/s/ Lawrence D. Duckworth
LAWRENCE D. DUCKWORTH
Acknowledged as of the date
first written above.
/s/ Ronald R. Antinori
RONALD R. ANTINORI
SETTLEMENT AGREEMENT - Page 5
<PAGE>
ATTACHMENT A
- - Letter of Agreement dated October 24, 1995, as amended by that certain
Amendment to Letter Agreement dated January 31, 1997 among Antinori Software,
Inc., Mr. Duckworth and Ronald R. Antinori.
- - Mr. Duckworth and Ronald R. Antinori have agreed that Mr. Duckworth's option
to purchase shares of Company stock held by Mr. Antinori, further described in
the Letter of Agreement and the Amendment to Letter Agreement referenced
immediately above, is cancelled to the extent of 24,444 of such shares (being
approximately one-half of the 48,889 total shares subject to such option, which
total has been reduced pursuant to the adjustment procedure described in
Section 3 of such Amendment to Letter Agreement) and that Mr. Duckworth will
exercise his option as to such 24,445 shares at a price of $4.3816 per share
for a total of $107,108.02 on or before March 31, 1998.
- - Release Agreement dated on or about the date hereof between Mr. Duckworth and
Mr. Antinori.
- - The Shareholders Agreement.
- - None other.
Acknowledged as of the date
first written above.
/s/ Ronald R. Antinori
RONALD R. ANTINORI
SETTLEMENT AGREEMENT - Page 6
<PAGE>
EXHIBIT 10.18
SETTLEMENT AGREEMENT
This Settlement Agreement (this "Agreement"), dated as of January 29,
1998, is between Michael Israel, an individual ("Mr. Israel"), and Carreker-
Antinori, Inc., a Texas corporation (the "Company").
RECITALS
Mr. Israel was a shareholder of Antinori Software, Inc., a Georgia
corporation ("ASI"). On January 31, 1997, a wholly-owned subsidiary of the
Company merged with and into ASI, with the result that ASI then became a wholly-
owned subsidiary of the Company (the "Merger").
The Merger occurred pursuant to that certain Agreement and Plan of Merger
dated as of January 29, 1997 between the Company (then named The Carreker
Group, Inc.), such wholly-owned subsidiary and ASI (the "Merger Agreement").
In the Merger, Mr. Israel received 5,146 shares of the Company's Class A
Voting Common Stock.
Pursuant to that certain Escrow Agreement entered into as of January 31,
1997 among the Company, Mr. Israel, Ronald R. Antinori, Susan Antinori and U.S.
Trust Company of Texas, N.A., as escrow agent (the "Antinori Escrow
Agreement"), Mr. Israel placed 257 shares of the Company's Class A Voting
Common Stock into an escrow account to secure indemnification obligations to
the Company and other Indemnified Persons (as defined in Section 10.2 of the
Merger Agreement).
Subsequent to the Merger the parties have decided that an adjustment to
the relative valuation of ASI and the Company is appropriate for reasons
including, but not limited to, the developmental status of the "ASI 17" and
"Odyssey" products as of the closing date of the Merger. Mr. Israel and the
Company also desire to fully and finally settle certain claims, to avoid
continued or future disputes and controversies regarding those claims, to
provide peace of mind for both parties, and to eliminate and forego the
nuisance of possible litigation and the financial costs of such litigation.
In consideration of the foregoing recitals and other good and valuable
consideration, the receipt and sufficiency of which the parties acknowledge,
the parties agree as follows:
1. CANCELLATION; RELEASE FROM ESCROW. The 257 shares of the Company's
Class A Voting Common Stock that Mr. Israel placed into the escrow established
by the Antinori Escrow Agreement shall be released to the Company, for
cancellation pursuant to the terms thereof. An original or photocopy of this
Agreement, delivered to U.S. Trust Company of Texas, N.A., shall constitute
joint notice by the Company and Mr. Israel, and direction to U.S. Trust Company
of Texas, N.A. per Section 4(b) of the Antinori Escrow Agreement, that such
2,570 shares are to be released to the Company, for cancellation.
<PAGE>
2. RELEASE FROM ESCROW TO J.D. CARREKER. In connection with Merger
Agreement, J.D. Carreker deposited 25,700 shares of the Company's Class A
Voting Common Stock into an escrow pursuant to that certain Escrow Agreement
entered into as of January 31, 1997 among the Company, Mr. Carreker and U.S.
Trust Company of Texas, N.A., as escrow agent (the "Carreker Escrow
Agreement"). An original or photocopy of this Agreement, delivered to U.S.
Trust Company of Texas, N.A., shall constitute joint notice by the Company and
Mr. Carreker, and direction to U.S. Trust Company of Texas, N.A. per Section
4(b) of the Antinori Escrow Agreement, that such 25,700 shares are to be
released to Mr. Carreker.
3. RECIPROCAL RELEASES. In consideration of Mr. Israel's agreements made
in this Agreement, the Company knowingly, voluntarily, and intentionally agrees
to, and does, settle, release, waive, and discharge Mr. Israel and his past,
present and future affiliates, assigns, accountants, attorneys, consultants and
other representatives (collectively, the "Israel Released Parties"), from any
and all claims and causes of action, whether legal, equitable, or
administrative, whether presently known or not known to the Company, and
whether fixed or contingent, that the Company and/or its successors, assigns
and/or any person on its behalf now holds, may ever hold or has held, known or
unknown and may have or claim to have now or in the future against any one or
more of the Israel Released Parties, concerning any and all matters arising in
connection with or under the Merger Agreement and/or the Antinori Escrow
Agreement or by reason of the Merger; PROVIDED, HOWEVER, that the foregoing
shall not constitute a settlement, release, waiver, or discharge of the
Company's rights or obligations under (1) this Agreement, (2) that certain
Employment Agreement dated January 31, 1997 between Mr. Israel and the Company
("Mr. Israel's Employment Agreement"), (3) that certain Non-Competition
Agreement dated January 31, 1997 between Mr. Israel and the Company, (4) that
certain Employee Confidentiality Agreement dated January 31, 1997 between Mr.
Israel and the Company, (5) those two certain Stock Option Agreements each
dated January 31, 1997 between Mr. Israel and the Company, and (6) that certain
Shareholders Agreement dated as of January 31, 1997 among the Company, Mr.
Israel and others (the "Shareholders Agreement"), each of which shall survive
this Agreement in accordance with its terms.
In consideration of the Company's agreements made in this Agreement, Mr.
Israel knowingly, voluntarily, and intentionally agrees to, and does, settle,
release, waive, and discharge the Company, its predecessors, successors and
past, present and future affiliates, employees, officers, directors,
shareholders, partners, assigns, accountants, attorneys, consultants, other
representatives, employee retirement, health and welfare benefit plans and the
fiduciaries thereof and agents (collectively, the "Company Released Parties"),
from any and all claims and causes of action, whether legal, equitable, or
administrative, whether presently known or not known to Mr. Israel, and whether
fixed or contingent, that Mr. Israel and/or his spouse, dependents, heirs,
successors, and assigns and/or any person on his behalf now holds, may ever
hold or has held, known or unknown and may have or claim to have now or in the
future against any one or more of the Company Released Parties, concerning any
and all matters arising in connection with or under the Merger Agreement and/or
the Carreker Escrow Agreement or by reason of the Merger; PROVIDED, HOWEVER,
that the foregoing shall not constitute a settlement, release, waiver, or
SETTLEMENT AGREEMENT - Page 2
<PAGE>
discharge of Mr. Israel's rights or obligations under (1) this Agreement, (2)
Mr. Israel's Employment Agreement, (3) that certain Non-Competition Agreement
dated January 31, 1997 between Mr. Israel and the Company, (4) that certain
Employee Confidentiality Agreement dated January 31, 1997 between Mr. Israel
and the Company, (5) those two certain Stock Option Agreements each dated
January 31, 1997 between Mr. Israel and the Company, and (6) the Shareholders
Agreement, each of which shall survive this Agreement in accordance with its
terms.
4. NO ADMISSION OF WRONG-DOING. Entry into this Agreement does not, in
any way, constitute an admission of improprieties or other wrong-doing by any
party hereto.
5. SURVIVAL. This Agreement, together with the agreements referenced in
the provisos of Section 3 above as not being settled, waived, released or
discharged, contains all of the terms, provisions, and understandings between
Mr. Israel and the Company. No modification of this Agreement can be made
except in writing and signed by both parties.
6. ARBITRATION. Any Dispute (as defined in the Merger Agreement) arising
in connection with this Agreement will be subject to arbitration in the same
manner as a Dispute arising in connection with the Merger Agreement, i.e., as
provided in Section 11.1 of the Merger Agreement.
7. MISCELLANEOUS. This Agreement is binding on the parties and their
representatives, heirs, and successors and assigns. This Agreement shall be
governed by and interpreted under the laws of the State of Texas, without
regard to conflict of laws. Mr. Israel acknowledges that the Company makes no
representation whatsoever concerning the tax consequences, if any, of this
Agreement to him. Each party agrees that such party is solely responsible for
payment of all of such party's federal, state, and local taxes, interest and
penalties, if any, which are or may become due on account of this Agreement and
agrees to indemnify, defend and hold harmless the other party from any
liability for such amounts. Each party represents and warrants to the other
party that no claims settled, released, waived or discharged herein have been
previously conveyed, assigned, or transferred in any manner, whether in whole
or in part, to any person, entity, or other third party. Each party represents
to the other that such party is relying on its or his, as applicable, own
judgment in entering into this Agreement, and is not relying (and has not
relied) on any statement or representation, not expressly set forth herein, of
such other party (or any agent or affiliate of such other party). Mr. Israel
expressly represents that he is competent and authorized to release and/or
waive any claims he may have against the Company that are released and/or
waived hereby. If any portion of this Agreement (other than Section 1 hereof)
is deemed unenforceable, void, voidable, or of no force and effect, then no
other portion will be thereby affected, and the remainder of this Agreement
will continue in full force and effect. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument; but in pleading or
proving this Agreement, or any provision hereof, it shall not be necessary to
produce or introduce any more than one of such counterparts. MR. ISRAEL
ACKNOWLEDGES AND
SETTLEMENT AGREEMENT - Page 3
<PAGE>
AGREES THAT HE HAS THE RIGHT TO DISCUSS ALL ASPECTS OF THIS AGREEMENT WITH A
PRIVATE ATTORNEY, HAS BEEN ENCOURAGED TO DO SO BY THE COMPANY, AND HAS DONE
SO TO THE EXTENT HE DESIRES. MR. ISRAEL REPRESENTS AND AGREES THAT HE HAS
THOROUGHLY AND CAREFULLY READ THIS AGREEMENT IN ITS ENTIRETY, THAT HE HAS HAD
A REASONABLE TIME TO CONSIDER ITS TERMS, THAT HE FULLY UNDERSTANDS ALL OF ITS
TERMS, AND THAT HE HAS NOT RELIED UPON ANY REPRESENTATIONS OR STATEMENTS,
WHETHER WRITTEN OR ORAL, NOT SET FORTH IN THIS AGREEMENT.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
CARREKER-ANTINORI, INC.
By: /s/ J.D. Carreker
J.D. Carreker
Chief Executive Officer
/s/ Michael Israel
MICHAEL ISRAEL
SETTLEMENT AGREEMENT - Page 4
<PAGE>
EXHIBIT 10.19
LOAN AND SECURITY AGREEMENT
BETWEEN
COMPASS BANK
as
Lender
and
CARREKER-ANTINORI, INC.
as
Borrower
September _____, 1997
<PAGE>
TABLE OF CONTENTS
SECTION 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. Borrower's Representations and Warranties . . . . . . . . . 5
SECTION 3. Bank's Agreement to Make Loan . . . . . . . . . . . . . . . 7
SECTION 4. Inspection of Records; Further Assurance. . . . . . . . . . 8
SECTION 5. Security Interest of Bank in Collateral . . . . . . . . . . 9
SECTION 6. Collection of Accounts. . . . . . . . . . . . . . . . . . . 10
SECTION 7. Affirmative Covenants . . . . . . . . . . . . . . . . . . . 11
SECTION 8. Negative Covenants. . . . . . . . . . . . . . . . . . . . . 13
SECTION 9. Events of Default; Acceleration . . . . . . . . . . . . . . 15
SECTION 10. Power to Sell or Collect Collateral; Remedies Cumulative. . 17
SECTION 11. Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 12. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 13. Expenses, Proceeds of Collateral. . . . . . . . . . . . . . 19
SECTION 14. Duration; Extension . . . . . . . . . . . . . . . . . . . . 19
SECTION 15. General . . . . . . . . . . . . . . . . . . . . . . . . . . 19
EXHIBITS
- --------
Exhibit A Offices and Other Locations of Borrower
Exhibit B Actions, Suits & Proceedings
Exhibit C Borrowing Base Certificate and Compliance Certificate
Exhibit D Schedule of Certain Indebtedness and Leases
<PAGE>
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT ("Agreement") is executed this _____ day
of September, 1997, by and among CARREKER-ANTINORI, INC., a Texas corporation
("Borrower") and COMPASS BANK, a Texas state chartered banking institution
("Bank"). Borrower has applied to Bank for a revolving line of credit not to
exceed an aggregate principal amount at any one time outstanding in the sum of
Three Million and No/100 Dollars ($3,000,000.00); Borrower has agreed that each
such extension of credit is to be secured by a security interest in all of the
Collateral (as hereinafter defined) now owned or hereafter acquired by Borrower
on the terms hereinafter set forth.
Bank is willing to extend credit under the Revolving Line to Borrower up to
aggregate amounts not in excess of the sums set forth above upon the security of
such Collateral on the terms and subject to the conditions hereinafter set
forth.
A G R E E M E N T:
NOW, THEREFORE, in consideration of the premises, the credit to be extended
hereunder, the mutual agreements of the parties as set forth herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound hereby, agree as
follows:
SECTION 1. DEFINITIONS.
1.1 "ACCOUNT" and "ACCOUNT RECEIVABLE" shall include accounts, accounts
receivable, notes, notes receivable, rental agreements and other rights to
collect rent, contract rights, drafts, acceptances, instruments, chattel paper,
general intangibles, and other forms of obligation or rights to payment and
receivables, whether or not yet earned by performance, including state and
federal tax refunds.
1.2 "ACCOUNT DEBTOR" shall mean the party who is obligated oh or under
any Account or contract right.
1.3 "BORROWER'S LOAN ACCOUNT" shall mean the account on the books of
Bank with respect to Borrower in which Bank will separately record advances
under the Revolving Line and other advances made by Bank to Borrower pursuant to
this Agreement, payments received thereon and other appropriate debits and
credits as provided by this Agreement.
1.4 "COLLATERAL" shall mean any and all personal, real or intangible
property of Borrower in which Bank acquired, now has, or by this Agreement or
any other agreement acquires, or hereafter acquires a security interest or other
rights or interests as security for Borrower's Liabilities, including, without
limitation, Borrower's obligations under this Agreement and the Note.
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1.5 "CURRENT RATIO" shall be defined for Borrower as the ratio of (a)
current assets to (b) current liabilities, calculated in accordance with
generally accepted accounting principles consistently applied as of the date
hereof.
1.6 "DEBT TO TANGIBLE NET WORTH RATIO" shall be defined for Borrower as
the ratio of (a) Borrower's total debt and liabilities to (b) Borrower's
Tangible Net Worth, calculated in accordance with generally accepted accounting
principles consistently applied as of the date hereof
1.7 An "ELIGIBLE ACCOUNT" shall mean an Account which meets each of the
following requirements:
(a) it arises from the sale of goods or from services rendered, such
goods have been shipped or delivered to the Account Debtor under
such Account and such services have been fully performed and have
been accepted by the Account Debtor, and Borrower's full right to
payment for all sums due from such Account Debtor with respect to
such Account shall have been earned and then be due and payable;
(b) it is a valid and legally enforceable obligation of the Account
Debtor thereunder according to its express terms, and is not
subject to any offset, counterclaim, crossclaim, or other defense
on the part of such Account Debtor denying liability thereunder in
whole or in part;
(c) it is not subject to any mortgage, lien, security interest, or
similar adverse rights or interests whatsoever other than the
security interest in favor of Bank hereunder;
(d) it is evidenced by an invoice, dated not later than the date of
shipment (in the case of goods sold or leased) or the date of
performance (in the case of services rendered) and having payment
terms acceptable to Bank which required payment no later than
thirty (30) days following the invoice date, rendered to such
Account Debtor, and is not evidenced by an instrument or chattel
paper;
(e) it is not owing by an Account Debtor whose obligations Bank, acting
in its sole discretion, shall have notified Borrower is not deemed
to constitute an Eligible Account;
(f) it is not due from an affiliated corporation or entity, subsidiary
corporation or entity, parent corporation or entity, stockholder,
officer, or director or employee of Borrower or any such affiliate,
subsidiary, or parent corporation or entity; or any individual or
entity affiliated or related to any of the foregoing, whether by
blood, marriage, or otherwise;
(g) it does not constitute progress billings, retainages, or deferred
payments under a contract not fully performed;
(h) it does not constitute, in whole or in part, interest or finance
charges on outstanding balances;
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<PAGE>
(i) it is an Account with respect to which no return, repossession,
rejection, cancellation, or repudiation shall have occurred or have
been threatened;
(j) it is an Account with respect to which Borrower continues to be in
full conformity with the representations, warranties, and covenants
of Borrower made with respect thereto;
(k) it is not subject to any sales terms, trial terms, sales-or-return
terms, consignment terms, guaranteed sales performance or
warranties or representations relating to minimum sales volume,
C.O.D. terms, cash terms, or similar terms or conditions;
(l) it is not owed by an Account Debtor that is not an individual
residing in the United States or a corporation or partnership
organized and validly existing under the laws of a state within the
United States, unless payment is secured by a letter of credit
acceptable to Bank;
(m) it is not an Account subject, in whole or in part, to any "bill and
hold", pre-billing or other similar arrangement pursuant to which
the invoice is delivered prior to the actual delivery of the sold
or leased goods or the performance of the services;
(n) it is not an Account with respect to which ninety (90) days or more
shall have passed since the invoice dates;
(o) it is not owed by any Account Debtor who or which has at any time
account balances with Borrower equaling or exceeding ten percent
(10%) of its total accounts receivable at such time unpaid after
ninety (90) days from invoice date;
(p) it is not an amount in excess of twenty-five percent (25%) of the
total of Borrower's Accounts, owed by an Account Debtor whose
account balance exceeds twenty-five percent (25%) of the total of
Borrower's Accounts; and
(q) it is not an Account billed with respect to software maintenance.
1.8 "FIXED CHARGE COVERAGE RATIO" shall be defined for Borrower as
earnings before taxes plus interest and lease expense divided by interest plus
lease expense.
1.9 "INDEX RATE" shall mean at any time the variable rate of interest
published in THE WALL STREET JOURNAL'S "Money Rates" table as the prime rate.
If multiple prime rates are quoted in the table, then the highest prime rate
will be Bank's Index Rate. In the event the prime rate is no longer published
in the "Money Rates" table, then Bank or any subsequent holder will choose a
substitute Index Rate which is based upon comparable information. The term
Index Rate is not intended nor shall it be implied to mean the lowest rate of
interest available to the most creditworthy borrower of Bank.
1.10 "INSOLVENCY" of Borrower or any other person or entity shall mean
that there shall have occurred with respect to that person or entity one or more
of the following events: death, dissolution, termination of existence,
liquidation, insolvency, business failure, appointment of a
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<PAGE>
receiver, liquidator, fiscal agent, or trustee of any part of the property
of, assignment for the benefit of creditors by or against such person or
entity, or institution of any action or proceeding, with respect to such
person or entity under or pursuant to any insolvency laws relating to the
relief of debtors by or against any such person or entity, institution of
proceedings in bankruptcy or with respect to the readjustment of
indebtedness, reorganization, composition, or extension by or against such
person or entity (including, without limitation, under or pursuant to the
United States Bankruptcy Code, as amended, or under any similar law at any
time enacted).
1.11 "INVENTORY" shall mean all of Borrower's inventory (as defined in
the Uniform Commercial Code as enacted in the State of Texas, or in any other
applicable jurisdiction), wherever located, and other personal property now
owned or hereafter acquired by Borrower (or other entities, as applicable) which
are held for sale or lease, or are furnished or to be furnished under a contract
of service or are raw materials, work in process, or materials or supplies used
or to be used, or consumed or to be consumed, in Borrower's business, and all
shipping and packaging materials relating to any of the foregoing.
1.12 "LIABILITIES" shall mean any and all liabilities, obligations, and
indebtedness of Borrower to Bank of every kind and description, direct or
indirect, absolute or contingent, matured or unmatured, primary or secondary,
whether as principal obligor or guarantor, liquidated or unliquidated, due or to
become due, now existing or hereafter arising, and whether arising directly or
acquired from others, regardless of how such Liabilities arise or by what
agreement or instrument they may be evidenced or whether the foregoing
Liabilities include obligations to perform acts and refrain from taking actions
as well as obligations to pay money. Without limiting the foregoing,
Liabilities specifically include Borrower's obligations evidenced by the Note.
1.13 "NOTE" shall mean the Revolving Promissory Note signed this date by
Borrower in the principal amount of $3,000,000.00.
1.14 "PROCEEDS" shall mean all forms of payment received by or due to
Borrower from the collection of Accounts or sale, lease, exchange, collection,
or other disposition of Inventory or other property constituting Collateral
hereunder and any and all claims against any third party for loss or damage to
any Collateral, including insurance claims, and further, without limiting the
Generality of the foregoing, Proceeds shall include all Accounts, checks, cash,
money orders, drafts, chattel paper, instruments, notes, or other documents
evidencing payment obligations to Borrower for sale or exchange of Collateral.
1.15 "REVOLVING LINE" shall mean the revolving line of credit issued by
Bank in favor of Borrower evidenced by the Note.
1.16 "TANGIBLE NET WORTH" shall be defined for Borrower as:
(a) Borrower's Net Worth LESS
(b) any and all loans and other advances to affiliates, subsidiaries,
parent, employees, officers, stockholders, directors, or other
related entities', notes, notes receivable, accounts, accounts
receivable, inter-company receivables, and other amounts owing
4
<PAGE>
from affiliates, subsidiaries, parent, employees, officers,
stockholders, directors, or other related entities; treasury stock,
good will, trademarks, trade names, patents, and deferred charges;
covenants not to compete and any and all other intangible assets;
calculated in accordance with generally accepted accounting principles
consistently applied as of the date hereof
1.17 Any terms used to describe Bank's security interest hereunder not
specifically defined herein shall have the meaning and definition given those
terms under the Texas Business and Commerce Code as in effect from time to time.
SECTION 2. BORROWER'S REPRESENTATIONS AND WARRANTIES.
To induce Bank to enter into this Agreement, Borrower represents, warrants
and covenants as follows:
2.1 Borrower (a) is a duly organized corporation, which is validly
existing and in good standing under the laws of the State of Texas, (b) is duly
qualified and in good standing (and will remain so qualified and in good
standing) in every state in which it is doing business or in which the failure
so to qualify would or could have an adverse effect on its business or
properties or Bank, (c) has no subsidiaries, and (d) has all necessary corporate
power and authority to own its assets and conduct its business as now conducted
or presently proposed to be conducted.
2.2 The execution, delivery, and performance hereof and of all other
agreements or instruments contemplated hereby are within Borrower's corporate
powers, have been duly authorized, and are not in contravention of the law or
the terms of Borrower's articles of incorporation, bylaws, or other
incorporation papers. The execution, delivery, and performance hereof and of
all other agreements or instruments contemplated hereby are not in contravention
of any indenture, agreement, or undertaking to which Borrower is a party or by
which it or any of its properties is bound. This Agreement, the Note and all
other agreements and instruments executed by Borrower in connection herewith
have been validly executed and delivered by Borrower and constitute legal, valid
and binding obligations of Borrower enforceable against Borrower in accordance
with their respective terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws at the time in effect
affecting the rights of creditors generally.
2.3 Except for the security interest granted hereby or by any other
document executed in favor of Bank, Borrower is and, as to its Accounts and
Collateral arising or to be acquired after the date hereof, shall be the sole
and exclusive owner of such Accounts and each and every other item of Collateral
free from any lien, security interest, or encumbrance, and Borrower shall defend
its Accounts and each and every other item of Collateral and all Proceeds and
products thereof against all claims and demands of all persons at any time
claiming the same or any interest therein adverse to Bank.
2.4 At the time any Account becomes subject to a security interest in
favor of Bank, said Account shall be a good and valid Account representing an
undisputed, bona fide
5
<PAGE>
indebtedness incurred by the Account Debtor named therein, for merchandise
held subject to delivery instructions or theretofore shipped or delivered
pursuant to a contract of sale, or for services theretofore performed by
Borrower with or for said Account Debtor; there shall be no set-offs,
counterclaims, or disputes against any such Account except as indicated in
some written list, statement, or invoice furnished to Bank with reference
thereto; and Borrower shall be the lawful owner of all its Accounts and shall
have good right to subject the same to a security interest in favor of Bank.
No such Account shall be sold, assigned, or transferred to any person other
than Bank or in any way encumbered except to Bank, and Borrower shall defend
the same against the lawful claims and demands of all persons. If any
Account shall be in violation of any one or more of the warranties expressed
in this section, it shall not be deemed an Eligible Account for purposes of
this Agreement.
2.5 At the time Borrower pledges, sells, assigns, or transfers to Bank
any instrument, document of title, security, chattel paper, or other property,
or any interest therein, Borrower shall be the lawful owner thereof and shall
have good right to pledge, sell, assign, or transfer the same; none of such
property shall have been pledged, sold, assigned, or transferred to any person
other than Bank or in any way encumbered, and Borrower shall defend the same
against the lawful claims and demands of all persons.
2.6 Set forth on EXHIBIT A is a list of each location at which tangible
Collateral is kept, whether for storage, like purposes, or otherwise. Also set
forth on EXHIBIT A is a list of each office of Borrower at which records of
Borrower pertaining to Accounts are kept and of Borrower's chief executive
office.
2.7 Subject to any limitations stated therein or in connection
therewith, (a) all balance sheets, earnings statements, and other financial data
which have been or may hereafter be furnished to Bank to induce it to enter into
this Agreement, or otherwise furnished in connection herewith, do or shall
fairly represent the financial condition and results of operations of Borrower
(or other entity, as applicable), as of the dates and for the periods for which
the same are furnished, in accordance with generally accepted accounting
principles consistently applied, and (b) Bank all other information, reports,
and other papers and data furnished to Bank shall be accurate, as of the
relevant date, and correct in all material respects and complete insofar as
completeness may be necessary to give Bank a true and accurate knowledge of the
subject matter. Neither this Agreement, nor any document, certificate, or
statement furnished to Bank by or on behalf of Borrower pursuant to or in
connection with this Agreement contains any untrue statement of a material fact
or omits to state a material fact necessary to make the statements contained
herein and therein not misleading. There is no fact known to Borrower that
materially and adversely affects, or will materially and adversely affect, the
assets, business, operations, or condition of Borrower that has not been
specifically set forth in this Agreement or otherwise disclosed by Borrower to
Bank in writing.
2.8 Except as specifically disclosed by Borrower to Bank, in EXHIBIT B,
there are no actions, suits, or proceedings pending or, to the knowledge of
Borrower, threatened against Borrower at law, or in equity, or by or before any
governmental department, commission, board, bureau, agency, or instrumentality,
or any arbitrator, that are not at least eighty percent (80%) covered by
insurance or which involve in the aggregate more than Twenty-Five Thousand
Dollars ($25,000.00).
6
<PAGE>
2.9 Borrower is not engaged in the business of extending credit for the
purpose of purchasing or carrying "margin" stock within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System (12 C.F.R.
Part 221), as amended from time to time ("Regulation U"). No funds borrowed
pursuant to this Agreement shall be used for the purpose, whether immediate,
incidental, or ultimate, of purchasing or carrying within the meaning of
Regulation U, any "margin stock" as defined therein, unless exempt under
Regulation U.
2.10 Prior to the execution of this Agreement, Borrower is solvent,
having assets of a value that exceeds the amount of its liabilities. Taking
into consideration the considerable value of the Collateral securing the
Liabilities directly incurred by Borrower, and the satisfactory value of the
rights of subrogation and contribution that Borrower would enjoy in the event it
is required to satisfy the obligations hereunder, Borrower reasonably
anticipates that it will be able to meet its debts as they mature. Borrower has
adequate capital to conduct the business in which it is engaged. The acceptance
by Borrower of advances hereunder shall be deemed to be a representation and
warranty to Bank that Borrower is solvent at the time of such advance, and
otherwise that the representations and warranties of Borrower in this Agreement
are true and correct as if made again on the date of such advance.
SECTION 3. BANK'S AGREEMENT TO MAKE LOAN.
3.1 Subject to the terms and conditions of this Agreement, and so long
as no Event of Default or event which with notice or the passage of time would
constitute an Event of Default, as defined below or under any other document or
instrument executed in connection herewith shall have occurred or be continuing,
from the date hereof until July 1, 1998, or such future date to which the
expiration date of the Note may be extended (the "Termination Date"), Bank
agrees to extend to Borrower an open-end line of credit on the basis of seventy
percent (70%) of the value of Borrower's Eligible Accounts (such advance formula
being hereinafter referred to as the "Borrowing Base"); provided, however, that
in no event shall the aggregate sum of all advances made by Bank to Borrower
under its Revolving Line exceed Borrower's Line Limit (as defined below).
Within such Line Limit, Borrower may borrow, repay, and reborrow hereunder, from
the date of this Agreement until the Termination Date. The Line Limit for
Borrower shall be $3,000,000.00.
3.2 All borrowings under the Revolving Line shall be evidenced by the
Note and by entering such advances as debits to Borrower's Loan Account. Bank
also shall record in Borrower's Loan Account other charges, expenses, and items
properly chargeable to Borrower hereunder, all payments made by Borrower on
account of its indebtedness thereunder, and other appropriate debits and
credits. The debit balance of Borrower's Loan Account shall reflect the amount
of Borrower's indebtedness under its Revolving Line from time to time hereunder.
Notwithstanding the foregoing, no failure by Bank to properly reflect any
advance actually made or any such charge, expense, or item actually incurred in
any Borrower's Loan Account shall relieve Borrower from its obligations with
respect thereto. At least once each month, Bank shall render a statement of
account for Borrower's Loan Account. Each such statement shall be considered
correct and accepted by Borrower and conclusively binding upon Borrower except
to the extent that Bank receives a written notice of Borrower's exceptions
within thirty (30) days after such statement has been mailed by ordinary mail to
Borrower.
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3.3 If at any time the sum of the outstanding balance of any Borrower's
Loan Account exceeds the lesser of its (i) Borrowing Base or (ii) Line Limit,
then Borrower immediately shall remit to Bank good funds sufficient to eliminate
such excess. If a Borrower fails immediately to remit to Bank good funds
sufficient to eliminate such excess, Bank may, without notice to or demand on
Borrower, at Bank's option (in addition to and without waiving any and all other
rights and remedies of Bank) apply against such excess (x) any collections on
and Proceeds from Accounts Receivable forwarded to Bank and/or in Bank's
possession; (y) any other property of Borrower and the Proceeds thereof now or
hereafter held by Bank (whether for safekeeping, custody, pledge, transmission,
collection or otherwise); and (z) Borrower's' deposit balances (general or
special) and credits with Bank. Borrower shall repay to Bank on the Termination
Date the aggregate amount in Borrower's Loan Account at the close of business on
the Termination Date.
3.4 In the event that the availability of advances expires by the terms
of this Agreement, or by the terms of any agreement extending the expiration
date of this Agreement, Bank may, in its sole discretion, make requested
advances; however, it is expressly acknowledged and agreed that, in such event,
Bank shall have the right, in its sole discretion, to decline to make any
requested advance and may require payment in full of Borrower's Loan Account
without prior notice to Borrower and the making of any such advances shall not
be construed as a waiver of such right by Bank.
3.5 Borrower shall pay interest on the principal amount of the
Revolving Line from time to time at a per annum interest rate equal to the Index
Rate, but in no event shall the interest rate exceed the Highest Lawful Rate.
All payments of principal and interest that are past due shall, at the option of
Bank, bear interest at the lesser of a rate equal to the Index Rate or the
Highest Lawful Rate.
3.6 All funds borrowed under the Revolving Line shall be used for
working capital and general corporate purposes.
Nothing in this Section shall be deemed to extend the duration of the Loans
beyond the times noted in Section 14 hereof.
SECTION 4. INSPECTION OF RECORDS; FURTHER ASSURANCE.
4.1 Borrower shall at reasonable times and from time to time allow
Bank, by or through any of its officers, agents, employees, attorneys, or
accountants (i) to examine, inspect, or make extracts from Borrower's' books and
records; (ii) to analyze financial statements; (iii) to arrange for verification
of Accounts under reasonable procedures, directly with Account Debtors or by
other methods; and (iv) to inspect tangible property constituting Collateral
(all the foregoing collectively referred to as "Audits"). Audits by Bank, may
be at any time during normal business hours, without prior notice to Borrower.
The reasonable expense of such Audits shall be paid by Borrower.
4.2 Borrower shall do, make, execute and deliver all such additional
and further acts, things, deeds, assurances and instruments which Bank may
require more completely to vest in and assure to Bank its rights hereunder or in
any Collateral.
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4.3 Borrower shall pay an annual monitoring fee of $2,500.00 to Bank.
SECTION 5. SECURITY INTEREST OF BANK IN COLLATERAL.
5.1 As security for the payment and performance of all Liabilities,
Bank shall have and is hereby granted a continuing lien on, a security interest
in and a right of set-off against the following Collateral:
(a) all Accounts of Borrower, whether now or hereafter existing,
created, arising or acquired;
(b) all Inventory of Borrower, whether now or hereafter existing,
created, arising or acquired;
(c) all general intangibles of Borrower, whether now or hereafter
existing, created, arising, or acquired;
(d) all books and records now owned and hereafter acquired relating to
Collateral and all files, correspondence, computer programs, tapes,
disks and related data processing software owned Borrower or in
which Borrower has an interest that contains information concerning
or relating to Collateral or any item thereof; and
(e) all Proceeds and products of all of the foregoing, including,
without limitation, insurance proceeds.
No submission by Borrower to Bank of any schedule or other particular
identification of Collateral shall be necessary to vest in Bank a security
interest in each and every item of Collateral now existing or hereafter
acquired, but rather, such security interest shall vest in Bank immediately upon
the creation or acquisition of any item of Collateral, without the necessity for
any other or further action by Borrower or Bank.
5.2 To the extent applicable, the Texas Business and Commerce Code
governs the security interests provided for herein. In connection therewith,
Borrower shall take such steps and execute and deliver such financing statements
and other papers as Bank may from time to time request.
5.3 If, by reason of location of Collateral or otherwise, the creation,
validity, or perfection of security interests provided for herein are governed
by the law of a jurisdiction other than Texas, Borrower shall take such steps
and execute and deliver such papers as Bank may from time to time request to
comply with the Uniform Commercial Code, the Uniform Trust Receipts Act, the
Factors Lien Act, the Federal Food Security Act, or other laws of other states
or jurisdictions. Borrower hereby appoints and empowers Bank, or any employee
of Bank which Bank may designate for the purpose, as attorney-in-fact, to
execute on its behalf any financing statements which, in Bank's sole judgment,
are necessary to be filed in order to perfect or preserve the perfection of
Bank's security interests granted hereby.
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5.4 As additional security for the payment and performance of all
Liabilities, Borrower shall obtain and maintain or cause to be maintained, with
a financially sound and reputable insurer acceptable to Bank, such acceptance
not to be unreasonably withheld, life insurance with respect to the life of J.
Denny Carreker having a death benefit of at least $1,000,000.00 while any of the
Liabilities are outstanding and unpaid. Such life insurance policy shall
provide that such policy may not be cancelled, amended, or terminated unless at
least thirty (30) days prior written notice thereof has been given to Bank. In
addition, such insurance policy shall be assigned by Borrower to Bank to secure
the prompt payment, performance and observance in full of the Liabilities. All
insurance proceeds received by Bank under such policy shall be retained by Bank
for application to the payment of such portion of the Liabilities and in such
order as Bank may determine in its sole discretion with the balance, if any, to
be disbursed to Borrower. Borrower shall furnish Bank with an original or, at
Bank's option, a certificate of such insurance policy prior to and as a
condition to the receipt of any advance hereunder. Borrower shall deliver to
Bank each renewal policy or a certificate pertaining thereto at least fifteen
(15) days before the expiration date of such policy.
SECTION 6. COLLECTION OF ACCOUNTS.
6.1 (a) Until Borrower is notified by Bank to the contrary, Borrower
shall have the right to collect Accounts and deposit proceeds
received from Account Debtors into operating accounts of Borrower
maintained at Bank.
(b) If Bank at any time determines in good faith that the financial
condition of Borrower or its ability to repay the Liabilities has
materially changed to the detriment of Bank, then Bank may, at its
option, notify Borrower that it must immediately establish a
remittances account maintained by and in the name of Bank (the
"Remittances Account") for the deposit of each and every remittance
with respect to the Accounts, and in such event, Borrower shall
provide contemporaneously with each and every remittance with
respect to the Accounts and upon each deposit of funds to the
Remittances Account to Bank, a report reflecting the amount of all
such remittances, the Accounts and amounts thereof with respect to
which such remittances were made. Thereafter, Borrower shall
notify Bank of such collections as are received pursuant to the
provisions of Section 7.1 below and shall hold the proceeds
received from collections in trust for Bank without commingling the
same with other funds of Borrower and shall turn the same over to
Bank immediately upon receipt in the identical form received.
Proceeds so transmitted to Bank may be handled and administered in
and through remittance or special accounts; the maintenance of any
such accounts shall be solely for the convenience of Bank, and
Borrower shall not have any right, title, or interest in or to any
such accounts or in the amounts at any time appearing to the credit
thereof.
(c) Following an Event of Default or event which following notice or
the passage of time would constitute an Event of Default, Bank may
(without notice to or demand on Borrower, at Bank's option) apply
against the outstanding balance of Borrower's Loan Account from
time to time any collections on and Proceeds from Accounts
Receivable forwarded to Bank and/or in Bank's possession
(including,
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without limitation, any such collections and Proceeds in any
lock-box, Remittances Account or any operating or other account
maintained by or for Borrower at Bank). Nothing herein shall be
deemed to diminish or limit any of Bank's rights or remedies under
applicable law or Section 3.3, Section 10, Section 11, or any other
Section of this Agreement or otherwise. If no Event of Default has
occurred or is continuing hereunder and if there is no excess
outstanding balance in Borrower's Loan Account required to be paid
by Borrower under Section 3.3 hereof, Bank may, at its option,
deposit any or all collections on and Proceeds from Accounts
Receivable in Bank's possession into Borrower's operating accounts
maintained and to be maintained at Bank. Bank shall not be required
to credit Borrower's Loan Account with the amount of any check or
other instrument constituting provisional payment until Bank has
received final payment thereof at its office in cash or solvent
credits accepted by Bank.
(d) Borrower shall, at the request of Bank, notify the Account Debtors
of the security interest of Bank in any Account and shall instruct
Account Debtors to remit payments directly to Bank, and Bank may
itself, at any time, so notify Account Debtors.
6.2 Borrower agrees that no court action or other legal proceeding or
garnishment, attachment, repossession of property, or any other attempt to
repossess any merchandise covered by an Account shall be attempted by Borrower
except by or under the direction of competent legal counsel. Borrower hereby
agrees to indemnify and hold Bank harmless from any loss or liability of any
kind or character which may be asserted against Bank by virtue of any suit
filed, process issued, or any repossession or attempted repossession done or
attempted by Borrower or by virtue of any other endeavors which Borrower may
make to collect any Accounts or repossess any such merchandise.
SECTION 7. AFFIRMATIVE COVENANTS.
Until all indebtedness of Borrower to Bank has been paid and all
Liabilities have been satisfied, Borrower shall furnish or cause to be furnished
to Bank:
7.1 (a) together with each request for an advance, or if not
previously furnished, within twenty (20) days following the end of
each calendar month, detailed reports in form acceptable to Bank of
all Accounts as of the last day of the immediately preceding
calendar month, and the period of time which has elapsed with
respect to such Accounts since the invoice date with respect
thereto;
(b) together with each request for an advance, or if not previously
furnished, within twenty (20) days following the end of each
calendar month, a Borrowing Base Certificate and Compliance
Certificate in the forms attach hereto as EXHIBIT C, as of the last
day of the immediately preceding calendar month signed by an
authorized officer of the applicable Borrower;
(c) if requested by Bank, monthly, within twenty (20) days following
the end of each calendar month, a report reflecting the amount of
all deposits to operating
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accounts, Remittances Accounts, if applicable, and other accounts
of Borrower, together with the Accounts and amounts thereof with
respect to which deposits were made;
(d) monthly financial statements of Borrower, which may be internally
prepared, within twenty (20) days following the end of each
calendar month in each fiscal year, including a balance sheet as of
the close of such period, an income statement, and reconciliation
of surplus for such period, prepared and analyzed in accordance
with generally accepted accounting principles consistently applied
and attested to by an authorized officer of Borrower;
(e) audited annual financial statements of Borrower within one hundred
twenty (120) days following the end of each fiscal year, including
a balance sheet as of the close of such period, an income
statement, and reconciliation of surplus for such period, prepared
by an outside certified public accountant reasonably satisfactory
to Bank in accordance with generally accepted accounting principles
consistently applied;
(f) a copy of Borrower's federal income tax returns within thirty (30)
days following the filing thereof with the Internal Revenue
Service;
(g) such other documents, instruments, data, or information of any type
requested by Bank with respect to the Accounts, or other Collateral
or Borrower's operations or financial condition.
7.2 Borrower shall (a) maintain insurance in form, amount, and
substance acceptable to Bank including, without limitation, extended multi-peril
hazard, worker's compensation, and general liability insurance written by
companies reasonably acceptable to Bank upon all facets of its business,
including without limitation, the Collateral pledged to Bank, its property, and
its equipment, of such character and amounts as are usually maintained by
companies engaged in like business; (b) furnish to Bank, upon request, a
statement of the insurance coverage; (c) obtain other or additional insurance
promptly, upon request of Bank, to the extent that such insurance may be
available; and (d) cause Bank to be named as loss payee as to all property
constituting Collateral hereunder, pursuant to a loss payable endorsement in
form acceptable to Bank.
7.3 Borrower shall maintain with Bank its primary operating and
depository accounts ("Depository Accounts"), and Bank, at Bank's option, may
make all advances hereunder into Borrower's Depository Accounts, and Borrower
expressly agrees that Bank may, at Bank's option, debit against any such
Depository Accounts any and all sums, amounts, charges, and payments due under
or in connection with this Agreement and/or the Note.
7.4 Borrower does and shall at all times comply with all present and
future laws, ordinances, rules, and regulations (of any governmental authority
or entity) applicable to, governing or affecting Borrower, its operations, its
property, the Collateral, or any part of any of the foregoing, and shall
immediately notify Bank of any and all alleged or asserted violations of any
such law, ordinance, or regulation.
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7.5 Borrower shall at the time of its first knowledge or notice
immediately notify Bank in writing of (i) the occurrence of any event or the
existence of any event, circumstance, or condition which constitutes or upon
notice or lapse of time would constitute an Event of Default under the terms of
this Agreement and (ii) any other information that may adversely affect in any
material manner the assets of Borrower including, but not limited to, the filing
of any lawsuit against or involving Borrower.
7.6 Borrower agrees to indemnify Bank, its officers, directors,
employees, agents and attorneys ("Indemnified Parties") and hold them harmless
against any and all claims, demands, causes of action, loss, damage,
liabilities, costs and expenses (including, without limitation, attorneys' fees
and court costs) asserted against or incurred by Indemnified Parties by reason
of, arising out of, or in connection with, any fact or circumstance relating to
the transactions made the subject of this Agreement or the Security Documents or
any of them. The above notwithstanding Borrower shall have no obligation to
indemnify or hold harmless Bank from claims resulting from the gross negligence
or intentional misconduct of Bank.
7.7 Borrower agrees to take all actions that Bank may request to
establish and maintain a valid security interest in the Accounts and each and
every other item of Collateral, free and clear of all other liens, claims,
charges, security interests, and encumbrances whatsoever. Borrower shall
promptly pay all taxes or charges levied on or with respect to the Collateral,
and will at all times keep the Accounts and each and every other item of
Collateral free and clear of all liens, claims, charges, security interests, and
encumbrances whatsoever, other than the security interest granted hereby or by
any other document executed in favor of Bank. If such taxes or other
assessments remain unpaid after the date fixed for the payment of same, or if
any lien, charge, claim, security interest, or encumbrance shall arise, or be
claimed or asserted with respect to the Accounts or any other item of
Collateral, Bank may, without notice to Borrower, pay such taxes, assessments,
charges, or claims, and take any and all other actions (including the payment of
money) deemed desirable by Bank to remove any such lien, charge, claim, security
interest, or encumbrance, and Borrower agrees that the amounts thereof shall be
charged to Borrower's Loan Account created hereby and shall bear interest at the
rate of interest then borne by Borrower's obligations under the Note. Not
withstanding the other provisions of this Section 7.7, nothing herein shall
require the payment or discharge of any such taxes or assessments so long as
Borrower (a) shall, in good faith, and at its own expense, contest the same or
the validity thereof by appropriate legal proceedings diligently pursued; and
(b) shall, at Bank's option, post a bond or provide other security deemed
equivalent by Bank to cover or secure payment of such taxes or assessments.
Nothing in this Section shall be deemed to extend the duration of the Loans
beyond the times noted in Section 14 hereof.
SECTION 8. NEGATIVE COVENANTS.
8.1 Borrower shall not create or permit the creation or continuance of
any lien, charge, encumbrance, or other interest upon any of its property,
except for liens (collectively, "Permitted Liens") (a) for taxes, assessments or
governmental charges not yet payable; (b) of landlords and vendors arising in
the ordinary course of business for sums not yet due; and (c) approved in
advance in writing by Bank or listed on EXHIBIT D attached hereto. Borrower
will not sell,
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transfer, lease or otherwise dispose of, or suffer to exist any lien, charge,
claim, security interest, or encumbrance (except for those in favor of Bank)
with respect to any of the Collateral or any interest therein (or any of the
Proceeds thereof, whether money, checks, money orders, drafts, notes,
instruments, documents, chattel paper, Accounts, returns, or repossessions),
without Bank's prior written consent.
8.2 Without Bank's prior written consent, Borrower shall not borrow any
money, or otherwise become directly or indirectly obligated, other than for
trade credit in the ordinary course of business and the existing indebtedness
listed on EXHIBIT D attached hereto, and Borrower shall not guarantee, endorse,
or assume, either directly or indirectly, any indebtedness of any other
corporation, person, or entity.
8.3 Without Bank's prior written consent, Borrower shall not purchase
or acquire, directly or indirectly, any shares of stock, evidences of
indebtedness, or other securities of any person, corporation, or other entity.
Without Bank's prior written consent, Borrower shall not lend, make advances or
otherwise extend credit to any person or entity.
8.4 Borrower shall not liquidate, or discontinue or materially reduce
its normal operations with intention to liquidate, and shall not merge or
consolidate with or into any corporation, partnership, or other entity, or sell,
lease, transfer, or otherwise dispose of all or any substantial part of its
assets, or any of its Accounts. Borrower shall not cause, allow, or suffer to
occur a change in the ownership or management of Borrower or its business
without Bank's prior written consent. Borrower will not change its name or
identity without notifying Bank of such change in writing at least thirty (30)
days prior to the effective date of such change, and Borrower will take all
steps necessary prior to any such change to maintain at all times the priority
and validity of all liens and security interests contemplated by this Agreement,
and will execute and deliver to Bank all financing statement amendments
requested by Bank prior to such name change becoming effective.
8.5 Without Bank's prior written consent, Borrower shall not declare or
pay any dividends or bonuses (unless payable in shares of a Borrower) upon
its outstanding shares, and Borrower shall not redeem, purchase or in any
manner acquire any of such outstanding shares.
8.6 Borrower shall not change any office or other location set forth on
EXHIBIT A without Bank's written consent, and, prior to making such change,
Borrower agrees to execute any additional financing statements or other
documents or notices that Bank may require.
8.7 Borrower shall not cause, allow, or suffer to occur its Current
Ratio to be less than 1.35 to 1.0 at any time.
8.8 Borrower shall not cause, allow, or suffer to occur its Debt to
Tangible Net Worth Ratio to be greater than 2.25 to 1.0 at any time.
8.9 Borrower shall not cause, allow or suffer to occur its Tangible Net
Worth to be less than $6,500,000.00 at any time.
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8.10 Borrower shall not cause, allow or suffer to occur its Tangible Net
Worth to increase by an amount less than $500,000.00 annually, calculated at the
end of each fiscal year of Borrower.
8.11 Borrower shall not cause, allow, or suffer to occur its Fixed
Charge Coverage Ratio to be less than 2.5 to 1.0 at any time.
8.12 Without Bank's prior written consent, Borrower shall not make in
any fiscal year capital expenditures or contracts for capital expenditures
together aggregating in excess of $500,000.00, except that Borrower can, without
Bank's prior written consent, purchase personal property.
Nothing in this Section shall be deemed to extend the duration of the Loans
beyond the times noted in Section 14 hereof.
SECTION 9. EVENTS OF DEFAULT; ACCELERATION.
9.1 Any or all of the liabilities of Borrower to Bank, including,
without limitation, the Note and the Liabilities, shall all be, at the option of
Bank and notwithstanding any time or credit allowed by any instrument evidencing
a Liability, immediately due and payable without notice or demand, and the
obligation of Bank to make advances hereunder shall immediately cease and
terminate upon the occurrence of any of the following, which shall be considered
Events of Default:
(a) default in the payment or performance, when due or payable, of any
Liability of Borrower, to Bank;
(b) except for any Event of Default described in another subsection of
this Section 9.1, failure by Borrower to perform any act or
obligation imposed hereby, or in any other agreement to which Bank
and Borrower are parties, or Borrower's' failure to abide by the
terms of this Agreement, or any other document or instrument
executed in connection herewith, or in any other agreement to which
Bank and Borrower are parties and such failure continues for thirty
(30) days following the giving of notice by Bank to Borrower;
(c) failure of Borrower to pay when due any taxes, including without
limitation federal income and FICA taxes and state and local sales
and property taxes, each with the appropriate taxing authorities
and as required by law;
(d) if any warranty or representation contained herein shall prove
false or misleading or if Borrower or any endorser, Guarantor, or
surety for any Liability of Borrower to Bank makes any other
misrepresentation to Bank for the purpose of obtaining credit or
any extension of credit;
(e) failure of Borrower or any endorser, Guarantor, or surety for any
Liability of Borrower to Bank, after request by Bank, to furnish
financial information or to permit the inspection of the books or
records or Collateral of Borrower or any
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endorser, Guarantor, or surety for any Liability of Borrower to
Bank and such failure continues for thirty (30) days following the
giving of notice by Bank to Borrower;
(f) issuance of an injunction or attachment against property of
Borrower;
(g) calling of a meeting of creditors, appointment of a committee of
creditors or liquidation agents, or offering of a composition or
extension to creditors by, for or of Borrower or of any endorser,
Guarantor, or surety for any Liability of Borrower to Bank;
(h) bankruptcy or Insolvency of Borrower or of any of Borrower's'
shareholders, or of any endorser, Guarantor, or surety for any
Liability of Borrower to Bank;
(i) any change in the ownership or executive management of Borrower or
its business without the prior written consent of Bank;
(j) Borrower's failure to maintain any insurance required hereunder or
pay any premium on (i) any insurance policy assigned to Bank, or
(ii) any insurance covering any Collateral;
(k) fraud or misrepresentation by or on behalf of Borrower in its
transactions with Bank;
(l) violation of any affirmative or negative covenant recited in
Section 7 or Section 8 hereof or violation of or failure to abide
by any other provision of this Agreement;
(m) any default or event of default under the Note, Security Documents
or any other document or agreement executed in connection herewith,
or any other document or agreement to which Borrower and Bank are
parties;
(n) any endorser, Guarantor, or surety for any Liability terminates or
attempts to terminate a guaranty or other agreement with Bank,
whether or not such termination or attempted termination
constitutes a breach under such guaranty or other agreement;
(o) if a judgment against Borrower remains unpaid, unstayed, or
undismissed for a period of more than twenty (20) days;
(p) if Borrower discontinues doing business for any reason;
(q) if any event occurs that, under any agreement to which Borrower is
a party, grants the option to the holder of indebtedness of
Borrower to accelerate such indebtedness;
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(r) if title to any of the stock or other interest in Borrower directly
or indirectly shall be transferred, pledged, or otherwise
encumbered;
(s) the death or incapacity of J. Denny Carreker; or
(t) the termination of employment of J. Denny Carreker.
9.2 Borrower agrees that all Liabilities, whether arising under this
Agreement or the Note or under any other agreement to which Bank and Borrower
are parties, shall become immediately due and payable upon failure by Borrower
to perform any act or obligation imposed under this Agreement or the Note or
under any other agreement to which Bank and Borrower are parties.
SECTION 10. POWER TO SELL OR COLLECT COLLATERAL; REMEDIES CUMULATIVE.
10.1 Upon the occurrence of any one or more of the above Events of
Default and at any time thereafter (such defaults not having been previously
cured), Bank shall have, in addition to all other rights and remedies, the
remedies of a secured party under the Texas Business and Commerce Code
(regardless of whether the Uniform Commercial Code has been enacted in the
jurisdiction where rights or remedies are asserted), including, without
limitation, the right to take possession of the Collateral, and for that purpose
Bank may, so far as Borrower can give authority therefor, enter upon any
premises on which the Collateral may be situated and remove the same therefrom
or take possession of same and store same on such premises pending disposition
under the terms of this Agreement or applicable law. Bank may require Borrower
to assemble the Collateral and make it available to Bank at a place designated
by Bank. Unless the Collateral is perishable or threatens to decline speedily
in value or is to a type customarily sold on a recognized market, Bank shall
give to Borrower at least five (5) days' written notice of the time and place of
any public sale of Collateral or of the time after which any private sale or any
other intended disposition is to be made, which time period shall be deemed for
all purposes to be commercially reasonable. Bank may, at any time in its
discretion. transfer any securities or other property constituting Collateral
into its own name or that of its nominee, and receive the income thereon and
hold the same as security for the Liabilities or apply it on principal or
interest due on Liabilities. Insofar as Collateral shall consist of Accounts,
insurance policies, instruments, chattel paper, choices in action, or the like,
Bank may demand, collect, receipt for, settle, compromise, adjust, sue for,
release, extend the time of payment, make allowances and adjustments, foreclose,
or realize upon Collateral as Bank may determine, whether or not Liabilities or
Collateral are then due, and for the purpose of realizing Bank's rights therein,
Bank is granted power of attorney to receive, open, and dispose of mail
addressed to Borrower and endorse notes, checks, drafts, money orders, documents
of title, or other evidences of payment, shipment, or storage or any form of
Collateral on behalf of and in the name of Borrower.
10.2 No right, power, or remedy conferred in this Agreement, the Note,
or any other agreement executed in connection herewith or any other document or
agreement to which Borrower and Bank are parties, or now or hereafter existing
at law, in equity, or admiralty, by statute or otherwise, shall be exclusive,
and each such right, power, or remedy, shall, to the full extent permitted by
law, be cumulative and in addition to every other such night, power, or remedy.
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10.3 The sale by Bank of less than the whole of the Collateral shall not
exhaust the rights of Bank hereunder, and Bank is specifically empowered to make
successive sales hereunder until the whole of the Collateral shall be sold. If
the proceeds of any sale of less than the whole of the Collateral shall be less
than the aggregate of the Liabilities, this Agreement and the security interests
created hereby shall remain in full force and effect as to the unsold portion of
the Collateral just as though no sale had been made, provided, however, that
Borrower shall never have any right to require sale of less than the whole of
the Collateral but Bank shall have the right, at its sole election, to sell less
than the whole of the Collateral.
10.4 Bank may resort to any security given by this Agreement or to any
other security now existing or hereafter given to secure the payment of
Borrower's Liabilities, in whole or in part, and in such portions and in such
order as may seem best to Bank in its sole discretion, and any such action shall
not in any way be considered as a waiver of any of the rights, benefits, or
security interests evidenced by this Agreement.
10.5 Bank may, at all times, proceed directly against Borrower to
enforce payment of Borrower's Liabilities and shall not be required first to
enforce its rights in the Collateral or any other security granted to it. Bank
shall not be required to take any action of any kind to preserve, collect, or
protect it or Borrower's rights in the Collateral or any other security granted
to it.
SECTION 11. DEPOSITS.
Bank, any participant, and any other holder of all or any part of the
Liabilities are hereby given a continuing lien as additional security for all
Liabilities hereunder upon any and all moneys, securities, and other property of
Borrower, and the Proceeds thereof, now or hereafter held or received by or in
transit to Bank, such participant, or such holder from or for Borrower, whether
for safekeeping, custody, pledge, transmission, collection, or otherwise, and
also upon any and all deposit balances (general or special) and credits of
Borrower with. and any and all claims of Borrower against Bank, such
participant, or such holder at any time existing, and upon an event of default
hereunder, Bank, such participant, or such holder may apply or set off the same
against the Liabilities and indebtedness hereby secured, without notice and
without liability. Borrower agrees that any other person or entity purchasing a
participation from Bank may exercise all its rights of payment (including the
right of set-off) with respect to such participation as fully as if such person
or entity was the direct creditor of Borrower in the amount of such
participation.
SECTION 12. WAIVERS.
Borrower and each accommodation party, surety, endorser, or other person or
entity liable for the payment or collection of the Liabilities expressly waive
demand, presentment for payment, notice of protest, notice of intent to
accelerate, notice of acceleration, notice of acceptance of this Agreement, and
notice of loans made, credit extended, Collateral received or delivered, or
other action taken in reliance hereon and all other demands and notices of any
description. With respect both to the Liabilities and Collateral, Borrower
consents to any extension or postponement of the time of payment or any other
indulgence, to any substitution, exchange, or release of any or all of the
Collateral, to the addition or release of any party or person primarily or
secondarily
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liable, to the acceptance of partial payments thereon and the settlement,
compromising, or adjusting of any thereof, all in such manner and at such
time or times as Bank may deem advisable. Bank shall have no duty as to the
collection or protection of any or all of the Collateral or any income
thereon, nor as to the preservation of any rights pertaining thereto beyond
the safe custody of Collateral without resorting or regard to other
collateral or sources of reimbursement for the Liabilities. Bank shall not
be deemed to have waived any of its rights upon or under any of the
Liabilities or Collateral unless such waiver be in writing and signed by
Bank. No course of dealing and no delay or omission on the part of Bank in
exercising any right shall operate as a waiver of such right or any other
right. A waiver on any one occasion shall not be construed as a bar to or
waiver of any right on any further occasion. All rights and remedies of Bank
with respect to Liabilities or Collateral, whether evidenced hereby or by any
other instrument or paper, shall be cumulative and may be exercised singly or
concurrently.
SECTION 13. EXPENSES, PROCEEDS OF COLLATERAL.
Irrespective of whether the proceeds of the Note are disbursed, Borrower
shall pay all expenses, including, without limitation, reasonable legal
expenses, incurred by Bank from time to time in connection with the preparation,
administration, amendment, or modification of this Agreement, the Note, and
other documents executed in connection with the creation of the Loans and those
associated with the perfection and creation of the security interests granted
pursuant hereto. Borrower shall pay to Bank on demand any and all expenses and
costs of collection, including, without limitation, reasonable counsel fees,
incurred or paid by Bank in protecting or enforcing its rights upon or with
respect to any of the Liabilities or the Collateral. After deducting all of
said expenses, the residue of any proceeds of collection or sale of Liabilities
or Collateral shall be applied to the payment of principal or interest on
Liabilities in such order or preference as Bank may determine, proper allowance
for interest on Liabilities not then due being made, and any excess shall be
returned to Borrower, and Borrower shall remain liable for any deficiency.
SECTION 14. DURATION; EXTENSION.
The Revolving Line shall terminate on the Termination Date; however, the
parties recognize that they may wish to extend the expiration date by mutual
agreement. The termination or expiration of the Revolving Line shall in no way
affect any transactions entered into or rights created or obligations incurred
prior to such termination or expiration; rather, such rights and obligations
shall be fully operative until the same are fully disposed of, concluded, and/or
liquidated. Without limiting the generality of the foregoing, such termination
or expiration shall not release nor diminish any of Borrower's' obligations and
agreements hereunder until payment in full of all of the Liabilities under this
Agreement and all other sums and amounts payable under or pursuant to this
Agreement. This Agreement shall be a continuing agreement in every respect. No
modification or amendment of this Agreement or extension of the Termination Date
shall be effective unless placed in writing and duly executed by Bank and
Borrower.
SECTION 15. GENERAL.
15.1 All notices or other communications required or permitted to be
given pursuant to this Agreement shall be in writing and shall be considered as
properly given if mailed by first
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class United States mail, postage prepaid, registered or certified with
return receipt requested, or by delivering same to the designated address of
the addressee stated herein by a third party commercial delivery service.
Notice given in any other manner shall be effective only if and when received
by addressee. For purposes of notice, the addresses of the parties shall be
as set below; provided, however, that either party shall have the right to
change its address for notice hereunder to any other location within the
continental United States by the giving of thirty (30) days' notice to the
other party in the manner set forth hereinabove.
IF TO BANK:
Compass Bank
P.O. Box 650561
Dallas, Texas 75265-0561
Attention: Mr. Jerry Hopkins
IF TO BORROWER:
Carreker-Antinori, Inc.
1400 North Dallas Parkway, Suite 1100
Dallas, Texas 75240
Attn: Mr. J. Denny Carreker
15.2 If at any time or times by assignment or otherwise Bank transfers
any of the Liabilities (either separately or together with the Collateral
therefor), such transfer shall carry with it Bank's powers and rights under this
Agreement with respect to the Liabilities and Collateral transferred, and the
transferee shall become vested with said powers and rights whether or not they
are specifically referred to in the transfer. If and to the extent Bank retains
any other of the Liabilities or Collateral, Bank will continue to have the
rights and powers herein set forth with respect thereto.
15.3 This Agreement and all rights and obligations hereunder, including,
matters of constriction, validity, and performance, shall be governed by the
laws of the State of Texas, except that Tex. Rev. Civ. Stat. Ann. art.
5069-1.04, as amended, Ch. 15, which regulates certain revolving credit loan
accounts and revolving tri-party accounts, shall not apply to this Agreement,
the Note, the Revolving Line, or any transaction contemplated hereby. Unless
changed in accordance with law, the applicable rate under Texas law shall be the
indicated (weekly) rate ceiling from time to time in effect as provided in Tex.
Rev. Civ. Stat. Ann. art. 5069-1.04, as amended.
15.4 This Agreement is performable in Dallas County, Texas, and any
action brought for the enforcement or construction of any term of this Agreement
or any of the Note or other instruments executed in connection herewith shall be
brought in a court of appropriate jurisdiction in Dallas County, Texas.
15.5 It is the intention of Bank and Borrower to conform strictly to any
applicable usury laws. Accordingly, if the transactions contemplated hereby
would be usurious under any applicable law, then, in that event, notwithstanding
anything to the contrary in this Agreement,
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the Note, or any other agreement or instrument entered into in connection
with or as security for or guaranteeing this Agreement or the Note, it is
agreed as follows: (i) the aggregate of all consideration that constitutes
interest under applicable law that is contracted for, taken, reserved,
charged, or received by Bank under this Agreement, the Note, or under any
other agreement entered into in connection with or as security for or
guaranteeing this Agreement or the Note shall under no circumstances exceed
the Highest Lawful Rate (as defined below), and any excess shall be cancelled
automatically and, if theretofore paid, shall, at the option of Bank, be
credited by Bank on the principal amount of any indebtedness owed to Bank by
Borrower or refunded by Bank to Borrower, and (ii) in the event that the
maturity of the Note or any other of the Liabilities are accelerated or in
the event of any required or permitted prepayment, then such consideration
that constitutes interest under law applicable to Bank may never include more
than the Highest Lawful Rate and excess interest, if any, provided for in
this Agreement or the Note or otherwise shall be cancelled automatically as
of the date of such acceleration or prepayment and, if theretofore paid,
shall, at the option of Bank, be credited by Bank on the principal amount of
any indebtedness owed to Bank by Borrower or refunded by Bank to Borrower.
15.6 Notwithstanding anything herein to the contrary, in no event will
interest payable to Bank exceed the maximum amount permitted by the law
applicable to Bank (after taking into account all charges payable to Bank that
constitute interest under such applicable law), but if any amount referred to in
any of this Agreement, the Note, or any other agreement or instrument to which
Bank and Borrower are parties that would be payable to Bank but for the
applicability of usury or other laws limiting the consideration payable to Bank
is not paid to Bank as a result of the applicability of such laws, then interest
on the outstanding principal balance of the Liabilities payable to Bank shall,
to the extent permitted by law, accrue at the Highest Lawful Rate (after taking
into account all charges payable to Bank that constitute interest under
applicable law) until the total amount received by Bank equals the amount it
would have received had no such laws been applicable.
15.7 "HIGHEST LAWFUL RATE" means the maximum non-usurious interest rate
(computed on the basis of a year of 365 or 366 days, as applicable) that at any
time or from time to time may be contracted for, taken, reserved, charged or
received on amounts due to Bank, under laws applicable to Bank that are
presently in effect or, to the extent allowed by law, under such applicable laws
which allow a higher maximum non-usurious rate than applicable laws now allow.
15.8 This Agreement and the documents delivered hereunder or in
connection herewith contain the entire agreement between the parties with
respect to the subject matter hereof and thereof and supersede all prior
agreements relating to the subject matter hereof and thereof In the event of
actual conflict in the terms and provisions of this Agreement and any of such
documents or any other instrument or agreement executed in connection with this
Agreement or described or referred to in this Agreement, the terms and
provisions of this Agreement shall control. No modification, consent, amendment
or waiver or any provision of this Agreement, nor consent to any departure by
Borrower therefrom, shall be effective unless the same shall be in writing and
signed by Bank, and then shall be effectively only in the specific instance and
for the purpose for which given. This Agreement is binding upon Borrower, its
heirs, successors and assigns, and inures to the benefit of Bank, its successors
and assigns. All representations and warranties of Borrower herein, and all
covenants and agreements herein or in any document delivered
21
<PAGE>
hereunder or in connection herewith that are not fully performed before the
effective date of this Agreement, shall survive such date.
15.9 Prior to the date of this Agreement, Bank and Borrower have entered
into one or more loan agreements ("Prior Loan Agreements") relating to one or
more extensions of credit including extensions of credit renewed and extended by
this Agreement and the Note and other extensions of credit which are not
evidenced by the Note. To the extent any term or provision of the Prior Loan
Agreements is in conflict with the terms and provisions of this Agreement, the
terms and provisions of this Agreement shall control and supersede all such
Prior Loan Agreements.
15.10 If at any time after the date hereof, and from time to time, Bank
determines that the adoption or modification of any applicable law, rule or
regulation regarding taxation, Bank's required levels of reserves, deposits,
insurance or capital (including any allocation of capital requirements or
conditions), or similar requirements, or any interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation, administration or compliance of Bank with any of such
requirements, has or would have the effect of (i) increasing Bank's costs
relating to the Loans, or (ii) reducing the yield or rate of return of Bank on
the Loans, to a level below that which Bank could have achieved but for the
adoption or modification of any such requirements, Borrower shall, within
fifteen (15) days of any request by Bank, pay to Bank such additional amounts as
(in Bank's sole judgment, after good faith and reasonable computation) will
compensate Bank for such increase in costs or reduction in yield or rate of
return of Bank; provided, however, that nothing herein contained shall be
construed or so operate as to require Borrower to pay any interest, fees, costs
or charges greater than is permitted by applicable law. No failure by Bank to
immediately demand payment of any additional amounts payable hereunder shall
constitute a waiver of Bank's right to demand payment of such amounts at any
subsequent time.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
BORROWER:
CARREKER-ANTINORI, INC.,
a Texas corporation
By: /s/ J.D. Carreker
-----------------------------------
Its: Chairman
----------------------------------
BANK:
COMPASS BANK
By: /s/ Jerry Hopkins
-----------------------------------
Jerry Hopkins, Vice President
22
<PAGE>
EXHIBIT A
Offices and Other Locations of the Borrower
1. Location(s) at which Collateral is kept:
14001 North Dallas Parkway, Suite 1100
Dallas, Texas 75240
1201 Peachtree Street, NE
400 Colony Square, Suite 450
Atlanta, Georgia 30361
2. Location(s) at which records regarding Accounts are kept:
14001 North Dallas Parkway, Suite 1100
Dallas, Texas 75240
1201 Peachtree Street, NE
400 Colony Square, Suite 450
Atlanta, Georgia 30361
3. Chief executive office:
14001 North Dallas Parkway, Suite 1100
Dallas, Texas 75240
<PAGE>
EXHIBIT B
Actions, Suits & Proceedings
<PAGE>
EXHIBIT C
Borrowing Base Certificate and Compliance Certificate
<PAGE>
EXHIBIT D
Schedule of Certain Indebtedness and Leases
1. Office Leases:
a. Office lease for 13,742 rentable sq. ft. located at 400 Colony
Square, Suite 450, Atlanta, Georgia 30361 at a base rent per month
of $21,467.67 by and between Trizec Colony Square, Inc. and
borrower dated November 20, 1991 as amended by First Amendment to
Lease Agreement dated September 9, 1993, Second Amendment to Lease
Agreement dated October 18, 1995 and 3rd Amendment of Office Lease
dated April 18, 1997 and terminating March 1, 1998.
b. Office lease for 20,639 rentable sq. ft. located at 400 Colony
Square, Suite 700, Atlanta, Georgia 30361 at a base rent per month
of $30,528.52 by and between Trizec Colony Square, Inc. and
borrower dated August 6, 1997, commencing March 1, 1998 and
terminating February 28, 2003.
c. Office lease for 21,157 rentable sq. ft. located at 14001 North
Dallas Parkway, Suite 1100, Dallas, Texas 75240 at a base rent per
month of $19,307.86 through May 31, 1998 that increases to
$20,560.11 on June 1, 1998 by and between Crescent Real Estate
Funding II, L.P. and borrower dated December 8, 1993 as amended by
First Amendment to Office Building Lease, Second Amendment to
Office Building Lease dated May 31, 1995, Third Amendment to Office
Building Lease dated August 14, 1995, and Fourth Amendment to
Office Building Lease dated July 1, 1996 and terminating May 31,
1999.
2. Existing Indebtedness:
a. Term note in the amount of $22,100 payable in consecutive equal
monthly payments of $454.75 through June 17, 2002 that is secured
by certain equipment (copier machine) as collateral for SunTrust
Bank Atlanta, Attn: John Moreau - 151, P.O. Box 4418, Atlanta,
Georgia, 30302.
<PAGE>
EXHIBIT 10.20
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("AGREEMENT") is made and entered into as
of October 10, 1996, by and among THE CARREKER GROUP, INC., a Texas
corporation formerly known as J.D. Carreker and Associates, Inc. ("COMPANY"),
J.D. CARREKER ("CARREKER") and SCIENCE APPLICATIONS INTERNATIONAL
CORPORATION, a Delaware corporation ("SAIC").
RECITALS
WHEREAS, the Company and SAIC each desire to form a strategic alliance
in an effort to maximize their respective diverse and complementary
capabilities;
WHEREAS, the Company is authorized to issue shares ("SHARES") of the
Company's no par value Class A (voting) and Class B (non-voting) common stock
(individually "Class A Common Stock" and "Class B Common Stock") and
collectively ("COMMON STOCK");
WHEREAS, the strategic alliance provides for a cooperative arrangement
between the parties pursuant to a strategic alliance agreement ("STRATEGIC
ALLIANCE AGREEMENT"), an equity investment by SAIC in the Company and certain
other arrangements pursuant to this Agreement and a shareholder agreement by
and among SAIC, the Company and Carreker ("SHAREHOLDER AGREEMENT");
WHEREAS, the Company desires to sell to SAIC, and SAIC desires to
purchase from the Company, one hundred thousand six hundred forty-five
(100,645) Shares of the Company's Class A Common Stock, pursuant to this
Agreement;
WHEREAS, it is the intention of the parties hereto that upon
consummation of the purchase and sale of the Shares pursuant to this
Agreement, SAIC shall own not less than eight percent (8%) of the issued and
outstanding Shares of Common Stock (including treasury Shares and Shares for
issuance under existing stock options) in the amount of 1,258,074 Shares; and
WHEREAS, in consideration of such purchase of Shares and the strategic
alliance, the Company desires to grant to SAIC and SAIC desires to grant to
the Company an option to purchase Shares in the future on the terms and
conditions set forth in the Shareholder Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I
SALE OF SHARES
1.1 PURCHASE AND SALE OF SHARES. Subject to the terms and conditions
of this Agreement and in reliance upon the representations, warranties and
agreements herein contained,
<PAGE>
on the Closing Date (as defined in Section 2.1), the Company shall issue and
sell to SAIC, and SAIC shall purchase from the Company, the Shares free and
clear of all liens, security interests, options, rights, mortgages, pledges,
restrictions on transferability of any type, (other than restrictions on
transferability as may be applicable under federal and state securities
laws), defective titles, claims, charges or encumbrances of any nature
whatsoever on any property interests, other than liens for personal property
taxes that are not yet due ("ENCUMBRANCES"). Immediately after the sale of
the Shares to SAIC, such Shares shall represent not less than eight percent
(8%) of the sum of (a) the issued and outstanding Shares of the Common Stock
of the Company as of the Closing Date (including treasury Shares) and (b) all
Shares of the Common Stock of the Company which as of the Closing Date are
the subject of outstanding options.
1.2 PURCHASE PRICE. The purchase price for the Shares ("PURCHASE
PRICE") shall be Two Million Dollars ($2,000,000.00). At the Closing, SAIC
shall pay the Purchase Price to the Company, at Company's option, either (a)
by delivery of SAIC's corporate check or (b) by wire transfer to such account
as is designated by the Company.
ARTICLE II
CLOSING
2.1 THE CLOSING. The consummation of the sale and purchase of the
Shares referred to in Section 1.1 (the "CLOSING") shall take place on October
___, 1996 at the executive offices of the Company, in Dallas, Texas, or at
such other date or place as the parties hereto mutually determine, either
verbally or in writing. Such date is referred to herein as the "Closing
Date" and the Closing shall be deemed to be effective as of 5:00 p.m.,
Central Daylight Savings Time on the Closing Date.
2.2 DELIVERY AT CLOSING.
(a) At the Closing, SAIC shall deliver to the Company the following:
(i) the Purchase Price as provided for in Section 1.2
above;
(ii) the Strategic Alliance Agreement described in
Section 5.7 below, duly executed by SAIC;
(iii) the Shareholder Agreement described in Section 5.8
below, duly executed by SAIC;
(iv) the Nonsolicitation Agreement described in
Section 5.9, duly executed by SAIC; and
(v) an officer's certificate as described in Section 6.1
below.
(b) At the Closing, the Company shall deliver to SAIC the following:
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<PAGE>
(i) a duly authorized and issued stock certificate
representing the Shares;
(ii) certified copies of resolutions of its Board of
Directors authorizing the execution and delivery of
this Agreement the Strategic Alliance Agreement, the
Shareholder Agreement and the consummation of the
transactions set forth herein and therein;
(iii) the Strategic Alliance Agreement described in
Section 5.7 below, duly executed by the Company;
(iv) the Shareholder Agreement described in Section 5.8
below, duly executed by the Company;
(v) the Nonsolicitation Agreement described in
Section 5.9 below, duly executed by the Company;
(vi) the Release Agreement described in Section 5.10
below, duly executed by the Company and Pacific
Technology Services, Inc. ("Pacific"); and
(vii) an officer's certificate as described in Section 5.3
below.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Whenever the term "knowledge" is used herein, it shall mean that the
Company has made due investigation and inquiry of its officers as to their
individual knowledge of any fact, event, statement representation, warranty
or otherwise which relates to or concerns the subject matter of the knowledge
referred to herein. Each of the Company and Carreker, jointly and severally,
represents and warrants to SAIC as of the Closing Date (unless otherwise
indicated) as follows:
3.1 CORPORATE ORGANIZATION: DIRECTORS AND OFFICERS. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Texas. The Company has full corporate power and
authority to carry on its business as it is now being conducted and as
proposed to be conducted and to own the properties and assets, property
rights, goodwill and rights of any kind, real and personal, tangible and
intangible wherever situated ("ASSETS") and whether or not reflected in the
Balance Sheet or Financial Statements as defined in Section 3.10 below it now
owns. The character or location of the property owned by the Company and the
nature of the business conducted by the Company does not require the Company
to be qualified or licensed to conduct business in any state or jurisdiction
other than Texas. Set forth in Section 3.1 of the disclosure schedule
attached hereto ("DISCLOSURE SCHEDULE") is a listing of the current directors
and officers of the Company.
-3-
<PAGE>
3.2 CAPITAL STOCK. The authorized capital stock of the Company
consists solely of 17,500,000 Shares, of which (a) 12,500,000 Shares are
common stock, no par value, of which (i) 12,000,000 Shares are classified as
Class A Common Stock and (ii) 500,000 Shares are classified as Class B Common
Stock, and (b) 5,000,000 are classified as preferred stock, no par value, of
which 825,426 Shares of Class A Common Stock (excluding treasury Shares) and
667 Shares of Class B Common Stock are issued and outstanding, and which are
owned by the persons and entities in the numbers (with respect to each class
of stock outstanding) identified in Section 3.2 of the Disclosure Schedule.
Except as set forth in Section 3.2 of the Disclosure Schedule, there are no
outstanding subscriptions, options, warrants, rights, calls, commitments,
preemptive rights, rights of first refusal or similar rights, conversion
rights, rights of exchange, plans or other agreements of any character
providing for the purchase, issuance, transfer or sale of any Shares of the
capital stock of the Company, other than as contemplated by this Agreement.
3.3 VALID ISSUANCE OF CAPITAL STOCK.
(a) The Shares, when issued, sold and delivered, in
accordance with the provisions and conditions of this Agreement for the
consideration expressed herein, will be duly and validly issued, fully paid
and non-assessable and, assuming the accuracy of the representation and
warranty of SAIC set forth in Section 4.5, will be issued in compliance with
all applicable federal and state securities laws.
(b) The outstanding Shares of the Company have been duly and
validly authorized, issued and delivered, and are validly outstanding, fully
paid and non-assessable and have been issued in compliance with all
applicable federal and state securities laws. Immediately after the issuance
and sale of the Shares to SAIC, there will be issued and outstanding 926,071
Shares (excluding treasury Shares) of the Company's Class A Common Stock and
667 Shares of the Company's Class B Common Stock and the ownership of the
capital stock of the Company shall be as listed on EXHIBIT 3.3(b) hereto.
3.4 NO INVESTMENTS. Except as set forth in Section 3.4 of the
Disclosure Schedule, the Company does not own or control, directly or
indirectly, any capital stock or other equity, debt, ownership or proprietary
interest in any corporation, partnership, association, trust, joint venture
or other entity.
3.5 AUTHORIZATION, ETC. The Company has full corporate power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby. The Company has taken all action required by law, its
Articles of Incorporation and Bylaws or otherwise to authorize the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby. This Agreement and all other agreements delivered hereunder are
valid and binding agreements of the Company, enforceable against the Company
in accordance with their terms, except that (a) the enforceability of this
Agreement may be subject to general principles of equity, regardless of
whether such enforceability is considered in a proceeding in equity or at
law; and (b) the enforceability of this Agreement may be subject to or
limited by bankruptcy, insolvency, reorganization, arrangement, moratorium,
or other similar laws relating to or affecting the rights of creditors
generally.
-4-
<PAGE>
3.6 RESTRICTIVE DOCUMENTS. Except as set forth in Section 3.6 of the
Disclosure Schedule, the Company is not subject to or a party to, any
charter, bylaw, mortgage, lien, lease, license, permit agreement contract
instrument, law, rule, ordinance, regulation, order, judgment or decree, or
any other restriction of any kind or character, which materially and
adversely affects the business practices, operations or condition of the
Company or any of its Assets or property, or which would prevent consummation
of the transactions contemplated by this Agreement, compliance by the Company
with the terms, conditions and provisions hereof or the continued operation
of the Company's business after the Closing Date on substantially the same
basis as previously operated or which would restrict the ability of the
Company to acquire any property or conduct business in any area.
3.7 NO VIOLATION. Except as set forth in Section 3.7 of the
Disclosure Schedule, neither the execution and delivery of this Agreement nor
the consummation of the transaction contemplated hereby will violate any
provision of the Articles of Incorporation or Bylaws of the Company, or
violate, or be in conflict with, or constitute a default (or an event, which,
with a notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
cause acceleration of the maturity of any debt or obligation pursuant to, or
result in the creation or imposition of any security interest, lien or other
Encumbrance upon any property or Assets of the Company under, or give any
person the right to terminate, modify or otherwise change the rights and
obligations of the Company under, any mortgage, bond, indenture, agreement,
lease or other instrument, obligation or commitment to which the Company is a
party or by it or any of its property or Assets are subject, or violate any
statute or law, or any judgment, decree, order, regulation or rule of any
court or governmental authority.
3.8 CONSENTS. Except as set forth in Section 3.8 of the Disclosure
Schedule, no consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any person, entity or
governmental authority is required in connection with the consummation of the
transactions contemplated hereby, including, without limitation, consents
from all parties to loans, contracts, leases or other agreements and consents
from governmental agencies, whether federal, state or local.
3.9 BOOKS AND RECORDS. The Company has furnished or made available to
SAIC and its representatives:
(a) a true, correct and complete copy of the Articles of
Incorporation and the Bylaws of the Company, with all amendments thereto;
(b) a true, correct and complete copy of the minute books of
the Company containing all records required to be set forth of all
proceedings, consents, actions and meetings of the shareholders and the Board
of Directors of the Company;
(c) a true, correct and complete copy of all permits, orders
and consents issued by the state securities commissioner with respect to the
Company and all applications for such permits, orders and consents; and
-5-
<PAGE>
(d) a true, correct and complete schedule of all issuances
and transfers of any capital stock of the Company.
3.10 FINANCIAL STATEMENTS. The Company previously has furnished SAIC
with the balance sheet of the Company dated as of June 30, 1996 (the "BALANCE
SHEET") and the related statement of income, for the five months then ended
(such financial statements are collectively referred to herein as the
"FINANCIAL STATEMENTS"). The Balance Sheet is true, complete and accurate in
all material respects (except for year-end adjustments) and fairly presents
the Assets, Liabilities (as defined below) and financial conditions of the
Company as of the date thereof. The statement of income included in the
Financial Statements is true, complete and accurate in all material respects
and fairly present the results of operations for the periods referred to
therein. The Financial Statements were prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
indicated.
3.11 ASSETS. The Company has good, valid and, in the case of real
property owned in fee simple by the Company, marketable title to all Assets,
owned by the Company, including, without limitation, all Assets reflected in
the Company's Balance Sheet and all Assets purchased by the Company since the
date of the Balance Sheet (except for Assets reflected in the Balance Sheet
or acquired since the date of the Balance Sheet which have been sold or
otherwise disposed of in the ordinary course of business), free and clear of
all Encumbrances, except for (a) the Encumbrances set forth in Section 3.11
of the Disclosure Schedule, (b) liens for current taxes not yet due and (c)
such Encumbrances which do not materially and adversely effect the use of
such Assets for the purpose for which they are presently being used.
3.12 INSURANCE. Section 3.12 of the Disclosure Schedule lists all
policies of title, property, fire, hazard, casualty, liability, life,
worker's compensation and other forms of insurance of any kind owned or held
by the Company. All such policies: (a) are with insurance companies believed
by the Company to be financially sound and reputable; (b) are in full force
and effect; (c) to the Company's knowledge are sufficient for compliance by
the Company with all requirements of law and of all agreements to which the
Company is a party; and (d) provide that they will remain in full force and
effect through the respective dates set forth in the Disclosure Schedule.
3.13 DEBT INSTRUMENTS. Except as set forth in Section 3.13 of the
Disclosure Schedule, neither the Company nor any of its Assets is subject to
any Encumbrance, including any mortgage, indenture, note, guarantee or other
agreement for or relating to borrowed money (including, without limitation,
conditional sales agreements and capital leases).
3.14 LEASES. Section 3.14 of the Disclosure Schedule lists all leases
and other agreements involving payments of more than Twenty-Five Thousand
Dollars ($25,000) during any twelve (12) month period under which the Company
is lessee or lessor of any Asset, or holds, manages or operates any asset
owned by any third party, or under which any Asset owned by the Company is
held, operated or managed by a third party. The Company is the owner and
holder of all the leasehold estates purported to be granted to it described
in Section 3.14 of the Disclosure Schedule and is the owner of all equipment,
machinery and other Assets thereon or
-6-
<PAGE>
in buildings and structures thereon, in each case free and clear of all
Encumbrances, except for the Encumbrances set forth in Section 3.14 of the
Disclosure Schedule and such Encumbrances which do not materially and
adversely effect the use of such Assets for the purpose for which they are
presently being used. Each such lease and other agreement is in full force
and effect and constitutes a legal, valid and binding obligation of, and is
legally enforceable against, the Company and, to the Company's knowledge, the
other parties thereto, and grants the leasehold estate it purports to grant
free and clear of all Encumbrances, except as provided therein. To the
Company's knowledge, all necessary governmental approvals with respect
thereto, if any, have been obtained, all necessary filings or registrations
therefor, if any, have been made, and there have been no threatened
cancellations thereof and are no outstanding disputes thereunder. To the
Company's knowledge, the Company has in all material respects performed all
obligations thereunder required to be performed by the Company to date. To
the Company's knowledge, no party is in default in any material respect under
any of the foregoing, and there has not occurred any event which (whether
with or without notice, lapse of time or the happening or occurrence of any
other event) would constitute such a default. All of the Assets subject to
such leases are in good operating condition and repair, normal wear and tear
excepted.
3.15 MATERIAL CONTRACTS AND AGREEMENTS.
(a) Other than agreements which are terminable by the Company
within thirty (30) days or upon thirty (30) days' (or less) notice or which
provide for the payment of no more than $25,000, Section 3.15 of the
Disclosure Schedule lists all of the following contracts and agreements to
which the Company is a party or by which the Company or its Assets are bound
at the date hereof: (i) agreements involving payments by the Company of more
than Twenty-Five Thousand Dollars ($25,000) during any twelve (12) month
period, (ii) agreements for the employment of any officer, employee,
consultant or independent contractor; (iii) license agreements or
distributor, dealer, manufacturer's representative, sales agency or brokerage
agreements; (iv) agreements with any labor organization or other collective
bargaining unit; (v) agreements for the future purchase of materials,
supplies, services, merchandise or equipment involving payments of more than
Twenty-Five Thousand Dollars ($25,000) over their remaining term (including,
without limitation, periods covered by any option to renew by either party),
except for agreements for the purchase of such materials, supplies, services,
merchandise or equipment which are resold in the ordinary course of business;
(vi) profit-sharing, bonus, incentive compensation, deferred compensation,
stock option, severance pay, stock purchase, employee benefit, insurance,
hospitalization, pension, retirement or other similar plans or agreements;
(vii) agreements for the sale or purchase of any Assets or the grant of any
preferential rights to purchase any Assets or rights, other than in the
ordinary course of business; (viii) agreements that contain any provisions
requiring the Company to indemnify any other party thereto; (ix) joint
venture agreements or other agreements involving the sharing of profits; (x)
outstanding loans to any persons or entity; (xi) any agreements or
understandings (including, without limitation, agreements not to compete and
exclusivity agreements) that reasonably could be interpreted to impose
restrictions on any business operations of the Company which, either
individually or in the aggregate, could reasonably be expected to have a
material adverse impact on the Company; or (xii) agreements involving
payments to the Company which are reasonably
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<PAGE>
expected to be in excess of $100,000 during any twelve (12) month period
(each, individually a "MATERIAL CONTRACT AND AGREEMENT" and collectively,
"MATERIAL CONTRACTS AND AGREEMENTS").
(b) Each of the Material Contracts and Agreements is in full
force and effect and constitutes a legal, valid and binding obligation of,
and is legally enforceable against, the Company and, to the Company's
knowledge, the other parties thereto. All necessary governmental approvals
with respect thereto, if any, have been obtained, all necessary filings or
registrations therefor, if any, have been made, and there have been no
threatened cancellations thereof and there are no outstanding disputes
thereunder. The Company has in all material respects performed all the
obligations thereunder required to be performed by the Company to date. To
the Company's knowledge, no party is in default in any material respect under
any of the contracts or agreements set forth in Section 3.15 of the
Disclosure Schedule, and there has not occurred any event which (whether with
or without notice, lapse of time or the happening or occurrence of any other
event) would constitute such a default.
3.16 BOOKS AND RECORDS. The books of account stock records, minute
books and other records of the Company are true and complete in all material
respects and have been maintained in accordance with good business practices,
and the matters contained therein which are material to the business or
operations of the Company are appropriately and accurately reflected in the
financial statements of the Company.
3.17 LABOR RELATIONS. There are no strikes, work stoppages, grievance
proceedings, union organization efforts or other employment related
controversies pending, or, to the Company's knowledge, threatened between the
Company and (a) any current or former employees of the Company or (b) any
union or other collective bargaining unit representing such employees. The
Company has complied and is in compliance in all material respects with all
laws relating to employment or the workplace, including, without limitation
provisions relating to wages, hours, collective bargaining, safety and
health, work authorization, equal employment opportunity, immigration,
withholding, unemployment compensation and worker's compensation. There are
no collective bargaining agreements or employment agreements between the
Company and any of its employees.
3.18 ENVIRONMENTAL MATTERS.
(a) To the Company's knowledge, the Company has complied and
is in compliance with, and the real property whether leased or owned and all
improvements thereon are in compliance with, all environmental laws in all
material respects.
(b) There are no pending or, to the Company's knowledge,
threatened actions, suits, claims, legal proceedings or other proceedings
based on, and the Company has not received any notice of any complaint order,
directive, citation, notice of responsibility, notice of potential
responsibility, or information request from any governmental authority or any
other person or knows of any fact(s) which would reasonably be expected to
form the basis for any such actions or notices arising out of or attributable
to: (i) the current or past presence at any part of the real property of
hazardous or toxic materials or any substances that pose a hazard to human
health
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or an impediment to working conditions; (ii) the current or past release or
threatened release into the environment from the real property (including,
without limitation, into any storm drain, sewer, septic system or publicly
owned treatment works) of any hazardous or toxic materials or any substances
that pose a hazard to human health or an impediment to working conditions;
(iii) the off-site disposal of hazardous or toxic materials originating on or
from the real property or the business Assets of the Company; (iv) any
facility operations, procedures or designs of the Company which do not
conform to requirements of the environmental laws; or (v) any violation of
environmental laws related to the Company's operations at any part of the
real property or otherwise arising from the Company's activities (or the
activities of the Company's predecessors) involving hazardous or toxic
materials.
(c) To the Company's knowledge, the Company has been duly
issued, and currently has all permits, licenses, certificates and approvals
required under any environmental law. A true and complete list of such
permits, licenses, certificates and approvals, all of which are valid and in
full force and effect, is set out in Section 3.18 of the Disclosure Schedule.
(d) To the Company's knowledge, the real property contains no
underground storage tanks, or underground piping associated with such tanks,
used cuff entry or in the past for the management of hazardous materials. To
the Company's knowledge, neither PCBs nor asbestos-containing materials are
present on or in the real property.
3.19 ERISA.
(a) All employee benefit plans of the Company ("BENEFIT
PLANS") (as defined in the Employee Retirement Income Security Act of 1977,
"ERISA") conform (and at all times have conformed) in all material respects
to, and are being administered and operated (and have at all times been
administered and operated) in material compliance with, the requirements of
ERISA, the Internal Revenue Code ("CODE") and all other applicable ERISA and
Code Regulations (including code provisions governing entitlement to
deductions claimed by Company or any exemption or non-taxable benefit claimed
or provided to any Plan participant). All returns, reports and disclosure
statements required to be made under the Code or ERISA with respect to all
Benefit Plans have been timely filed or delivered. There have not been any
"prohibited transactions," as such term is defined in Section 4975 of the
Code or Section 406 of ERISA, involving any of the Benefit Plans that could
subject the Company to any material penalty or tax imposed under the Code or
ERISA.
(b) Except as is set forth in Section 3.19 of the Disclosure
Schedule, each such qualified Benefit Plan has been determined by the
Internal Revenue Service to be so qualified, and such determination remains
in effect and has not been revoked. Nothing has occurred since the date of
any such determination that is reasonably likely to affect adversely such
qualification or exemption, or result in the imposition of excise taxes or
income taxes on unrelated business income under ERISA with respect to any
Benefit Plan.
(c) The Company does not have a defined benefit plan subject
to Title IV of ERISA. The Company does not have a current or contingent
obligation to contribute to any
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multiemployer plan (as defined in Section 3(37) of ERISA) nor has incurred or
has any potential to incur any withdrawal liability with respect to such a
multiemployer plan.
(d) There are no pending or, to the knowledge of the Company,
threatened claims by or on behalf of any Benefit Plans, or by or on behalf of
any individual participants or beneficiaries of any Benefit Plans, alleging
any breach of fiduciary duty on the part of the Company or any of its
officers, directors or employees under ERISA or any other applicable
regulations, or claiming benefit payments other than those made in the
ordinary operation of such plans, nor is there, to the knowledge of the
Company, any basis for such claim. The Benefit Plans are not the subject of
any pending or, to the knowledge of the Company, threatened investigation,
audit or action by the Internal Revenue Service, the Department of Labor or
the Pension Benefit Guaranty Corporation.
(e) The Company has made all required contributions under the
Benefit Plans, including the payment of any insurance premiums on a timely
basis.
3.20 LITIGATION. There is no action, suit, inquiry, proceeding or
investigation by or before any court or governmental or other regulatory or
administrative agency or commission pending or threatened against or
involving the Company, or any of its officers, directors or employees if
related to the business or operations of the Company, or which questions or
challenges the validity of this Agreement or any action taken or to be taken
by the Company, pursuant to this Agreement or in connection with the
transactions contemplated hereby, nor is there any valid basis for any such
action, proceeding or investigation. Except as set forth in Section 3.20 of
the Disclosure Schedule, the Company is not subject to any judgment order or
decree entered in any lawsuit or proceeding which is likely to have a
material adverse effect on the business of the Company, the Assets or
property of the Company or the financial condition, business practices or
prospects of the Company or on the Company's ability to conduct its business
in any area. There is no matter as to which the Company has received any
notice, claim or assertion, or which otherwise has been threatened or which
reasonably is expected to be threatened or initiated against or involving any
director, officer, employee, agent or representative of the Company, nor is
there any reasonable basis therefor, in connection with which any such person
has any right to be indemnified by the Company. Except as set forth in
Section 3.20 of the Disclosure Schedule, there is no action, suit, proceeding
or investigation by the Company currently pending or which the Company
intends to initiate.
3.21 COMPLIANCE WITH LAW. To the Company's knowledge, the business and
operations of the Company have been conducted in accordance with all
applicable laws, regulations, rules and other requirements of all national
governmental authorities, and of all states, municipalities and other
political subdivisions and agencies thereof, having jurisdiction over the
Company which if not complied with by the Company would have a material
adverse effect on the Company. To the Company's knowledge, the Company has
not received any notification of any asserted present or past failure by the
Company to comply with such laws, rules or regulations.
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3.22 NO LIABILITIES. The Company has no outstanding claims,
liabilities or indebtedness of any nature, whether accrued, absolute,
contingent, known or unknown or otherwise, and whether due, or to become due,
probable of assertion or not (collectively, "LIABILITIES"), except:
(a) Liabilities, the amounts of which are stated or reserved
against in the Balance Sheet;
(b) Liabilities incurred subsequent to the date of the
Balance Sheet in the ordinary course of business not involving borrowings by
the Company which, individually or in the aggregate, do not materially impair
the financial condition or business prospects of the Company; or
(c) Liabilities set forth in Section 3.22 of the Disclosure
Schedule.
3.23 INTELLECTUAL PROPERTY. The Company has sufficient title and
ownership of all patents, trademarks, service marks, trade names, copyrights,
trade secrets, information, software, proprietary rights and processes
necessary for its business as now conducted and as proposed to be conducted
("INTELLECTUAL PROPERTY") without any conflict with or infringement of the
rights of others. Except as set forth in Section 3.23 of the Disclosure
Schedule, there are no outstanding options, licenses or agreements of any
kind relating to the foregoing, which are material to the business of the
Company nor is the Company bound by or a party to any options, licenses or
agreements of any kind with respect to the patents, trademarks, service
marks, trade names, copyrights, trade secrets, licenses, information,
software, proprietary rights and processes of any other person or entity or
the Company's Intellectual Property that would have a material adverse effect
on the Company's ability to carry on its business as it is currently
undertaken. The Company has not received any communications alleging that
the Company has violated or, by conducting its business as proposed, would
violate any of the patents, trademarks, service marks, trade names,
copyrights or trade secrets or other proprietary rights of any other person
or entity. The Company is not aware that any of its employees is obligated
under any contract (including licenses, covenants or commitments of any
nature) or other agreement, or subject to any judgment, decree (except as
imposed by laws of general application) or order (except as imposed by laws
of general application) of any court or administrative agency, that would
interfere with the use of his or her best efforts to promote the interests of
the Company or that would conflict with the Company's business as proposed to
be conducted. Neither the execution nor delivery of this Agreement nor the
carrying on of the Company's business by the employees of the Company, nor
the conduct of the Company's business as proposed, will, to the Company's or
Carreker's knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated,
which conflict or default would be materially adverse to the Company, its
properties or its business.
3.24 INVENTION AND SECRECY AND COMMON STOCK PURCHASE AGREEMENTS. All
key employees and officers of the Company have executed an employee's
invention and proprietary information, assignment and non-disclosure
agreement (the "INVENTION AND NON-DISCLOSURE AGREEMENT") in substantially the
form previously provided to SAIC. To the Company's
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knowledge, the Company is not aware that any of such key employees or
officers is in violation thereof.
3.25 GOVERNMENT CLAIMS. Except as set forth in Section 3.25 of the
Disclosure Schedule, no state of facts exists or has existed which would
constitute valid grounds for the assertion of a claim against the Company for
any of the following:
(a) Defective pricing;
(b) Cost Accounting Standards noncompliance;
(c) unallowable costs per FAR Part 31 including those which
may be included in Indirect Cost claims for prior years that have not yet
been finally agreed to by DCAA and the ACO;
(d) fraud; and
(e) all other bases for monetary claims relating to the
performance or administration of government contracts or subcontracts.
3.26 ABSENCE OF QUESTIONABLE PAYMENTS. Except as set forth in Section
3.26 of the Disclosure Schedule, neither the Company nor any director,
officer, agent employee or other person acting on behalf of the Company, has
used any corporate funds for unlawful contributions, payments, gifts or
entertainment or made any unlawful corporate expenditures relating to
political activity to government officials or others or established or
maintained any unlawful or unrecorded funds. To the Company's knowledge,
neither the Company nor any director, officer, agent employee or other person
acting on behalf of the Company, has accepted or received any unlawful
contributions, payments, gifts or expenditures.
3.27 BROKERS AND FINDERS. Neither the Company nor any of its
directors, officers or employees has employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finders' fees
in connection with the transactions contemplated by this Agreement.
3.28 VOTING AGREEMENTS, REGISTRATION RIGHTS. Except (a) for the
Shareholder Agreement described in Section 5.8 hereof, and (b) as set forth
in Section 3.28 of the Disclosure Schedule, there are no proposed or existing
shareholder agreements, voting trusts, proxies or other arrangements or
understandings among the shareholders of the Company relating to the voting
of their respective Shares and the Company has not granted or agreed to grant
any registration rights, including piggyback rights, to any person or entity.
3.29 OTHER AGREEMENTS. Except as set forth in Section 3.29 of the
Disclosure Schedule, or otherwise disclosed herein, there are no material
agreements, understandings or proposed transactions between the Company and
any of its shareholders, officers or directors.
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3.30 INSIDER INTERESTS. Except as set forth in Section 3.30 of the
Disclosure Schedule, no officer or employee of the Company has any material
interest in any property, real or personal, tangible or intangible of the
Company, is indebted or otherwise obligated to the Company, in any material
respects, has any contractual relation with the Company or, to the Company's
knowledge, is an officer, director, employee or consultant of a competitor of
the Company. The Company is not indebted or otherwise obligated to any such
person, except for amounts due under normal arrangements applicable to all
employees generally as to salary or reimbursement of ordinary business
expenses not unusual in amount or significance. The consummation of the
transactions contemplated by this Agreement will not (either alone, or upon
the occurrence of any act or event or with the lapse or time, or both) result
in any benefit or payment (severance or other) arising or becoming due from
the Company to any Shareholder, director, officer, employee or consultant of
the Company (other than any benefit which may result from the Company's
payment of attorneys' fees, accountants' fees and other customary and
ordinary transaction costs incurred as a result of this transaction).
3.31 TAXES. The Company has filed or caused to be filed, within the
manner prescribed by law, all federal tax returns and tax returns required by
the State of Texas and tax return in other jurisdictions where the Company
has made a determination that a tax return would be required to be filed
("TAX RETURNS"). Such Tax Returns, including amendments to date, reflect
completely and accurately in all material respects all liability for taxes of
the Company for the periods covered thereby, whether or not due and payable
and whether or not disputed. To the Company's knowledge, all Taxes payable
by, or due from, the Company have been fully paid or adequately disclosed and
fully provided for in the books and financial statements of the Company. To
the Company's knowledge, no state of facts exists which would constitute
grounds for the assertion of a deficiency by any federal, state or local tax
authority for any Tax with respect to any post-Closing tax period which, if
adversely determined, would have a material adverse effect on the Company.
To the Company's knowledge, no examination of any Tax Return of the Company
currently is in progress. There are no outstanding agreements or waivers
extending the statutory period of limitation applicable to any Tax Return of
the Company. The Company's Federal tax identification number is 75-1622836.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SAIC
SAIC represents and warrants to the Company as follows:
4.1 CORPORATE ORGANIZATION. SAIC is a corporation duty organized,
validly existing and in good standing under the laws of the State of
Delaware. SAIC has full corporate power and authority to carry on its
business as it is now being conducted and to own the properties and Assets it
now owns.
4.2 AUTHORIZATION. SAIC has full corporate power and authority to
enter into this Agreement and to carry out the transactions contemplated
hereby. SAIC has taken all action required by law, its Certificate of
Incorporation and Bylaws or otherwise to authorize the
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execution and delivery of this Agreement and the transactions contemplated
hereby. This Agreement and all other agreements delivered hereunder are
valid and binding agreements of SAIC enforceable in accordance with their
terms, except that: (a) the enforceability of this Agreement may be subject
to general principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law; and (b) the enforceability of
this Agreement may be subject to or limited by bankruptcy, insolvency,
reorganization, arrangement moratorium, or other similar laws relating to or
affecting the rights of creditors generally.
4.3 NO VIOLATION. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
violate any provisions of the Certificate of Incorporation or Bylaws of SAIC
or violate, or be in conflict with, or constitute a default under, or cause
the acceleration of the maturity of any debt or obligation pursuant to, any
agreement or commitment to which SAIC is a party or by which SAIC is bound,
or violate any statute or law or any judgment, decree, order, regulation or
rule of any court or governmental authority.
4.4 BROKERS AND FINDERS. Neither SAIC nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated by this Agreement.
4.5 INVESTMENT INTENT. SAIC is purchasing the Shares for its own
account for an investment and with no present intention of distributing the
Shares or any part thereof.
ARTICLE V
CONDITIONS OF SAIC'S OBLIGATIONS TO CLOSE
The obligations of SAIC to the Company under this Agreement are subject
to the fulfillment by the Company on or before the Closing of each of the
following conditions, unless waived by SAIC in writing:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 3 shall be true on and as of
the Closing with the same effect as though such representations and
warranties had been made on and as of the date of such closing.
5.2 PERFORMANCE. The Company shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the Closing.
5.3 COMPLIANCE CERTIFICATE. The Chairman of the Board, President or a
Vice President of the Company shall deliver to SAIC at the Closing a
certificate certifying that the conditions specified in Sections 5.1 and 5.2
have been fulfilled and stating that except as set forth in the Disclosure
Schedule hereto, there has been no material adverse change in the business,
affairs, prospects, operations, properties, Assets or conditions of the
Company since June 30, 1996, such certificate being substantially in the form
of Exhibit 5.3.
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5.4 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to SAIC, and they shall have received all such counterpart original
and certified or other copies of such documents as they may reasonably
request.
5.5 BOARD OF DIRECTORS. Effective as of the Closing, the Board of
Directors shall consist of not more than twelve (12) members and shall be
comprised of the persons listed on Exhibit 5.5 hereto.
5.6 STRATEGIC ALLIANCE AGREEMENT. The Company and SAIC shall have
entered into a Strategic Alliance Agreement substantially in the form
attached hereto as Exhibit 5.6.
5.7 SHAREHOLDER AGREEMENT. The Company, Carreker and SAIC shall have
entered into a Shareholder Agreement substantially in the form attached
hereto as Exhibit 5.7.
5.8 NONSOLICITATION AGREEMENT. The Company and SAIC shall have
entered into a Nonsolicitation Agreement substantially in the form attached
hereto as Exhibit 5.8.
5.9 RELEASE AGREEMENT. The Company and Pacific shall have entered
into a Release Agreement substantially in the form attached hereto as Exhibit
5.9 and the Company shall have delivered said Release Agreement to SAIC.
ARTICLE VI
CONDITIONS OF THE COMPANY'S OBLIGATIONS TO CLOSE
The obligations of the Company to SAIC under this Agreement are subject
to the fulfillment on or before the Closing of each of the following
conditions, unless waived by the Company in writing:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of SAIC contained in Section 4 hereof shall be true on and as of
the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing and a Closing Certificate
executed by an officer of SAIC to the foregoing effect shall be delivered at
Closing.
6.2 PAYMENT OF PURCHASE PRICE. SAIC shall have delivered the Purchase
Price specified in Section 1.2.
6.3 STRATEGIC ALLIANCE AGREEMENT. The Company and SAIC shalt have
entered into a Strategic Alliance Agreement substantially in the form
attached hereto as Exhibit 5.6.
6.4 SHAREHOLDER AGREEMENT. The Company, Carreker and SAIC shall have
entered into a Shareholder Agreement substantially in the form attached
hereto as Exhibit 5.7.
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6.5 NONSOLICITATION AGREEMENT. The Company and SAIC shall have
entered into a Nonsolicitation Agreement substantially in the form attached
hereto as Exhibit 5.8.
ARTICLE VII
CONTINUING COVENANTS OF COMPANY
Subject to Section 8.1 herein, so long as SAIC owns any Shares, Company
covenants as follows:
7.1 DELIVERY OF FINANCIAL STATEMENTS. The Company shall deliver to
SAIC, as soon as practicable, but in any event within 45 days after the end
of each month, a statement of operations for such period and a balance sheet
of the Company as of the end of such period, such financial reports to be in
reasonable detail, prepared in accordance with generally accepted accounting
principles in all material respects ("FINANCIAL REPORTS"). The Company also
shall deliver to SAIC, as soon as practicable but in any event within 90 days
after the end of each fiscal year of the Company, an annual audited set of
Financial Reports.
7.2 INSPECTION. Upon reasonable notice and at SAIC's expense, the
Company shall permit SAIC to examine the Company's books of account and
records at such reasonable times as may be requested by SAIC and, once each
quarter, to inspect the Company's properties and to discuss the Company's
affairs, finances and accounts with its officers.
7.3 BOARD OF DIRECTORS REPRESENTATION. SAIC shall have the right to
designate one representative as a member of the Company's Board of Directors;
provided, however, that if the Company increases the size of its Board of
Directors above twelve (12) directors, or if SAIC's percentage of ownership
interest in the Company increases above eight percent (8%) of the Company's
issued and outstanding Shares of Class A and Class B Common Stock (including
treasury Shares and Shares issued under options) on a fully diluted basis,
SAIC shall have the right to designate more than one representative to the
Company's Board of Directors, and the Company and SAIC shall undertake good
faith negotiations to determine the number of representatives to the
Company's Board of Directors that SAIC shall be entitled to designate.
7.4 PROMPT PAYMENT OF TAXES, ETC. Company will promptly pay and
discharge, or cause to be paid and discharged, when due and payable, all
lawful taxes, assessments and governmental charges or levies imposed upon the
income, profits, property or business of Company or any subsidiary; provided,
however, that any such tax, assessment charge or levy need not be paid if the
validity thereof shall currently be contested in good faith by appropriate
proceedings and if Company shall have set aside on its books adequate
reserves with respect thereto, and provided, further, that Company will pay
all such taxes, assessments, charges or levies forthwith upon the
commencement of proceedings to foreclose any lien which may have attached as
security therefor. Company will promptly pay or cause to be paid when due,
or in conformance with customary trade terms or otherwise in accordance with
policies related thereto adopted by Company's Board of Directors, all other
indebtedness incident to operations of Company.
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7.5 MAINTENANCE OF PROPERTIES AND LEASES. Company will keep its
properties in good repair, working order and condition, reasonable wear and
tear excepted, and from time to time make all needful and proper repairs,
renewals, replacements, additions and improvements thereto; and Company will
at all times comply with each material provision of all leases to which it is
a party or under which it occupies property if the breach of such provision
might have a material and adverse effect on the condition, financial or
otherwise, or operations of Company.
7.6 INSURANCE. Except as otherwise decided in accordance with
policies adopted by Company's Board of Directors, Company will keep its
Assets and those of its subsidiaries which are of an insurance character
insured by financially sound and reputable insurers against loss or damage by
fire, explosion and other risks customarily insured against by companies in
Company's line of business, and Company will maintain, with financially sound
and reputable insurers, insurance against other hazards and risks and
liability to persons and property to the extent and in the manner customary
for companies in similar businesses similarly situated.
7.7 ACCOUNTS AND RECORDS. Company will keep true records and books of
account in which full, true and correct entries will be made of all dealings
or transactions in relation to its business and affairs in accordance with
generally accepted accounting principles applied on a consistent basis.
7.8 COMPLIANCE WITH REQUIREMENTS OF GOVERNMENTAL AUTHORITIES. Company
and all its subsidiaries shall duly observe and conform to all valid
requirements of governmental authorities relating to the conduct of their
businesses or to their properties or assets which, if the Company or its
subsidiaries failed to observe and conform, would have a material adverse
effect on the Company as a whole.
7.9 MAINTENANCE OF CORPORATE EXISTENCE, ETC. Company shall maintain
in full force and effect its corporate existence, rights and franchises and
all licenses and other rights in or to use patents, processes, licenses,
trademarks, trade names or copyrights owned or possessed by it and deemed by
Company to be necessary to the conduct of its business.
7.10 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. Company will
cause each person now or hereafter employed by it or any subsidiary with
access to confidential information to enter into an Invention and
Non-Disclosure Agreement substantially in the form previously provided to
SAIC and referred to in Section 3.24 above.
7.11 INDEBTEDNESS. Company shall not without the prior approval of the
Company's Board of Directors incur any indebtedness in excess of its existing
bank line of credit other than trade credit incurred in the ordinary course
of business.
7.12 EXTENSION OF CREDIT. Company shall not, without the prior
approval of the Company's Board of Directors, extend trade credit by any
method or in any form or manner in excess of $250,000 other than open account
credit extended to customers in the ordinary course of business. The
extension of credit does not encompass the loaning of money.
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7.13 TRANSACTIONS WITH AFFILIATES. Company shall not, without the
approval of the disinterested members of Company's Board of Directors, enter
into or engage in any loans, leases, contracts or other transactions of a
material nature with any director, officer or key employee of Company, or any
member of any such person's immediate family, including the parents, spouse,
children and other relatives of any such person.
7.14 TRANSACTIONS OUTSIDE THE ORDINARY COURSE OF BUSINESS AND EXCLUSIVE
DEALINGS. Company will not, without the prior approval of the Board of
Directors, enter into any agreement or understanding concerning the Company's
Common Stock, merger, acquisition, material change in ownership, joint
venture or other combination or any agreement undertaking, commitment or
transaction outside the ordinary course of business of the Company, nor will
the Company enter into any transaction or understanding granting any person
the exclusive right to ownership or use of any of Company's Intellectual
Property.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND
WARRANTIES INDEMNIFICATION
8.1 SURVIVAL OF REPRESENTATIONS. All covenants and agreements of the
parties as contained in this Agreement shall survive the Closing; provided,
however, the covenants of the Company set forth in Article VII shall
terminate upon the first closing of the first firmly underwritten public
offering of Common Stock of the Company that (i) is pursuant to a
registration statement filed with, and declared effective by the Securities
and Exchange Commission under the Securities Act of 1933, as amended, and
(ii) has an aggregate offering price to the public of at least Fifteen
Million Dollars $15,000,000). All representations and warranties of the
parties as contained in this Agreement shall terminate on September 30, 1999.
8.2 STATEMENTS AS REPRESENTATIONS. All statements contained in the
Disclosure Schedule and all Exhibits or in any certificate or other document
delivered pursuant to this Agreement shall be deemed representations and
warranties within the meaning of Section 8.1 hereof.
8.3 INDEMNIFICATION BY THE COMPANY AND CARREKER. Subject to the terms
and conditions of this Article VIII, the Company and Carreker (individually,
an "INDEMNIFYING PARTY" and collectively, "INDEMNIFYING PARTIES") each hereby
agrees to indemnify, defend and hold harmless SAIC, any subsidiary, director,
officer, employee, agent or representative of SAIC (individually, an
"INDEMNITEE" and collectively, "INDEMNITEES") from and against all demands,
claims, actions or causes of action, assessments, losses, damages,
liabilities, costs and expenses, including, without limitation, interest
penalties, attorneys' fees and expenses (collectively, "DAMAGES"), imposed
upon or incurred by the Indemnitees or any Indemnitee, resulting from, or
arising out of any breach of any representation, warranty or agreement of the
Company, contained in or made pursuant to this Agreement. Any liability of
Carreker under this Section 8.3 shall be limited in time to one (1) year from
the date of Closing and a maximum liability of $500,000. Any liability of
the Company under this Section 8.3 shall be limited in time to September 30,
1999 and a maximum liability of $2,000,000.
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8.4 INDEMNIFICATION BY SAIC. Subject to the terms and conditions of
this Article VIII, SAIC (sometimes referred to herein as the "INDEMNIFYING
PARTY") hereby agrees to indemnify, defend and hold harmless the Company and
any agent or representative of the Company ("INDEMNITEE" and collectively,
"INDEMNITEES") from and against all demands, claims, actions or causes of
action, assessments, losses, damages, liabilities, costs and expenses,
including, without limitation, interest penalties, attorneys' fees and
expenses (collectively, "DAMAGES"), asserted against, resulting from, imposed
upon or incurred by the Indemnitees or any Indemnitee, resulting from,
relating to or arising out of a breach of any representation, warranty or
agreement of SAIC contained in or made pursuant to this Agreement. Any
liability of SAIC under this Section 8.4 shall be limited in time to one (1)
year from the date of Closing and a maximum liability of $500,000.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 AMENDMENT AND MODIFICATIONS. Subject to applicable law, this
Agreement may be amended, modified and supplemented only by written agreement
between the parties hereto which states that it is intended to be a
modification of this Agreement.
9.2 WAIVER OF COMPLIANCE. Any failure of the Company, Carreker or
SAIC to comply with any obligation, covenant, agreement or condition herein
may be expressly waived in writing by the other party, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
9.3 EXPENSES. The parties agree that all fees and expenses incurred
by them in connection with this Agreement and the transaction contemplated
hereby shall be borne by the party incurring such fees and expenses,
including, without limitation, all fees of counsel, actuaries and accountants.
9.4 TRANSFER TAXES. The Company shall be responsible for and shall
pay all taxes levied or to be levied with respect to the sale of the Shares.
9.5 REMEDIES WAIVER. All rights and remedies existing under this
Agreement are cumulative to and not exclusive of, any rights or remedies
otherwise available under applicable law. No failure on the part of any
party to exercise or delay in exercising any right hereunder shall be deemed
a waiver thereof, nor shall any single or partial exercise preclude any
further or other exercise of such or any other right. No right or remedy of
a party shall be deemed waived unless expressly made a term, covenant or
condition in this Agreement.
9.6 NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to
have been duty given if personally delivered, sent by facsimile transmission,
or mailed by certified or registered mail with postage prepaid:
-19-
<PAGE>
(a) if to the Company, to:
J. D. Carreker
The Carreker Group
14001 North Dallas Parkway, Suite 1100
Dallas, TX 75240
with a copy to:
Maurice E. Purnell, Jr.
Locke, Purnell, Rain, Harrell
2200 Ross Ave., Suite 2200
Dallas TX 75201-8000
or to such other person or address as the Company shall furnish to SAIC in
writing;
(b) if to SAIC, to:
Kevin E. Murphy
Corporate Vice President
Science Applications International Corporation
10260 Campus Point Drive, M/S L2
San Diego, CA 92121
with a copy to:
Kevin A. Werner
Corporate Counsel
Science Applications International Corporation
10260 Campus Point Drive, M/S F3
San Diego, CA 92121
or to such other person or address as SAIC shall furnish to the Seller in
writing. Any notice given in accordance with the foregoing shall be deemed
to have been given when personally received by personal delivery or telecopy
or on the second business day following the date on which it was mailed.
9.7 ASSIGNMENT. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto without the prior written consent of the other
party.
9.8 PUBLICITY. Neither the Company nor SAIC shall make or issue, or
cause to be made or issued, any announcement or written statement concerning
this Agreement or the transactions contemplated hereby for dissemination to
the general public without the prior consent
-20-
<PAGE>
of the other parties. This provision shall not apply, however, to any
announcement or written statement required to be made by law or the
regulations of any federal or state governmental agency, except that the
party required to make such announcement shall, whenever practicable, consult
with the other party concerning the timing and content of such announcement
before such announcement is made.
9.9 SEVERABILITY. If any portion of this Agreement shall be deemed
unenforceable by a court of competent jurisdiction, the remaining portions
shall be valid and enforceable.
9.10 ATTORNEYS' FEES. If any legal action, arbitration or other
proceeding is brought for the enforcement of this Agreement or because of an
alleged dispute, breach, default or misrepresentation in connection with any
of the provisions of this Agreement, the successful or prevailing party shall
be entitled to recover reasonable attorneys' fees and other costs incurred in
that action or proceeding, in addition to any other relief to which it may be
entitled.
9.11 GOVERNING LAW. This Agreement and the legal relations among the
parties hereto shall be governed by and construed in accordance with the laws
of the State of Texas.
9.12 COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
9.13 HEADINGS. The headings of the Sections and Articles of this
Agreement are inserted for convenience only and shall not constitute a part
hereof or affect in any way the meaning or interpretation of this Agreement.
9.14 ENTIRE AGREEMENT. This Agreement, including the Exhibits and
Schedules hereto, the other documents and certificates delivered pursuant to
the terms hereof, set forth the entire agreement and understanding of the
parties hereto in respect of the subject matter contained herein, and
supersede all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by
any officer, employee or representative of any party hereto, including but
not limited to the letter of July 10, 1996 authored by Kevin E. Murphy on
behalf of SAIC and signed by J.D. Carreker on behalf of the Company.
9.15 THIRD PARTIES. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed
to confer upon or give to any person or corporation other than the parties
hereto and their successors or assigns, any rights or remedies under or by
reason of this Agreement.
9.16 FURTHER ASSURANCES. Each of the parties hereto agrees that from
time to time, at the request of any of the other parties hereto and without
further consideration, it will execute and deliver such other documents and
take such other action as such other party may reasonably request in order to
consummate more effectively the transactions contemplated hereby.
-21-
<PAGE>
9.17 SCHEDULES AND EXHIBITS. The Exhibits and the Disclosure Schedule
are deemed incorporated in this Agreement and may contain information that is
not expressly required to be disclosed by this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duty executed and if a corporation have caused their respective corporate
seats to be affixed hereto, all as of the day and year first above written.
SCIENCE APPLICATIONS
INTERNATIONAL CORPORATION,
a Delaware corporation
By: /s/ Kevin Werner
Name: Kevin Werner
Title: Corp. Vice President
Attest:
By: /s/ Edward B. George
Name: Edward B. George
Title: Assistant Vice President
THE CARREKER GROUP, INC.,
a Texas corporation
By: /s/ J. D. Carreker
Name: J. D. Carreker
Title: President
Attest:
By: /s/ Maurice E. Purnell
Name: Maurice E. Purnell
Title: Secretary
-22-
<PAGE>
DISCLOSURE SCHEDULE
To the extent an item is disclosed on any schedule, it shall be deemed to be
disclosed for purposes of any and all other schedules, regardless of whether
a cross reference to such other schedule has been made.
SECTION SUBJECT MATTER
- ------- --------------
3.1 List of Current Directors and Officers
3.2 List of Holders of Company Stock
3.2 Capital Stock Exceptions
3.3(b) Valid Issuance of Capital Stock
3.4 Investments
3.6 Restrictive Documents
3.7 Violations
3.8 Consents Required
3.11 Encumbrances on Assets
3.12 Insurance Policies
3.13 Debt Instruments
3.14 Leases
3.15 Material Contracts and Agreements
3.18 Environmental Permits
3.19 ERISA Plans
3.20 Litigation
3.22 Liabilities
3.23 Intellectual Property
3.25 Government Claims
3.26 Questionable Payments
3.28 Shareholder Agreements
3.29 Other Agreements
3.30 Insider Interests
-1-
<PAGE>
SCHEDULE 3.01
THE CARREKER GROUP
THE OFFICERS
John D. Carreker President & Chief Executive Officer
4321 Overhill Drive, Dallas, TX 75205
Royce Brown Executive Vice President
2512 Rothland, Plano, TX 75023
Doug Eubanks Executive Vice President
6305 Ahnee Drive, Rowlett, TX 75098
Wyn Lewis Executive Vice President
121 Rubicon Peak, Incline Village, NV 89451
Terry Gage Senior Vice President, Treasurer, & Chief Financial Officer
5209 Gentle Drive, Flower Mound, TX 75028
Jack Davis Senior Vice President
2913 Sunset Ridge, McKinney, TX 75070
Bill Long Senior Vice President
7328 Stoney Ridge, McKinney, TX 75025
George Noga Senior Vice President
2905 Wyndham Lane, Richardson, TX 75082
David Walker Senior Vice President
523 Highland, Waxahachie, TX 75082
Maury Purnell Corporate Secretary
4409 South Versailles, Dallas, TX 75205
Kathryn Huffhines Assistant Secretary
P.O. Box 830758, Richardson, TX 75083
Judith Grooters Assistant Treasurer
7103 Dye Drive, Dallas, TX 75248
-2-
<PAGE>
SCHEDULE 3.01
THE CARREKER GROUP
THE BOARD OF DIRECTORS
John D. Carreker Chairman
James D. Carreker Director
Ben P. Denman Director
James L. Fischer Director
Richard L. Lee Director
David K. Sias Director
Maurice E. Purnell Corporate Secretary
-3-
<PAGE>
SCHEDULE 3.02
List of Holders of Company Stock
<TABLE>
CLASS CLASS B CLASS B
CLASS A B PREFERRED STOCK STOCK
STOCK STOCK STOCK OPTIONS OPTIONS
NAME ISSUED ISSUED ISSUED GRANTED RESERVED TOTAL
<S> <C> <C> <C> <C> <C> <C>
J.D. Carreker 655,514 0 0 0 0 655,514
Wyn Lewis 755 0 0 60,000 10,000 70,755
Royce Brown 14,095 0 0 35,000 0 49,095
1984 ESOP 42,036 0 0 0 0 42,036
1992 ESOP 36,111 0 0 0 0 38,111
Doug Eubanks 0 0 0 21,667 3,333 25,000
David Sias 23,170 0 0 0 0 23,170
Jim McCormick 14,300 0 0 7,177 0 21,477
(deceased)
Bill Long 0 0 0 20,500 0 20,500
Jack Davis 0 0 0 14,334 5,866 20,000
George Noga 0 0 0 14,667 5,333 20,000
Jim Fischer 10,029 0 0 7,177 0 17,206
Tom Clifford 0 0 0 5,834 10,666 16,500
Jim Carreker 7,329 0 0 7,177 0 14,506
Richard Lee 7,329 0 0 7,177 0 14,506
Ben Denman 7,329 0 0 7,177 0 14,506
Mike Jessie 0 0 0 6,334 6,666 13,000
John Carreker 0 0 0 3,334 6,666 10,000
Terry Gage 0 0 0 3,334 6,666 10,000
Betty Haley 0 0 0 3,334 6,666 10,000
David Walker 0 0 0 4,667 5,333 10,000
Paul Carruba 0 0 0 2,667 5,333 8,000
Henry S. Miller 7,329 667 0 0 0 7,996
Blake Williams 0 0 0 2,500 5,000 7,500
Randy Haga 0 0 0 1,667 3,333 5,000
Kenneth Siegman 0 0 0 0 5,000 5,000
Tom Stephens 0 0 0 3,667 1,333 5,000
Bill Stuart 0 0 0 1,667 3,333 5,000
Don Lewellyn 0 0 0 4,000 0 4,000
Judy Grooters 0 0 0 1,000 0 1,000
Roger Snell 100 0 0 600 0 600
Unassigned 0 0 0 0 27,000 27,000
- -------------------------------------------------------------------------------------------------
</TABLE>
-4-
<PAGE>
SCHEDULE 3.02
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Total Issued & 825,426 667 0 246,558 117,327 1,189,978
outstanding
Treasury (FY95) 821 821
Treasury (PUSA) 184,602 184,602
- -------------------------------------------------------------------------------------------------
Total Issued 1,010,849 667 0 246,558 117,327 1,375,401
</TABLE>
Reserved options represent options which have not yet been granted, but
have been set aside to be granted upon meeting pro-established
performance criteria.
-5-
<PAGE>
SCHEDULE 3.02
Capital Stock Exceptions
Agreement between the company and Wynn Lewis whereby, following the close of
the current fiscal year (January 31, 1997), Wynn Lewis will use the amount of
his incentive bonus payment net of taxes which exceeds $105,000, if any, to
purchase Class A Shares in the company at the market price as of the date of
purchase. Assuming a full payout on his bonus, the value of his purchase is
anticipated to be at least $75,000.
Employee Stock Ownership Program (ESOP)
Under the terms of the companies ESOP program the company is obligated to
repurchase shares of stock from the plan which the plan is required to sell
in order to fund payments to participants who resign, retire, are dismissed
or die. Payments for any individual participant are to be made in a lump sum
if the amount is less than $3,500. For payments which excised $3,500,
payments are to be made in equal amounts over a period of five years.
-6-
<PAGE>
3.03(B)
OWNERSHIP AT CLOSING
<TABLE>
NAME SHARES SHARES SHARES
A B TOTAL
<S> <C> <C> <C>
J.D. Carreker 655,514 0 655,514
SAIC 100,645 0 100,645
1984 ESOP 42,036 0 42,036
1992 ESOP 36,111 0 36,111
David Sias 23,170 0 23,170
Jim McCormick (deceased) 14,300 0 14,300
Royce Brown 14,095 0 14,095
Jim Fischer 10,029 0 10,029
Henry S. Miller 7,329 667 7,996
Jim Carreker 7,329 0 7,329
Richard Lee 7,329 0 7,329
Ben Denman 7,329 0 7,329
Wyn Lewis 755 0 755
Roger Snell 100 0 100
---------------------------------
Total Issued at Closing 926,071 667 926,738
</TABLE>
-7-
<PAGE>
SCHEDULE 3.04
Investments
The company holds an investment interest in Payment Solutions Network, Inc.
(Holdings).
The company entered into an agreement with PSN whereby the company is
entitled to a Payment of $250,000, subject to certain restrictions, on
January 1, 1996 and on each January 1 thereafter through January 1, 2000.
Each payment represents a repurchase of the companies interest in PSN on a $1
per share basis. In addition, the company is entitled to a contingent
Payment of 7% of the first $60,000,000 of PSN revenue and 6.25% of all PSN
revenues above $60,000,000 for the fiscal year ended December 31, 1999 less
amounts previously paid an each January 1.
-8-
<PAGE>
SCHEDULE 3.06
Restrictive Documents
None
-9-
<PAGE>
SCHEDULE 3.07
Violations
None
-10-
<PAGE>
SCHEDULE 3.09
Consents
- - Under the companies Revolving Line of Credit agreement with Compass Bank,
the company has agreed not to make material changes in the ownership or
management of the company. While not deemed a material change by the
company, the company has requested and received confirmation from the bank
that the transaction will not violate our loan covenants or change our
current borrowing relationship.
-11-
<PAGE>
SCHEDULE 3.11
Encumbrances on Assets
Collateral provided to Compass Bank to secure $1,000,000 Revolving Line of
Credit as follows:
a. All present and future accounts, contract rights, general
intangibles, chattel paper, documents and instruments now existing or
hereafter arising from the business of Borrower together with an returned,
refused and/or repossessed goods, as well as an cash and noncash proceeds and
other rights arising from or by virtue of or from the voluntary or
involuntary sale, lease or other disposition of, or collections with respect
to, or insurance proceeds payable by virtue of warranty or other claims
against manufacturers of or claims against any other person with respect to
all or part of the collateral heretofore described in this clause.
b. AR goods, inventory, raw materials, work in progress or materials
used or consumed in Borrower's business, whether now owned or hereafter
acquired and all products and accessions thereof, whether in the possession
of Borrower, warehouseman, bailee or any other person together with all
proceeds thereof, including an accounts receivable, instruments and notes.
c. AR substitutes and replacements for, accessions attachments and
other additions to, proceeds and products of, the above collateral (including
all income and benefits resulting from any of the above, such as dividends
payable or distributable in cash, property or stock; interest, premium and
principal payments; redemption proceeds and subscription rights- and shares
or other proceeds of conversions or splits or any securities in collateral),
and returned or repossessed collateral.
d. All other interests of every kind and character which Borrower now
has or at any time hereafter acquires in and to the property described or
referred to in the preceding paragraphs.
-12-
<PAGE>
SCHEDULE 3.12
Insurance Policies
<TABLE>
<S> <C>
1. General Liability Travelers Insurance Co.
- General Aggregate $2,000,000
- Products - Comp/OP Agg. $2,000,000
- Personal & Adv Injury $1,000,000
- Each Occurrence $1,000,000
- Fire Damage $50,000
- Med Exp. $50,000
2. Automobile Liability Travelers Insurance Co.
- Combined Single Limit $1,000,000
3. Excess Liability Umbrella Travelers Insurance Co.
- Each Occurrence $4,000,000
- Aggregate $4,000,000
4. Workers Compensation Travelers Insurance Co.
- EL each Accident $1,000,000
- EL Disease - Policy Limit $1,000,000
- FI Disease - EA Employee $1,000,000
5. Property Travelers Insurance Co.
- Contents $338,000
6. Specialty Errors & Omissions Liability
- Retro Date of 6/23/83 $2,000,000
7. Life Policy on Denny Carreker Transamerica Life Companies
- $10,000,000
- Assignment of proceeds to cover
outstanding debt on Pacific Technology
Promissory Note and Compass Revolving
Line of Credit
</TABLE>
-13-
<PAGE>
SCHEDULE 3.13
Debt Instruments
1. Compass Bank $1,000,000 Revolving Line Of Credit
- No amounts borrowed as of this date
2. Pacific Technology Services, Inc. $1,400,000 Promissory Note (to be
paid off immediately following Closing)
-14-
<PAGE>
SCHEDULE 3.13
Debt Instruments
1. Compass Bank $1,000,000 Revolving Line Of Credit
- No amounts borrowed as of this date
2. Pacific Technology Services, Inc. $1,400,000 Promissory Note
-15-
<PAGE>
SCHEDULE 3.14
Leases
Lease of Office space at 14001 North Dallas Pkwy, Dallas, Texas
Landlord: Crescent Real Estate Equities, Ltd. Partnership
- Term ends May 31, 1999
- Base monthly lease commitment $24,400
-16-
<PAGE>
SCHEDULE 3.15
Material Contracts and Agreements
Defaults in contracts or Agreements
- None
I. Agreements involving payments by the Company of more than $25,000 during
any 12 month period:
- None
II. Agreements for the employment of any officer, employee, consultant or
independent contractor:
- Board members are compensated $2,500 per quarter for board meeting
attended and $1,250 per quarter for meetings held which they did
not attend
- SCON Inc. retainer agreement for David Sias at $4,166.67/month as
a consultant less amounts paid for board membership
- Subhash Mukerji minimum retainer agreement at $4,000/month as a
consultant
- Bill Toner minimum retainer agreement at $5,000/month as a
consultant
- Proposed retainer agreement with DRH Strategic Consulting, Inc. at
$12,500 per quarter
- Employees are provided an initial offer of employment which
outlines the specific salary and benefits which they will be
entitled to. The company operates as an "at will" employer and
has taken the position that employment can be terminated "at
will". No fixed duration or payment agreements exist with any
employee.
III. License agreements or distributor, dealer, manufacturer's
representative, sales agency or brokerage agreements:
- The company entered into an agreement with World Savings whereby
the company has agreed to pay a finders fee if sales of the
companies ReserveLink software product are sold to banks where
World Savings has provided an introduction. The fee terms are as
follows:
- 10% of sales up to $350,000
- $50,000 on sales of $350,000
- For sales in excess of $350,000 fee is $50,000 plus 10% of
the sale which exceeds $350,000
- The company entered into an agreement with Mr. Dan Atkinson
whereby Mr. Atkinson would be paid a commission of $5,000 for
banks that he signs up to install the PSN Smartnotes product. PSN
will reimburse the company for this cost plus 20%.
- The company entered into an agreement with Michigan National Bank
under which the company agreed to pay a royalty for Cash
Forecaster sales an or before November 1997 either at the rate of
25% of each sale up to a maximum aggregate payment of $100,000 or
$100,000 in November 1997.
- The company entered into an agreement with Mr. Drolinger whereby
Mr. Drolinger would be paid 7% of each CheckLink CPCS software
sale up to a
-17-
<PAGE>
maximum aggregate payment of $210,000. To date the company has
paid or accrued payments of $129,010.
IV. Agreements with any labor organization or other collective bargaining
unit:
- None
V. Agreements for the future purchase of materials, supplies, services,
merchandise or equipment involving payments of more the $25,000 over
their remaining term:
- None
VI. Profit-sharing, bonus, incentive compensation, deferred compensation,
stock option, severance pay, stock purchase, employee benefit,
insurance, hospitalization, pension, retirement or other similar plans
or agreements:
- Incentive bonus program under which employees are entitled to
receive a bonus payment following year end based on a percentage
of their base compensation, The bonus is determined based on the
company's performance against net income targets and the
contribution of the employee.
- The company maintains an incentive stock option plan under which
grants are made based on recommendations from company management.
- The company maintains an Employee Stock Ownership Plan for the
benefit of it's employees. There are currently no funding
obligations with respect to the plan and all contributions have
been fully allocated.
- The company provide standard health, life and disability insurance
for it's full time employees. Employees may elect to cover their
dependents for health Insurance with the increased premium cost
being deducted from their paycheck.
- The company maintains a 401(k) plan for the benefit of it's
employees. Employees can contribute by payroll deduction into the
plan subject to limits established by the IRS. Contributions are
matched 100% by the company.
- The company does not maintain a formal severance pay plan.
- The company has an agreement to sell stock to one employee as
described in schedule 3.28
VII. Agreements for the sale or purchase of any Assets or the grant of any
preferential rights to purchase any Assets or rights, other than in the
ordinary course of business:
- None
VIII. Agreements that contain any provisions requiring the Company to indents
any other party thereto:
- Standard contract indemnity
IX. Joint venture agreements or other agreements involving the sharing of
profits:
- The company has entered into an agreement with VISA for the
sharing of license fees due from PSN from installed SmartNotes
software. Under the agreement fees will be split 80% to VISA and
20% to the company until such time as VISA collects $350,000.
After such time the percentages will reverse.
- The company has entered into an agreement with ETC involving the
sharing of license fees due from PSN from installed Tnotes
software. Under the agreement, fees will be split 50% to ETC and
50% to the company.
-18-
<PAGE>
X. Outstanding loans to any persons or entity:
- The company is obligated under loans as described in schedule 3.13
XI. Any agreement or understandings that reasonably could be interpreted to
impose restrictions on any business operations of the Company which,
either individually or in the aggregate, could reasonably be expected to
have a material adverse impact on the Company.
- None
XII. Commitments to lend money
- The Company loaned PSN $200,000 to fund general working capital
requirements of PSN. The company has given consideration to
loaning an additional $200,000 under similar terms.
- The company has committed to loaning PSN up to $200,000 to fund
the installation cost of SmartNotes in banks who have contracted
with PSN for the SmartNote service. To date, $13,685 has been
drawn on the loan.
XIII. Contracts for Services
- The company performs management and other services for PSN under a
management service agreement
See following attachment
-19-
<PAGE>
SCHEDULE 3.15
THE CARREKER GROUP
ANALYSIS OF CONTRACT COMMITMENT
REMAINING AS OF 8/31/96
<TABLE>
- --------------------------------------------------------------------------------------------------
REMAINING
TOTAL COMMITMENT
CLIENT PROJECT PHASE CONTRACT AS OF 8/31/96
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UNION PLANTERS SWEEP LICENSE 100,000 100,000
IMPLEMENTATION 100,000 100,000
RESIDUAL 200,000 200,000
---------- ---------
400,000 400,000
BANK OF MISSISSIPPI SWEEP LICENSE 100,000 100,000
IMPLEMENTATION 50,000 20,000
RESIDUAL 100,000 100,000
---------- ---------
250,000 220,000
WORLD SAVINGS SWEEP LICENSE 68,000 0
DEFERRED MAINTENANCE 32,000 30,700
RESIDUAL 250,000 100,000
---------- ---------
350,000 130,700
FIRST CHICAGO SWEEP LICENSE 100,000 0
IMPLEMENTATION 100,000 92,400
RESIDUAL 200,000 0
---------- ---------
400,000 92,400
US BANCORP SWEEP LICENSE 74,400 20,600
DEFERRED MAINTENANCE 25,600 13,000
IMPLEMENTATION 100,000 66,400
RESIDUAL 350,000 350,000
---------- ---------
550,000 450,000
UNITED JERSEY (SUMMIT) SWEEP LICENSE 100,000 0
IMPLEMENTATION 50,000 48,500
RESIDUAL 110,000 110,000
---------- ---------
260,000 158,500
RIGGS SWEEP LICENSE 84,000 0,
DEFERRED MAINTENANCE 16,000 8,200
IMPLEMENTATION 50,000 50,000
RESIDUAL 5,000 5,000
---------- ---------
155,000 63,200
COMPASS BANK SWEEP LICENSE 100,000 0
IMPLEMENTATION 50,000 48,800
RESIDUAL 250,000 0
---------- ---------
400,000 48,800
WESTAMERICA SWEEP LICENSE 60,000 60,000
DEFERRED MAINTENANCE 5,000 5,000
IMPLEMENTATION 50,000 50,000
RESIDUAL 10,000 10,000
---------- ---------
125,000 125,000
-20-
<PAGE>
SCHEDULE 3.15
- --------------------------------------------------------------------------------------------------
REMAINING
TOTAL COMMITMENT
CLIENT PROJECT PHASE CONTRACT AS OF 8/31/96
- --------------------------------------------------------------------------------------------------
COMMERCE BANK SWEEP LICENSE 54,000 0
DEFERRED MAINTENANCE 6,000 6,000
IMPLEMENTATION 50,000 32,000
RESIDUAL 15,000 0
---------- ---------
125,000 38,000
OLD KENT SWEEP LICENSE 50,000 0
IMPLEMENTATION 50,000 22,100
RESIDUAL 50,000 50,000
---------- ---------
150,000 72,100
CITIZENS MARYLAND SWEEP LICENSE 75,000 0
IMPLEMENTATION 50,000 45,100
RESIDUAL 50,000 50,000
---------- ---------
175,000 95,100
US TRUST SWEEP LICENSE 46,200 0
DEFERRED MAINTENANCE 3,800 1,400
IMPLEMENTATION 50,000 0
---------- ---------
100,000 1,400
BANK OF LANCASTER SWEEP LICENSE 100,000 0
IMPLEMENTATION 50,000 50,000
---------- ---------
150,000 50,000
BANK OF THE WEST SWEEP LICENSE IMPLEMENTATION 50,000 0
50,000 50,000
---------- ---------
100,000 50,000
MICHIGAN NATIONAL SWEEP LICENSE 25,000 0
DEFERRED MAINTENANCE 75,000 73,800
IMPLEMENTATION 50,000 50,000
CASH FORECASTER DEVELOPMENT/CONSULTING 150,000 141,100
---------- ---------
300,000 264,900
NORWEST SWEEP LICENSE 284,000 0
DEFERRED MAINTENANCE 18,000 4,100
IMPLEMENTATION 350,000 52,200
RESIDUAL 100,000 100,000
BSE CORPORATE 136,000 0
REGIONAL 326,000 186,400
FLOAT FLOAT MANAGEMENT 580,000 286,800
RECONFIGURATION PMO 1,375,000 566,500
IMPLEMENTATION 500,000 500,000
---------- ---------
3,647,000 1,716,000
NORWEST BSE PHASE I - (1995) 850,000 30,000
NORWEST CASH MANAGEMENT LEWIS 75,000 72,500
CASH MANAGEMENT NOGA 75,000 74,000
---------- ---------
150,000 146,500
CITIBANK INTERNATIONAL
PRICING PHASE I 45,000 21,300
SAIC FREDDIE MAC PHASE I 20,000 13,700
IBM AGREEMENT
#ATLCON-223 PHASE II 6,000 2,000
-21-
<PAGE>
SCHEDULE 3.15
- --------------------------------------------------------------------------------------------------
REMAINING
TOTAL COMMITMENT
CLIENT PROJECT PHASE CONTRACT AS OF 8/31/96
- --------------------------------------------------------------------------------------------------
PSN MANAGEMENT MANAGEMENT SERVICES
SERVICES (ESTIMATED) 1,029,400 400,000
MANAGEMENT FEES
(ESTIMATED) 263,200 100,000
---------- ---------
1,292,600 500,000
ECCHO MANAGEMENT ECCHO ADMINISTRATION
SERVICES (ESTIMATED) 631,200 250,000
ECCHO CONFERENCE
(ESTIMATED) 95,700 53,000
---------- ---------
726,900 303,000
NORTHERN TRUST NPPC PRODUCT DEVELOPMENT 100,000 22,800
SUNTRUST NPPC PRODUCT DEVELOPMENT 100,000 29,600
NORWEST NPPC PRODUCT DEVELOPMENT 100,000 51,100
BANK OF BOSTON NPPC PRODUCT DEVELOPMENT 100,000 75,800
SOFTWARE MAINTENANCE DEFERRED REVENUE CHECKLINK CPCS 294,866 168,679
FROM CURRENT CHECKLINK CICS 193,897 94,173
CONTRACTS STILL FPS/FAS 623,381 338,608
TO BE RECOGNIZED ALC 8,250 6,875
---------- ---------
1,120,394 608,335
CITIBANK CHECKLINK CPCS WORK ORDER 150,000 138,200
FROST FPS INSTALLATION 176,000 143,900
SIGNET CHECKLINK CICS INSTALLATION 231,000 84,000
BANK OF HAWAII FPS INSTALLATION 126,600 100,700
KEY FPS INSTALLATION 175,300 124,700
M & I FPS INSTALLATION 67,000 63,200
FIRST ALABAMA ALC DEVELOPMENT/
INSTALLATION 50,000 35,100
NORWEST FPS TECHNICAL SUPPORT 66,100 47,600
PSN SMART NOTES IMPLEMENTATION 197,400 134,400
VISA SMART NOTES PRODUCT
DEVELOPMENT PILOT 242,500 6,200
199,000 29,800
---------- ---------
441,500 36,000
COMERICA CONSOLIDATION PHASE II AND III 1,410,000 1,355,000
HOME SAVINGS OPERATIONS CASH MANAGEMENT 600,000 222,900
SUPPORT OPERATIONS REVIEW 600,000 183,800
ACH & WIRE 62,300 7,200
---------- ---------
1,262,300 413,900
SIGNET BSE CONTINGENCY (ESTIMATED) 250,000 250,000
CENTRAL FIDELITY BSE CONTINGENCY (ESTIMATED) 500,000 500,000
UNITED JERSEY (SUMMIT) MARKET
SEGMENTATION PHASE I 105,000 14,300
- --------------------------------------------------------------------------------------------------
TOTAL 17,455,094 9,221,235
- --------------------------------------------------------------------------------------------------
</TABLE>
-22-
<PAGE>
SCHEDULE 3.18
Environmental Permits
None
-23-
<PAGE>
SCHEDULE 3.19
ERISA Plans
The company has received a determination letter (as provided to SAIC) from
the IRS dated August 19, 1996 relating to it's Employee Stock Ownership Plan
(ESOP) which provides that the company is required to adopt certain
amendments to it's ESOP no later than 90 days following the date of the
letter (November 19, 1996). The company is in the process of amending it's
ESOP in accordance with said determination letter.
-24-
<PAGE>
SCHEDULE 3.20
Litigation
None
-25-
<PAGE>
SCHEDULE 3.22
Liabilities
None
-26-
<PAGE>
SCHEDULE 3.23
Intellectual Property
- - The company is obligated to a royalty arrangement (as described in
schedule 3.15) on the sale of it's CheckLink CPCS software.
- - The company is obligated to a royalty arrangement (as described in
schedule 3.15) on the sale of it's Cash Forecaster software.
-27-
<PAGE>
SCHEDULE 3.25
Government Claim
None
-28-
<PAGE>
SCHEDULE 3.26
Questionable Payments
None
-29-
<PAGE>
SCHEDULE 3.28
Shareholder Agreements
- - Agreement between J.D. Carreker and Wyn Lewis whereby J.D. Carreker has
committed to Wyn Lewis, that without the consent of Wyn Lewis, he will
not vote his shares of Class A Stock in favor of a Corporate Transaction
unless the Class B Stock is treated equally in all material respects,
from an economic standpoint, with the Class A Stock in such Corporate
Transaction.
- - Agreement between J.D. Carreker and David Sias as follows:
- TAKE-ALONG SECURITIES. If Denny decides to sell any of his shares
in a third-party negotiated transaction, David has the right to
participate in the sale on a pro rata basis and on the same terms.
- BOARD SEAT. Denny agreed to vote his shares to elect David to the
Board as long as David owns at least 15,000 shares.
- - The company his a right of first refusal with certain of it's holders of
class A common stock which gives the company the right to purchase
shares under certain circumstances (copies of agreement previously
provided)
-30-
<PAGE>
SCHEDULE 3.29
Other Agreements
None
-31-
<PAGE>
SCHEDULE 3.30
Insider Interests
None
-32-
<PAGE>
EXHIBIT 5.03
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
CLOSING CERTIFICATE
The undersigned, KEVIN E. MURPHY, Corporate Vice President of Science
Applications International Corporation, a Delaware corporation, hereby
delivers this Closing Certificate in connection with that certain Stock
Purchase Agreement (the "Stock Purchase Agreement") dated as of October _,
1996, by and among The Carreker Group, Inc., a Texas corporation, J. D.
Carreker, a resident of Texas, and Science Applications International
Corporation, a Delaware corporation, and certifies as follows:
1. REPRESENTATIONS AND WARRANTIES. The representations and
warranties by Science Applications International Corporation set forth
in Article IV of the Stock Purchase Agreement are true and correct on
and as of this date with the same effect as though such representations
and warranties had been made on and as of this date.
IN WITNESS WHEREOF, the undersigned has executed this Closing
Certificate as of October , 1996.
/s/ Kevin E. Murphy
-------------------------------------------------
Kevin E. Murphy, Corporate Vice President of
Science Applications International Corporation
-33-
<PAGE>
EXHIBIT 5.05
MEMBERS OF THE BOARD OF DIRECTORS AT CLOSING
1. J. D. Carreker (Chairman)
2. Jim Carreker
3. David Sais
4. Richard Lee
5. Ben Denman
6. Jim Fischer
7. Larry Peck
-34-
<PAGE>
Exhibit 5.06
STRATEGIC ALLIANCE AGREEMENT
THIS STRATEGIC ALLIANCE AGREEMENT ("AGREEMENT"), is made effective as of
October __, 1996, by and between SCIENCE APPLICATIONS INTERNATIONAL CORPORATION,
a Delaware corporation ("SAIC"), and THE CARREKER GROUP, INC., a Texas
corporation ("CARREKER"), who agree as follows:
1. RECITALS. This Agreement is entered into in contemplation of the
following facts and circumstances:
1.1 OBJECTIVES. Carreker and SAIC desire to establish an
arrangement whereby they can in the future jointly offer such services,
products and technology as they may possess to prospective users of the
services, products and/or technology the parties may offer with
particular emphasis on commercial financial institutions and federal
government agencies ("CUSTOMERS") pursuant to terms, conditions and
prices mutually agreed upon by the parties in advance of entering any
contract with a Customer. The parties also anticipate that each may
identify opportunities which they do not pursue jointly, but with
respect to which the services, products and/or technology of the other
party may be marketed and sold to a Customer. This Agreement pertains
only to the SAIC Financial Services Practice within SAIC's Technology
Solutions Sector (the "SAIC FINANCIAL SERVICES PRACTICE").
1.2 PURPOSE. This Agreement (a) sets forth (i) the provisions
and conditions pursuant to which either party may identify and advise
the other party of a mutually beneficial business opportunity and
(ii) the circumstances under which parties may pursue the opportunity
jointly, and (b) establishes the basis of payments to a party that
introduces an opportunity which is not pursued jointly but with respect
to which the other party successfully markets and sells its services,
products and/or technology.
2. SCOPE OF AGREEMENT. The parties specifically acknowledge and
agree that this Agreement shall not apply to any work or contracts that
commenced prior to the date of this Agreement, unless the parties otherwise
agree in writing. This Agreement is not an exclusive dealings agreement and
each party is free to do business with others with respect to Customers or
otherwise; PROVIDED, HOWEVER, during the first three (3) years of this
Agreement, Carreker shall provide SAIC with a preferential opportunity to
provide services, products and/or technology to each prospective Customer that
Carreker solicits in those instances where it appears to Carreker that a teaming
relationship is necessary and that SAIC could provide the services, products
and/or technology that is the subject matter of the solicitation.
Exhibit 5.06 - 1
<PAGE>
EXHIBIT 5.06
3. MUTUAL BUSINESS OPPORTUNITIES.
3.1 REPRESENTATIVES. Each party shall designate one or more
authorized representatives to interact with the other for purposes
hereof ("REPRESENTATIVE") until such time as either party notifies the
other of its decision to designate a new Representative.
3.2 REVIEW OF OPPORTUNITIES. The parties' Representatives may
select and submit to the other for its consideration such business
opportunities identified by a party that the party believes may be of
mutual interest and the Representatives shall jointly determine whether
to pursue such business opportunity together. If the parties determine
to pursue an opportunity jointly, they also shall determine the terms,
conditions and prices that will be offered to the prospective Customer
and the strategy by which the parties will attempt to acquire the
business (including, without limitation, designation of the party which
shall serve as the prime contractor, the party which will perform the
necessary services and provide the appropriate products and/or
technology, and the party which will assume responsibility for
presentation of the parties' proposal). The Representatives shall meet
and confer, either in person or by teleconference, at least once
monthly, to discuss prospective business opportunities and performance
with respect to existing accounts.
3.3 COOPERATION. If the parties pursue a business opportunity
jointly, each party shall utilize commercially reasonable efforts to
market and obtain the targeted business; PROVIDED, HOWEVER, that the
parties shall coordinate their activities so as to provide a unified
presentation to the prospective Customer.
4. TRANSACTIONS.
4.1 JOINT TRANSACTIONS. Whenever a mutually satisfactory
contract to perform or provide services, products and/or technology to a
Customer has been obtained due to the active and substantial marketing
and sales efforts of both parties, Carreker will have the right to
provide services, products and/or technology having a value up to fifty
percent (50%) of the estimated value of the contract and Carreker shall
be entitled to its proportion of the revenue derived from the services,
products and/or technology provided by Carreker. SAIC shall provide or
obtain all services, products and/or technology not provided by Carreker
and shall receive the revenue represented by the proportion of the
revenue derived from the services, products and/or technology provided
by SAIC.
4.2 SOLE EFFORTS TRANSACTIONS. Whenever a mutually satisfactory
contract to provide services, products and/or technology to a Customer
has been obtained by the sole marketing and sales efforts of such party,
the contracting party shall make a commercially reasonable good faith
effort to enter into a subcontract or other arrangement to have the
other party provide up to five percent (5%) of the services, products
and/or technology required under the contract and the non-contracting
party shall receive its share of revenues accordingly.
Exhibit 5.06 - 2
<PAGE>
EXHIBIT 5.06
4.3 FACILITATING TRANSACTIONS. Whenever a mutually satisfactory
contract to provide services, products and/or technology to a Customer
has been obtained by a party and the other party has provided limited
solicitation assistance, such as by way of introduction, endorsement,
referral or similar facilitating activity ("FACILITATING EFFORT"), the
contracting party shall make a commercially reasonable good faith effort
to enter into a subcontract or other arrangement to have the party
providing the Facilitating Effort to provide up to five percent (5%) of
the services, products and/or technology required under the contract and
the party providing the Facilitating Effort shall receive its share of
the revenues accordingly; PROVIDED, HOWEVER, that any contract under
this Section 4.3 entered into must have been entered into within one (1)
year of the performance of the initial Facilitating Effort.
4.4 LIMITATION. Notwithstanding the foregoing, should it be
discovered that any SAIC organization or affiliate other than the SAIC
Financial Services Practice is marketing, performing or providing
services, products and/or technology independently of the relationship
described in this Agreement, no subcontracting shall be required by the
other SAIC organization or affiliate with Carreker.
5. BUSINESS DEVELOPMENT COMMITMENT.
5.1 During the first two (2) years of this Agreement, Carreker
and SAIC agree to confer, develop, fund (either through the utilization
of internal personnel, resources, facilities, equipment, products and/or
other assets or by contributing cash) and implement mutually acceptable
business development plans approved in advance in writing by Carreker's
President and SAIC's Technology Solutions Sector Manager and which will
consist of (a) a public relations promotional program (the "PR PROGRAM")
and (b) the development of a joint marketing and sales plan such as, but
not limited to an electronic commerce strategic plan.
5.2 Each party shall equally contribute up to Twenty Thousand
Dollars ($20,000) in value per year to fund the PR Program, subject to a
maximum total contribution by each party of Forty Thousand Dollars
($40,000).
5.3 Each party shall equally contribute up to One Hundred
Thousand Dollars ($100,000) in value per year to fund the marketing and
sales plan agreed mutually upon and referred to in Section 5.1 above,
subject to a maximum total contribution by each party of Two Hundred
Thousand Dollars ($200,000).
6. CONTRACTING.
6.1 With respect to any undertaking proposed under this
Agreement, the parties shall confer and determine which of them should
be the party contracting with the Customer (the "PROJECT LEADER").
Exhibit 5.06 - 3
<PAGE>
EXHIBIT 5.06
6.2 Each party shall (i) provide appropriate information and
personnel and use commercially reasonable good faith efforts to timely
prepare and submit to the Project Leader such data as are required for
use in preparation of that part of the proposal to be submitted to the
Customer and the services, products and/or technology to be provided to
the Customer and (ii) provide all other reasonable assistance to the
Project Leader in preparation of a proposal.
6.3 The Project Leader shall prepare the proposal, integrate the
information and data provided by the parties, submit the proposal to the
other party for advance review and written approval and submit the
resulting proposal to the Customer.
6.4 The Project Leader shall propose and promote the other party
as the subcontractor for the services, products and/or technology to be
provided under the contract with the Customer by such party.
6.5 The parties shall perform such additional effort subsequent
to submittal of the proposal to the Customer as appears reasonable to
obtain the contract with the Customer.
6.6 Each party shall perform its respective obligations
described in the contract with the Customer in a proper and workmanlike
manner and in accordance with the specifications, terms and conditions
of the contract with the Customer.
6.7 Any and all costs, expense or liability of either party
caused by or arising out of this Agreement, its implementation,
amendment, or expansion, shall be borne by each party separately and
individually and neither party shall be liable or obligated to the other
for any such cost, expense or liability except to the extent that such
costs, expense, or liabilities are reimbursed, paid or provided for,
under a written agreement entered into between the parties.
7. COMPLIANCE WITH LAW. Each Party agrees that in carrying out its
duties and responsibilities under this Agreement, it will neither undertake, nor
cause nor permit to be undertaken any activity which either (a) is illegal under
any laws, decrees, rules or regulations in effect in the United States, any
state or territory or in any other applicable jurisdiction, or (b) would have
the effect of causing the other party to be in violation of any laws, decrees,
rules or regulations in effect in the United States, any state or territory or
in any other applicable jurisdiction. Each party further acknowledges and
agrees that if either party breaches this Paragraph 7: (i) the non-breaching
party shall have the immediate right to terminate this Agreement; and (ii) the
breaching party shall indemnify the non-breaching party for any penalty, loss or
expenses incurred by the non-breaching party as a result of any such breach.
8. OWNERSHIP OF PRODUCTS AND WORK PRODUCT. Any patent, trademark,
copyright or intellectual property right in any software, software enhancements,
products,
Exhibit 5.06 - 4
<PAGE>
EXHIBIT 5.06
services, technology, inventions, proprietary information or work product
("PRODUCTS") produced or created solely by one party as a result of the
activities contemplated by this Agreement shall be the sole and exclusive
property of such party. With respect to Products that are created directly
as a result of the combined work efforts of both parties (and not merely
because the contract with the Customer was jointly solicited), unless
otherwise agreed in advance in a document signed by Carreker's President and
SAIC's Technology Solutions Sector Manager, each party shall have a one-half
(1/2) undivided interest in the Products without a duty to account to the
other, provided that the Products are created or developed solely by the
combined work efforts of the parties and not merely because the contract was
jointly solicited.
9. CONFIDENTIAL AND/OR PROPRIETARY INFORMATION.
9.1 The parties anticipate that under this Agreement it may be
necessary for either to transfer to the other information of a
confidential and/or proprietary nature ("CONFIDENTIAL INFORMATION").
Confidential Information shall be clearly identified by the disclosing
party at the time of disclosure either by being marked with a legend
clearly indicating that it is confidential or proprietary and all oral
information that is reduced to writing and is identified as being
confidential or proprietary and such writing is given to the recipient
within fifteen (15) days of the date of the oral disclosure. Any
information otherwise provided shall be deemed to not be confidential or
proprietary.
9.2 Each of the parties agree that it will use the same efforts
to protect such Confidential Information as are used to protect its own
Confidential Information. Disclosures of such Confidential Information
shall be restricted to those individuals who are directly participating
in the proposal and contracting efforts hereunder.
9.3 Neither party shall make any reproductions, disclosure or
use of such Confidential Information except in performing its
obligations under this Agreement and as are set forth in the proposal to
the Customer, with appropriate restrictive legends to the extent that
either party specifically requests, and such legends as are permitted by
the Customer's regulations.
9.4 The limitations on reproduction, disclosure or use of
Confidential Information shall not apply to, and neither party shall be
liable for reproduction, disclosure or use of Confidential Information
with respect to which any of the following conditions exist:
(a) If, prior to the receipt thereof under this
Agreement, it has been developed independently by the party
receiving it, or was lawfully known to the party receiving it, or
has been lawfully received from other sources, including the
Customer, provided such other source did not receive it due to a
breach of this Agreement;
Exhibit 5.06 - 5
<PAGE>
EXHIBIT 5.06
(b) If, subsequent to the receipt thereof under this
Agreement, (i) it is published by the party furnishing it or is
disclosed by the party furnishing it to others, including the
Customer, without restriction, or (ii) it has been lawfully
obtained by the party receiving it from other sources, including
the Customer, provided such other source did not receive it due to
a breach of this Agreement, or (iii) if such information otherwise
comes within the public knowledge or becomes generally known to
the public; or
(c) If any part of the Confidential Information has been
or hereafter shall be disclosed in a United States patent issued
to the party furnishing the Confidential Information hereunder,
then, after the issuance of said patent, the limitations on such
Confidential Information as disclosed in the patent shall be only
that afforded by the United States Patent Laws.
9.5 Neither the execution and delivery of this Agreement, nor
the furnishing of any Confidential Information by either party shall be
construed as granting to the other party either expressly, by
implication, estoppel, or otherwise, any license under any invention,
patent, trademark, or copyright now or hereafter owned or controlled by
the party furnishing same.
9.6 Notwithstanding the expiration of the other portions of this
Agreement, the obligations and provisions of this Article 9 shall
continue until terminated by either party upon five (5) days written
notice to the other; PROVIDED, HOWEVER, that the terms and conditions of
this Article shall continue to apply to all Confidential Information
disclosed prior to the effective date of such termination.
9.7 Each of the parties shall identify a person responsible for
receipt of Confidential Information subject to this Article.
10. RELATIONSHIP OF PARTIES.
10.1 INDEPENDENT CONTRACTORS. The parties hereto intend that the
relationship between them created by this Agreement shall be that of
independent contractors and that the relationship shall continue as such
as long as this Agreement remains in effect. Nothing contained in this
Agreement shall be construed to constitute either party as a partner,
employee or agent of the other, and no employee or agent of either party
shall be or be deemed to be the employee or agent of the other.
10.2 SCOPE OF AGREEMENT. Neither party shall have the authority
to make any agreement or commitment, or incur any liability on behalf of
the other party, nor shall either party be liable for any acts,
omissions to act, contracts, commitments, promises or representations
made by the other, except as specifically authorized in this Agreement
or as the parties hereafter may agree in writing.
Exhibit 5.06 - 6
<PAGE>
EXHIBIT 5.06
11. INDEMNIFICATION. Each party shall be solely responsible for the
performances of its acts, duties and responsibilities under this Agreement and
for the acts, duties and responsibilities of its officers, employees and agents;
and each party agrees to indemnify the other, its officers, employees and
agents, and to hold harmless the other, its officers, employees and agents, and,
at the indemnifying party's sole expense, to defend the indemnified party, its
officers, employees and agents, from and against any claims, demands, causes of
action, loss, cost and expense, arising from, in connection with or based upon
the actions or omissions of the indemnifying party, its officers, employees or
agents pursuant to or in contravention of the provisions of this Agreement.
12. TERMINATION. This Agreement shall have an initial term of three
(3) years. Thereafter, except as to any contracts entered into with Customers
hereunder, either party shall have the right to terminate this Agreement at any
time, with or without cause, effective upon thirty (30) day's written notice to
the other party. Any amounts earned by either party as of the date of notice of
termination shall survive termination and shall continue to be payable, but
neither party shall be entitled to receive or obligated to pay any damages in
connection with such termination.
13. ARBITRATION OF DISPUTES. The parties agree that any controversy
or claim (whether such controversy or claim is based upon or sounds in statute,
contract, tort or otherwise) arising out of or relating to this Agreement, any
performance or dealings between the parties, or any dispute arising out of the
interpretation or application of this Agreement, which the parties are not able
to resolve, shall be settled exclusively by arbitration in Dallas, Texas by a
single arbitrator pursuant to the American Arbitration Association's Commercial
Arbitration Rules then obtaining and judgment upon the award rendered by the
arbitrator shall be entered in any court having Jurisdiction thereof and such
arbitrator shall have the authority to grant injunctive relief in a form similar
to that which a court of law would otherwise grant. The arbitrator shall be
chosen from a panel of licensed attorneys familiar with the subject matter of
this Agreement and shall be appointed within thirty (30) days of the date the
demand for arbitration was sent to the other party. Discovery shall be
permitted in accordance with the Federal Rules of Civil Procedure. If an
arbitration proceeding is brought pursuant to this Agreement, the prevailing
party shall be entitled to recover reasonable attorneys' fees, costs and
necessary disbursements incurred in addition to any other relief to which such
party may be entitled.
14. CHOICE OF LAW. The Agreement and the performance or breach
thereof shall be governed by and interpreted as to substantive matters in
accordance with the applicable laws of the State of Texas (excluding its choice
of law rules).
15. ASSIGNMENT. No portion of this Agreement or any right or
obligation hereunder can be assigned, in whole or in part, by either party
hereto without the prior written consent of the other party.
Exhibit 5.06 - 7
<PAGE>
EXHIBIT 5.06
16. ENTIRE AGREEMENT. This Agreement contains the final, complete and
exclusive agreement of the parties with respect to the subject matter hereof and
supersedes all previous verbal and written agreements. This Agreement cannot be
amended, in whole or in part, without a written instrument signed by both of the
parties hereto.
17. WAIVER. No waiver of, no delay in the exercise of, and no
omission to exercise any rights or remedies by either party shall be construed
as a waiver by such party of any other rights or remedies that such party may
have under this Agreement.
18. NOTICE. Unless otherwise specified herein, any notice required or
permitted to be given under this Agreement shall be sufficient, if in writing,
and shall be deemed to be fully given if personally delivered, if sent by
registered mail, by facsimile with an original copy by regular mail, or by telex
with receipt acknowledged, to the following addresses:
(a) If to SAIC, to:
Kevin E. Murphy
Science Applications International Corporation
1299 Prospect St., Suite 303
La Jolla CA 92037
With a copy to:
Kevin A. Werner, Esq.
Corporate Counsel
Science Applications International Corporation
10260 Campus Point Drive, M/S F3
San Diego CA 92121
(b) If to Carreker, to:
Douglas Eubanks
Executive Vice President
The Carreker Group, Inc.
14001 North Dallas Parkway, Suite 1100
Dallas TX 75240
The foregoing addresses and individuals may be changed by either party by giving
to the other party prior written notice of any such change.
19. COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Exhibit 5.06 - 8
<PAGE>
EXHIBIT 5.06
20. THIRD PARTIES. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any person or corporation other than the parties hereto
and their successors or assigns, any rights or remedies under or by reason of
this Agreement.
21. FURTHER ASSURANCES. Each of the parties hereto agrees that from
time to time, at the request of any of the other parties hereto and without
further consideration, it will execute and deliver such other documents and take
such other action as such other party may reasonably request in order to
consummate more effectively the transactions contemplated hereby.
IN WITNESS WHEREOF, as of the day first above written, the SAIC and
Carreker have caused this Agreement to be signed by their respective duly
authorized officer.
SCIENCE APPLICATIONS
INTERNATIONAL CORPORATION,
a Delaware corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
THE CARREKER GROUP, INC.,
a Texas corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Exhibit 5.06 - 9
<PAGE>
EXHIBIT 5.07
SHAREHOLDER AGREEMENT
THIS SHAREHOLDER AGREEMENT (this "AGREEMENT") is made and entered into
as of October __, 1996 by and among THE CARREKER GROUP, INC., a Texas
corporation (the "COMPANY"), J.D. CARREKER ("CARREKER") and SCIENCE APPLICATIONS
INTERNATIONAL CORPORATION, a Delaware corporation ("SAIC").
RECITALS
WHEREAS, the Company and SAIC desire to form a strategic alliance
between them, because of their diverse and complementary capabilities;
WHEREAS, the Company is authorized to issue shares ("SHARES") of the
Company's no par value Class A (voting) and Class B (non-voting) common stock
(individually "CLASS A COMMON STOCK") and "CLASS B COMMON STOCK") and
collectively "COMMON STOCK");
WHEREAS, in connection with the formation of the strategic alliance SAIC
desires to make an investment in the Company by purchasing 100,645 Shares of the
Company's Class A Common Stock ("SAIC SHARES") pursuant to a Stock Purchase
Agreement to be executed by the Company and SAIC contemporaneously with this
Agreement;
WHEREAS, Carreker presently owns 655,514 Shares (approximately 79.41%)
of the issued and outstanding Shares of Class A Common Stock (the "CARREKER
SHARES");
WHEREAS, upon the consummation of the purchase and sale of the Shares
pursuant to the Stock Purchase Agreement, SAIC will own not less than eight
percent (8%) of the issued and outstanding Shares of Common Stock (including
treasury Shares and Shares reserved for issuance under existing stock options)
in the amount of 1,258,074 Shares;
WHEREAS, the parties agree that SAIC should have the right to
participate in any future offerings of Common Stock by the Company so as to
avoid the dilution of SAIC's equity interest in the Company and that SAIC should
have the option to require the Company to purchase SAIC's Shares under certain
circumstances;
WHEREAS, the parties agree that the Company should have the right to
purchase SAIC's Shares under certain circumstances;
WHEREAS, the Company, SAIC and Carreker agree that SAIC should have at
least one representative as a member of the Board of Directors of the Company at
all times during the term of this Agreement;
Exhibit 5.07 - 1
<PAGE>
EXHIBIT 5.07
WHEREAS, the parties believe that it is of mutual benefit to the
Company, to SAIC and to Carreker to provide for the nomination and election of
the representative of SAIC as a member of the Company's Board of Directors and
to provide for future dispositions of certain Shares;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
hereto hereby agree as follows:
ARTICLE 1
ELECTION OF DIRECTORS
1.1 BOARD OF DIRECTORS. The Company and Carreker hereby agree that
for so long as SAIC shall be entitled to have a representative on the Company's
Board of Directors pursuant to Section 1.2 below, neither the Company nor
Carreker shall take or permit to be taken any action which would increase the
size of the Board of Directors to more than twelve (12) members, except as set
forth in this Article 1. In the event that the Board of Directors is increased
in size to more than twelve (12) members, the Company and Carreker hereby agree
to take all such action as shall be necessary to ensure that SAIC shall be
entitled to designate a number of directors to the Board equal to the product of
one-twelfth (1/12th) times (ii) the total number of directors on the Board after
the increase, rounded down to the nearest whole number.
1.2 BOARD OF DIRECTORS REPRESENTATION. The Company and Carreker agree
that SAIC shall have the right to have one (1) representative on the Company's
Board of Directors during the term of this Agreement. Carreker hereby agrees to
vote for such SAIC nominated representative. Accordingly, contemporaneous with
the Closing of the Stock Purchase Agreement (as defined therein), the Company
agrees to nominate, and Carreker agrees to elect, one representative to the
Company's Board of Directors designated by SAIC. Following such election, the
members of the Board of Directors shall be those persons set forth on
EXHIBIT 1.2 hereto. SAIC shall have the right to remove and replace its
representative at any time, in SAIC's sole discretion.
1.3 AGREEMENT COUPLED WITH INTEREST. The voting agreements set forth
in this Article 1 are coupled with an interest and may not be revoked without
the written consent of SAIC.
Exhibit 5.07 - 2
<PAGE>
EXHIBIT 5.07
ARTICLE 2
RIGHTS OF FIRST REFUSAL, PUTS AND CALLS
2.1 SAIC RIGHT OF FIRST REFUSAL ON FUTURE SECURITIES. Subject to the
terms and conditions specified in this Section 2.1, the Company hereby grants to
SAIC a right of first refusal with respect to future sales by the Company of its
Future Securities (as hereinafter defined).
Each time the Company proposes to offer any Shares or options of,
or securities convertible into or exercisable or exchangeable for, any
class of its capital stock, including any Shares authorized by the
Company in the future which will result in the Company having in excess
of 1,258,074 Shares (including treasury Shares) issued and outstanding
and reserved for issuance upon exercise of existing stock options
("FUTURE SECURITIES"), the Company shall first make an offering of such
Future Securities to SAIC in accordance with the following provisions:
(a) The Company shall deliver a notice ("FUTURE SECURITIES
NOTICE") to SAIC stating (i) its bona fide intention to offer or issue
such Future Securities, (ii) the type and number of such Shares of
Future Securities to be offered, (iii) the price for which it proposes
to offer such Future Securities, and (iv) all other material terms and
conditions relating to such Future Securities.
(b) Within 30 calendar days after SAIC's receipt of the Future
Securities Notice, SAIC may elect to purchase, at the price and on the
terms and conditions specified in the Future Securities Notice, up to
that portion of such Shares of Future Securities which equals the
proportion that the number of Shares of Common Stock then issued and
held by SAIC bears to the total number of Shares of Common Stock of the
Company issued and outstanding and reserved for issuance upon exercise
of outstanding stock options.
(c) If all such Shares of Future Securities referred to in the
Future Securities Notice are not elected to be purchased by SAIC as
provided in subsection 2.1(b) hereof, the Company may, during the sixty
(60) day period following the expiration of the period provided in
subsection 2.1(b) hereof, offer the remaining unsubscribed Shares to any
person or persons at a price not less than that, and upon terms and
conditions no more favorable to the offeree than those, specified in the
Future Securities Notice. If the Company does not enter into an
agreement for the sale of the Shares within such period, or if such
agreement is not consummated within seventy-five (75) days of the
execution thereof, the right provided hereunder shall be deemed to be
revived and such Shares shall not be offered unless first reoffered to
SAIC in accordance herewith. Even though SAIC may decline to
participate in an offering of Future Securities, the provisions of this
Section 2.1 shall continue to apply to any subsequent offering of Future
Securities and SAIC shall be eligible to purchase subsequently offered
Future Securities on the same
Exhibit 5.07 - 3
<PAGE>
EXHIBIT 5.07
basis provided herein, except that the anti-dilution percentage will be
reduced from eight percent (8%) to the SAIC percentage of ownership of
Shares that results from the transaction in which SAIC did not
participate.
(d) With respect to any Shares that may be issued, from time to
time, under stock options granted by the Company to its employees
pursuant to stock option plans approved by the Company's Board of
Directors, which result in the Company having in excess of 1,258,074
Shares (including treasury Shares) issued and outstanding, SAIC shall
have the right, at its option, to purchase such additional number of
Shares of the same class of Common Stock from the Company at the price
of the option(s) at the time the option is granted by the Company so as
to enable SAIC to maintain the same percentage of ownership stake in the
Company as it owned immediately preceding the date of grant of such
options.
2.2 SAIC'S STRATEGIC ALLIANCE PUT OPTION. Subject to the terms and
conditions specified in this Section 2.2, the Company hereby grants to SAIC a
right to require that the Company purchase, and the Company hereby agrees to
purchase from SAIC, all of the Shares then issued and held by SAIC, including
any Shares acquired by SAIC pursuant to this Article 2 (the "STRATEGIC ALLIANCE
PUT OPTION").
(a) The Strategic Alliance Put Option is only exercisable if the
cumulative revenues recognized by SAIC as a direct result of business
done jointly by SAIC and the Company pursuant to the Strategic Alliance
Agreement between SAIC and the Company of even date herewith do not
exceed TWENTY-FIVE MILLION DOLLARS ($25,000,000) on or before the third
(3rd) anniversary of this Agreement. In the event this Agreement is
terminated pursuant to Article 3 prior to the third (3rd) anniversary of
this Agreement, the Strategic Alliance Put Option shall terminate.
(b) The price of the Shares under the Strategic Alliance Put
Option shall equal the aggregate price paid by SAIC to acquire the
Shares.
(c) To exercise the Strategic Alliance Put Option, on or before
the last day of the fortieth (40th) month after the first date written
above, SAIC shall provide Company with a written notice (the "STRATEGIC
ALLIANCE PUT NOTICE") of SAIC's desire to have the Company purchase the
Shares and, unless the provisions of subsection 2.2(d) apply, the
Company shall pay SAIC in cash and SAIC shall transfer, assign and
deliver the Shares, duly executed, to the Company on or before the
thirtieth (30th) business day after Company receives the Strategic
Alliance Put Notice.
(d) In the event Company's payment to SAIC pursuant to the
Strategic Alliance Put Option would cause the Company to violate any of
the covenants in Sections 5k, l, m, n or o (the "COMPASS BANK REVOLVER
COVENANTS") of the $1 million revolving Line of Credit Loan from Compass
Bank - Dallas to the Company dated October 26, 1995 (the
Exhibit 5.07 - 4
<PAGE>
EXHIBIT 5.07
"COMPASS BANK REVOLVER"), or which would violate the covenants of any
future bank loan agreement (which such future covenants shall not be
more restrictive, individually or collectively, than those contained
in the Compass Bank Revolver in order to have the provisions of this
Section 2.2(d) to apply to any future bank loan agreement) so as to
prohibit borrowing by the Company under said agreement, Company may
elect to make and deliver a promissory note to SAIC substantially in
the form attached hereto as EXHIBIT 2.2(d) (the "PROMISSORY NOTE")
bearing an interest rate of the Prime Rate as defined hereafter plus
two percent (2%) with principal and interest payable semiannually over
a period of three (3) years but with no prepayment penalty; FURTHER,
PROVIDED, HOWEVER, that if the making of any payment under the
Promissory Note at any time would cause Company to be in default of
the Compass Bank Revolver Covenants (or in default under any future
bank loan agreement as provided above), then Company may postpone
payments under the Promissory Note, until the aforementioned default
ceases but in no event shall the postponement of payment of principal
and interest under the Promissory Note exceed five (5) years from the
date of the Strategic Alliance Put Notice. Interest will continue to
accrue during any such postponement at the Prime Rate plus two percent
(2%) per annum. The "PRIME RATE" shall mean the fluctuating per annum
interest rate established by NationsBank, N.A. in Dallas, Texas, as its
prime rate of interest offered from time to time. SAIC shall retain all
Shares until payment in full of the Promissory Note is made by Company.
In addition to the foregoing, during the period of any postponement of
payment of principal and interest by the Company to SAIC pursuant to the
Strategic Alliance Put Option, during such postponement, no base salary,
bonuses, awards or other payment for services rendered by Carreker to
the Company shall be made if such payment to Carreker would render the
Company insolvent or otherwise unable to pay its debts as they become
due.
2.3 SAIC'S CARREKER SHARES PUT OPTION. Subject to the terms and
conditions specified in this Section 2.3, the Company hereby grants to SAIC a
right to require that the Company purchase any or all of the Shares owned by
SAIC, including any Shares acquired by SAIC pursuant to this Article 2 (the
"CARREKER SHARES PUT OPTION").
(a) Carreker may sell, assign, transfer, alienate, convey,
donate or otherwise in any manner dispose of (such dispositions are
hereafter collectively referred to as a "TRANSFER") his Carreker Shares
by a bona fide sale to a third party, provided that Carreker has first
complied with the procedures set forth in this Section 2.3. In the
event Carreker, at any time, intends to Transfer to a third party an
amount of Carreker Shares that would, at any time, result in such third
party owning more Shares than SAIC, Carreker agrees to and shall deliver
to SAIC (with a copy to the Company) notice of such intention by
delivering a signed written statement setting forth Carreker's desire to
Transfer all or a portion of the Carreker Shares, the number of Carreker
Shares to be Transferred, the identity of the proposed Transferee, the
proposed Transfer price and all other material terms and conditions
relating to the proposed Transfer ("CARREKER'S NOTICE OF INTENTION TO
TRANSFER"). The following shall not be considered a "third party" and
this Section 2.3
Exhibit 5.07 - 5
<PAGE>
EXHIBIT 5.07
shall not apply to Transfers to (i) the Company; (ii) to Carreker's
immediate family (spouse, children, parents or siblings of Carreker)
or to a trust for the benefit of Carreker or his immediate family; or
(iii) to a corporation, all of whose capital stock is owned by Carreker.
(b) Within thirty (30) days after SAIC's receipt of Carreker's
Notice of Intention to Transfer, SAIC may, at its option, elect to
exercise the Carreker Shares Put Option by providing the Company (with a
copy to Carreker) with a written notice (the "SAIC CARREKER SHARE PUT
OPTION NOTICE") of SAIC's desire to have the Company purchase or all of
any SAIC's Shares.
(c) The price for Shares under the Carreker Shares Put Option
shall be the highest of (i) the then fair market value of the Shares or
(ii) the price paid by SAIC to acquire SAIC's Shares or (iii) the price
at which Carreker Proposes to Transfer the Carreker Shares.
(d) The Company shall pay SAIC in cash and SAIC shall transfer,
assign and deliver the Shares, duly executed, to the Company on or
before the thirtieth (30th) business day after the Company receives the
Carreker Share Put Option Notice.
(e) This Carreker Shares Put Option shall apply to each and
every Transfer of Carreker Shares during the term of this Agreement.
2.4 COMPANY'S RIGHT OF FIRST REFUSAL ON SAIC'S SHARES. Subject to the
terms and conditions of this Section 2.4 and during the term of this Agreement,
SAIC hereby grants to the Company a right of first refusal with respect to any
Shares that SAIC proposes to sell to a third party (excluding thereby, from the
scope of this Section 2.4, any Transfers by SAIC to any subsidiary or Affiliate
of SAIC as defined below ("COMPANY'S RIGHT OF FIRST REFUSAL"). An "Affiliate of
SAIC" shall mean any corporation which controls SAIC or is controlled by SAIC or
is under common control of or with SAIC.
(a) SAIC may Transfer any or all of the Shares then owned by
SAIC by a bona fide sale to a third party, provided that SAIC has first
complied with the procedures set forth in this Section 2.4. In the
event SAIC intends to Transfer any of the Shares owned by SAIC, SAIC
agrees to and shall deliver to the Company notice of such intention by
delivering a signed written statement setting forth SAIC's desire to
Transfer all or a portion of the Shares owned by SAIC, the number of
such Shares to be Transferred, the identity of the proposed Transferee,
the proposed Transfer price and all other materials terms and conditions
relating to the proposed Transfer ("SAIC'S NOTICE OF INTENTION TO
TRANSFER").
(b) Within thirty (30) days after Company's receipt of SAIC's
Notice of Intention to Transfer, the Company may, at its option, elect
to purchase the quantity of
Exhibit 5.07 - 6
<PAGE>
EXHIBIT 5.07
Shares SAIC proposes to sell, each time SAIC decides to sell Shares,
by providing a written notice of Company's desire to purchase the SAIC
Shares (the "COMPANY EXERCISE NOTICE").
(c) The price for Shares under the Company's Right of First
Refusal shall be the price offered to SAIC by the third party.
(d) The Company shall pay SAIC on the same terms and conditions
as offered by the third party and SAIC shall transfer, assign and
deliver the Shares, duly executed, to the Company on or before the
thirtieth (30th) business day after the Company receives the Company
Exercise Notice.
2.5 COMPANY'S CALL OPTION TO REPURCHASE SAIC'S SHARES. Subject to the
terms and conditions specified in this Section 2.5, SAIC hereby grants to the
Company a right to require that SAIC sell, and SAIC hereby agrees to sell to the
Company, all of the Shares then issued and held by SAIC (the "CALL OPTION").
(a) The Call Option is only exercisable if the cumulative
revenues recognized by the Company as a direct result of business done
jointly by SAIC and the Company pursuant to the Strategic Alliance
Agreement do not exceed $10,000,000 on or before the third (3rd)
anniversary of this Agreement. In the event this Agreement is
terminated pursuant to Article 3 prior to the third (3rd) anniversary of
this Agreement, the Call Option shall terminate.
(b) The price for the Shares under the Call Option shall be the
higher of (i) the then fair market value of the Shares or (ii) the
aggregate price paid by SAIC to acquire the Shares; PROVIDED, HOWEVER,
that in the event the Company sells any Shares of its Common Stock
(other than Shares issued upon exercise of outstanding employee stock
options) to any other person or entity within twelve (12) months
following the date of the Company's payment to SAIC under the Call
Option at a per Share price in excess of the price paid per Share to
SAIC under this Section 2.5(b), then within thirty (30) days of the
closing of any such subsequent sale of Shares of Common Stock the
Company shall pay such excess price per Share to SAIC for its Shares
sold under the Call Option up to the number of Shares sold to the other
person or entity.
(c) To exercise the Call Option, on or before the last day of
the fortieth (40th) month after the first date written above, the
Company shall provide SAIC with a written notice (the "CALL NOTICE") of
the Company's desire to purchase the Shares. The Company shall pay SAIC
in cash and SAIC shall transfer, assign and deliver the Shares, duly
executed, to the Company on or before the thirtieth (30th) business day
after SAIC receives the Call Notice.
Exhibit 5.07 - 7
<PAGE>
EXHIBIT 5.07
ARTICLE 3
TERM
This Agreement shall continue in full force and effect during the period
that SAIC owns any Shares; PROVIDED, HOWEVER, that this Agreement shall
terminate upon (a) the first closing of the first firmly underwritten public
offering of Common Stock of the Company that (i) is pursuant to a registration
statement filed with, and declared effective by the Securities and Exchange
Commission under the Securities Act of 1933, as amended, and (ii) has an
aggregate offering price to the public of at least Fifteen Million Dollars
($15,000,000); (b) the sale of all or substantially all of the assets of the
Company to any person or entity that is not affiliated with or controlled by the
Company; or (c) 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, whichever occurs first.
ARTICLE 4
MISCELLANEOUS
4.1 LEGEND ON SHARE CERTIFICATES. Carreker agrees to surrender the
certificate(s) evidencing Carreker's ownership of Shares to the Secretary of the
Company and the Company agrees to cause the Secretary to stamp on the Carreker's
Share certificate(s), in a prominent manner, the following legend:
The transfer, sale, assignment, hypothecation, encumbrance
or alienation of the Shares represented by this
certificate may result in a put option in favor of SAIC or
a right of first refusal in favor of the Company pursuant
to a Shareholder Agreement, by and among J.D. Carreker,
The Carreker Group, Inc. and Science Applications
International Corporation, dated as of October ,
1996, a copy of which is available for inspection during
normal business hours at the principal executive office of
the Company.
The Company agrees that it shall cause all certificates for Shares
subsequently issued by the Company to Carreker to bear such legend in a
prominent manner on the face or back of the stock certificate.
The aforementioned legend shall also be placed on all certificates
for Shares issued to SAIC.
4.2 FURTHER ASSURANCES. The parties agree to execute such further
instruments and to take such further actions as may be reasonably required to
carry out the intent of this Agreement. The parties hereby authorize the
Company and/or its transfer agents to make such transfers as are permitted by
this Agreement upon the books and records of the Company.
Exhibit 5.07 - 8
<PAGE>
EXHIBIT 5.07
4.3 ARBITRATION OF DISPUTES. The parties agree that any controversy
or claim (whether such controversy or claim is based upon or sounds in statute,
contract, tort or otherwise) arising out of or relating to this Agreement, any
performance or dealings between the parties, or any dispute arising out of the
interpretation or application of this Agreement, which the parties are not able
to resolve, shall be settled exclusively by arbitration in Dallas, Texas by a
single arbitrator pursuant to the American Arbitration Association's Commercial
Arbitration Rules then obtaining and judgment upon the award rendered by the
arbitrator shall be entered in any court having jurisdiction thereof and such
arbitrator shall have the authority to grant injunctive relief in a form similar
to that which a court of law would otherwise grant. The arbitrator shall be
chosen from a panel of licensed attorneys familiar with the subject matter of
this Agreement and shall be appointed within thirty (30) days of the date the
demand for arbitration was sent to the other party. Discovery shall be
permitted in accordance with the Federal Rules of Civil Procedure. If an
arbitration proceeding is brought pursuant to this Agreement, the prevailing
party shall be entitled to recover reasonable attorneys' fees, costs and
necessary disbursements incurred in addition to any other relief to which such
party may be entitled.
4.4 NOTICES. All notices, requests, demands or other communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered, sent by facsimile transmission, or mailed by certified or
registered mail, postage prepaid and addressed as follows:
If to the Company: Terry L. Gage
Chief Financial Officer
The Carreker Group, Inc.
14000 North Dallas Parkway, Suite 1100
Dallas TX 75240
If to Carreker: J.D. Carreker
4321 Overhill
Dallas TX 75205
If to SAIC: Kevin E. Murphy
Science Applications International Corporation
1299 Prospect Street, Suite 303
La Jolla CA 92037
with a copy to: Kevin A. Werner, Esq.
Corporate Counsel
Science Applications International Corporation
10260 Campus Point Drive, M/S F3
San Diego CA 92121
Exhibit 5.07 - 9
<PAGE>
EXHIBIT 5.07
or to such other address as the party to be notified shall have furnished to the
other party in writing. Any notice given in accordance with the foregoing shall
be deemed to have been given when personally received by personal delivery or
telecopy or on the third (3rd) day following the date on which it was mailed.
4.5 SPECIFIC PERFORMANCE. The parties agree that it is impossible to
measure in money the damages that which will accrue to a party hereto by reason
of a failure to perform any of the obligations under this Agreement and that
irreparable harm will result from any such breach. Therefore, if any party to
this Agreement shall institute any action or proceeding to enforce the
provisions hereof, any party against whom such action or proceeding is brought
hereby waives the claim or defense therein that the party initiating the action
or proceeding has an adequate remedy at law.
4.6 APPLICABLE LAW. This Agreement shall be construed in accordance
with and governed by the laws of the State of Texas.
4.7 SUCCESSORS. This Agreement shall inure to the benefit of the
successors and assigns of the Company and subject to the restrictions on
transfer herein set forth, be binding upon SAIC and Carreker, their respective
heirs, executors, administrators, successors, transferees and assigns.
4.8 ENTIRE AGREEMENT. This Agreement contains all the agreements,
representations and understandings of the parties hereto and supersedes and
replaces any and all previous understandings, commitments of agreements, oral or
written, relating to the subject matter of this Agreement. The invalidity or
unenforceability of any particular provision of this Agreement shall not effect
the other provisions hereof, and this Agreement shall be construed and enforced
in all respects as if such invalid or unenforceable provisions were omitted.
4.9 AMENDMENTS. This contract may not be modified or terminated
orally, and no modification nor any claimed waiver of any of the provisions
hereof shall be binding unless in writing and signed by the party against whom
such modification or waiver is sought to be enforced.
4.10 COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Exhibit 5.07 - 10
<PAGE>
EXHIBIT 5.07
IN WITNESS WHEREOF, as of the day first above written, the Company and
SAIC have caused this Agreement to be signed by their respective duly authorized
officer, and Carreker has signed this Agreement.
THE CARREKER GROUP, INC.,
a Texas corporation
By:
-----------------------------------
Name:
----------------------------------
Title:
---------------------------------
J.D. CARREKER
SCIENCE APPLICATIONS
INTERNATIONAL CORPORATION,
a Delaware corporation
By:
-----------------------------------
Name:
----------------------------------
Title:
---------------------------------
Exhibit 5.07 - 11
<PAGE>
EXHIBIT 5.07
EXHIBIT 2.2(d)
PROMISSORY NOTE
DATE:
------------------------
MAKER: THE CARREKER GROUP, INC.
PAYEE: SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
Maker promises to pay to the order of Payee at the place for payment and
according to the terms of payment the principal amount plus interest at rates
stated below:
PRINCIPAL AMOUNT: TWO MILLION AND NO/100 DOLLARS ($2,000,000.00)
ANNUAL INTEREST RATE ON UNPAID PRINCIPAL FROM DATE HEREOF:
This Promissory Note shall bear interest equal to the Prime Rate
(defined below) in effect from time to time, plus two percent
(2%) computed on the basis of a year of three hundred sixty (360)
days and actual days elapsed. As used herein, the term "Prime
Rate" means the fluctuating per annum rate established by
NationsBank, N.A. in Dallas, Texas as its prime rate of interest
from time to time. Postponed payments, as provided herein, shall
bear the interest rate stated above.
TERMS OF PAYMENT (PRINCIPAL AND INTEREST):
All accrued and unpaid principal and interest shall be paid on a
semi-annual basis over a period of three (3) years with the first
payment commencing six (6) months after the date of this
Promissory Note.
ANNUAL INTEREST RATE ON MATURED, UNPAID AMOUNTS:
Eighteen percent (18%) or the highest rate allowed by applicable
law, whichever is the lesser.
PLACE FOR PAYMENT: SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
10260 Campus Point Dr. M/S F3
San Diego CA 92121
or such other place as Payee or any other holder may, by
reasonable notice, direct.
POSTPONEMENT OF PAYMENT:
The payment of principal and accrued interest may be postponed,
if and only if, the making of any such payment would immediately
cause the Maker to violate any of the covenants in Sections 5k,
l, m, n or o of the $1 million Revolving Line of Credit Loan from
Compass Bank-Dallas to Maker dated October 26, 1995.
Notwithstanding the foregoing, no postponement shall extend
beyond and payments shall recommence on the earlier of W the date
any such violation would cease, or (ii) the fifth (5th)
anniversary of this Promissory Note at which time payment in full
shall be made. Interest win continue to accrue at all times on
the unpaid principal and interest.
Exhibit 2.2(d) - 1
<PAGE>
SUBSTANTIATION:
In order for Maker to be entitled to or exercise any postponement
under this Promissory Note, Maker must first provide Payee with
all documents and information requested by Payee which relate or
concern Maker's claimed entitlement to any postponement of
principal and interest hereunder.
On default in the payment of this note or any installment hereof, then this
note shall become immediately due in full at the election of Payee. Maker
waives all demands for payment, presentations for payment, notices of
intention to accelerate maturity, and notices of protest. Time is of the
essence hereof.
In any litigation arising out of or relating to this note in which Payee and
the Maker or any subsequent holder shall be adverse parties, the Maker waives
the right to interpose any defense, set-off, or counterclaim other than
payment in accordance with the terms hereof.
The holder's acceptance of any installment or payment after it of the full
amount thereof may have become due and payable hereunder shall not be deemed
to alter the holder's rights or Maker's obligations with respect to any
subsequent payments or defaults hereunder.
The Maker shall have the right to prepay the principal amount outstanding, in
whole or in part, together with any accrued interest thereon, without
penalty. Any partial prepayment shall be first applied against any interest
then due and owing and then against the payment of principal outstanding.
If this note is given to an attorney for collection, or if suit is brought
for collection, or if it is collected through probate, bankruptcy, or other
judicial proceeding, then Maker shall pay Payee reasonable attorneys fees and
court costs, in addition to other amounts due. Reasonable attorney's fees
are agreed to be 10% of all remaining amounts due.
Nothing in this note shall authorize the collection of interest in excess of
the highest rate allowed by applicable law.
The terms "Maker" and "Payee" and other nouns and pronouns include the plural
if more than one, and include each gender. The terms "Maker" and "Payee"
also include their respective heirs, personal representatives, successors,
and assigns.
THIS NOTE IS GIVEN FOR A BUSINESS-PURPOSE LOAN OR EXTENSION OF CREDIT, AND
NOT FOR MAKERS PERSONAL, FAMILY HOUSEHOLD OR AGRICULTURAL USE. Chapter 15 of
the Texas Credit Code shall not apply hereto. This note shall be governed by
and construed in accordance with the local law of the State of Texas unless,
and then to the extent, preempted by federal law. This note is in all things
performable in Dallas County, Texas. In the event of litigation arising out
of or related to this note or its subject matter between or among the parties
hereto, then the parties consent to the personal jurisdiction of the state
and federal courts located in Dallas County, Texas, and, in the event of
litigation in federal courts, to the venue of such federal courts. The
parties hereby stipulate to the convenience of such fora.
Exhibit 2.2(d) - 2
<PAGE>
MAKER:
THE CARREKER GROUP, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
PREPARED IN THE LAW OFFICE OF:
Haynes and Boone, L.L.P.
112 East Pecan, Suite 1600
San Antonio, Texas 78205-1540
Exhibit 2.2(d) - 3
<PAGE>
EXHIBIT 5.08
NONSOLICITATION AGREEMENT
THIS NONSOLICITATION AGREEMENT (this "AGREEMENT") is made and entered
into as of October , 1996 by and between SCIENCE APPLICATIONS INTERNATIONAL
CORPORATION, a Delaware corporation ("SAIC"), and THE CARREKER GROUP, INC., a
Texas corporation (the "COMPANY"), who agree as follows:
1. RECITALS. Company and SAIC desire to establish a relationship
whereby SAIC shall acquire an ownership in Company and the parties will enter
into a strategic alliance arrangement to develop mutually beneficial
contractual relationships with financial institutions. The parties
acknowledge that the employment relationship each party has with its
respective personnel are among the most important assets of such company and
that they both agree to refrain from soliciting the employees and former
employees of the other as provided herein.
2. NONSOLICITATION. The parties agree that during the period in
which SAIC holds any ownership interest in Company and for a period of one
(1) year after SAIC's ownership interest in Company ceases (the
"NONSOLICITATION PERIOD"), neither party will knowingly solicit, directly or
indirectly, for employment by such party, any employees of the other party or
any person who was employed by the other party within one (1) year prior to
the date of such solicitation for employment. Indirect solicitation includes
the use of employment or placement firms, or initiating the use of
intermediaries to contact a specific employee or former employee identified
to the employment or placement finn or intermediary by the party hiring an
employee or former employee. Indirect solicitation does not include the
placement of an advertisement for employment in a newspaper of general
circulation, job fairs, internet postings, trade publications, use of
employment or placement firms without identifying a particular person and
other similar activities. Neither party shall be prohibited from discussing
employment opportunities or hiring an employee or former employee of the
other party if such discussion or hiring is initiated by the employee or
former employee.
3. COOPERATION. During the Nonsolicitation Period and for one (1)
year thereafter, each party agrees, upon the receipt of a written request, to
provide the other party with full and complete access to all documents and
information such party has concerning any employee or former employee of a
party that is hired by the other party to this Agreement. The information to
be provided hereunder shall be delivered to the requesting party within ten
(10) business days from the hiring party's receipt of a request for same by
the former employer.
4. ARBITRATION OF DISPUTES. The parties agree that any controversy
or claim (whether such controversy or claim is based upon or sounds in
statute, contract, tort or otherwise) arising out of or relating to this
Agreement, any performance or dealings between the parties, or
Exhibit 5.08 - 1
<PAGE>
any dispute arising out of the interpretation or application of this
Agreement, which the parties are not able to resolve, shall be settled
exclusively by arbitration in Dallas, Texas by a single arbitrator pursuant
to the American Arbitration Association's Commercial Arbitration Rules then
obtaining and judgment upon the award rendered by the arbitrator shall be
entered in any court having jurisdiction thereof and such arbitrator shall
have the authority to grant injunctive relief in a form similar to that which
a court of law would otherwise grant. The arbitrator shall be chosen from a
panel of licensed attorneys familiar with the subject matter of this
Agreement and shall be appointed within thirty (30) days of the date the
demand for arbitration was sent to the other party. Discovery shall be
permitted in accordance with the Federal Rules of Civil Procedure. If an
arbitration proceeding is brought pursuant to this Agreement, the prevailing
party shall be entitled to recover reasonable attorneys' fees, costs and
necessary disbursements incurred in addition to any other relief to which
such party may be entitled.
5. CHOICE OF LAW. The Agreement and the performance or breach
thereof shall be governed by and interpreted as to substantive matters in
accordance with the applicable laws of the State of Texas (excluding its
choice of law rules).
6. ASSIGNMENT. No portion of this Agreement or any right or
obligation hereunder can be assigned, in whole or in part, by either party
hereto without the prior written consent of the other party.
7. ENTIRE AGREEMENT. This Agreement contains the final, complete
and exclusive agreement of the parties with respect to the subject matter
hereof and supersedes all previous verbal and written agreements. This
Agreement cannot be amended, in whole or in part, without a written
instrument signed by both of the parties hereto.
8. WAIVER. No waiver of, no delay in the exercise of, and no
omission to exercise any rights or remedies by either party shall be
construed as a waiver by such party of any other rights or remedies that such
party may have under this Agreement.
9. NOTICE. Unless otherwise specified herein, any notice required
or permitted to be given under this Agreement shall be sufficient, if in
writing, and shall be deemed to be fully given if personally delivered, if
sent by registered mail, by facsimile with an original copy by regular mail,
or by telex with receipt acknowledged, to the following addresses:
If to SAIC, to:
----------------------
----------------------
----------------------
----------------------
Exhibit 5.08 - 2
<PAGE>
With a copy to:
Kevin A. Werner, Esq.
Corporate Counsel
Science Applications International Corporation
10260 Campus Point Drive, WS F3
San Diego CA 92121
If to Company, to:
Terry L. Gage
The Carreker Group, Inc.
14001 North Dallas Parkway, Suite 1100
Dallas, Texas 75240
The foregoing addresses and individuals may be changed by either party by
giving to the other party prior written notice of any such change.
10. COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
11. THIRD PARTIES. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed
to confer upon or give to any person or corporation other than the parties
hereto and their successors or assigns, any rights or remedies under or by
reason of this Agreement.
IN WITNESS WHEREOF, as of the day first above written, the SAIC and
Company have caused this Agreement to be signed by their respective duly
authorized officers.
SCIENCE APPLICATIONS
INTERNATIONAL CORPORATION,
a Delaware corporation
BY:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Exhibit 5.08 - 3
<PAGE>
THE CARREKER GROUP, INC.,
a Texas corporation
BY:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Exhibit 5.08 - 4
<PAGE>
EXHIBIT 5.09
RECEIPT AND RELEASE
This Receipt and Release is made and entered into this 10th day of
October, 1996 by and between The Carreker Group, Inc. ("CARREKER") and
Pacific Technology Services, Inc. ("PACIFIC TECHNOLOGY").
1. PAYMENT OF PROMISSORY NOTE. Reference is made to that certain
Promissory Note dated June 17, 1996 (the "PROMISSORY NOTE") payable by
Carreker, as Maker, to Pacific Technology, as Payee, issued pursuant to that
certain Stock Redemption Agreement (the "STOCK REDEMPTION AGREEMENT") by and
between Carreker and Pacific Technology dated as of may 30, 1996. Carreker
intends to make full payment on this date, by wire transfer of funds as
instructed by Pacific Technology, of principal and accrued interest on the
Promissory Note in the aggregate amount of $1,440,801.37. In the event
payment is received after October 10, 1996, an additional per diem payment of
$354.80 will be due on the Promissory Note.
2. MUTUAL RELEASE. Subject only to the receipt of funds from
Carreker in full payment of the Promissory note as provided above, each party
hereto and its respective officers, directors, employees, representatives and
agents (collectively, "RELATED PARTIES") and their respective predecessors,
successors, transferees, successors and assigns (collectively "ASSIGNEES")
hereby release and discharge the other party and such other party's Related
Parties and Assignees, and each of them, from any and all claims, debts,
liabilities, demands, causes of action, obligations, promises, acts,
agreements, costs, attorneys' fees, expenses and damages, of any kind and
nature whatsoever, whether known or unknown, suspected or unsuspected,
claimed or unclaimed, fixed or contingent, or apparent or concealed
(collectively, "CLAIMS") that exist between the parties on the date hereof,
including, without limitation, any Claims which arise out of or are connected
with the redemption by Carreker of 185,357 shares of its Class A Common Stock
from Carreker Technology pursuant to that Stock Redemption Agreement or any
other document, instrument or transaction between the parties.
3. RETURN OF PLEDGED SHARES. Pursuant to that certain Stock Pledge
Agreement (the "STOCK PLEDGE AGREEMENT") dated as of June 17, 1996 by and
between Carreker, as Pledgor, Pacific Technology, as Secured Party, and James
L. Fischer, as Pledgeholder, the Pledge Shares (as defined in the Stock
Pledge Agreement) are being held by Pledgeholder to secure the payment of all
Secured Obligations (as defined in the Stock Purchase Agreement). Upon
receipt of funds from Carreker in full payment of the Promissory Note, this
Receipt and Release shall constitute notice to the Pledgeholder that the
Secured Obligations have been satisfied in full and that the Pledged Shares
shall be returned to Carreker.
Exhibit 5.09 - 1
<PAGE>
THE CARREKER GROUP, INC.
By:
-------------------------------------
PACIFIC TECHNOLOGY SERVICES, INC.
By:
-------------------------------------
Exhibit 5.09 - 2
<PAGE>
EXHIBIT 10.21
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
CROW FAMILY PARTNERSHIP, L.P. AND THE CARREKER GROUP, INC.
This Stock Purchase Agreement (the "Agreement"), dated as of January 10,
1997, is entered into by and between Crow Family Partnership, L.P., a Texas
limited partnership ("Buyer"), and The Carreker Group, Inc., a Texas
corporation ("Seller").
WITNESSETH:
WHEREAS, on the terms and subject to the conditions set forth herein,
Buyer desires to purchase from Seller and Seller desires to sell to Buyer, a
total of 35,000 shares of the Class A Voting Common Stock, no par value, of
Seller, at a purchase price of $23.83 per Share;
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth, the parties hereto agree as follows:
1. PURCHASE OF SHARES. On the terms and subject to the conditions set
forth herein and in reliance upon the representations and warranties of
Seller in Section 3, Buyer hereby agrees to purchase from Seller, and Seller
hereby agrees to sell and transfer to Buyer, at the Closing (as defined
below) 35,000 shares (the "Shares") of Class A Voting Common Stock, no par
value, of Seller for an aggregate purchase price of $834,050 ($23.83 per
share).
2. CLOSING AND DELIVERY. The closing of the purchase and sale of the
Shares (the "Closing") shall take place at 2 p.m., Dallas time, on January
10, 1997, at the offices of Seller, or at such other time or place as may be
mutually agreed upon by Buyer and Seller. At the Closing, Buyer will deliver
to Seller $834,050 in same-day funds and Seller will deliver to Buyer a
certificate for the Shares, duly executed and registered in the name of Buyer.
3. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby represents
and warrants to Buyer that:
(a) CORPORATE ORGANIZATION AND STANDING: POWER AND AUTHORITY.
Seller is a corporation duly organized, validly existing and in good standing
under the laws of the State of Texas, and is duly qualified to do business
and is in good standing as a foreign corporation in all other jurisdictions
where Seller owns or leases property or where the nature of Seller's business
requires such qualification. Seller has full power and authority to own its
properties, to carry on its business and to hold under lease the properties
it holds under lease. Seller has full power and authority to enter into this
Agreement and to perform the transactions contemplated hereby. Accurate and
complete copies of the Articles of Incorporation and By-laws of Seller have
been delivered to Buyer.
<PAGE>
(b) CAPITAL STOCK. The authorized capital stock of Seller
consists of 17,500,000 shares, of which (a) 12,500,000 shares are Common
Stock, no par value, of which (i) 12,000,000 Shares are classified as Class A
Voting Common Stock ("Class A Common Stock") and (ii) 500,000 Shares are
classified as Class B Non-Voting Common Stock ("Class B Common Stock"), and
(b) 5,000,000 Shares are preferred stock, no par value. The relative rights,
preferences and limitations of the Class A Common Stock and the Class B Comon
Stock are identical, except that the Class B Common Stock does not have
voting rights. On the date hereof, 926,071 shares of Class A Common Stock
(excluding treasury shares) and 3,167 shares of Class B Common Stock are
issued and outstanding, and are owned by the persons and entities in the
numbers identified in Schedule 3(b). No shares of preferred stock are
outstanding. Except as set forth in Schedule 3(b), there are no outstanding
subscriptions, options, warrants, rights, calls, commitments, preemptive
rights, rights of first refusal or similar rights, conversion rights, rights
of exchange, plans or other agreements of any character providing for the
purchase, issuance, transfer or sale of any shares of the capital stock of
the Company, other than as contemplated by this Agreement.
(c) AUTHORIZATION AND ENFORCEABILITY. Prior to the Closing, all
corporate action on the part of Seller, its directors and Shareholders
necessary for the authorization, execution, delivery and performance by
Seller of this Agreement and the consummation of the transactions
contemplated hereby will have been taken. This Agreement is a legal, valid
and binding obligation of Seller and enforceable against Seller in accordance
with its terms, except as limited by bankruptcy, insolvency or other laws
affecting creditors, rights generally or by the availability of equitable
remedies.
(d) VALID ISSUANCE OF CAPITAL STOCK.
(i) The Shares, when issued, sold and delivered in
accordance with the provisions of this Agreement, for the consideration
expressed herein, will be duly and validly issued, fully paid and
non-assessable and, assuming the accuracy of the representation and warranty
of Buyer set forth in Section 4(d), will be issued in compliance with all
applicable federal and state securities laws. The Shares, when sold and
delivered to Buyer in accordance with the provisions of this Agreement, will
not have been issued in violation of any contractual or statutory preemptive
rights.
(ii) The outstanding shares of Common Stock of Seller have
been duly and validly authorized, issued and delivered, and are validly
outstanding, fully paid and non-assessable and have been issued in compliance
with all applicable federal and state securities laws. Immediately after the
issuance and sale of the Shares to Buyer and assuming the closing of the
transaction with
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<PAGE>
Antinori Software, Inc., as disclosed on Schedule 3(b), the ownership of the
capital stock of the Company shall be as listed on Schedule 3(d).
(e) TITLE TO AND CONDITION OF ASSETS. Seller has good and
marketable title to all property reflected on the Balance Sheet (as
hereinafter defined) (except property sold or otherwise disposed of in the
ordinary course of business after November 30, 1996), free and clear of all
mortgages, liens, security interests, pledges, charges, claims, encumbrances
and restrictions of any nature whatsoever, except as described on Schedule
3(e). All tangible assets (whether owned or leased) utilized by Seller in
its business are in good operating condition and repair, subject to normal
wear and tear. Seller has good and marketable title to all of the assets
necessary to conduct its business as presently conducted or as proposed to be
conducted.
(f) NO INVESTMENTS. Except as set forth in Schedule 3(f), the
Company does not own or control, directly or indirectly, any capital stock or
other equity, debt, ownership or proprietary interest in any corporation,
partnership, association, trust, joint venture or other entity.
(g) FINANCIAL STATEMENTS. Copies of the balance sheet of Seller
as of November 30, 1996 (the "Balance Sheet"), the related statement of
income for the 10 months then ended, and Seller's audited financial
statements as of and for the years ending January 31, 1996 and January 31,
1995 (collectively, the "Financial Statements"), have been delivered to
Buyer. The Financial Statements have been prepared in conformity with
generally accepted accounting principles ("GAAP") applied on a basis
consistent with prior periods, except as may be otherwise expressly
indicated, and present fairly the financial condition of Seller as of the
dates and the results of operations of Seller for the periods indicated.
(h) LIABILITIES. Seller has no material liabilities or
obligations of any nature, whether absolute, accrued, contingent or otherwise
and whether due or to become due, that are not reflected on the Balance Sheet
or in the notes thereto, except for liabilities incurred since such date in
the ordinary course of business.
(i) PROPRIETARY RIGHTS. Seller owns or has the unrestricted right
to use all proprietary rights (including patents, trademarks, service marks,
tradenames, software and applications therefor or licenses thereto) used in
its business. To the best of Seller's knowledge, all such proprietary rights
are in good standing and uncontested and do not violate or infringe on the
proprietary rights of any third party. To the best of Seller's knowledge,
there is no claim, action, proceeding or investigation pending or threatened
against Seller with respect to any of such proprietary rights. Seller has no
knowledge that any third party is infringing any of such proprietary rights.
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<PAGE>
(j) TAXES. Seller has filed all tax reports and returns
(including, without limitation, all federal, state and local income tax,
franchise tax, gross receipts, sales tax, and real and personal property tax
returns) required to be filed and has either paid all taxes and other charges
indicated due on the basis of such returns and reports, or has made adequate
provision for the payment thereof, and the assessment of any material amount
of additional taxes in excess of those paid and reported is not reasonably
expected. Seller has withheld all taxes required to be withheld by it or by
any federal, state, local or foreign taxing authority. There are no claims
asserted for, or, to the best of Seller's knowledge, pending questions of a
material nature relating to, taxes or assessments against Seller. The
reserves for taxes reflected on the Balance Sheet are adequate in amount for
the payment of all liabilities for all taxes (whether or not disputed) of
Seller accrued through the date of such Balance Sheet.
(k) CONTRACTS. Except as set forth on Schedule 3(k), to the best
of Seller's knowledge, all material contracts and leases and other agreements
to which Seller is a party or by which it or its assets are bound are valid
and in full force and effect. Except as set forth on Schedule 3(k), Seller
is not in default, and has not been notified by any other party that it is in
default, under any material contract, lease or agreement, and no party with
whom Seller has an agreement which is of material importance to Seller is in
default thereunder.
(l) LITIGATION. There are no actions, suits, proceedings and
investigations pending or, to the best of Seller's knowledge, threatened
against or affecting Seller, or any property or right of Seller. Seller is
not aware of any fact which would provide a valid basis for any
investigation, action, suit, proceeding or claim which could, either alone or
in the aggregate, materially and adversely affect the condition (financial or
otherwise) of Seller.
(m) COMPLIANCE WITH LAWS. Seller is not in default in any respect
under any law, ordinance, requirement, regulation, rule or order applicable
to its business the violation of which might materially and adversely affect
Seller. Seller is not subject to any continuing court or administrative
order, writ, injunction or decree applicable specifically to it or to its
business, property or employees, and is not in default with respect to any
order, writ, injunction or decree of any court or federal, state, municipal
or other governmental department, commission, board, agency or
instrumentality, domestic or foreign, to such an extent that any default
would or could have a materially adverse effect on the condition (financial
or otherwise) of Seller.
(n) ABSENCE OF CONFLICTS. Neither the execution and delivery of
this Agreement nor the consummation of the transactions provided for herein
or the fulfillment by Seller of the terms hereof will (a) conflict with or
result in a breach of any provision of Seller's Articles of Incorporation or
By-laws,
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<PAGE>
(b) result in a conflict or default or give rise to any right of termination,
cancellation or acceleration under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which Seller is a party or by which Seller is
bound, (c) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Seller or any of the material properties or assets
of Seller or (d) terminate or adversely affect any material permit, license
or authorization of any governmental authorities used or required by Seller.
(o) GOVERNMENTAL CONSENTS AND REGULATIONS. No consent, approval
or other action by any local, state, federal or foreign governmental
authority is required in connection with the execution and delivery by Seller
of this Agreement and the consummation of the transactions contemplated
hereby.
(p) LICENSES AND PERMITS. Seller has all licenses, permits and
other authorizations of governmental authorities, domestic and foreign,
necessary in the conduct of its business. Seller has not received any notice
(nor, to the best of Seller's knowledge, does Seller have any reason to
believe) that revocation is being considered with respect to any of such
licenses, permits or authorizations.
(q) OFFERING. Assuming the accuracy of the representations of
Buyer set forth in Section 4(d), the offer and sale of the Shares are exempt
from the registration requirements of the Securities Act of 1933, as amended
(the "Securities Act"), and the Texas securities laws.
(r) NO MATERIAL ADVERSE CHANGE. Since November 30, 1996, there
has not been any material adverse change in the condition (financial or
otherwise) of Seller.
4. REPRESENTATIONS AND WARRANTIES OF BUYER.
(a) ORGANIZATION. Buyer is a Texas limited partnership duly
organized, validly existing and in good standing under the laws of the State
of Texas. Buyer has full power and authority to carry on its business as it
is now being conducted and to own the properties and assets it now owns.
(b) AUTHORIZATION. Buyer has full power and authority to enter
into this Agreement and to carry out the transactions contemplated hereby.
Buyer has taken all action required by law, its Certificate of Limited
Partnership or otherwise to authorize the execution and delivery of this
Agreement and the transactions contemplated hereby. This Agreement and all
other agreements delivered hereunder are valid and binding agreements of
Buyer enforceable against Buyer in accordance with their terms, except as
limited by bankruptcy, insolvency or other laws affecting creditors' rights
generally or by the availability of equitable remedies.
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<PAGE>
(c) BROKERS AND FINDERS. Neither Buyer nor any of its partners or
representatives has employed any broker or finder or incurred any liability
for any brokerage fees, commissions or finders' fees in connection with the
transactions contemplated by this Agreement.
(d) INVESTMENT. Buyer is acquiring the Shares solely for its own
account and not with a view to a sale or distribution thereof in violation of
any securities laws. Buyer acknowledges that (i) it is an "accredited
investor" as such term if defined in Regulation D promulgated under the
Securities Act, (ii) it has been granted access to all information that it
considers necessary or advisable to enable it to make an informed decision
concerning an investment in the Shares (including regarding the proposed
transaction with Antinori Software, Inc. referenced above), (iii) it
understands that the Shares have not been registered under the Securities Act
or the securities act of any state, (iv) as a result thereof, there is no
market for the Shares, with Buyer assuming the entire risk of investment
therein, and (v) there may be restrictive legends typed or otherwise printed
on the certificates representing the Shares.
5. FINANCIAL STATEMENTS AND REPORTING.
(a) Seller will maintain, and cause each of its subsidiaries to
maintain, a system of accounting established and administered in accordance
with GAAP and all financial statements or information delivered under
subsection (b) will be prepared in accordance with GAAP.
(b) Seller will deliver to Buyer:
(i) as soon as practicable after the end of each fiscal
year of Seller and in any event within 120 days thereafter, a balance sheet
of Seller as at the end of such year, and a statement of income of Seller for
such fiscal year, prepared in accordance with GAAP and setting forth in each
case in comparative form the figures for the previous fiscal year, all in
reasonable detail and certified by an independent public accounting firm
selected by Seller; and
(ii) as soon as practicable after the end of each fiscal
quarter of Seller, and in any event within 45 business days thereafter, a
balance sheet of Seller as of the end of such quarter, and a statement of
income of Seller for such quarter and for the current fiscal year to date,
prepared in accordance with GAAP, subject to changes resulting from normal
year-end audit adjustments, all in reasonable detail.
6. CONDITIONS OF BUYER'S OBLIGATIONS TO CLOSE. The obligation of
Buyer to purchase the Shares at the Closing is subject to the fulfillment on
or before the Closing of the following:
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<PAGE>
(a) REPRESENTATIONS AND WARRANTIES; PERFORMANCE. (i) The
representations and warranties set forth in Section 3 hereof shall be
accurate as of the Closing Date as if made on the Closing Date; (ii) Seller
shall have performed all obligations and complied with all covenants and
agreements required to be performed or to be complied with by it under this
Agreement on or prior to the Closing Date; and (iii) Buyer shall have
received a certificate dated the Closing Date and signed by an officer of
Seller to all such effects.
(b) NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the condition (financial or otherwise) of Seller from the
date of the Balance Sheet through the Closing.
7. CONDITIONS OF SELLER'S OBLIGATIONS TO CLOSE. The obligation of
Seller to sell the Shares at the Closing is subject to the fulfillment on or
before the Closing of the following condition: the representations and
warranties set forth in Section 4 hereof shall be accurate as of the Closing
Date as if made on the Closing Date and Seller shall have received a
certificate dated the Closing Date and signed by the general partner of Buyer
to such effect.
8. RIGHT OF FIRST REFUSAL.
(a) If Buyer proposes to sell, pledge, exchange or otherwise
dispose of any of its Shares, whether for cash or other consideration, Buyer
shall promptly deliver to the Secretary of Seller a written notice
(hereinafter referred to as the "Notice"). Such Notice shall include a true
and complete copy of a written bona fide offer for the purchase or transfer
of Buyer's Shares, the name and address of the proposed purchaser or
transferee and the proposed purchase price, terms, and conditions of the
transfer, which must include a sufficient period prior to consummation of
such purchase or transfer for the option period contemplated by subsection
(b) below to expire (the "Bona Fide Offer").
(b) Seller shall have an option to purchase all, and not less than
all, of the Shares of Buyer subject to the Bona Fide Offer at the same price
and upon substantially the same terms and conditions as set forth in the Bona
Fide Offer by giving written notice of acceptance to Buyer within thirty (30)
days after receipt of the Notice.
(c) Upon the refusal or failure of Seller to exercise its option
to purchase the Shares in accordance with subsection (b) above, such Shares
may be sold upon the terms and conditions set forth in the Bona Fide Offer,
provided that the notice of the closing thereunder shall be given to Seller
immediately after the occurrence thereof and provided further that the
purchaser of the Shares under the Bona Fide Offer and the purchaser's spouse,
if such Shares were sold to an individual with a spouse, shall, as a
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<PAGE>
condition precedent to such purchase, agree to be bound by all terms and
provisions of this Section 8.
(d) The right of first refusal granted to Seller hereunder shall
not apply to any transfer of Shares by Buyer to any Affiliate of Buyer. For
purposes of this Section 8, an "Affiliate of Buyer" shall mean any person,
corporation, partnership or other entity which controls Buyer or is
controlled by Buyer or is under common control of or with Buyer; provided,
however, any Affiliate of Buyer shall continue to be subject to the right of
first refusal granted Seller under this Section 8.
(e) The right of first refusal granted to Seller under this
Section 8 shall automatically terminate upon the occurrence of any of the
following events:
(i) The bankruptcy or insolvency of Seller;
(ii) The closing of a public offering of securities of
Seller pursuant to a registration statement declared effective under the
Securities Act of 1933, as amended; or
(iii) The closing of the sale of all or substantially all of
the assets of Seller, the consolidation or merger of Seller in which Seller
is not the surviving corporation, or the complete liquidation of Seller in
compliance with the Texas Business Corporation Act.
9. RIGHT OF INCLUSION. Seller represents to Buyer that as of the date
of this Agreement Seller has not granted to any party rights to require
Seller to register under the Securities Act of 1933, as amended (the "Act"),
securities issued by Seller ("registration rights"). Buyer acknowledges that
the contemplated transaction with Antinori Software, Inc., as disclosed on
Schedule 3(b), likely will involve the grant of registration rights to one or
more of the former shareholders of Antinori Software, Inc.
Seller hereby grants Buyer the right to have included, in each
registration under the Act of common stock (of any class) of Seller resulting
from the exercise of contractual registration rights granted to such former
shareholders, or to any other party, Buyer's proportionate share of such
common stock; provided, however, that in order to exercise the foregoing
right Buyer must first agree in writing to abide by all terms and conditions
of such contractual registration rights regarding the inclusion of shares in
such registration, so that to the greatest extent practical Buyer's foregoing
right of inclusion is PARI PASSU with, but not superior or subordinate to,
provisions regarding the inclusion of shares in the exercise of such
contractual registration rights. Without limiting the foregoing, such terms
and conditions may include provisions regarding Buyer's agreement to enter
into an underwriting agreement in respect of any underwritten offering of
Buyer's shares, indemnify the underwriters thereof, accept the
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<PAGE>
exclusion of shares previously proposed to be included in any such
registration based on an underwriter's or underwriters' opinion that the
initially proposed number of shares to be included will adversely affect the
success of the offering thereof (i.e., "underwriters' cutbacks"), and any and
all other terms and conditions, whether or not customary, obligating
participants in any such registration (e.g., "lock-up" provisions, provisions
regarding payment of the expenses of registration, and market "standoff" and
"blackout" provisions, etc.). Notwithstanding anything to the contrary in
this Agreement, (a) in no event shall this Section 9 be construed to grant
Buyer the right to unilaterally exercise "demand," "piggyback" or other
registration rights and (b) the foregoing right of inclusion shall expire as
to any shares of common stock issued by Seller when such shares are eligible
for sale under Rule 144 promulgated under the Act.
For purposes of this Section 9, Buyer's "proportionate share" shall be
the number of shares of Seller's common stock (of any class) then held by
Buyer multiplied by a fraction, the numerator of which is the total number
shares of such common stock proposed to then be registered under the Act and
the denominator is the number of shares of such common stock then issued and
outstanding or otherwise contractually subject to issuance (i.e., calculated
on a fully-diluted basis).
10. MISCELLANEOUS.
(a) ENTIRE AGREEMENT; CONSTRUCTION. This Agreement constitutes
the entire agreement between Buyer and Seller and supersedes any prior
understandings or agreements, written or oral, that relate to the subject
matter hereof. All representations, warranties and covenants of Buyer and
Seller contained herein or in any document delivered hereunder shall survive
the Closing and remain in full force and effect thereafter; provided,
however, that Seller's representations and warranties set forth in
subsections (e) through (r) , inclusive, of Section 3 shall survive the
Closing and thereafter remain in full force and effect only until the second
anniversary of the Closing.
This Agreement may not be amended except in writing signed by both Buyer
and Seller.
(b) EXPENSES. The parties agree that all fees and expenses
incurred by them in connection with this Agreement and the transactions
contemplated hereby shall be borne by the party incurring such fees and
expenses, including, without limitation, all fees of counsel and accountants.
(c) NOTICES. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall
be deemed to have been duly given if personally delivered, sent by facsimile
transmission, or mailed by certified or registered mail with postage prepaid:
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(a) if to Seller, to:
J.D. Carreker
Chief Executive Officer
The Carreker Group, Inc.
14001 North Dallas Parkway, Suite 1100
Dallas, TX 75240
or to such other person or address as Seller shall furnish to Buyer in
writing:
(b) if to Buyer, to:
Ms. Susan T. Groenteman
3200 Trammell Crow Center
2001 Ross Avenue
Dallas, TX 75201
or to such other person or address as Buyer shall furnish to Seller in
writing.
(d) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
(e) HEADINGS. The headings of the sections and subsections of
this Agreement are inserted for convenience only and shall not constitute a
part hereof or affect in any way the meaning or interpretation of this
Agreement.
(f) THIRD PARTIES. Except as specifically set forth or referred
to herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or give to any person or corporation other than the
parties hereto and their successors or assigns, any rights or remedies under
or by reason of this Agreement.
(g) FURTHER ASSURANCES. Each of the parties agree that from time
to time, at the request of the other party and without further consideration,
it will execute and deliver such other documents and take such other action
as such other party may reasonably request in order to consummate more
effectively the transactions contemplated hereby.
(h) SCHEDULES. The Schedules to this Agreement are deemed
incorporated in this Agreement and may contain information that is not
expressly required to be disclosed by this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
CROW FAMILY PARTNERSHIP,
a Texas limited partnership
By: Crow Family, Inc., General Partner
By: /s/ Susan Groenteman
Name: Susan Groenteman
Title: Vice President
THE CARREKER GROUP, INC.,
a Texas corporation
By: /s/ J.D. Carreker
Name: J.D. Carreker
Title: Chief Executive Officer
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<PAGE>
STOCK PURCHASE AGREEMENT
SCHEDULE 3(b)
CAPITAL STOCK REPRESENTATIONS
Ownership of Capital Stock is reflected in the attached schedule titled
Ownership of Capital Stock. The Carreker Group, Inc. (TCG) is currently
involved in discussions with Antinori Software, Inc. (ASI) regarding potential
merger of the two companies. Under the proposed terms of the deal, shareholders
of ASI would receive shares or options in TCG in exchange for their share or
options in ASI. The ASI shares and options would then be retired.
Schedule 3(b) titled Potential Ownership of Capital Stock Following Merger with
Antinori Software, Inc. reflects the current projection of capital stock
holdings following consummation of the proposed merger. This schedule also
reflects 84,328 Class "B" options which have been previously approved by the
shareholders for issuance.
In connection with the proposed merger, the board of directors will seek
shareholder approval to authorize an additional 75,000 shares of class "B"
options and 10,000 shares of class "A" options to facilitate the merger. Of
this additional approved block, approximately 50,850 class "B" and 5,147 of the
class "A" will be used in the merger and have been reflected in the attached
schedule.
EMPLOYEE STOCK OWNERSHIP PROGRAM (ESOP)
Under the terms of the companies ESOP program, the company is obligated to
repurchase shares of stock from the plan which the plan is required to sell in
order to fund payments to participants who resign, retire, are dismissed or die.
Payments for any individual participant are to be made in a lump sum if the
amount is less than $3,500. For payments which exceed $3,500 payments are to be
made in equal amounts over a period of five years.
OPTIONS
The company maintains a stock option plan for the benefit of its employees and
directors. Option grants and available options are listed on the schedule
titled Potential Ownership of Capital Stock Following Merger with Antinori
Software, Inc.
SHAREHOLDER AGREEMENTS
Mr. J.D. Carreker entered into an agreement with Mr. Wyn Lewis whereby
Mr. Carreker committed to Mr. Lewis that without the consent of Mr. Lewis, he
would no vote his shares of Class A Stock in favor of a Corporate Transaction
unless the Class B Stock is treated equally in all material respects from an
economic standpoint, with the Class A Stock in such Corporate Transaction.
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<PAGE>
Mr. J.D. Carreker entered into an agreement with W. David Sias as follows:
- TAKE-ALONG SECURITIES. If Carreker decides to sell any of his shares
in a third-party negotiated transaction, David has the right to participate in
the sale on a pro rata basis and on the same terms.
- BOARD SEAT. Denny agreed to vote his shares to elect David to the
Board as long as David owns at least 15,000 shares.
The company has a right of first refusal with certain of it's holders of class A
and B common stock which gives the company the right to purchase shares under
certain circumstances.
The company recently completed a sale of class A stock to Science Applications
International Corporation as part of the sale the following agreements were
reached:
- SAIC was given the right to participate in future offerings of Common
Stock by the Company so as to avoid the dilution of SAIC's equity
interest.
- SAIC was given the option to require the Company to purchase SAIC's
Shares under certain circumstances.
- The Company was given the right to purchase SAIC's Shares under
certain circumstances.
- SAIC was granted the right to have at least one representative as a
member of the Board of Directors of the Company at all times during
the term of this Agreement.
- The Company and SAIC entered into a Strategic Alliance Agreement.
Excerpts from these agreements are available upon request.
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<PAGE>
STOCK PURCHASE AGREEMENT
SCHEDULE (3)e
ENCUMBRANCES ON ASSETS
Collateral provided to Compass Bank to secure $1,000,000 Revolving Line of
Credit as follows:
Compass Bank has been granted rights in company property and assets to secure
its position for loans which it may make from time to time under the above line
of credit. No draws have been made under this credit facility during the past
year, and none are currently anticipated.
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<PAGE>
STOCK PURCHASE AGREEMENT
SCHEDULE (3)f
INVESTMENTS
The company holds an investment interest in Payment Solutions Network, Inc.
(Holdings).
The company entered into an agreement with PSN whereby the company is entitled
to a payment of $250,000, subject to certain restrictions, on January 1, 1996
and on each January 1 thereafter through January 1, 2000. Each payment
represents a repurchase of the companies interest in PSN on a $1 per share
basis. In addition the company is entitled to a contingent payment of 7% of the
first $60,000,000 of PSN revenue and 6.25% of all PSN revenues above $60,000,000
for the fiscal year ended December 31, 1999 less amounts previously paid on each
January 1.
In addition to the above holdings, the company has loaned to PSN $500,000 under
a working capital credit agreement, and has agreed to loan up to an addition
$200,000 to finance the installation of SmartNotes software at PSN customer
sites.
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<PAGE>
STOCK PURCHASE AGREEMENT
SCHEDULE (3)k
CONTRACTS
The company is not in default, and has not been notified by any other party that
it is in default, under any material contract, lease or agreement.
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<PAGE>
CROW FAMILY PARTNERSHIP, L.P.
CERTIFICATE
The undersigned, S.T. Groenteman, Vice President, of Crow Family, Inc., a
Texas corporation and the general partner of Crow Family Partnership, L.P., a
Texas limited partnership ("Buyer"), does hereby certify as follows:
1. This Certificate is furnished to The Carreker Group, Inc. ("Seller")
in connection with the closing of the transactions contemplated by the
Stock Purchase Agreement dated as of January 10, 1997 (the
"Agreement") by and between Buyer and Seller and pursuant to Section 7
of the Agreement.
2. All of the representations and warranties of Buyer set forth in
Section 4 of the Agreement are true and correct on the date hereof.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
28 day of January, 1997.
Crow Family, Inc.
By: /s/ S.T. Groenteman
-----------------------------
Name: Susan Groenteman
----------------------
Title: Vice President
----------------------
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<PAGE>
EXHIBIT 10.22
INDIVIDUAL CONSULTANT AGREEMENT
This INDIVIDUAL CONSULTING AGREEMENT (this "Agreement"), effective as of
the day is entered into by and between CARREKER-ANTINORI, INC., a Texas
corporation with primary business offices in Dallas, Texas, and Atlanta,
Georgia, and ______________________________ (the "Consultant"), having a
business address at _______________________ (collectively, CARREKER-ANTINORI,
INC. and the Consultant are hereinafter referred to as the "Parties").
RECITALS
1. CARREKER-ANTINORI, INC. desires to retain the Consultant as an independent
contractor to perform tactical and strategic project management or
software/programming services (the "Consulting Services") on a project,
defined in attached APPENDIX A (the "Work Order"), for and on behalf Of
CARREKER-ANTINORI, INC., or a Client Of CARREKER-ANTINORI, INC.
2. The Consultant desires to be so retained to perform such services on the
project, subject only to CARREKER-ANTINORI, INC.'s general right to review
the Services provided by, and work resulting from, the Consultant, and
subject to the terms and Conditions hereof.
3. The Parties intend to modify the Work Order, or add additional work orders,
from time to time; any such modification or addition will be in writing
signed by both Parties and will be automatically incorporated herein for
all purposes, as if fully set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged and confessed, the Parties agree to
be bound by the terms of this Agreement, which are as follows:
SECTION 1: DEFINITIONS
1.1 "Know-how," as used herein, means all knowledge, whether technical or
not, relating to any business or activity of CARREKER-ANTINORI, INC.
1.2 "Work of Authorship," as used herein, means any original expression,
whether copyrightable or not, relating to any business or activity of
CARREKER-ANTINORI, INC., including, but not limited to, any
advertising material, compilation, data repository or structure,
design, drawing, manual, product/service description, software/program
(whether executable or not), specification, or other original writing.
1.3 "Trade Secret" as used herein, means any sensitive, confidential,
restricted, proprietary or otherwise secret
<PAGE>
Work of Authorship or other information, whether technical or not and
regardless of form, that provides, or may provide, CARREKER-ANTINORI,
INC. with a competitive advantage, including, but not limited to,
development projects, financial data, financial plans, formulas,
lists of actual, past or potential business contacts, customers,
suppliers or otherwise, methods, negative trade secrets, patterns,
pricing structures, processes, product plans, protocols,
research/development information, routines, techniques, test data or
other results, or other like information relating to any business or
activity of CARREKER-ANTINORI, INC.
1.4 "Confidential Information," as used herein, means any information,
whether technical or not and regardless of form, relating to any
business or activity of CARREKER-ANTINORI, INC., that is:
1.4.1 disclosed to, or known by, the Consultant as a consequence
of the contractual relationship between the Parties (the
"Contractual Relationship"), whether or not the Confidential
Information was developed by the Consultant; and
1.4.2 the subject of efforts by CARREKER-ANTINORI, INC. to
maintain in confidence, or is otherwise not generally known
outside CARREKER-ANTINORI, INC., such as any relevant
Know-how, Work of Authorship, Trade Secret or other
research/development efforts, plans or otherwise, marketing,
purchasing, accounting, engineering, pricing, bidding,
selling, or other business plan (e.g planned merger,
acquisition, joint venture, initial public offering,
potential or ongoing dispute, whether or not involving
litigation, etc.), or any information received in confidence
by CARREKER-ANTINORI, INC. from another, such as a third
party with whom CARREKER-ANTINORI, INC. had or has an
ongoing or prospective business relationship,
1.5 "Intellectual Property," as used herein, means any property right
(e.g., right to possess, use, dispose of, etc.) in and to any
Know-how, Work of Authorship, Trade Secret, Confidential Information
or other information or thing relating to any business or activity of
CARREKER-ANTINORI, INC. that is subject to contract, copyright,
patent, (actual or prospective), publicity, service mark, trademark,
trade dress, trade name, trade, secret, or other intangible property
protection, whether domestic or foreign,
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<PAGE>
1.6 "Work Product," as used herein, means any Know-how, Work of Authorship
Trade Secret, Confidential Information, Intellectual Property, or
other information or thing, whether tangible or intangible, relating
to any business or activity Of CARREKER-ANTINORI, INC. created,
developed or produced by the Consultant in performance of the
Consulting Services during the Contractual Relationship.
SECTION 2: TERM AND TERMINATION
2.1 This Agreement is effective on the date given above and will continue
in affect through the completion of be Work Order, or as other agreed
in writing by both of the Parties.
2.2 The Parties agree that CARREKER-ANTINORI, INC. may, at its sole
option, terminate the Work Order (and, hence, this Agreement), or any
portion thereof, upon fifteen days' written notice. Upon receipt of
such notice, the Consultant agrees to advise CARREKER-ANTINORI, INC.,
of the extent to which performance has been completed through such
date, and collect and deliver to CARREKER-ANTINORI, INC. whatever Work
Product then exists in a manner requested by CARREKER-ANTINORI, INC.
The Consultant will be paid for all the Consulting Services performed
through the date of termination the Work Order.
2.3 The Parties agree that CARREKER-ANTINORI, INC. may terminate this
Agreement, without notice or consent, at anytime for cause.
2.4 The Parties agree that CARREKER-ANTINORI, INC. may terminate this
Agreement, without notice or consent at anytime, if the Work Order is
being performed for a CARREKER-ANTINORI, INC. Client and the
CARREKER-ANTINORI, INC. client (1) terminates the Work Order or (2)
requests that CARREKER-ANTINORI, INC. remove the Consultant from the
project with which the Work Order is associated.
2.5 Upon termination of this Agreement, the Consultant agrees to return
all Confidential Information in the possession or Control of the
Consultant, as well as all other memoranda, notes, records, drawings,
manuals, disks or other documents, media, or thing relating to any
business or activities of CARREKER-ANTINORI, INC. or which is the
property of CARREKER-ANTINORI, INC.
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<PAGE>
SECTION 3: INDEPENDENT CONTRACTOR STATUS
3.1 The Parties intend and agree that the Consultant is an independent
contractor, and not an employee, agent, joint venture, or partner of
CARREKER-ANTINORI, INC.; nothing in this Agreement will be interpreted
or construed as create or establishing an employer/employee
relationship between the Parties.
3.2 The Parties agree that the Consultant retains the right to perform
other tactical and strategic project management or
software/programming services for third-parties during the term of
this Agreement, subject to the confidentiality and intellectual
property provisions of SECTIONS 6 and 7, and sub-SECTION 8.5, of this
Agreement.
3.3 The Parties agree, as an independent contractor, the Consultant bears
sole responsibility for:
3.3.1 reporting and paying all federal and state income tax
withholding, social security taxes (FICA), and unemployment
insurance applicable, to the extent required.
3.3.2 any health or disability insurance, retirement benefits or
other welfare or pension benefits, if any.
The Consultant agrees to defend, indemnify, and hold harmless
CARREKER-ANTINORI, INC., its officers, directors, employees and agents,
and the administrators of CARREKER-ANTINORI, INC.'s benefit plans, from and
against, any claims, liabilities, or expenses relating to such tax,
insurance, or benefit matters; provided that CARREKER-ANTINORI, INC. will
cooperate with the Consultant in the defense and resolution of such claim
and not Settle or otherwise dispose of such claim without the Consultant's
prior written consent, such consent not to be unreasonably withheld.
SECTION 4: SCOPE OF CONSULTANT'S SERVICES
4.1 The Consultant agrees to document the Consulting Services in
accordance with the Work Order, such documentation will be signed by
the Consultant. Each additional work order agreed to by the Parties
will set forth, at a minimum, the Consulting Services to be performed,
the duration of such additional work order, and the fees for the
Consulting Services to be performed in accordance therewith.
4.2 The Parties agree that the Consultant will determine the method,
details, and means of performing the Consulting Services to be carried
out for CARREKER-ANTINORI, INC.
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<PAGE>
CARREKER-ANTINORI, INC. will have no right to, and will not, control
the manner or determine the method of accomplishing the Consulting
Services, The Parties agree that CARREKER-ANTINORI, INC., retains the
right to exercise a broad general power of acceptance over the result
of the Consulting Services performed by the Consultant to ensure
satisfactory performance. This power of acceptance will include the
right to inspect, stop work, make suggestions or recommendations as to
the details of the work, and request modifications to the scope of
the Work Order. In addition, CARREKER-ANTINORI, INC. requires the
Consultant to observe at all times the security and safety Policies
of CARREKER-ANTINORI, INC.
4.3 Other than when the Consulting Services are performed at the offices
of a CARREKER-ANTINORI, INC. client, the Consultant will perform such
Consulting Services primarily at the Consultant's place of business,
and from time to time at a CARREKER-ANTINORI, INC. business office
located at ___________________________ (the "CARREKER-ANTINORI, INC.
Premises").
4.4 The Consultant agrees to perform the Consulting Services diligently
and in a professional manner.
SECTION 5: FEES, EXPENSES AND PAYMENT
5.1 The current schedule of fees for the Consulting Services performed by
the Consultant are set forth in the Work Order. The Parties agree
that the Consultant may modify such schedule for additional work
orders only.
5.2 The Consultant agrees to submit invoices to CARREKER-ANTINORI, INC.
Consulting Services. Each invoice will provide a breakdown and
distribution of charges and expense items.
5.3 CARREKER-ANTINORI, INC. agrees to pay each invoice in full within
thirty days after receipt thereof and in accordance with
CARREKER-ANTINORI, INC.'s invoice procedures outlined in attached
APPENDIX B.
5.4 The Consultant agrees, during the Contractual Relationship and for a
period of one year afterwards, not to knowingly entice, persuade or
otherwise solicit any CARREKER-ANTINORI, INC. employee or other
representative to leave the services of CARREKER-ANTINORI, INC. for
any reason.
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<PAGE>
SECTION 6: OWNERSHIP OF WORK PRODUCT
6.1 The Parties agree that all Work Products will belong exclusively to
CARREKER-ANTINORI, Inc., and, to the maximum extent possible, will be
considered a work made for hire, as defined in 17 U.S.C. Section 101,
for CARREKER-ANTINORI, INC. To the extent any such Work Product cannot
be considered a work trade for hire for CARREKER-ANTINORI, INC, the
Consultant agrees to assign and will automatically, assign, at the
time of creation of any such Work Product without a requirement of
further consideration, regardless of any right, title or interest the
Consultant may have in any such Work Product. The Consultant agrees,
upon a request of CARREKER-ANTINORI, INC., to take such further
actions as may be appropriate to give full and proper effect to such
assignment.
6.1.1 The Consultant agrees to promptly communicate and disclose,
in writing, to the management of CARREKER-ANTINORI, INC. any
and all Intellectual Property which the Consultant authors,
conceives, creates, develops, makes, modifies or otherwise
invents, either solely or jointly, with others, or on or off
CARREKER-ANTINORI, INC. premises, during the Contractual
Relationship.
6.1.2 The Consultant agrees to and, does hereby assign, grant and
convey to CARREKER-ANTINORI, INC., its successors and
assigns, the Consultant's entire right, title and interest
in and to any and all such Intellectual Property.
6.1.3 The Consultant agrees to execute and deliver, and will
execute and deliver, any and all papers, instruments or
other documents, including assignments, and do any end all
other lawful acts that may be desirable in the opinion of
CARREKER-ANTINORI, INC. to secure, establish and maintain
title in CARREKER-ANTINORI, INC. its successors and assigns,
to any and all such Intellectual Property, and gave
CARREKER-ANTINORI, INC., its successors, and assigns the
full benefit of the assignment set forth herein.
6.1.4 The Consultant acknowledges and agrees that Intellectual
Property relating to the Consultant's activities while
performing the Consultant's Services for CARREKER-ANTINORI,
INC. and conceived or made by the CARREKER-ANTINORI, INC.
alone or with others, after
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<PAGE>
termination of the Contractual Relationship, have been
conceived in significant part during the Contractual
Relationship the Parties agree that such Intellectual
Property will be presumed to have been conceived during
the Contractual Relationship and is to be assigned to
CARREKER-ANTINORI, INC.
Unless and until the Consultant conclusively establishes the
contrary, any and all such Intellectual Property is subject
to the provisions of this Agreement.
6.2 The Consultant has diligently reviewed the Consultant's records, and
hereby provides, acknowledges and agrees that any and all copyrights,
letters patent, patent applications, publicity, service marks,
trademarks, trade dress, trade names, and trade secrets, whether
domestic or foreign, listed in (attached APPENDIX C are the only
intangible interests or properties that the Consultant owns, or has
any claim to, at the time of execution of this Agreement.
SECTION 7: CONFIDENTIALITY
7.1 The Parties agree that the Consultant will be privy to certain
Confidential Information by virtue of the Contractual Relationship,
and their misappropriation (e.g, authorized access, copying,
disclosure, sale, transfer, use, etc.) of any of the Confidential
Information by the Consultant or a third-party including a party
within the Consultant's control, will likely cause irreparable harm to
CARREKER-ANTINORI, INC. The Consultant agrees:
7.1.1 to take reasonable steps to protect and safeguard the
Confidential Information against misappropriation by such
third-parties;
7.1.2 not to misappropriate, either directly or indirectly, any of
the Confidential Information during the Contractual
Relationship, and, with respect to any pertinent portion of
the Confidential Information, for so long afterwards as such
pertinent position remains Confidential Information; and
7.1.3 to immediately notify the management of CARREKER-ANTINORI,
INC. of any known or perceived misappropriation of the
Confidential Information, whether such misappropriation is
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<PAGE>
a result of a negligent, or an intentional act of the
Consultant or such third-party.
7.2 The Consultant agrees not to disclose, incorporate; or otherwise use
in CARREKER-ANTINORI, INC.'s business any confidential or proprietary
information relating to the business or activities of any third party,
if CARREKER-ANTINORI, INC. or the Consultant is under an obligation
not to disclose, incorporate or otherwise use such confidential or
proprietary information.
7.3 The Consultant agrees not to prepare, publish, or otherwise disclose
any articles or speeches, whether technical or not, relating to any
portion of the Confidential Information or any other business or
activity of CARREKER-ANTINORI, INC.
7.4 Notwithstanding the foregoing restrictions, the Consultant may
disclose any Confidential Information to the extent required by an
order of any court, or other governmental authority, having competent
jurisdiction, but only after CARREKER-ANTINORI, INC. is:
7.4.1 notified in writing and provided with a copy of such order;
and
7.4.2 given an opportunity to obtain reasonable protection for
such Confidential Information in connection with such
disclosure.
SECTION 8: MISCELLANEOUS PROVISIONS
8.1 The Parties agree that this Agreement will insure to the benefit of,
and be binding upon, CARREKER-ANTINORI, INC., and its subsidiaries and
affiliates, together with their successors and assigns, and the
Consultant, together with the Consultant's executor, administrator,
personal representative, heirs, and legatees.
8.2 The Parties hereto are independent contractors and neither is the
agent of the other.
8.3 The Parties agree that the covenants in this Agreement will be
construed as covenants independent of one another and as obligations
distinct from any other contract between the Parties. Any claim that
either party may have against the other will not constitute a defense
to enforcement of this Agreement.
8.4 The Parties agree that the covenants in SECTIONS 6 and 7, and
sub-SECTION 8.5, of this Agreement will survive termination of the
Contractual Relationship.
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<PAGE>
8.5 The Parties agree that irreparable harm should be presumed if the
Consultant breaches any covenant in this Agreement, faithful
observance of all covenants in this Agreement is an essential
condition of the Contractual Relationship, and CARREKER-ANTINORI, INC.
depends upon such absolute compliance, the Parties further agree:
8.5.1 this Agreement is intended to protect the rights of
CARREKER-ANTINORI, INC. in many important ways, even a
threat of misuse of any of the Confidential Information or
Intellectual Property would be extremely harmful, its both
are essential. to the business Of CARREKER-ANTINORI, INC.;
8.5.2 CARREKER-ANTINORI, INC. will be entitled, as a matter of
right, to injunctive relief, both temporary and permanent,
against any breach or attempted breach of this Agreement by
the Consultant; and
8.5.3 actual damages may be very difficult to ascertain if the
Consultant breaches or attempts to breach a covenant in this
Agreement, hence CARREKER-ANTINORI, INC, will bc entitled to
such injunctive relief without the necessity of posting
bond, or other security, or proving such actual damages,
and, further, that such injunctive relief will be cumulative
and in addition to any other remedies available to
CARREKER-ANTINORI, INC.
8.6 The Parties agree that this Agreement will be governed by and enforced
under the laws of the State of Texas, and to the maximum extent
practicable, jurisdiction and venue in any dispute relating to the
subject matter hereof will be in Dallas County, The prevailing party
in any such dispute will be entitled to recover, in addition to any
other relief granted, reasonable Attorney fee and expense related to
such dispute.
8.7 All notices under this Agreement will be made in writing and will be
deemed given (1) hand delivered, (2) deposited in the United States
mail, registered, with proper postage prepaid and properly addressed,
return receipt requested, or (3) sent through the interoffice delivery
service of CARREKER-ANTINORI, INC. during the term of the Contractual
Relationship,
8.8 The Parties agree that this Agreement merges and supersedes all prior
and contemporaneous agreements, undertakings, covenants, or conditions
concerning the subject matter hereof, whether oral or written, express
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<PAGE>
or implied, to the extent they contradict or conflict with the
provisions hereof.
IN WITNESS WHEREOF, the Parties accept and execute this Agreement.
----------- --------------------- ---------------------
Date CARREKER-ANTINORI TITLE
----------- ---------------------------------------
Date Name
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<PAGE>
APPENDIX A
The work order that outlines the project and scope and total cost for the
work to be performed should be listed in this appendix, Additionally, an
estimate of reasonable expenses that may be incurred are included.
<PAGE>
APPENDIX B
Expense reports are to be submitted to the accounting department on the last
day of CARREKER-ANTINORI's accounting month to allow timely billing of
expenses to clients and reimbursement of expenses to employees. Expense
reports received more than three (3) days late will be reimbursed the
following month. Reports are to be approved and signed by the appropriate
Managing Director.
BILLABLE EXPENSES
It is the responsibility of the Project Manager to understand the client's
policies regarding billable, expenses and to communicate that to all
Consultants that will bill to the project. Expenses that are not billable to
the client should not be incurred. In the absence of other instructions, the
guidelines listed below will be followed in billing clients and reimbursing
employees. All procedures should conform to IRS requirements.
TRAVEL
The date of the trip, destination and client or purpose of the trip must be
clearly stated. Meals charged to the client should NOT EXCEED $35.00 per day
for each person assigned to a project. Meal expenses are reported as actual
amounts, to a per diem allowance.
Drinks or wine as part of the meal allowance may be charged to the client,
however, personal entertainment "clubbing" is not to be charged.
Business entertainment must be specifically authorized by the appropriate
Project Manager. All entertainment must be documented to include name,
description of activity, and the nature of the business discussion.
Personal entertainment (including in-room movies) should not be charged to
the client,
Laundry and valet services are not billable to the client unless the
assignment involves more than five (5) consecutive days.
Telephone calls must be identified and billed appropriately. Telephone
charges are determined by the subject or project being discussed, not the
location from which the call is made. Individual telephone bills are
distributed for identification of charges and are expected to be returned to
the accounting department promptly. Calls ARE NOT TO BE MADE FROM AIRPHONES.
Efforts should be made to control expenses in your choice of hotels and
restaurants. Use hotels that allow the client a corporate rate whenever
possible. Charges on hotel bills must be itemized.
The most reasonable type of transportation must be chosen. Generally taxi
rides are cheaper than rental cars. Try to plan plane routes and schedules
that avoid excess charges.
<PAGE>
Rental cars should be charged on Diner's Club to take advantage of the
insurance they provide. If this is not possible, be sure to take out the
rental car insurance.
An employee working out-of-town may elect to remain on site or travel to a
destination other than the home office over the weekend. However, additional
charges incurred for transportation, laundry, or meals are to be paid by the
individual.
Upgrades or first class tickets are not to be used.
Mileage may be charged at $.29 per mile. Please use the following CARREKER
ANTINORI standards:
Office to Hartsfield Airport -- 15 Miles
A contractor traveling from his/her home (instead of the office) to one of
these destinations should use these standards.
Expenses OVER $25.00 MUST be supported with receipts. For billing, purposes
it is important to try to document all expenses, regardless of the amount.
ALL travel arrangements will be made through the company authorized travel
agent.
OTHER BILLABLE EXPENSES
All non-travel expenses are reviewed by the Project Manager. The Project
Manager must give prior approval to all purchases that will be billed to the
client.
Production expenses are billed as follows:
<TABLE>
<S> <C>
copies $.15
regular disks $1.00
high-density disks $3.00
transparencies $1.00
(graphics, Lotus, word processing, graphing) $25.00 per hour
Overtime secretary production time $37.50 per hour
</TABLE>
The client is billed for actual telephone, mail, FAX and computer
expenses,
<PAGE>
NON-BILLABLE EXPENSES
TRAVEL/MARKETING
Expenses relating to marketing must be approved by the Practice Director or
Sales Manager and must conform to a planned budget. The basic guidelines for
billable travel will apply for sales travel as well.
All marketing related entertainment must be documented to include client
name, date, description of activity, and the nature of the business
discussion.
CARREKER-ANTINORI expects employees to call the office twice a day when they
are traveling and allows a daily telephone call home. Marketing calls are
charged to the individual's practice. Calls are not to be made from
airphones.
OTHER EXPENSES
Purchase requisitions are required for all non-travel purchases. The
requisitions must be signed by your Practice Director and must accompany all
purchases listed on an expense report or submitted to the Accounting
Department for payment. Purchases over $1,000 also require the approval of
the Chief Financial Officer.
Responsibility for planning has been assigned for the following areas:
<TABLE>
<S> <C>
Computers/software Terry Gage
Jeff Martin
Human Resources Jennifer Kenyon
Furniture/Secretarial Needs/
Office Space/Supplies Ruth McCoullough
Flowers/Gifts Ruth McCoullough
Library Materials Kathy Howard
Advertising/Public Relations Leonard Wink
</TABLE>
Please check with these people to avoid duplication or unplanned expenditures.
All other expenses are to be incurred only with the approval of the Practice
Director and will be expensed to the practice.
<PAGE>
INVOICE PROCEDURES
Listed below are the guidelines you should follow when submitting an invoice
to CARREKER ANTINORI.
TIME SHEETS
Time sheets are to be submitted twice monthly, on the 15th and the end of the
month. Billing periods are from the 1st through the 15th, and the 16th
through the end of the month. Time sheets can be faxed to Accounting;
however, the original must be sent to Accounting as soon as possible. The
correct time period, including month, day and year, should be indicated and
the time sheet must be signed by the contractor and initialed by the
appropriate supervisor. Use the correct project number and record the hours
worked each day on the project. Non-billable time is recorded with a project
number which indicates the department for which work is being done. Record
only the time that you have been authorized by your supervisor to bill.
Invoices for labor must be concurrent with the time period and be for the
same number of hours on the time sheet. They should be in a format which
provides the name and address of the contractor, the number of hours worked,
the project number(s), the rate being charged, and the total due. Invoices
must be approved by the project supervisor before payment can be made.
EXPENSE REPORTS
Expense reports should be submitted using QuickXpense software. Expenses are
to be submitted once a month, on the 25th. Do not submit more than one
expense report per month. Project numbers to be billed should be clearly
indicated; nonbillable expenses must be designated as Admin or Marketing, and
the appropriate department indicated. Airline tickets purchased by the,
company must be included on the report in the column headed "Paid By
Company." The face of the report can be faxed to Accounting; however, the
original and all necessary receipts must be in Accounting before
reimbursement can be made. Submit a separate invoice that corresponds to the
expense report and have it approved by your supervisor. Expense checks are
issued on the 15th of the month following the 25th submission date.
The Accounting fax number is 404-873-5554.
Please see CARREKER ANTINORI's Controller if you have any questions or would
like additional information.
<PAGE>
APPENDIX C
This appendix refers to Section 6...6.2
<PAGE>
AGREEMENT AND PLAN OF MERGER
BETWEEN
THE CARREKER GROUP, INC.,
CAG NEWCO, INC.
AND
ANTINORI SOFTWARE, INC.
AS OF JANUARY 29, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
PAGE
----
<S> <C>
1. PLAN OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Escrow Agreements . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . 3
1.5 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . 4
1.6 Tax-Free Reorganization . . . . . . . . . . . . . . . . . . . . . 4
1.7 Pooling of Interests. . . . . . . . . . . . . . . . . . . . . . . 4
2. REPRESENTATIONS AND WARRANTIES OF ANTINORI . . . . . . . . . . . . . . . 4
2.1 Organization and Good Standing. . . . . . . . . . . . . . . . . . 4
2.2 Power, Authorization and Validity . . . . . . . . . . . . . . . . 5
2.3 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.4 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.5 No Violation of Existing Agreements . . . . . . . . . . . . . . . 6
2.6 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.7 Antinori Financial Statements . . . . . . . . . . . . . . . . . . 6
2.8 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.9 Title to Properties . . . . . . . . . . . . . . . . . . . . . . . 7
2.10 Absence of Certain Changes. . . . . . . . . . . . . . . . . . . . 8
2.11 Agreements and Commitments. . . . . . . . . . . . . . . . . . . . 9
2.12 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . 10
2.13 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . 11
2.14 Certain Transactions and Agreements . . . . . . . . . . . . . . . 11
2.15 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.16 Corporate Documents . . . . . . . . . . . . . . . . . . . . . . . 13
2.17 No Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.18 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.19 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . 14
2.20 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.21 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . 14
2.22 Government Contracts. . . . . . . . . . . . . . . . . . . . . . . 15
2.23 Sale of Antinori. . . . . . . . . . . . . . . . . . . . . . . . . 15
3. REPRESENTATIONS AND WARRANTIES OF CARREKER . . . . . . . . . . . . . . . 16
3.1 Organization and Good Standing. . . . . . . . . . . . . . . . . . 16
3.2 Power, Authorization and Validity . . . . . . . . . . . . . . . . 16
3.3 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.4 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(i)
<PAGE>
3.5 No Violation of Existing Agreements . . . . . . . . . . . . . . . 17
3.6 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.7 Carreker Financial Statements . . . . . . . . . . . . . . . . . . 18
3.8 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.9 Title to Properties . . . . . . . . . . . . . . . . . . . . . . . 18
3.10 Absence of Certain Changes. . . . . . . . . . . . . . . . . . . . 19
3.11 Agreements and Commitments. . . . . . . . . . . . . . . . . . . . 20
3.12 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . 21
3.13 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . 22
3.14 Certain Transactions and Agreements . . . . . . . . . . . . . . . 22
3.15 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.16 Corporate Documents . . . . . . . . . . . . . . . . . . . . . . . 25
3.17 No Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.18 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.19 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . 25
3.20 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.21 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . 25
3.22 Government Contracts. . . . . . . . . . . . . . . . . . . . . . . 26
3.23 Sale of Carreker. . . . . . . . . . . . . . . . . . . . . . . . . 26
4. ANTINORI PRE-CLOSING COVENANTS . . . . . . . . . . . . . . . . . . . . . 27
4.1 Advise of Changes . . . . . . . . . . . . . . . . . . . . . . . . 27
4.2 Maintenance of Business . . . . . . . . . . . . . . . . . . . . . 27
4.3 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . 27
4.4 Certain Agreements. . . . . . . . . . . . . . . . . . . . . . . . 29
4.5 Regulatory Approvals. . . . . . . . . . . . . . . . . . . . . . . 29
4.6 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.7 No Other Negotiations . . . . . . . . . . . . . . . . . . . . . . 29
4.8 Access to Information . . . . . . . . . . . . . . . . . . . . . . 30
4.9 Satisfaction of Conditions Precedent. . . . . . . . . . . . . . . 30
4.10 Notification of Employee Problems . . . . . . . . . . . . . . . . 30
4.11 Antinori Affiliate Agreements . . . . . . . . . . . . . . . . . . 30
5. CARREKER PRE-CLOSING COVENANTS . . . . . . . . . . . . . . . . . . . . . 31
5.1 Advise of Changes . . . . . . . . . . . . . . . . . . . . . . . . 31
5.2 Maintenance of Business . . . . . . . . . . . . . . . . . . . . . 31
5.3 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . 31
5.4 Regulatory Approvals. . . . . . . . . . . . . . . . . . . . . . . 33
5.5 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.6 No Other Negotiations . . . . . . . . . . . . . . . . . . . . . . 33
5.7 Access to Information . . . . . . . . . . . . . . . . . . . . . . 33
5.8 Satisfaction of Conditions Precedent. . . . . . . . . . . . . . . 34
5.9 Notification of Employee Problems . . . . . . . . . . . . . . . . 34
(ii)
<PAGE>
5.10 Carreker Affiliate Agreements . . . . . . . . . . . . . . . . . . 34
6. CLOSING MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.1 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.2 Exchange of Certificates. . . . . . . . . . . . . . . . . . . . . 35
7. CONDITIONS TO OBLIGATIONS OF ANTINORI. . . . . . . . . . . . . . . . . . 35
7.1 Accuracy of Representations and Warranties. . . . . . . . . . . . 36
7.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.3 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . 36
7.4 Opinion of Carreker's Counsel . . . . . . . . . . . . . . . . . . 36
7.5 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.6 Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.7 Pooling Opinion . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.8 Certain Agreements. . . . . . . . . . . . . . . . . . . . . . . . 36
8. CONDITIONS TO OBLIGATIONS OF CARREKER. . . . . . . . . . . . . . . . . . 36
8.1 Accuracy of Representations and Warranties. . . . . . . . . . . . 37
8.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.3 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . 37
8.4 Opinion of Antinori's Counsel . . . . . . . . . . . . . . . . . . 37
8.5 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.6 Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.7 Pooling Opinion . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.8 Certain Agreements. . . . . . . . . . . . . . . . . . . . . . . . 37
9. TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 38
9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.2 Certain Continuing Obligations. . . . . . . . . . . . . . . . . . 38
10. SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION AND REMEDIES, CONTINUING
COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.1 Survival of Representations . . . . . . . . . . . . . . . . . . . 39
10.2 Antinori Agreement to Indemnify . . . . . . . . . . . . . . . . . 39
10.3 Carreker Agreement to Indemnify . . . . . . . . . . . . . . . . . 40
11. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.1 Governing Law; Dispute Resolution . . . . . . . . . . . . . . . . 40
11.2 Assignment; Binding Upon Successors and Assigns . . . . . . . . . 42
11.3 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.4 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.5 Other Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.6 Amendment and Waivers . . . . . . . . . . . . . . . . . . . . . . 42
(iii)
<PAGE>
11.7 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.8 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.10 Construction of Agreement . . . . . . . . . . . . . . . . . . . . 44
11.11 No Joint Venture. . . . . . . . . . . . . . . . . . . . . . . . . 44
11.12 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . 44
11.13 Absence of Third Party Beneficiary Rights . . . . . . . . . . . . 44
11.14 Public Announcement . . . . . . . . . . . . . . . . . . . . . . . 44
11.15 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.16 Time is of the Essence. . . . . . . . . . . . . . . . . . . . . . 45
11.17 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 45
</TABLE>
Schedules
Exhibits
(iv)
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is entered
into as of January 29, 1997, among The Carreker Group, Inc., a Texas
corporation ("CARREKER"), CAG Newco, Inc., a Texas corporation and a
wholly-owned subsidiary of Carreker ("NEWCO"), and Antinori Software, Inc., a
Georgia corporation ("ANTINORI").
RECITALS
A. The parties intend that, subject to the terms and conditions
hereinafter set forth, Newco will merge with and into Antinori (the
"MERGER"). Antinori will be the surviving corporation and will become a
wholly-owned subsidiary of Carreker, which will be renamed "CARREKER-ANTINORI
GROUP, INC." The merger will occur pursuant to a Plan of Merger substantially
in the form of EXHIBIT A (the "PLAN OF MERGER") and the applicable provisions
of the laws of the States of Texas and Georgia. Upon the Merger, all
outstanding Common Stock of Antinori will be converted into Class A Voting
Common Stock of Carreker and all outstanding Common Stock of Newco will be
converted into Common Stock of Antinori, in each case in the manner and on
the basis determined herein and as provided in the Plan of Merger.
B. The Merger is intended to be treated as a "pooling of
interests" for accounting purposes and a tax-free reorganization pursuant to
the provisions of Section 368(a)(1)(A) and Section 368(a)(2)(E) of the
Internal Revenue Code of 1986, as amended (the "CODE").
C. Concurrently with the execution and delivery of this
Agreement, Ronald R. Antinori, Susan Antinori and Michael Israel are
executing and delivering to Antinori's Secretary their unanimous written
consents, as all of Antinori's shareholders (the "ANTINORI SHAREHOLDERS"), to
the Merger, this Agreement, the Plan of Merger and the transactions provided
for herein.
D. Concurrently with the execution and delivery of this
Agreement: (i) Ronald R. Antinori is entering into with Carreker (1) an
Employment Agreement in the form of EXHIBIT B-1, (2) a Noncompetition
Agreement in the form of EXHIBIT C, (3) the Escrow Agreement in the form of
EXHIBIT D-1, (4) an Intellectual Property Rights Agreement in the form of
EXHIBIT F, (5) a Confidentiality Agreement in the form of EXHIBIT N, (6) an
Antinori Affiliate Agreement substantially in the form of EXHIBIT G and (7)
the Shareholders Agreement in the form of EXHIBIT K; (ii) Susan Antinori is
entering into with Carreker (1) a Escrow Agreement in the form of EXHIBIT
D-1, (2) an Antinori Affiliate Agreement in the form of EXHIBIT G and (3) the
Shareholders Agreement in the form of EXHIBIT K; (iii) Lawrence Duckworth is
entering into with Carreker (1) an Employment Agreement in the form of
EXHIBIT B-2, (2) a Noncompetition Agreement in the form of EXHIBIT C, (3) an
Intellectual Property Rights Agreement in the form of EXHIBIT F, (4) a
Confidentiality Agreement in the form of EXHIBIT M, (5) Stock Option
Agreements in the form of Exhibits L-1 and L-2, (6) an Antinori Affiliate
Agreement substantially in the form of EXHIBIT G and (7) the Shareholders
Agreement in the form of EXHIBIT K; (iv) Michael Israel is entering into with
Carreker (1) an Employment Agreement in the form of EXHIBIT B-3, (2) a
Noncompetition Agreement in the form of EXHIBIT C, (3) the Escrow Agreement
in the form of EXHIBIT D-1, (4) an Intellectual Property Rights Agreement in
the form of EXHIBIT F, (5) a Confidentiality Agreement in the form of EXHIBIT
N, (6) Stock Option Agreements in the form of EXHIBITS L-3 AND L-4, (7) an
Antinori Affiliate Agreement in the form of EXHIBIT G and (8) the
Shareholders Agreement in the form of EXHIBIT K; (v) Frank
<PAGE>
Basset is entering into with Carreker a Stock Option Agreement in the form of
EXHIBIT L-5; and (vi) Ruth McCullough is entering into with Carreker a Stock
Option Agreement in the form of EXHIBIT L-6.
E. Concurrently with the execution and delivery of this
Agreement, J.D. Carreker is entering into with Carreker (1) an Employment
Agreement in the form of EXHIBIT B-4, (2) a Noncompetition Agreement in the
form of EXHIBIT C, (3) the Escrow Agreement in the form of EXHIBIT D-2, (4)
an Intellectual Property Rights Agreement in the form of EXHIBIT F, (5) a
Confidentiality Agreement in the form of EXHIBIT N, (6) an Carreker Affiliate
Agreement in the form of EXHIBIT H and (7) the Shareholders Agreement in the
form of EXHIBIT K.
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements of Carreker, Antinori and Newco contained herein, the
parties agree as follows:
1. PLAN OF MERGER
1.1 THE MERGER. The Plan of Merger will be filed with
the Secretaries of State of the States of Texas and Georgia as soon as
practicable after the Closing (as defined in Section 6.1; hereinafter the
"CLOSING"). The effective time of the Merger as specified in the Plan of
Merger (the "EFFECTIVE TIME") will occur on or before January 31, 1997 or on
such other date as the parties may mutually agree upon. Subject to the terms
and conditions of this Agreement and the Plan of Merger, Newco will be merged
with and into Antinori pursuant to the Plan of Merger and in accordance with
applicable provisions of the laws of the States of Texas and Georgia as
follows:
1.1.1 CONVERSION OF SHARES. The shares of
Antinori Common Stock, $.01 par value per share (the "ANTINORI COMMON
STOCK"), that are issued and outstanding immediately prior to the Effective
Time will by virtue of the Merger and at the Effective Time, and without
further action on the part of any holder thereof, be converted into the
Applicable Number of fully paid and nonassessable shares of Carreker Class A
Voting Common Stock, no par value per share (the "CARREKER CLASS A COMMON
STOCK"). Unless there is an adjustment to the shares to be issued in the
Merger pursuant to Section 1.1.2 below, the "APPLICABLE NUMBER" will equal
(a) 0.50946871 multiplied by (b) the total number of shares of Antinori
Common Stock issued and outstanding at the Effective Time. The shares to be
issued and the recipients thereof are identified on EXHIBIT 1.1.1.
1.1.2 ADJUSTMENTS FOR CAPITAL CHANGES. If prior
to the Merger, Carreker recapitalizes either through a split-up of its
outstanding shares into a greater number, or through a combination of its
outstanding shares into a lesser number, or reorganizes, reclassifies or
otherwise changes its outstanding shares into the same or a different number
of shares of other classes (other than through a split-up or combination of
shares provided for in the previous clause), or declares a dividend on its
outstanding shares payable in shares or securities convertible into shares,
the number of shares of Carreker Class A Common Stock into which the shares
of Antinori Common Stock are to be converted will be adjusted appropriately.
AGREEMENT AND PLAN OF MERGER - Page 2
<PAGE>
1.1.3 ANTINORI TREASURY STOCK. All shares of
Antinori Common Stock that are held by Antinori as treasury stock shall be
cancelled and retired and no shares of Carreker Common Stock, of Class A
Voting or Class B Non-Voting (collectively, "CARREKER COMMON STOCK"), shall
be delivered or paid in exchange therefor.
1.2 FRACTIONAL SHARES. No fractional shares of Carreker
Class A Common Stock will be issued in connection with the Merger, but in
lieu thereof, the holder of any shares of Antinori Common Stock who would
otherwise be entitled to receive a fraction of a share of Carreker Class A
Common Stock would receive from Carreker, promptly after the Effective Time,
an amount of cash equal to $23.83 multiplied by the fraction of a share of
Carreker Class A Common Stock to which such holder would otherwise be
entitled.
1.3 ESCROW AGREEMENTS. Pursuant to the Escrow Agreement
in the form of EXHIBIT D-1 (the "ANTINORI ESCROW AGREEMENT"), Carreker will
withhold from the shares of Carreker Class A Common Stock that would
otherwise be delivered to the Antinori Shareholders, 25,700 shares of
Carreker Class A Common Stock, being approximately (and less than) 5% of the
total number of shares of Carreker Class A Common Stock issuable to such
shareholders in the Merger. On the Closing Date, Carreker will deposit or
cause to be deposited in escrow pursuant to the Antinori Escrow Agreement
certificates representing the shares thus withheld (the "ANTINORI ESCROW
SHARES") as collateral for the indemnification obligations of the Antinori
Shareholders under Section 10.2, pending their release from escrow pursuant
to the Antinori Escrow Agreement.
Also on the Closing Date, Carreker will deposit or cause to be
deposited in escrow pursuant to the Carreker Escrow Agreement certificates
representing 25,700 shares of Carreker Class A Common Stock (the "CARREKER
ESCROW SHARES"). The Carreker Escrow Shares will be held as collateral for
the indemnification obligations of the Carreker Principal Shareholders under
Section 11.2, and pursuant to the Escrow Agreement in the form of EXHIBIT D-2
(the "CARREKER ESCROW AGREEMENT"), pending their release from escrow pursuant
to the Carreker Escrow Agreement.
1.4 EFFECTS OF THE MERGER. At the Effective Time: (a)
the separate existence of Newco will cease and Newco will be merged with and
into Antinori and Antinori will be the surviving corporation pursuant to the
terms of the Plan of Merger, (b) the Articles of Incorporation and Bylaws of
Antinori will continue unchanged as the Articles of Incorporation and Bylaws
of the surviving corporation, (c) each share of Newco Common Stock
outstanding immediately prior to the Effective Time will continue to be an
identical outstanding share of the surviving corporation, (d) the composition
of the Board of Directors of Antinori shall be as set forth in ANNEX 1 to
EXHIBIT A, (e) the officers of Antinori shall be the persons set forth in
ANNEX 1 to EXHIBIT A and (f) the Merger will, at and after the Effective
Time, have all of the effects provided by applicable law.
1.5 FURTHER ASSURANCES. Antinori agrees that if, at any
time after the Effective Time, Carreker considers or is advised that any
further deeds, assignments or assurances are reasonably necessary or
desirable to vest, perfect or confirm in the surviving corporation title to
any property or rights of Antinori, Carreker and any of its officers are
hereby authorized by
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Antinori to execute and deliver all such proper deeds, assignments and
assurances and do all other things necessary or desirable to vest, perfect or
confirm title to such property or rights in the surviving corporation and
otherwise to carry out the purposes of this Agreement, in the name of
Antinori or otherwise.
1.6 TAX-FREE REORGANIZATION. The parties intend to
adopt this Agreement as a tax-free plan of reorganization and to consummate
the Merger in accordance with the provisions of Section 368(a)(1)(A) and
368(a)(2)(E) of the Code. The shares of Carreker Class A Common Stock issued
in the Merger will be issued solely in exchange for the issued and
outstanding shares of Antinori Common Stock pursuant to this Agreement, and
no other transaction other than the Merger represents, provides for or is
intended to be an adjustment to the consideration paid for the Antinori
Common Stock. Except for cash paid in lieu of fractional shares, no
consideration that could constitute "other property" within the meaning of
Section 356 of the Code will be paid by Carreker for shares of Antinori
Common Stock in the Merger. In addition, Carreker represents that it
presently intends, and that at the Effective Time it will intend, to continue
Antinori's historic business or use a significant portion of Antinori's
business assets in a business. At the Closing, officers of Carreker and
officers of Antinori will execute and deliver officers' certificates in the
forms of EXHIBITS E-1 AND E-2.
1.7 POOLING OF INTERESTS. The parties intend that the
Merger be treated as a "pooling of interests" for accounting purposes.
2. REPRESENTATIONS AND WARRANTIES OF ANTINORI
Antinori hereby represents and warrants that, except as set
forth in the Antinori Schedules:
2.1 ORGANIZATION AND GOOD STANDING. Antinori is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Georgia and has the corporate power and authority to
own, operate and lease its properties and to carry on its business as now
conducted and as proposed to be conducted.
Antinori is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction listed in SCHEDULE 2.1, which to
its knowledge is each jurisdiction in which the ownership of its properties,
the employment of its personnel or the conduct of its business requires it to
be so qualified, except where the failure to so qualify would not have a
material adverse effect on Antinori, its assets or properties or its
financial condition.
2.2 POWER, AUTHORIZATION AND VALIDITY.
2.2.1 Antinori has the corporate right, power,
legal capacity and authority to enter into and perform its obligations under
this Agreement and all agreements to which Antinori is or will be a party
that are required to be executed pursuant to this Agreement (the "ANTINORI
ANCILLARY AGREEMENTS"). The execution, delivery and performance of this
Agreement
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<PAGE>
and the Antinori Ancillary Agreements have been duly and validly approved by
the Antinori Board of Directors and the Antinori Shareholders, as required by
applicable law.
2.2.2 No filing, authorization or approval,
governmental or otherwise, is necessary to enable Antinori to enter into, and
to perform its obligations under, this Agreement and the Antinori Ancillary
Agreements, except for (a) the filing of the Plan of Merger with the
Secretaries of State of the States of Texas and Georgia (which filing has
been authorized by all necessary corporate approvals) and publication of
notice thereof, and (b) consents required under contracts disclosed in
SCHEDULE 2.5 as exceptions to the representation made in the last sentence of
Section 2.5.
2.2.3 This Agreement and the Antinori Ancillary
Agreements are, or when executed and delivered by Antinori will be, valid and
binding obligations of Antinori, enforceable against Antinori in accordance
with their respective terms, except as to the effect, if any of (a)
applicable bankruptcy and other similar laws affecting the rights of
creditors generally, and (b) rules of law governing specific performance,
injunctive relief and other equitable remedies; provided, however, that the
Antinori Ancillary Agreements will not be effective until the earlier of the
date set forth therein or the Effective Time.
2.3 CAPITALIZATION.
(a) AUTHORIZED/OUTSTANDING CAPITAL STOCK. The
authorized capital stock of Antinori consists of 10,000,000 shares of
Antinori Common Stock, $.01 par value per share, of which 1,010,101 shares
are issued and outstanding as of this date and as of the Closing Date, and
all of which issued and outstanding shares are held of record and owned by
the Antinori Shareholders. Antinori has no authorized or issued share of
Preferred Stock. All issued and outstanding share of Antinori Common Stock
have been duly authorized and validly issued, are fully paid and
nonassessable, are not subject to any right of rescission and have been
offered, issued, sold and delivered by Antinori in compliance with all
registration or qualification requirements (or applicable exemptions
therefrom) of applicable federal and state securities laws.
(b) OPTIONS/RIGHTS. Except as disclosed on
SCHEDULE 2.3, there are no stock appreciation rights, options, warrants,
conversion privileges or preemptive or other rights or agreements outstanding
to purchase or otherwise acquire any of Antinori's authorized but unissued
capital stock, there are no options, warrants, conversion privileges or
preemptive or other rights or agreements to which Antinori is a party
involving the purchase or other acquisition of any share of Antinori capital
stock, and there is no liability for dividends accrued but unpaid; and there
are no voting agreements, rights of first refusal or other restrictions
(other than normal restrictions on transfer under applicable federal and
state securities laws) applicable to any of Antinori's outstanding securities.
2.4 SUBSIDIARIES. Except as disclosed on SCHEDULE 2.4,
Antinori does not have any subsidiaries or any equity interests, direct or
indirect, in any corporation, partnership, joint venture of other business
entity.
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2.5 NO VIOLATION OF EXISTING AGREEMENTS. Neither the
execution and delivery of this Agreement or any Antinori Ancillary Agreement,
nor the consummation of the transactions provided for herein or therein, will
conflict with, or (with or without notice or lapse of time, or both) result
in a termination, breach, impairment or violation of, (a) any provision of
the Articles of Incorporation or Bylaws of Antinori, as currently in effect,
(b) to the knowledge of Antinori, any material instrument or contract to
which Antinori is a party or by which Antinori is bound, or (c) any federal,
state, local or foreign judgment, writ, decree, order, statute, rule or
regulation applicable to and that would have a material adverse effect on
Antinori or its assets or properties. The consummation of the Merger by
Antinori and succession by Carreker to all rights, licenses, franchises,
leases and agreements of Antinori will not require the consent of any third
party and will not have a material adverse effect upon any such rights,
licenses, franchises, leases or agreements pursuant to the terms of those
agreements, other than as set forth in SCHEDULE 2.5.
2.6 LITIGATION. Except as set forth in SCHEDULE 2.6,
there is no action, proceeding or investigation pending or, to Antinori's
knowledge, threatened against Antinori before any court or administrative
agency that, if determined adversely to Antinori, may reasonably be expected
to have a material adverse effect on the present or future operations or
financial condition of Antinori or in which the adverse party or parties seek
to recover in excess of $25,000 against Antinori. Except as set forth on
SCHEDULE 2.6, there is no substantial basis for any person, firm, corporation
or entity to assert a claim against Antinori or Carreker as successor in
interest to Antinori based upon: (a) ownership or rights to ownership of any
shares of Antinori Common Stock, (b) any rights as a Antinori securities
holder, including, without limitation, any option or other right to acquire
any Antinori securities, any preemptive rights or any rights to notice or to
vote, or (c) any rights under any agreement between Antinori and any Antinori
securities holder or former Antinori securities holder in such holder's
capacity as such.
2.7 ANTINORI FINANCIAL STATEMENTS. Antinori has
delivered to Carreker the financial statements as set forth in SCHEDULE 2.7
(the "ANTINORI FINANCIAL STATEMENTS"). The Antinori Financial Statements
have been prepared on an accrual basis and, in all material respects, (a) are
in accordance with the books and records of Antinori, (b) fairly and
accurately represent the financial condition of Antinori at the respective
dates specified therein and the results of operations for the respective
periods specified therein in both cases in conformity with generally accepted
accounting principles, and (c) have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis.
Except as set forth in SCHEDULE 2.7, to the knowledge of Antinori, Antinori
has no material debt, liability or obligation of any nature, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, that is
not reflected, reserved against or disclosed in the Antinori Financial
Statements, except for (i) those that are not required to be reported in
accordance with such accounting principles and (ii) those that may have been
incurred after the issuance of the unaudited balance sheet of Antinori on
December 31, 1996 (the "BALANCE SHEET DATE") in the ordinary course of its
business.
Financial statements of Antinori as of December 31, 1995, December
31, 1994 and December 31, 1993 and for the years then ended, in each case
meeting the requirements of Regulation S-X promulgated by the Securities and
Exchange Commission, can be readily prepared
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from Antinori's financial statements as of such dates and for such years and
from other readily available information.
2.8 TAXES. Except as set forth in SCHEDULE 2.8, to the
knowledge of Antinori, Antinori has filed all federal, state, local and
foreign tax and information returns required to be filed, has paid all taxes
required to be paid in respect of all periods for which returns have been
filed, has made all necessary estimated tax payments, and has no material
liability for taxes in excess of the amount so paid. True, correct and
complete copies of all such tax and information returns have been provided or
made available by Antinori to Carreker. Except as set forth on SCHEDULE 2.8,
to the knowledge of Antinori, Antinori is not delinquent in the payment of
any tax or in the filing of any tax returns, and no deficiencies for any tax
have been threatened, claimed, proposed or assessed which have not been
settled or paid. Except as set forth in SCHEDULE 2.8, no tax return of
Antinori has ever been audited by the Internal Revenue Service or any state
taxing agency or authority. For the purposes of this Section 2.8, the terms
"TAX" and "TAXES" include all federal, state, local and foreign income,
gains, franchise, excise, property, sales, use, employment, license, payroll,
occupation, recording, value added or transfer taxes, governmental charges,
fees, levies or assessments (whether payable directly or by withholding),
and, with respect to such taxes, any estimated tax, interest and penalties or
additions to tax and interest on such penalties and additions to tax.
Without limiting the foregoing, Antinori's election for treatment
as a sub-chapter "S" corporation was valid and proper at the time of such
election, has not been revoked and will continue to be valid and proper
through the Effective Time.
2.9 TITLE TO PROPERTIES. Antinori has good and
marketable title to all of its assets as shown on the balance sheet as of the
Balance Sheet Date included in the Antinori Financial Statements, free and
clear of all liens, charges or encumbrances (other than for taxes not yet due
and payable and Permitted Liens (as defined below)), other than such material
assets set forth on SCHEDULE 2.9 as were sold by Antinori in the ordinary
course of business since the Balance Sheet Date or which are subject to
capitalized leases. "PERMITTED LIENS" means any lien, mortgage, encumbrance
or restriction that is reflected in the Antinori Financial Statements and is
not in excess of $100,000 and which does not materially detract from the
value or materially interfere with the use, as currently used, of the
properties subject thereto or affected thereby or otherwise materially impair
the business operations being conducted thereon. There are no UCC financing
statements of record naming Antinori as debtor. Trust Company Bank is not a
creditor of Antinori. The machinery and equipment included in such assets
are in all material respects in good condition and repair, normal wear and
tear excepted, and all leases of real or personal property to which Antinori
is a party are fully effective and afford Antinori peaceful and undisturbed
possession of the subject matter of the lease. To its knowledge, Antinori is
not in violation of any material zoning, building, safety or environmental
ordinance, regulation or requirement or other law or regulation applicable to
the operation of owned or leased properties, and Antinori has not received
any notice of such violation with which it has not complied or had waived.
2.10 ABSENCE OF CERTAIN CHANGES. Since the Balance Sheet
Date, except as set forth in SCHEDULE 2.10, there has not been with respect
to Antinori:
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<PAGE>
(a) to the knowledge of Antinori, any change in
the financial condition, properties, assets, liabilities business, results of
operations or prospects of Antinori, which change by itself or in conjunction
with all other such changes, whether or not arising in the ordinary course of
business, has had or can reasonably be expected to have a material adverse
effect on Antinori;
(b) to the knowledge of Antinori, any contingent
liability incurred by Antinori as guarantor or surety with respect to the
obligations of others;
(c) any material mortgage, encumbrance or lien
placed on any of the properties of Antinori;
(d) to the knowledge of Antinori, any material
obligation or liability incurred by Antinori other than in the ordinary
course of business;
(e) any purchase or sale or other disposition, or
any agreement or other arrangement for the purchase, sale or other
disposition, of any of the properties or assets of Antinori other than in the
ordinary course of business or in nonmaterial amounts;
(f) to the knowledge of Antinori, any damage,
destruction or loss, whether or not covered by insurance, materially and
adversely affecting the properties, assets or business of Antinori;
(g) any declaration, setting aside or payment of
any dividend on, or the making of any other distribution in respect of, the
capital stock of Antinori, any split, stock dividend, combination or
recapitalization of the capital stock of Antinori or any direct or indirect
redemption, purchase or other acquisition by Antinori of the capital stock of
Antinori;
(h) to the knowledge of Antinori, any material
labor dispute or claim of material unfair labor practices, any change in the
compensation payable or to become payable to any of Antinori's officers,
employees or agents earning compensation at an anticipated annual rate in
excess of $100,000, or any bonus payment or arrangement made to or with any
of such officers, employees or agents (except as previously disclosed in
writing to and approved in writing by Carreker); or any change in the
compensation payable or to become payable to any of Antinori's other
officers, employees or agents other than normal annual compensation increases
in accordance with past practices or any bonus payment or arrangement made to
or with any of such other officers, employees or agents other than normal
bonuses or other arrangements made in accordance with past practices;
(i) any material change with respect to the
management, supervisory, development or other key personnel of Antinori (the
management, supervisory, development and other key personnel of Antinori
being listed on SCHEDULE 2.10(i));
(j) any payment or discharge of a material lien
or liability thereof, which lien or liability was not either (i) shown on the
balance sheet as of the Balance Sheet Date
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<PAGE>
included in the Antinori Financial Statements or (ii) incurred in the
ordinary course of business after the Balance Sheet Date; or
(k) to the knowledge of Antinori, any obligation,
or material liability incurred by Antinori to any of its officers, directors
or shareholders, or any loans or advances made to any of its officers,
directors, shareholders or affiliate except normal compensation and expense
allowances payable to officers.
2.11 AGREEMENTS AND COMMITMENTS. Except as set forth in
SCHEDULE 2.11, or as listed in SCHEDULE 2.12, SCHEDULE 2.15.3 or SCHEDULE
2.15.6 as required by Section 2.12, Section 2.15.3 or Section 2.15.6,
respectively, to the knowledge of Antinori, Antinori is not a party or
subject to any oral or written executory agreement, obligation or commitment
that is material to Antinori, its financial condition, business or prospects
or which is described below and is not terminable within 60 days without cost
or penalty to Antinori:
(a) Any contract, commitment, letter agreement,
quotation or purchase order providing for payments by or to Antinori in an
aggregate amount of (i) $100,000 or more in the ordinary course of business
or (ii) $100,000 or more not in the ordinary course of business (except for
any contracts, commitments, letter agreements, quotations or purchase orders
providing for outstanding payments to Antinori solely with respect to ongoing
software maintenance services);
(b) Any license agreement as licensor (except for
any nonexclusive software license granted by Antinori to end-user customers
where the form of the license, excluding standard immaterial deviations, has
been provided to Carreker);
(c) Any agreement by Antinori to encumber,
transfer or sell rights in or with respect to any Antinori Intellectual
Property (as defined in Section 2.12);
(d) Any agreement for the sale or lease of real
or personal property involving more than $100,000 per year;
(e) Any dealer, distributor, sales
representative, original equipment manufacturer, value added remarketer or
other agreement for the distribution of Antinori's products;
(f) Any franchise agreement or financing
statement;
(g) Any stock redemption or purchase agreement;
(h) Any joint venture contract or arrangement or
any other agreement that involves a sharing of profits with other persons;
(i) Any instrument evidencing indebtedness for
borrowed money by way of direct loan, sale of debt securities, purchase money
obligations, conditional sale, guarantee or otherwise, except for trade
indebtedness or any advance to any employee of Antinori incurred
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<PAGE>
or made in the ordinary course of business, and except as disclosed in the
Antinori Financial Statements; or
(j) Any contract containing covenants purporting
to limit Antinori's freedom to compete in any line of business in any
geographic area.
All agreements, obligations and commitments listed
in SCHEDULE 2.11, SCHEDULE 2.12, SCHEDULE 2.15.3, or SCHEDULE 2.15.6 as
required by Section 2.11, Section 2.12, Section 2.15.3 or Section 2.15.6, as
the case may be, are valid and in full force and effect in all material
respects, and except as expressly noted, a true and complete copy of each has
been delivered to Carreker. Except as noted on SCHEDULE 2.11 neither
Antinori nor, to the knowledge of Antinori, any other party is in breach of
or default under any material terms of any such agreement, obligation or
commitment. Antinori is not a party to any contract or arrangement that it
reasonably expects will have a material adverse effect on its business or
prospects.
2.12 INTELLECTUAL PROPERTY. To its knowledge, Antinori
owns all right, title and interest in, or has the right to use, all domestic
and foreign patent applications, patents, patent licenses, trademark
applications, trademarks, service marks, trade names, copyrights
applications, copyrights, trade secrets, know-how, technology, material
software licenses and other intellectual property and proprietary rights used
in or reasonably necessary to the conduct of its business as presently
conducted and the business of the development, production, marketing,
licensing and sale of commercial products using such intellectual property
and proprietary rights (excluding any infringement of any intellectual
property or property rights of a third party to the extent such infringement
may be caused by the use of such intellectual property and proprietary rights
of Antinori in combination with the intellectual property, software or other
products of Carreker) ("ANTINORI INTELLECTUAL PROPERTY"). Antinori has taken
reasonable measures to protect all Antinori Intellectual Property, and,
except as set forth on SCHEDULE 2.12, Antinori has no knowledge of any
infringement of any Antinori Intellectual Property by any third party.
Notwithstanding the foregoing, the third party products listed on Schedule
2.12 (the "Antinori Third Party Products") are not owned by Antinori and
Antinori does not represent that the Antinori Third Party Products do not
infringe the intellectual property or other property rights of third parties;
Antinori represents only that it has obtained appropriate licensing rights to
the Antinori Third Party Products and its use of the Antinori Third Party
Products does not infringe the rights of Antinori's licensors. Set forth on
SCHEDULE 2.12 delivered to Carreker herewith is a true and complete list of
all copyright and trademark registrations and all patents for Antinori
Intellectual Property owned by Antinori. Antinori has no knowledge of any
material loss, cancellation, termination of expiration of any such
registration or patent except as set forth on SCHEDULE 2.12. To the
knowledge of Antinori, the business of Antinori as conducted as of the date
hereof, including (without limitation) the business of development,
production, marketing, licensing and sale of commercial products using
Antinori Intellectual Property and proprietary rights, does not infringe or
violate any of the patents, trademarks, service marks, tradenames,
copyrights, trade secrets, proprietary rights or other intellectual property
of any other person, and Antinori has not received any written or oral claim
or notice of infringement or potential infringement of the intellectual
property of any other person which could be expected to have a material
adverse effect on Antinori's business. Notwithstanding the foregoing, with
respect to the Antinori Third Party Products, Antinori represents only that
it has obtained appropriate licensing rights to such
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Antinori Third Party Products and its use of the Antinori Third Party
Products does not infringe the rights of Antinori's licensors. Antinori has
the right to manufacture all of its products and the right to use all of its
registered user lists, and to its knowledge, is not using any confidential
information or trade secrets of any former employer of any past or present
employees.
2.13 COMPLIANCE WITH LAWS. Except as set forth in
SCHEDULE 2.13 and except where the failure to comply would not have a material
adverse effect on the business, operations or financial conditions of Antinori,
to its knowledge Antinori has complied, or prior to the Closing Date (as defined
in Section 6.1; hereinafter the "CLOSING DATE") will have complied, or is on
will be at the Closing Date in full compliance, in all respects material to
Antinori, with all applicable laws, ordinances, regulations and rules, and all
orders, writs, injunctions, awards, judgements and decrees, applicable to
Antinori or to the assets, properties and business of Antinori, including,
without limitation (a) all applicable federal and state securities laws and
regulations, (b) all applicable federal state and local laws, ordinances and
regulations, and all orders, writs, injunctions, awards, judgments and decrees,
pertaining to (i) the sale, licensing, leasing, ownership or management of
Antinori's owned, leased or licensed real or personal property, products or
technical data, (ii) employment or employment practices, terms and conditions of
employment or wages and hours, or (iii) safety, health, fire prevention,
environmental protection (including toxic waste disposal and related matters
described in Section 2.21), building standards, zoning or other similar matters,
(c) the Export Administration Act and regulations promulgated thereunder or
other laws, regulations, rules, orders, writs, injunctions, judgements or
decrees applicable to the export or re-export of controlled commodities or
technical data, or (d) the Immigration Reform and Control Act. To its
knowledge, Antinori has received all material permits and approvals from and has
made all material filings with third parties, including government agencies and
authorities, that are necessary to the conduct of its business as presently
conducted.
2.14 CERTAIN TRANSACTIONS AND AGREEMENTS. To Antinori's
knowledge, no person who is an officer or director of Antinori, or a member of
any officer's or director's immediate family, has any direct or indirect
ownership interest in any firm or corporation that competes with Antinori
(except with respect to any interest in less than 1% of the outstanding voting
shares of any corporation the stock of which is publicly traded). Except as set
forth in SCHEDULE 2.14, no person who is an officer or director of Antinori, or
any member of any officer's or director's immediate family, is directly or
indirectly interested in any material contract or informal arrangement with
Antinori, except for compensation for services as an officer, director or
employee of Antinori and except for the normal rights of a shareholder. Except
at set forth in SCHEDULE 2.14, none of such officers or directors or family
members has any interest in any property, real or personal, tangible or
intangible, including, without limitation, inventions, patents, copyrights,
trademarks, trade names or trade secrets, used in the business of Antinori,
except for the normal rights of a shareholder.
2.15 EMPLOYEES.
2.15.1 Except as set forth in SCHEDULE 2.15.1,
Antinori has no employment contract or material consulting agreement currently
in effect that is not terminable at will without
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penalty or payment of compensation by Antinori (other than agreements with
the sole purpose of providing for the confidentiality of proprietary
information or assignment of inventions).
2.15.2 Antinori (a) has never been and is not now
subject to a union organizing effort, (b) is not subject to any collective
bargaining agreement with respect to any of its employees, (c) is not subject to
any other contract, written or oral, with any trade or labor union, employees'
association or similar organization, and (d) to its knowledge has no material
current labor dispute. Antinori has no knowledge of any facts indicating that
the consummation of the transactions provided for herein will have a material
adverse effect on its labor relations, and has no knowledge that any of its key
development employees (each of whom is listed on SCHEDULE 2.10(i)) intends to
leave its employ.
2.15.3 SCHEDULE 2.15.3 delivered by Antinori to
Carreker herewith contains a list of all pension, retirement, disability,
medical, dental or other health plans, life insurance or other death benefit
plans, profit sharing, deferred compensation agreements, stock, option, bonus or
other incentive plans, vacation, sick, holiday or other paid leave plans,
severance plans or other similar employee benefits plan maintained by Antinori
(the "EMPLOYEE PLANS"), including without limitation all "employee benefit
plans" as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"). Antinori has delivered true and complete copies
or descriptions of all the Employee plans of Antinori to Carreker. Except as
set forth in SCHEDULE 2.15.3, each of the Employee Plans, and its operation and
administration, is, to the knowledge of Antinori, in all material respects, in
compliance with all applicable, federal, state, local and other governmental
laws and ordinances, orders, rules and regulations, including the requirements
of ERISA and the Code. Except as set forth in SCHEDULE 2.15.3, any such
Employee Plans that are employee pension benefit plans (as defined in
Section 3(2) of ERISA) which are intended to qualify under Section 401(a)(8) of
the Code have received favorable determination letters that such plans satisfy
the qualification requirements of the Tax Equity and Fiscal Responsibility Act
of 1982, the Deficit Reduction Act of 1994 and the Retirement Equity Act of
1984. In addition, to the knowledge of Antinori, Antinori has never been a
participant in any "prohibited transaction," within the meaning of Section 406
of ERISA with respect to any employee pension benefit plan (as defined in
Section 3(2) of ERISA) which Antinori sponsors as employer or in which Antinori
participates as an employer, which was not otherwise exempt pursuant to
Section 408 of ERISA (including any individual exemption granted under
Section 408(a) of ERISA), or which could result in an excise tax under the Code.
The group health plans as defined in Section 4980B(g) of the Code, that benefit
employees of Antinori are in material compliance with the continuation coverage
requirements of subsection 4980B of the Code. To the knowledge of Antinori,
there are no outstanding violations of Section 4980B of the Code with respect to
any Employee Plan, covered employees or qualified beneficiaries. Except as set
forth in SCHEDULE 2.15.3, no employee of Antinori and no person subject to any
Antinori health plan has made medical claims during the twelve months preceding
the date hereof for $10,000 or more, in the aggregate, or, to Antinori's
knowledge, has any catastrophic illness.
2.15.4 To Antinori's knowledge, no employee of
Antinori is in material violation of (a) any term of any employment contract,
patent disclosure agreement or noncompetition agreement or (b) any other
contract or agreement, or any restrictive covenant, relating to the right of any
such employee to be employed by Antinori or to use trade secrets or
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proprietary information of others. To Antinori's knowledge, the employment
of any employee of Antinori does not of itself subject Antinori to any
liability to any third party.
2.15.5 Except as set forth in SCHEDULE 2.15.5,
Antinori is not a party to any (a) agreement with any executive officer or other
key employee of Antinori (i) the benefits of which are contingent, or the terms
of which are materially altered, upon the occurrence of a transaction involving
Antinori in the nature of any of the transactions contemplated by this Agreement
and the Plan of Merger, (ii) providing any term of employment or compensation
guarantee, or (iii) providing severance benefits or other benefits after the
termination of employment of such employee regardless of the reason for such
termination of employment or (b) agreement or plan, including, without
limitation, any stock option plan, stock appreciation rights plan or stock
purchase plan, any of the benefits of which will be materially increased, or the
vesting of benefits of which will be materially accelerated, by the occurrence
of any of the transactions contemplated by this Agreement and the Plan of Merger
or the value of any of the benefits of which will be calculated on the basis of
any of the transactions contemplated by this Agreement and the Plan of Merger.
Antinori is not obligated to make any excess parachute payment, as defined in
Section 280G(b)(1) of the Code, nor will any excess parachute payment be deemed
to have occurred as a result of or arising out of the Merger to the extent
Section 280G of the Code is applicable to Antinori.
2.15.6 A list of all employees, officers and
development consultants of Antinori and their current compensation and benefits
as of the date of this Agreement is set forth on SCHEDULE 2.15.6, which Antinori
has delivered to Carreker.
2.15.7 All contributions due from Antinori with
respect to any of the Employee Plans have been made or accrued on Antinori's
financial statements, and no further contributions will be due or will have
accrued thereunder as of the Closing Date.
2.16 CORPORATE DOCUMENTS. Antinori has made available to
Carreker for examination all documents and information listed in SCHEDULES 2.1
through 2.22 or other exhibits called for by this Agreement that have been
requested by Carreker's legal counsel, including, without limitation, the
following: (a) copies of Antinori's Articles of Incorporation and Bylaws as
currently in effect; (b) Antinori's minute book containing all records of all
proceedings, consents, actions and meetings of Antinori's directors and
shareholders; (c) Antinori's stock ledger, journal and other records reflecting
all stock issuances and transfers; and (d) all permits, orders and consents
issued by any regulatory agency with respect to Antinori, or any securities of
Antinori, and all applications for such permits, orders and consents.
2.17 NO BROKERS. Except for fees and expenses of The
Robinson-Humphrey Company, Inc. (which fees and expenses shall not exceed
$200,000), Antinori is not obligated for the payment of fees or expenses of any
investment banker, broker or finder in connection with the origin, negotiation
or execution of this Agreement or the Plan of Merger or in connection with any
transaction provided for herein or therein.
2.18 DISCLOSURE. This Agreement, its exhibits and
schedules, and any of the certificates or documents to be delivered by Antinori
to Carreker under this Agreement, taken
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together, do not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements contained
herein and therein, in light of the circumstances under which such statements
were made, not misleading.
2.19 BOOKS AND RECORDS. The books, records and accounts of
Antinori (a) are in all material respects true and complete, (b) have been
maintained in accordance with reasonable business practices on a basis
consistent with prior years, (c) are stated in reasonable detail and accurately
and fairly reflect the transactions and disposition of the assets of Antinori,
and (d) accurately and fairly reflect the basis for the Antinori Financial
Statements.
2.20 INSURANCE. Antinori maintains fire and casualty,
workers compensation, general liability, "key man" and other insurance as listed
on SCHEDULE 2.20. Antinori has no knowledge that any such insurance will not be
renewed in the normal course.
2.21 ENVIRONMENTAL MATTERS.
2.21.1 During the period that Antinori has leased
the premises currently occupied by it and those premises occupied by it since
the date of its incorporation, Antinori has not caused any and to its knowledge,
there have been no disposals, releases or threatened releases of Hazardous
Materials (as defined below) from or any presence thereof on any such premises
that would have a material adverse effect upon the business or financial
statements of Antinori. Antinori has no knowledge of any presence, disposals,
releases or threatened releases of Hazardous Materials on or from any of such
premises, which may have occurred prior to Antinori having taken possession of
any of such premises that would have a material adverse effect upon the business
or financial statements of Antinori. For purposes of this Agreement, the terms
"DISPOSAL," "RELEASE," and "THREATENED RELEASE" have the definitions assigned
thereto by the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, 42 U.S.C. Section 9601 et seq., as amended ("CERCLA"). For the
purposes of this Section 2.21, "HAZARDOUS MATERIALS" mean any hazardous or toxic
substance, material or waste which is or becomes prior to the Closing Date (as
defined in Section 6.1) regulated under, or defined as a "hazardous substance,"
"pollutant," "contaminant," "toxic chemical," "hazardous material," "toxic
substance" or "hazardous chemical" under (i) CERCLA; (ii) the Emergency Planning
and Community Right-to-Know Act, 42 U.S.C. Section 11001 ET SEQ.; (iii) the
Hazardous Material Transportation Act, 49 U.S.C. Section 1801, ET SEQ.; (iv) the
Toxic Substances Control Act, 15 U.S.C. Section 2601 ET SEQ.; (v) the
Occupational Safety and Health Act of 1970, 29 U.S.C. Section 651 ET SEQ.;
(vi) regulations promulgated under any of the above statutes; or (vii) any
applicable state or local statute, ordinance, rule or regulation that has a
scope or purpose similar to those identified above.
2.21.2 To its knowledge, none of the premises
currently leased by Antinori or any premises previously occupied by Antinori is
in material violation of any federal, state or local law, ordinance, regulation
or order relating to industrial hygiene or to the environmental conditions in
such premises.
2.21.3 During the time that Antinori has leased the
premises currently occupied by it or any premises previously occupied by
Antinori, neither Antinori nor, to Antinori's knowledge, any third party, has
used, generated, manufactured or stored in such
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<PAGE>
premises or transported to or from such premises any Hazardous Materials that
would have a material adverse effect upon the business or financial
statements of Antinori.
2.21.4 During the time that Antinori has leased the
premises currently occupied by it or any premises previously occupied by
Antinori, there has been no litigation, proceeding or administrative action
brought or threatened in writing against Antinori by, or any settlement reached
by Antinori with, any party or parties alleging the presence, disposal, release
or threatened release of any Hazardous Materials on, from or under any of such
premises.
2.21.5 During the period that Antinori has leased
the premises currently occupied by it or any premises previously occupied by
Antinori, to the knowledge of Antinori, no Hazardous Materials have been
transported from such premises to any site or facility now listed or proposed
for listing on the National Priorities List, at 40 C.F.R. Part 300, or any list
with a similar scope or purpose published by any state authority.
2.22 GOVERNMENT CONTRACTS. Antinori has no business
contracts with any independent or executive agency, division, subdivision, audit
group or procuring office of the federal government or of a state government,
including any prime contractor of the federal government and any higher level
subcontractor of a prime contractor of the federal government, and including any
employees or agents thereof, in each case acting in such capacity.
2.23 SALE OF ANTINORI. There are currently no discussions
to which Antinori is a party relating to (a) sale of all or a material portion
of Antinori's assets or (b) any merger, consolidation, liquidation, dissolution
or similar transaction involving Antinori or in which Antinori issues more than
20% of outstanding Antinori Common Stock or in which Antinori is required to
obtain the approval of its shareholders.
3. REPRESENTATIONS AND WARRANTIES OF CARREKER
Carreker hereby represents and warrants that, except as set
forth in the Carreker Schedules:
3.1 ORGANIZATION AND GOOD STANDING. Carreker is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas and has the corporate power and authority to own, operate
and lease its properties and to carry on its business as now conducted and as
proposed to be conducted.
Carreker is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction listed in SCHEDULE 3.1, which to its
knowledge is each jurisdiction in which the ownership of its properties, the
employment of its personnel or the conduct of its business requires it to be so
qualified, except where the failure to so qualify would not have a material
adverse effect on Carreker, its assets or properties or its financial condition.
AGREEMENT AND PLAN OF MERGER - Page 15
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3.2 POWER, AUTHORIZATION AND VALIDITY.
3.2.1 Carreker has the corporate right, power,
legal capacity and authority to enter into and perform its obligations under
this Agreement and all agreements to which Carreker is or will be a party that
are required to be executed pursuant to this Agreement (the "CARREKER ANCILLARY
AGREEMENTS"). The execution, delivery and performance of this Agreement and the
Carreker Ancillary Agreements have been duly and validly approved by the
Carreker Board of Directors and Carreker's shareholders holding not less than
two-thirds of the outstanding shares entitled to vote, as required by applicable
law.
3.2.2 No filing, authorization or approval,
governmental or otherwise, is necessary to enable Carreker to enter into, and to
perform its obligations under, this Agreement and the Carreker Ancillary
Agreements, except for (a) the filing of the Plan of Merger with the Secretaries
of State of the States of Texas and Georgia (which filing has been authorized by
all necessary corporate action) and publication of notice thereof and
(b) consents required under contracts disclosed in SCHEDULE 3.5 as exceptions to
the representations made in the last sentence of Section 3.5.
3.2.3 This Agreement and the Carreker Ancillary
Agreements are, or when executed and delivered by Carreker will be, valid and
binding obligations of Carreker, enforceable against Carreker in accordance with
their respective terms, except as to the effect, if any of (a) applicable
bankruptcy and other similar laws affecting the rights of creditors generally,
and (b) rules of law governing specific performance, injunctive relief and other
equitable remedies; provided, however, that the Carreker Ancillary Agreements
will not be effective until the earlier of the date set forth therein or the
Effective Time.
3.3 CAPITALIZATION.
(a) AUTHORIZED/OUTSTANDING CAPITAL STOCK. The
authorized capital stock of Carreker consists of 12,000,000 shares of Class A
Voting Common Stock, 500,000 shares of Class B Non-Voting Common Stock, and
5,000,000 shares of Preferred Stock, each no par value, of which 960,629 shares
of Carreker Class A Common Stock and 3,167 shares of Class B Non-Voting Common
Stock, respectively, are issued and outstanding as of this date and as of the
Closing Date, and all of which issued and outstanding shares are held of record
and owned as set forth in SCHEDULE 3.3. Carreker has no issued and outstanding
shares of Preferred Stock. All issued and outstanding share of Carreker Common
Stock have been duly authorized and validly issued, are fully paid and
nonassessable, are not subject to any right of rescission and have been offered,
issued, sold and delivered by Carreker in compliance with all registration or
qualification requirements (or applicable exemptions therefrom) of applicable
federal and state securities laws.
(b) OPTIONS/RIGHTS. Except as disclosed on
SCHEDULE 3.3, there are no stock appreciation rights, options, warrants,
conversion privileges or preemptive or other rights or agreements outstanding to
purchase or otherwise acquire any of Carreker's authorized but unissued capital
stock, there are no options, warrants, conversion privileges or preemptive or
other rights or agreements to which Carreker is a party involving the purchase
or other acquisition of any share of Carreker capital stock, and there is no
liability for dividends accrued but unpaid; and there are no voting agreements,
rights of first refusal or other restrictions (other than normal
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<PAGE>
restrictions on transfer under applicable federal and state securities laws)
applicable to any of Carreker's outstanding securities.
3.4 SUBSIDIARIES. Except as disclosed on SCHEDULE 3.4,
Carreker does not have any subsidiaries or any equity interests, direct or
indirect, in any corporation, partnership, joint venture of other business
entity.
3.5 NO VIOLATION OF EXISTING AGREEMENTS. Neither the
execution and delivery of this Agreement or any Carreker Ancillary Agreement,
nor the consummation of the transactions provided for herein or therein, will
conflict with, or (with or without notice or lapse of time, or both) result in a
termination, breach, impairment or violation of, (a) any provision of the
Articles of Incorporation or Bylaws of Carreker, as currently in effect, (b) to
the knowledge of Carreker, any material instrument or contract to which Carreker
is a party or by which Carreker is bound, or (c) any federal, state, local or
foreign judgment, writ, decree, order, statute, rule or regulation applicable to
and that would have a material adverse effect on Carreker or its assets or
properties. The consummation by Carreker of the Merger will not require the
consent of any third party and will not have a material adverse effect upon any
rights, licenses, franchises, leases or agreements of Carreker pursuant to the
terms of those agreements, other than as set forth in SCHEDULE 3.5.
3.6 LITIGATION. Except as set forth in SCHEDULE 3.6, there
is no action, proceeding or investigation pending or, to Carreker's knowledge,
threatened against Carreker before any court or administrative agency that, if
determined adversely to Carreker, may reasonably be expected to have a material
adverse effect on the present or future operations or financial condition of
Carreker or in which the adverse party or parties seek to recover in excess of
$25,000 against Carreker. Except as set forth on SCHEDULE 3.6, there is no
substantial basis for any person, firm, corporation or entity to assert a claim
against Carreker based upon: (a) ownership or rights to ownership of any shares
of Carreker Common Stock, (b) any rights as a Carreker securities holder,
including, without limitation, any option or other right to acquire any Carreker
securities, any preemptive rights or any rights to notice or to vote, or (c) any
rights under any agreement between Carreker and any Carreker securities holder
or former Carreker securities holder in such holder's capacity as such.
3.7 CARREKER FINANCIAL STATEMENTS. Carreker has delivered
to Antinori the financial statements as set forth in SCHEDULE 3.7 (the "CARREKER
FINANCIAL STATEMENTS"). The Carreker Financial Statements, in all material
respects, (a) are in accordance with the books and records of Carreker,
(b) fairly and accurately represent the financial condition of Carreker at the
respective dates specified therein and the results of operations for the
respective periods specified therein in both cases in conformity with generally
accepted accounting principles, and (c) have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis. Except
as set forth in SCHEDULE 3.7, to its knowledge Carreker has no material debt,
liability or obligation of any nature, whether accrued, absolute, contingent or
otherwise, and whether due or to become due, that is not reflected, reserved
against or disclosed in the Carreker Financial Statements, except for (i) those
that are not required to be reported in accordance with such accounting
principles and (ii) those that may have been incurred after the issuance of the
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<PAGE>
unaudited balance sheet of Carreker on December 31, 1996 (the "BALANCE SHEET
DATE") in the ordinary course of its business.
Financial statements of Carreker as of January 31, 1995, January 31,
1994 and January 31, 1993 and for the years then ended, in each case meeting the
requirements of Regulation S-X promulgated by the Securities and Exchange
Commission, can be readily prepared from Carreker's financial statements as of
such dates and for such years and from other readily available information.
3.8 TAXES. Except as set forth in SCHEDULE 3.8, to its
knowledge Carreker has filed all federal, state, local and foreign tax and
information returns required to be filed, has paid all taxes required to be paid
in respect of all periods for which returns have been filed, has made all
necessary estimated tax payments, and has no material liability for taxes in
excess of the amount so paid. True, correct and complete copies of all such tax
and information returns have been provided or made available by Carreker to
Antinori. Except as set forth in SCHEDULE 3.8, to its knowledge Carreker is not
delinquent in the payment of any tax or in the filing of any tax returns, and no
deficiencies for any tax have been threatened, claimed, proposed or assessed
which have not been settled or paid. Except as set forth in SCHEDULE 3.8 no tax
return of Carreker has ever been audited by the Internal Revenue Service or any
state taxing agency or authority. For the purposes of this Section 3.8, the
terms "TAX" and "TAXES" include all federal, state local and foreign income,
gains, franchise, excise, property, sales, use, employment, license, payroll,
occupation, recording, value added or transfer taxes, governmental charges,
fees, levies or assessments (whether payable directly or by withholding), and,
with respect to such taxes, any estimated tax, interest and penalties or
additions to tax and interest on such penalties and additions to tax.
3.9 TITLE TO PROPERTIES. Carreker has good and marketable
title to all of its assets as shown on the balance sheet as of the Balance Sheet
Date included in the Carreker Financial Statements, free and clear of all liens,
charges or encumbrances (other than for taxes not yet due and payable and
Permitted Liens (as defined below)), other than such material assets set forth
on SCHEDULE 3.9 as were sold by Carreker in the ordinary course of business
since the Balance Sheet Date or which are subject to capitalized leases.
"PERMITTED LIENS" means any lien, mortgage, encumbrance or restriction that is
reflected in the Carreker Financial Statements and is not in excess of $100,000
and which does not materially detract from the value or materially interfere
with the use, as currently used, of the properties subject thereto or affected
thereby or otherwise materially impair the business operations being conducted
thereon. Except for UCC-1 financing statements naming Compass Bank as secured
party and UCC-1 financing statements filed as a precaution by equipment lessors,
there are no UCC financing statements of record naming Carreker as debtor. The
machinery and equipment included in such assets are in all material respects in
good condition and repair, normal wear and tear excepted, and all leases of real
or personal property to which Carreker is a party are fully effective and afford
Carreker peaceful and undisturbed possession of the subject matter of the lease.
To its knowledge, Carreker is not violation of any material zoning, building,
safety or environmental ordinance, regulation or requirement or other law or
regulation applicable to the operation of owned or leased properties, and
Carreker has not received any notice of such violation with which it has not
complied or had waived.
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3.10 ABSENCE OF CERTAIN CHANGES. Since the Balance Sheet
Date, except as set forth in SCHEDULE 3.10, there has not been with respect to
Carreker:
(a) to the knowledge of Carreker, any change in the
financial condition, properties, assets, liabilities business, results of
operations or prospects of Carreker, which change by itself or in conjunction
with all other such changes, whether or not arising in the ordinary course of
business, has had or can reasonably be expected to have a material adverse
effect on Carreker;
(b) to the knowledge of Carreker, any contingent
liability incurred by Carreker as guarantor or surety with respect to the
obligations of others;
(c) any material mortgage, encumbrance or lien
placed on any of the properties of Carreker;
(d) to the knowledge of Carreker, any material
obligation or liability incurred by Carreker other than in the ordinary course
of business;
(e) any purchase or sale or other disposition, or
any agreement or other arrangement for the purchase, sale or other disposition,
of any of the properties or assets of Carreker other than in the ordinary course
of business or in nonmaterial amounts;
(f) to the knowledge of Carreker, any damage,
destruction or loss, whether or not covered by insurance, materially and
adversely affecting the properties, assets or business of Carreker;
(g) any declaration, setting aside or payment of
any dividend on, or the making of any other distribution in respect of, the
capital stock of Carreker, any split, stock dividend, combination or
recapitalization of the capital stock of Carreker or any direct or indirect
redemption, purchase or other acquisition by Carreker of the capital stock of
Carreker;
(h) to the knowledge of Carreker, any material
labor dispute or claim of material unfair labor practices, any change in the
compensation payable or to become payable to any of Carreker's officers,
employees or agents earning compensation at an anticipated annual rate in excess
of $100,000, or any bonus payment or arrangement made to or with any of such
officers, employees or agents (except as previously disclosed in writing to and
approved in writing by Antinori); or any change in the compensation payable or
to become payable to any of Carreker's other officers, employees or agents other
than normal annual compensation increases in accordance with past practices or
any bonus payment or arrangement made to or with any of such other officers,
employees or agents other than normal bonuses or other arrangements made in
accordance with past practices;
(i) any material change with respect to the
management, supervisory, development or other key personnel of Carreker (the
management, supervisory, development and other key personnel of Carreker being
listed on SCHEDULE 3.10(i));
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(j) any payment or discharge of a material lien or
liability thereof, which lien or liability was not either (i) shown on the
balance sheet as of the Balance Sheet Date included in the Carreker Financial
Statements or (ii) incurred in the ordinary course of business after the Balance
Sheet Date; or
(k) to the knowledge of Carreker, any obligation,
or material liability incurred by Carreker to any of its officers, directors or
shareholders, or any loans or advances made to any of its officers, directors,
shareholders or affiliate except normal compensation and expense allowances
payable to officers.
3.11 AGREEMENTS AND COMMITMENTS. Except as set forth in
SCHEDULE 3.11, or as listed in SCHEDULE 3.12, SCHEDULE 3.15.3 or SCHEDULE 3.15.6
as required by Section 3.12, Section 3.15.3 or Section 3.15.6, respectively, to
its knowledge, Carreker is not a party or subject to any oral or written
executory agreement, obligation or commitment that is material to Carreker, its
financial condition, business or prospects or which is described below and is
not terminable within 60 days without cost or penalty to Carreker:
(a) Any contract, commitment, letter agreement,
quotation or purchase order providing for payments by or to Carreker in an
aggregate amount of (i) $100,000 or more in the ordinary course of business or
(ii) $100,000 or more not in the ordinary course of business (except for any
contracts, commitments, letter agreements, quotations or purchase orders
providing for outstanding payments to Carreker solely with respect to ongoing
software maintenance services);
(b) Any license agreement as licensor (except for
any nonexclusive software license granted by Carreker to end-user customers
where the form of the license, excluding standard immaterial deviations, has
been provided to Antinori);
(c) Any agreement by Carreker to encumber, transfer
or sell rights in or with respect to any Carreker Intellectual Property (as
defined in Section 3.12);
(d) Any agreement for the sale or lease of real or
personal property involving more than $100,000 per year,
(e) Any dealer, distributor, sales representative,
original equipment manufacturer, value added remarketer or other agreement for
the distribution of Carreker's products;
(f) Any franchise agreement or financing statement;
(g) Any stock redemption or purchase agreement;
(h) Any joint venture contract or arrangement or
any other agreement that involves a sharing of profits with other persons;
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(i) Any instrument evidencing indebtedness for
borrowed money by way of direct loan, sale of debt securities, purchase money
obligations, conditional sale, guarantee or otherwise, except for trade
indebtedness or any advance to any employee of Carreker incurred or made in
the ordinary course of business, and except as disclosed in the Carreker
Financial Statements; or
(j) Any contract containing covenants purporting
to limit Carreker's freedom to compete in any line of business in any
geographic area.
All agreements, obligations and commitments listed
in SCHEDULE 3.11, SCHEDULE 3.12, SCHEDULE 3.15.3, or SCHEDULE 3.15.6 as
required by Section 3.11, Section 3.12, Section 3.15.3 or Section 3.15.6, as
the case may be, are valid and in full force and effect in all material
respects, and except as expressly noted, a true and complete copy of each has
been delivered to Antinori. Except as noted on SCHEDULE 3.11 neither
Carreker nor, to the knowledge of Carreker, any other party is in breach of
or default under any material terms of any such agreement, obligation or
commitment. Carreker is not a party to any contract or arrangement that it
reasonably expects will have a material adverse effect on its business or
prospects.
3.12 INTELLECTUAL PROPERTY. To its knowledge, Carreker
owns all right, title and interest in, or has the right to use, all domestic
and foreign patent applications, patents, patent licenses, trademark
applications, trademarks, service marks, trade names, copyrights
applications, copyrights, trade secrets, know-how, technology, material
software licenses and other intellectual property and proprietary rights used
in or reasonably necessary to the conduct of its business as presently
conducted and the business of the development, production, marketing,
licensing and sale of commercial products using such intellectual property
and proprietary rights (excluding any infringement of any intellectual
property or property rights of a third party to the extent such infringement
may be caused by the use of such intellectual property and proprietary rights
of Carreker in combination with the intellectual property, software or other
products of Carreker) ("CARREKER INTELLECTUAL PROPERTY"). Carreker has taken
reasonable measures to protect all Carreker Intellectual Property, and,
except as set forth on SCHEDULE 3.12, Carreker has no knowledge of any
infringement of any Carreker Intellectual Property by any third party.
Notwithstanding the foregoing, the third party products listed on Schedule
3.12 (the "Carreker Third Party Products") are not owned by Carreker and
Carreker does not represent that the Carreker Third Party Products do not
infringe the intellectual property or other property rights of third parties;
Carreker represents only that it has obtained appropriate licensing rights to
the Carreker Third Party Products and its use of the Carreker Third Party
Products does not infringe the rights of Carreker's licensors. Set forth on
SCHEDULE 3.12 delivered to Carreker herewith is a true and complete list of
all copyright and trademark registrations and all patents for Carreker
Intellectual Property owned by Carreker. Carreker has no knowledge of any
material loss, cancellation, termination of expiration of any such
registration or patent except as set forth on SCHEDULE 3.12. To the
knowledge of Carreker, the business of Carreker as conducted as of the date
hereof, including (without limitation) the business of development,
production, marketing, licensing and sale of commercial products using
Carreker Intellectual Property and proprietary rights, does not infringe or
violate any of the patents, trademarks, service marks, tradenames,
copyrights, trade secrets, proprietary rights or other intellectual property
of any other person, and Carreker has not received any written or oral claim
or notice of infringement or potential infringement of the
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intellectual property of any other person which could be expected to have a
material adverse effect on Carreker's business. Notwithstanding the
foregoing, with respect to the Carreker Third Party Products, Carreker
represents only that it has obtained appropriate licensing rights to such
Carreker Third Party Products and its use of the Carreker Third Party
Products does not infringe the rights of Carreker's licensors. Carreker has
the right to manufacture all of its products and the right to use all of its
registered user lists, and to its knowledge, is not using any confidential
information or trade secrets of any former employer of any past or present
employees.
3.13 COMPLIANCE WITH LAWS. Except as set forth in
SCHEDULE 3.13 and except where the failure to comply would not have a
material adverse effect on the business, operations or financial conditions
of Carreker, to its knowledge Carreker has complied or prior to the Closing
Date will have complied, or is or will be at the Closing Date in full
compliance, in all respects material to Carreker, with all applicable laws,
ordinances, regulations and rules, and all orders, writs, injunctions,
awards, judgements and decrees, applicable to Carreker or to the assets,
properties and business of Carreker, including, without limitation (a) all
applicable federal and state securities laws and regulations, (b) all
applicable federal state and local laws, ordinances and regulations, and all
orders, writs, injunctions, awards, judgments and decrees, pertaining to (i)
the sale, licensing, leasing, ownership or management of Carreker's owned,
leased or licensed real or personal property, products or technical data,
(ii) employment or employment practices, terms and conditions of employment
or wages and hours, or (iii) safety, health, fire prevention, environmental
protection (including toxic waste disposal and related matters described in
Section 3.21), building standards, zoning or other similar matters, (c) the
Export Administration Act and regulations promulgated thereunder or other
laws, regulations, rules, orders, writs, injunctions, judgements or decrees
applicable to the export or re-export of controlled commodities or technical
data, or (d) the Immigration Reform and Control Act. To its knowledge,
Carreker has received all material permits and approvals from and has made
all material filings with third parties, including government agencies and
authorities, that are necessary to the conduct of its business as presently
conducted.
3.14 CERTAIN TRANSACTIONS AND AGREEMENTS. To Carreker's
knowledge, no person who is an officer or director of Carreker, or a member
of any officer's or director's immediate family, has any direct or indirect
ownership interest in any firm or corporation that competes with Carreker
(except with respect to any interest in less than 1% of the outstanding
voting shares of any corporation the stock of which is publicly traded).
Except as set forth in SCHEDULE 3.14, no person who is an officer or director
of Carreker, or any member of any officer's or director's immediate family,
is directly or indirectly interested in any material contract or informal
arrangement with Carreker, except for compensation for services as an
officer, director or employee of Carreker and except for the normal rights of
a shareholder. Except at set forth in SCHEDULE 3.14, none of such officers
or directors or family members has any interest in any property, real or
personal, tangible or intangible, including, without limitation, inventions,
patents, copyrights, trademarks, trade names or trade secrets, used in the
business of Carreker, except for the normal rights of shareholder.
3.15 EMPLOYEES.
3.15.1 Except as set forth in SCHEDULE 3.15.1
Carreker has no employment contract or material consulting agreement
currently in effect that is not terminable at will without
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penalty or payment of compensation by Carreker (other than agreements with
the sole purpose of providing for the confidentiality of proprietary
information or assignment of inventions).
3.15.2 Carreker (a) has never been and is not now
subject to a union organizing effort, (b) is not subject to any collective
bargaining agreement with respect to any of its employees, (c) is not subject
to any other contract, written or oral, with any trade or labor union,
employees' association or similar organization, and (d) to its knowledge has
no material current labor dispute. Carreker has no knowledge of any facts
indicating that the consummation of the transactions provided for herein will
have a material adverse effect on its labor relations, and has no knowledge
that any of its key development employees (each of whom is listed on SCHEDULE
3.10.(i)) intends to leave its employ.
3.15.3 SCHEDULE 3.15.3 delivered by Carreker to
Antinori herewith contains a list of all pension, retirement, disability,
medical, dental or other health plans, life insurance or other death benefit
plans, profit sharing, deferred compensation agreements, stock, option, bonus
or other incentive plans, vacation, sick, holiday or other paid leave plans,
severance plans or other similar employee benefits plan maintained by
Carreker (the "EMPLOYEE PLANS"), including without limitation all "employee
benefit plans" as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). Carreker has delivered true and
complete copies or descriptions of all the Employee plans of Carreker to
Antinori. Except as set forth in SCHEDULE 3.15.3, each of the Employee
Plans, and its operation and administration, is, to Carreker's knowledge, in
all material respects, in compliance with all applicable, federal, state,
local and other governmental laws and ordinances, orders, rules and
regulations, including the requirements of ERISA and the Code. Except as set
forth in SCHEDULE 3.15.3, any such Employee Plans that are employee pension
benefit plans (as defined in Section 3(2) of ERISA) which are intended to
qualify under Section 401(a)(8) of the Code have received favorable
determination letters that such plans satisfy the qualification requirements
of the Tax Equity and Fiscal Responsibility Act of 1982, the Deficit
Reduction Act of 1994 and the Retirement Equity Act of 1984. In addition, to
its knowledge, Carreker has never been a participant in any "prohibited
transaction," within the meaning of Section 406 of ERISA with respect to any
employee pension benefit plan (as defined in Section 3(2) of ERISA) which
Carreker sponsors as employer or in which Carreker participates as an
employer, which was not otherwise exempt pursuant to Section 408 of ERISA
(including any individual exemption granted under Section 408(a) of ERISA),
or which could result in an excise tax under the Code. The group health
plans as defined in Section 4980B(g) of the Code, that benefit employees of
Carreker are in material compliance with the continuation coverage
requirements of subsection 4980B of the Code. To the knowledge of Carreker,
there are no outstanding violations of Section 4980B of the Code with respect
to any Employee Plan, covered employees or qualified beneficiaries. Except
as set forth in SCHEDULE 3.15.3, no employee of Carreker and no person
subject to any Carreker health plan has made medical claims during the twelve
months preceding the date hereof for $10,000 or more, in the aggregate, or,
to Carreker's knowledge, has any catastrophic illness.
3.15.4 To Carreker's knowledge, no employee of
Carreker is in material violation of (a) any term of any employment contract,
patent disclosure agreement or noncompetition agreement or (b) any other
contract or agreement, or any restrictive covenant, relating to the right of
any such employee to be employed by Carreker or to use trade secrets or
AGREEMENT AND PLAN OF MERGER - Page 23
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proprietary information of others. To Carreker's knowledge, the employment
of any employee of Carreker does not of itself subject Carreker to any
liability to any third party.
3.15.5 Except as set forth in SCHEDULE 3.15.5,
Carreker is not a party to any (a) agreement with any executive officer or
other key employee of Carreker (i) the benefits of which are contingent, or
the terms of which are materially altered, upon the occurrence of a
transaction involving Carreker in the nature of any of the transactions
contemplated by this Agreement and the Plan of Merger, (ii) providing any
term of employment or compensation guarantee, or (iii) providing severance
benefits or other benefits after the termination of employment of such
employee regardless of the reason for such termination of employment, or (b)
agreement or plan, including, without limitation, any stock option plan,
stock appreciation rights plan or stock purchase plan, any of the benefits of
which will be materially increased, or the vesting of benefits of which will
be materially accelerated, by the occurrence of any of the transactions
contemplated by this Agreement and the Plan of Merger or the value of any of
the benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement and the Plan of Merger. Carreker
is not obligated to make any excess parachute payment, as defined in Section
280G(b)(1) of the Code, nor will any excess parachute payment be deemed to
have occurred as a result of or arising out of the Merger to the extent
Section 280G of the Code is applicable to Carreker.
3.15.6 A list of all employees, officers and
development consultants of Carreker and their current compensation and
benefits as of the date of this Agreement is set forth on SCHEDULE 3.15.6,
which Carreker has delivered to Antinori.
3.15.7 All contributions due from Carreker with
respect to any of the Employee Plans have been made or accrued on Carreker's
financial statements, and no further contributions will be due or will have
accrued thereunder as of the Closing Date.
3.16 CORPORATE DOCUMENTS. Carreker has made available to
Antinori for examination all documents and information listed in SCHEDULES
3.1 through 3.22 or other exhibits called for by this Agreement that have
been requested by Antinori's legal counsel, including, without limitation,
the following: (a) copies of Carreker's Articles of Incorporation and Bylaws
as currently in effect; (b) Carreker's minute book containing all records of
all proceedings, consents, actions and meetings of Carreker's directors and
shareholders; (c) Carreker's stock ledger, journal and other records
reflecting all stock issuances and transfers; and (d) all permits, orders and
consents issued by any regulatory agency with respect to Carreker, or any
securities of Carreker, and all applications for such permits, orders and
consents.
3.17 NO BROKERS. Carreker is not obligated for the
payment of fees or expenses of any investment banker, broker or finder in
connection with the origin, negotiation or execution of this Agreement or the
Plan of Merger or in connection with any transaction provided for herein or
therein.
3.18 DISCLOSURE. This Agreement, its exhibits and
schedules, and any of the certificates or documents to be delivered by
Carreker to Antinori under this Agreement, taken together, do not contain any
untrue statement of a material fact or omit to state a material fact
AGREEMENT AND PLAN OF MERGER - Page 24
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necessary in order to make the statements contained herein and therein, in
light of the circumstances under which such statements were made, not
misleading.
3.19 BOOKS AND RECORDS. The books, records and accounts
of Carreker (a) are in all material respects true and complete, (b) have been
maintained in accordance with reasonable business practices on a basis
consistent with prior years, (c) are stated in reasonable detail and
accurately and fairly reflect the transactions and disposition of the assets
of Carreker, and (d) accurately and fairly reflect the basis for the Carreker
Financial Statements.
3.20 INSURANCE. Carreker maintains fire and casualty,
workers compensation, general liability, "key man" and other insurance as
listed on SCHEDULE 3.20. Carreker has no knowledge that any such insurance
will not be renewed in the normal course.
3.21 ENVIRONMENTAL MATTERS.
3.21.1 During the period that Carreker has leased
the premises currently occupied by it and those premises occupied by it since
the date of its incorporation, Carreker has not caused any and to its
knowledge, there have been no disposals, releases or threatened releases of
Hazardous Materials (as defined below) from or any presence thereof on any
such premises that would have a material adverse effect upon the business or
financial statements of Carreker. Carreker has no knowledge of any presence,
disposals, releases or threatened releases of Hazardous Materials on or from
any of such premises, which may have occurred prior to Carreker having taken
possession of any of such premises that would have a material adverse effect
upon the business or financial statements of Carreker. For purposes of this
Agreement, the terms "DISPOSAL," "RELEASE," and "THREATENED RELEASE" have the
definitions assigned thereto by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 et seq., as
amended ("CERCLA"). For the purposes of this Section 3.21.1, "HAZARDOUS
MATERIALS" mean any hazardous or toxic substance, material or waste which is
or becomes prior to the Closing Date (as defined in Section 6.1) regulated
under, or defined as a "hazardous substance," "pollutant," "contaminant,"
"toxic chemical," "hazardous material," "toxic substance" or "hazardous
chemical" under (i) CERCLA; (ii) the Emergency Planning and Community
Right-to-Know Act, 42 U.S.C. Section 11001 ET SEQ.; (iii) the Hazardous
Material Transportation Act, 49 U.S.C. Section 1801, ET SEQ.; (iv) the Toxic
Substances Control Act, 15 U.S.C.Section 2601 ET SEQ.; (v) the Occupational
Safety and Health Act of 1970, 29 U.S.C. Section 651 ET SEQ.; (vi)
regulations promulgated under any of the above statutes; or (vii) any
applicable state or local statute, ordinance, rule or regulation that has a
scope or purpose similar to those identified above.
3.21.2 To its knowledge, none of the premises
currently leased by Carreker or any premises previously occupied by Carreker
is in material violation of any federal, state or local law, ordinance,
regulation or order relating to industrial hygiene or to the environmental
conditions in such premises.
3.21.3 During the time that Carreker has leased
the premises currently occupied by it or any premises previously occupied by
Carreker, neither Carreker nor, to Carreker's knowledge, any third party, has
used, generated, manufactured or stored in such
AGREEMENT AND PLAN OF MERGER - Page 25
<PAGE>
premises or transported to or from such premises any Hazardous Materials that
would have a material adverse effect upon the business or financial
statements of Carreker.
3.21.4 During the time that Carreker has leased
the premises currently occupied by it or any premises previously occupied by
Carreker, there has been no litigation, proceeding or administrative action
brought or threatened in writing against Carreker, or any settlement reached
by Carreker with, any party or parties alleging the presence, disposal,
release or threatened release of any Hazardous Materials on, from or under
any of such premises.
3.21.5 During the period that Carreker has leased
the premises currently occupied by it or any premises previously occupied by
Carreker, to the knowledge of Carreker, no Hazardous Materials have been
transported from such premises to any site or facility now listed or proposed
for listing on the National Priorities List, at 40 C.F.R. Part 300, or any
list with a similar scope or purpose published by any state authority.
3.22 GOVERNMENT CONTRACTS. Carreker has no business
contracts with any independent or executive agency, division, subdivision,
audit group or procuring office of the federal government or of a state
government, including any prime contractor of the federal government and any
higher level subcontractor of a prime contractor of the federal government,
and including any employees or agents thereof, in each case acting in such
capacity.
3.23 SALE OF CARREKER. There are currently no
discussions to which Carreker is a party relating to (a) sale of all or a
material portion of Carreker's assets or (b) except for (i) the sale of
Carreker Common Stock to Science Applications International Corporation
("SAIC"), (ii) subsequent discussions therewith in connection with SAIC's
rights of first refusal arising from the transactions contemplated hereby,
and (iii) discussions with other prospective purchasers of treasury shares of
Carreker Common Stock, any merger, consolidation, liquidation, dissolution or
similar transaction involving Carreker or in which Carreker issues more than
20% of outstanding Carreker Common Stock or in which Carreker is required to
obtain the approval of its shareholders.
4. ANTINORI PRE-CLOSING COVENANTS
During the period from the date of this Agreement until the
Effective Time, Antinori covenants to and agrees with Carreker as follows:
4.1 ADVISE OF CHANGES. Antinori will promptly advise
Carreker, in writing, (a) of any event occurring subsequent to the date of
this Agreement that would render any representation or warranty of Antinori
contained in this Agreement, if made on or as of the date of such event or
the Closing Date, untrue or inaccurate in any material respect, and (b) of
any material adverse change in Antinori's financial condition, properties,
assets, liabilities, business, results of operations or prospects.
4.2 MAINTENANCE OF BUSINESS. The parties understand and
acknowledge that it is their intent to work closely together during the
period from the date hereof until the Closing
AGREEMENT AND PLAN OF MERGER - Page 26
<PAGE>
Date. If Antinori becomes aware of a material deterioration in the
relationship with any material customer, supplier or key employee, it will
promptly bring such information to the attention of Carreker in writing and,
if requested by Carreker, will exert all reasonable efforts to restore the
relationship.
4.3 CONDUCT OF BUSINESS. Except as provided otherwise
herein or as approved or recommended by Carreker, Antinori will not, without
the prior written consent of Carreker, which consent shall not be
unreasonably withheld:
(a) borrow any money except in the ordinary
course of business consistent with past practice;
(b) enter into any transaction not in the
ordinary course of business or enter into any transaction or make any
commitment involving an expense of Antinori or capital expenditure by
Antinori in excess of $100,000;
(c) encumber or permit to be encumbered any
of its assets except in the ordinary course of its business consistent with
past practice and to an extent which is not material;
(d) dispose of any of its material assets
except in the ordinary course of business consistent with past practice;
(e) enter into any material lease or
contract for the purchase or sale of any property, real or personal, tangible
or intangible, except in the ordinary course of business consistent with past
practice;
(f) fail to maintain its equipment and other
assets in good working condition and repair according to the standards it has
maintained to the date of this Agreement, subject only to ordinary wear and
tear;
(g) pay any bonus, royalty, increased salary
(except for annual increases in the ordinary course of business consistent
with past practices and disclosed to Carreker in writing) or special
remuneration to any officer, employee or consultant (except pursuant to
existing arrangements heretofore disclosed in writing to Carreker) or enter
into any new employment or consulting agreement with any such persons, or
enter into any new agreement or plan of the type described in Section 2.15.3;
(h) change accounting methods except as
necessitated by changes which Antinori is required in order to prepare its
federal, state and local tax returns;
(i) declare, set aside or pay any cash or
stock dividend or other distribution in respect of capital stock or redeem or
otherwise acquire any of its capital stock;
(j) amend or terminate any contract,
agreement or license to which it is a party (except pursuant to arrangements
previously disclosed in writing to Carreker)
AGREEMENT AND PLAN OF MERGER - Page 27
<PAGE>
except those amended or terminated in the ordinary course of business,
consistent with past practice, and which are not material in amount or effect;
(k) lend any amount to any person or entity,
other than advances for travel and expenses which are incurred in the
ordinary course of business consistent with past practices, not material in
amount, which travel and expenses shall be documented by receipts for the
claimed amounts;
(l) guarantee or act as a surety for any
obligation except for the endorsement of checks and other negotiable
instruments in the ordinary course of business, consistent with past practice;
(m) waive or release any material right or
claim except in the ordinary course of business, consistent with past
practice;
(n) issue or sell any shares of its capital
stock of any class or any other of its securities, or issue or create any
warrants, obligations, subscriptions, options, convertible securities, stock
appreciation rights or other commitments to issue shares of capital stock, or
take any action other than this transaction to call into question the
validity of its election for treatment as a sub-chapter "S" corporation or to
accelerate the vesting of any outstanding option or other security (except
pursuant to existing arrangements disclosed in writing to Carreker before the
date of this Agreement);
(o) split or combine the outstanding shares
of its capital stock of any class or enter into any recapitalization
affecting the number of outstanding shares of its capital stock of any class
or affecting any other of its securities;
(p) except for the Merger, merge,
consolidate or reorganize with, or acquire any entity;
(q) amend its Articles of Incorporation or
Bylaws except as may be required by law;
(r) agree to any audit assessment by any tax
authority or file any federal or state income or franchise tax return unless
copies of such returns have been delivered to Carreker for its review prior
to filing;
(s) license any of Antinori's technology or
any Antinori Intellectual Property, except in the ordinary course of business
consistent with past practices;
(t) change any insurance coverage except in
the ordinary course of business consistent with past practices;
(u) terminate the employment of any key
employee listed in Schedule 2.10(i); or
AGREEMENT AND PLAN OF MERGER - Page 28
<PAGE>
(v) agree to do any of the things described
in the preceding Sections 4.3(a) through 4.3(u).
4.4 CERTAIN AGREEMENTS. Antinori will use all
reasonable efforts to cause all present employees of Antinori to execute
Carreker's forms of assignments of copyright and other intellectual property
rights, noncompetition and trade secret agreements and confidentiality
agreements.
4.5 REGULATORY APPROVALS. Antinori will execute and
file, or join in the execution and filing, of any application or other
document that may be necessary in order to obtain the authorization, approval
or consent of any governmental body, federal, state, local or foreign, which
may be reasonably required, or which Carreker may reasonably request, in
connection with the consummation of the transactions provided for in this
Agreement. Antinori will use all reasonable efforts to obtain or assist
Carreker in obtaining all such authorizations, approvals and consents.
4.6 LITIGATION. Antinori will notify Carreker in
writing promptly after learning of any action, suit, proceeding or
investigation by or before any court, board or governmental agency, initiated
by or against Antinori or threatened against it.
4.7 NO OTHER NEGOTIATIONS. From the date hereof until
the termination of this Agreement (provided such termination is not in breach
of this Agreement) or the consummation of the Merger, Antinori will not, and
will not authorize any officer, director, employee or affiliate of Antinori,
or any other person, on its behalf, directly or indirectly, to (a) solicit,
facilitate, discuss or encourage any offer, inquiry or proposal received from
any party other than Carreker concerning the possible disposition of all or
any substantial portion of Antinori's business, assets or capital stock by
merger, sale or any other means or to otherwise solicit, facilitate, discuss
or encourage any such disposition (other than the Merger), or (b) provide any
confidential information to or negotiate with any third party other than
Carreker in connection with any offer, inquiry or proposal concerning any
such disposition. Antinori will immediately notify Carreker of any such
offer, inquiry or proposal.
4.8 ACCESS TO INFORMATION. Until the Closing Date and
subject to the terms and conditions hereof relating to the confidentiality
and use of confidential and proprietary information, Antinori will provide
Carreker and its agents with reasonable access to the files, books, records
and offices of Antinori, including, without limitation, any and all
information relating to Antinori taxes, commitments, contracts, leases,
licenses, real, personal and intangible property, and financial condition,
and specifically including, without limitation, access to Antinori source
code reasonably necessary for Carreker to complete its diligence review of
Antinori products and technology. Antinori will cause it accountants to
cooperate with Carreker and its agents in making available all financial
information reasonably requested, including without limitation the right to
examine all working papers pertaining to all financial statements prepared or
audited by such accountants.
4.9 SATISFACTION OF CONDITIONS PRECEDENT. Antinori will
use all reasonable efforts to satisfy or cause to be satisfied all the
conditions precedent which are set forth in
AGREEMENT AND PLAN OF MERGER - Page 29
<PAGE>
Section 7, and Antinori will use all reasonable efforts to cause the
transactions provided for in this Agreement to be consummated, and, without
limiting the generality of the foregoing, to obtain all consents and
authorizations of third parties and to make all filings with, and give all
notices to, third parties that may be necessary or reasonably required on its
part in order to effect the transactions provided for herein.
4.10 NOTIFICATION OF EMPLOYEE PROBLEMS. Antinori will
promptly notify Carreker if any of Antinori's officers becomes aware that any
of the key employees listed in SCHEDULE 2.10(I) intends to leave its employ.
4.11 ANTINORI AFFILIATE AGREEMENTS. To facilitate the
treatment of the Merger for accounting purposes as a "pooling of interests,"
Antinori will use all reasonable efforts to cause each of its affiliates to
execute and deliver to Carreker, on or prior to Closing, a written agreement
(the "ANTINORI AFFILIATE AGREEMENT") in substantially the form of EXHIBIT G
providing that such person will make no disposition of Carreker Common Stock
(a) in the 30-day period prior to the Effective Time or (b) after the
Effective Time until Carreker shall have distributed to its shareholders of
record the first report of quarterly financial statements that include the
combined financial results of Carreker and Antinori for a period of at least
30 days of combined operations.
5. CARREKER PRE-CLOSING COVENANTS
During the period from the date of this Agreement until the
Effective Time, Carreker covenants to and agrees with Antinori as follows:
5.1 ADVISE OF CHANGES. Carreker will promptly advise
Antinori, in writing, (a) of any event occurring subsequent to the date of
this Agreement that would render any representation or warranty of Carreker
contained in this Agreement, if made on or as of the date of such event or
the Closing Date, untrue or inaccurate in any material respect, and (b) of
any material adverse change in Carreker's financial condition, properties,
assets, liabilities, business, results of operations or prospects.
5.2 MAINTENANCE OF BUSINESS. The parties understand and
acknowledge that it is their intent to work closely together during the
period from the date hereof until the Closing Date. If Carreker becomes
aware of a material deterioration in the relationship with any material
customer, supplier or key employee, it will promptly bring such information
to the attention of Antinori in writing and, if requested by Antinori, will
exert all reasonable efforts to restore the relationship.
5.3 CONDUCT OF BUSINESS. Except as provided otherwise
herein or as approved or recommended by Antinori, Carreker will not, without
the prior written consent of Antinori, which consent shall not be
unreasonably withheld:
(a) borrow any money except in the ordinary
course of business consistent with past practice;
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<PAGE>
(b) enter into any transaction not in the
ordinary course of business or enter into any transaction or make any commitment
involving an expense of Carreker or capital expenditure by Carreker in excess of
$100,000;
(c) encumber or permit to be encumbered any of
its assets except in the ordinary course of its business consistent with past
practice and to an extent which is not material;
(d) dispose of any of its material assets
except in the ordinary course of business consistent with past practice;
(e) enter into any material lease or contract
for the purchase or sale of any property, real or personal, tangible or
intangible, except in the ordinary course of business consistent with past
practice;
(f) fail to maintain its equipment and other
assets in good working condition and repair according to the standards it has
maintained to the date of this Agreement, subject only to ordinary wear and
tear;
(g) pay any bonus, royalty, increased salary
(except for annual increases in the ordinary course of business consistent with
past practices and disclosed to Antinori in writing) or special remuneration to
any officer, employee or consultant (except pursuant to existing arrangements
heretofore disclosed in writing to Antinori) or enter into any new employment or
consulting agreement with any such persons, or enter into any new agreement or
plan of the type described in Section 3.15.3;
(h) change accounting methods except as
necessitated by changes which Carreker is required in order to prepare its
federal, state and local tax returns;
(i) declare, set aside or pay any cash or
stock dividend or other distribution in respect of capital stock or redeem or
otherwise acquire any of its capital stock (except pursuant to agreements
disclosed herein to Antinori);
(j) amend or terminate any contract, agreement
or license to which it is a party (except pursuant to arrangements previously
disclosed in writing to Antinori) except those amended or terminated in the
ordinary course of business, consistent with past practice, and which are not
material in amount or effect;
(k) lend any amount to any person or entity,
other than advances for travel and expenses which are incurred in the ordinary
course of business consistent with past practices, not material in amount, which
travel and expenses shall be documented by receipts for the claimed amounts;
(l) guarantee or act as a surety for any
obligation except for the endorsement of checks and other negotiable instruments
in the ordinary course of business, consistent with past practice;
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<PAGE>
(m) waive or release any material right or
claim except in the ordinary course of business, consistent with past practice;
(n) issue or sell any shares of its capital
stock of any class or any other of its securities, or issue or create any
warrants, obligations, subscriptions, options, convertible securities, stock
appreciation rights or other commitments to issue shares of capital stock, or
take any action other than this transaction to accelerate the vesting of any
outstanding option or other security (except to facilitate treatment of the
Merger as a "pooling of interests" for accounting purposes and except pursuant
to existing arrangements disclosed in writing to Antinori before the date of
this Agreement);
(o) split or combine the outstanding shares of
its capital stock of any class or enter into any recapitalization affecting the
number of outstanding shares of its capital stock of any class or affecting any
other of its securities;
(p) except for the Merger, merge, consolidate
or reorganize with, or acquire any entity;
(q) amend its Articles of Incorporation or
Bylaws except as may be required by law;
(r) agree to any audit assessment by any tax
authority or file any federal or state income or franchise tax return unless
copies of such returns have been delivered to Antinori for its review prior to
filing;
(s) license any of Carreker's technology or
any Carreker Intellectual Property, except in the ordinary course of business
consistent with past practices;
(t) change any insurance coverage except in
the ordinary course of business consistent with past practices;
(u) terminate the employment of any key
employee listed in Schedule 3.10(i); or
(v) agree to do any of the things described in
the preceding Sections 5.3(a) through 5.3(u).
5.4 REGULATORY APPROVALS. Carreker will execute and file,
or join in the execution and filing, of any application or other document that
may be necessary in order to obtain the authorization, approval or consent of
any governmental body, federal, state, local or foreign, which may be reasonably
required, or which Antinori may reasonably request, in connection with the
consummation of the transactions provided for in this Agreement. Carreker will
use all reasonable efforts to obtain or assist Antinori in obtaining all such
authorizations, approvals and consents.
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<PAGE>
5.5 LITIGATION. Carreker will notify Antinori in writing
promptly after learning of any action, suit, proceeding or investigation by or
before any court, board or governmental agency, initiated by or against Carreker
or threatened against it.
5.6 NO OTHER NEGOTIATIONS. From the date hereof until the
termination of this Agreement (provided such termination is not in breach of
this Agreement) or the consummation of the Merger, Carreker will not, and will
not authorize any officer, director, employee or affiliate of Carreker, or any
other person, on its behalf, directly or indirectly, to (a) solicit, facilitate,
discuss or encourage any offer, inquiry or proposal received from any party
other than Antinori concerning the possible disposition of all or any
substantial portion of Carreker's business, assets or capital stock by merger,
sale or any other means or to otherwise solicit, facilitate, discuss or
encourage any such disposition (other than the Merger), or (b) provide any
confidential information to or negotiate with any third party other than
Antinori in connection with any offer, inquiry or proposal concerning any such
disposition. Carreker will immediately notify Antinori of any such offer,
inquiry or proposal.
5.7 ACCESS TO INFORMATION. Until the Closing Date and
subject to the terms and conditions hereof relating to the confidentiality and
use of confidential and proprietary information, Carreker will provide Antinori
and its agents with reasonable access to the files, books, records and offices
of Carreker, including, without limitation, any and all information relating to
Carreker taxes, commitments, contracts, leases, licenses, real, personal and
intangible property, and financial condition, and specifically including,
without limitation, access to Carreker source code reasonably necessary for
Antinori to complete its diligence review of Carreker products and technology.
Carreker will cause it accountants to cooperate with Antinori and its agents in
making available all financial information reasonably requested, including
without limitation the right to examine all working papers pertaining to all
financial statements prepared or audited by such accountants.
5.8 SATISFACTION OF CONDITIONS PRECEDENT. Carreker will
use all reasonable efforts to satisfy or cause to be satisfied all the
conditions precedent which are set forth in Section 8, and Carreker will use all
reasonable efforts to cause the transactions provided for in this Agreement to
be consummated, and, without limiting the generality of the foregoing, to obtain
all consents and authorizations of third parties and to make all filings with,
and give all notices to, third parties that may be necessary or reasonably
required on its part in order to effect the transactions provided for herein.
5.9 NOTIFICATION OF EMPLOYEE PROBLEMS. Carreker will
promptly notify Antinori if any of Carreker's officers becomes aware that any of
the key employees listed in SCHEDULE 3.10(i) intends to leave its employ.
5.10 CARREKER AFFILIATE AGREEMENTS. To facilitate the
treatment of the Merger for accounting purposes as a "pooling of interests,"
Carreker will use all reasonable efforts to cause each of its affiliates to
execute and deliver to Carreker, on or prior to Closing, a written agreement
(the "CARREKER AFFILIATE AGREEMENT") in substantially the form of EXHIBIT H
providing that such person will make no disposition of Carreker Common Stock
(a) in the 30-day period prior to the Effective Time or (b) after the Effective
Time until Antinori shall have distributed
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to its shareholders of record its first report of financial statements that
include the combined financial results of Antinori and Carreker for a period
of at least 30 days of combined operations.
6. CLOSING MATTERS
6.1 THE CLOSING. Subject to termination of this Agreement
as provided in Section 9, the closing of the transactions provided for herein
(the "CLOSING") will take place at the office of Locke Purnell Rain Harrell (A
Professional Corporation), 2200 Ross Avenue, Suite 2200, Dallas, Texas 75201 at
9:00 a.m., Dallas, Texas time on or before January 31, 1997, or, if all
conditions to Closing have not been satisfied or waived by such date, such other
place, time and date as Antinori and Carreker may mutually select (the "CLOSING
DATE"). Prior to or concurrently with the Closing, the Plan of Merger and such
officers' certificates or other documents as may be required to effectuate the
Merger will be filed in the offices of the Georgia Secretary of State and the
Texas Secretary of State. Accordingly, the Merger will become effective at the
Effective Time.
6.2 EXCHANGE OF CERTIFICATES.
6.2.1 As of the Effective Time, all shares of
Antinori Common Stock that are outstanding immediately prior thereto will, by
virtue of the Merger and without further action, cease to exist, and all such
shares will be converted into the right to receive from Carreker the number of
shares of Carreker Class A Common Stock determined as set forth in Section 1.1,
subject to Sections 1.2 and 1.3, as identified on EXHIBIT 1.1.1.
6.2.2 At and after the Effective Time, each
certificate representing outstanding shares of Antinori Common Stock will
represent the number of shares of Carreker Class A Common Stock into which such
shares of Antinori Common Stock have been converted, and such shares of Carreker
Class A Common Stock will be deemed registered in the name of the holder of such
certificate. As soon as practicable after the Effective Time, the holder of
shares of Antinori Common Stock will surrender (a) the certificates of such
shares (the "ANTINORI CERTIFICATES") to Carreker for cancellation or (b) an
affidavit of lost (or non-issued) certificate and agreement to indemnify in form
satisfactory to Carreker (an "AFFIDAVIT"). Promptly following the Effective
Time and receipt of the Antinori Certificates and of any Affidavits, Carreker
will issue to such surrendering holder certificate(s) for the number of shares
of Carreker Class A Common Stock to which such holder is entitled pursuant to
Section 1.1, subject to Section 1.2, less the shares of Carreker Class A Common
Stock deposited into escrow pursuant to Section 1.3, and Carreker will
distribute any cash payable under Section 1.2.
6.2.3 All shares of Carreker Class A Common Stock
(and, if applicable, cash in lieu of fractional shares) delivered upon the
surrender of Antinori Certificates in accordance with the terms hereof will be
delivered to the registered holder or placed in escrow with Escrow Agent, as
applicable. After the Effective Time, there will be no further registration of
transfers of the shares of Antinori Common Stock on the stock transfer books of
Antinori. If, after the Effective Time, Antinori Certificates are presented for
transfer or for any other
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reason, there will be canceled and exchanged and certificates therefor will
be delivered or placed in escrow as provided in this Section 6.2.
6.2.4 Until Antinori Certificates representing
Antinori Common Stock outstanding prior to the Merger are surrendered pursuant
to Section 6.2.2 above, such certificates will be deemed, for all purposes, to
evidence ownership of (a) the number of shares of Carreker Class A Common Stock
into which the shares of Antinori Common Stock will have been converted, subject
to the obligation to place a portion thereof in escrow as required hereby, and
(b) if applicable, cash in lieu of fractional shares.
7. CONDITIONS TO OBLIGATIONS OF ANTINORI
The obligations of Antinori hereunder are subject to the
fulfillment or satisfaction on, and as of the Closing, of each of the following
conditions (any one or more of which may be waived by Antinori, but only in a
writing signed on behalf of Antinori by its Chairman of the Board):
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Carreker set forth in Section 3 shall be true
and complete in all material respects as of the Closing with the same force and
effect as if they had been made at the Closing, and Antinori shall have received
a certificate to such effect executed on behalf of Carreker by its Chief
Executive Officer.
7.2 COVENANTS. Carreker shall have performed and complied
in all material respects with all of its covenants contained in Section 5 on or
before the Closing and Antinori shall have received a certificate to such effect
signed on behalf of Carreker by its Chief Executive Officer.
7.3 COMPLIANCE WITH LAW. There shall be no order, decree,
or ruling by any court or governmental agency or threat thereof, or any other
fact or circumstance, that would prohibit or render illegal the transactions
provided for in this Agreement.
7.4 OPINION OF CARREKER'S COUNSEL. Antinori shall have
received from Locke Purnell Rain Harrell (A Professional Corporation), counsel
to Carreker, an opinion substantially in the form of EXHIBIT I.
7.5 NO LITIGATION. No litigation or proceeding shall be
pending that will have the probable effect of enjoining or preventing the
consummation of any of the transactions provided for in this Agreement. No
litigation or proceeding shall be pending which could reasonably be expected to
have a material adverse effect on the financial condition or results of
operations of Carreker that has not previously been disclosed to Antinori
herein.
7.6 DOCUMENTS. Antinori shall have received all written
consents, assignments, waivers, authorizations or other certificates reasonably
deemed necessary by Antinori's legal counsel to provide for the continuation in
full force and effect of any and all material contracts and leases of Antinori
and for Antinori to consummate the transactions contemplated hereby.
AGREEMENT AND PLAN OF MERGER - Page 35
<PAGE>
7.7 POOLING OPINION. Antinori shall have received letters
from Ernst & Young L.L.P. and Arthur Andersen L.L.P. regarding the
appropriateness of pooling of interests accounting for the Merger under
Accounting Principles Board No. 16 as consummated in accordance with this
Agreement in the forms of EXHIBIT 7.7.
7.8 CERTAIN AGREEMENTS. J.D. Carreker shall confirm his
execution and delivery to Carreker of, and the enforceability against him of,
the various agreements and documents specified in Recital E.
8. CONDITIONS TO OBLIGATIONS OF CARREKER
The obligations of Carreker hereunder are subject to the
fulfillment or satisfaction on, and as of the Closing, of each of the following
conditions (any one or more of which may be waived by Carreker, but only in a
writing signed on behalf of Carreker by its Chief Executive Officer):
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Antinori set forth in Section 2 shall be true
and complete in all material respects as of the Closing with the same force and
effect as if they had been made at the Closing, and Carreker shall have received
a certificate to such effect executed on behalf of Antinori by its Chairman of
the Board.
8.2 COVENANTS. Antinori shall have performed and complied
in all material respects with all of its covenants contained in Section 4 on or
before the Closing and Carreker shall have received a certificate to such effect
signed on behalf of Antinori by its Chairman of the Board.
8.3 COMPLIANCE WITH LAW. There shall be no order, decree,
or ruling by any court or governmental agency or threat thereof, or any other
fact or circumstance, that would prohibit or render illegal the transactions
provided for in this Agreement.
8.4 OPINION OF ANTINORI'S COUNSEL. Carreker shall have
received from Morris, Manning & Martin, L.L.P., counsel to Antinori, an opinion
substantially in the form of EXHIBIT J.
8.5 NO LITIGATION. No litigation or proceeding shall be
pending that will have the probable effect of enjoining or preventing the
consummation of any of the transactions provided for in this Agreement. No
litigation or proceeding shall be pending which could reasonably be expected to
have a material adverse effect on the financial condition or results of
operations of Antinori that has not previously been disclosed to Carreker
herein.
8.6 DOCUMENTS. Carreker shall have received all written
consents, assignments, waivers, authorizations or other certificates reasonably
deemed necessary by Carreker's legal counsel to provide for the continuation in
full force and effect of any and all material contracts
AGREEMENT AND PLAN OF MERGER - Page 36
<PAGE>
and leases of Antinori and Carreker and for Carreker to consummate the
transactions contemplated hereby.
8.7 POOLING OPINION. Carreker shall have received from
Arthur Andersen L.L.P. an opinion, in the form of EXHIBIT 8.7, that Antinori
qualifies as an entity that may be a party to a business combination for which
the pooling of interests method of accounting would be available.
8.8 CERTAIN AGREEMENTS. Each individual identified in
Recital D shall have confirmed his or her execution and delivery to Carreker of,
and the enforceability against him or her of, the various agreements and
documents specified in such recital as executed and delivered by him or her. In
addition, each of Lawrence D. Duckworth, Michael Israel and Frank Basset shall
have entered into agreements in form and substance reasonably acceptable to
Carreker with regard to their employment by Antinori prior to the Closing.
9. TERMINATION OF AGREEMENT
9.1 TERMINATION. This Agreement may be terminated at any
time prior to the Effective Time:
(a) by the mutual written consent of Carreker
and Antinori;
(b) Unless otherwise specifically provided
herein or agreed in writing by Carreker and Antinori, this Agreement will be
terminated if all the conditions to Closing have not been satisfied or waived on
or before February 1, 1997 (the "FINAL DATE") other than as a result of a breach
of this Agreement by the terminating party or a breach by any of the affiliates
of the terminating party of the Affiliate Agreements;
(c) by Antinori, if there has been a breach by
Carreker of any representation, warranty, covenant or agreement set forth in
this Agreement on the part of Carreker, or if any representation of Carreker
will have become untrue, in either case that has or can reasonably be expected
to have a material adverse effect on Carreker and which Carreker fails to cure
within a reasonable time, not to exceed 30 days, after written notice thereof
(except that no cure period will be provided for a breach by Carreker which by
its nature cannot be cured);
(d) by Carreker, if there has been a breach by
Antinori of any representation, warranty, covenant or agreement set forth in
this Agreement on the part of Antinori, or if any representation of Antinori
will have become untrue, in either case that has or can reasonably be expected
to have a material adverse effect on Antinori and which Antinori fails to cure
within a reasonable time not to exceed 30 days after written notice thereof
(except that no cure period will be provided for a breach by Antinori which by
its nature cannot by cured); or
AGREEMENT AND PLAN OF MERGER - Page 37
<PAGE>
(e) by any party, if a permanent injunction or
other order by any federal or state court that would make illegal or otherwise
restrain or prohibit the consummation of the Merger will have been issued and
will have become final and nonappealable.
Any termination of this Agreement under this Section 9.1 will
be effective by the delivery of written notice of the terminating party to the
other parties.
9.2 CERTAIN CONTINUING OBLIGATIONS. Following any
termination of this Agreement pursuant to this Section 9, the parties will
continue to perform their respective obligations under Section 11 but will not
be required to continue to perform their other covenants under this Agreement.
10. SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION AND REMEDIES,
CONTINUING COVENANTS
10.1 SURVIVAL OF REPRESENTATIONS.
10.1.1 ANTINORI'S REPRESENTATIONS. All
representations, warranties and covenants of Antinori contained in this
Agreement will remain operative and in full force and effect (but only as of the
date they were made and as of the date of Closing) for a period of one year
after the Closing, regardless of any investigation made by or on behalf of the
parties to this Agreement. Except for Antinori's obligations under Section 11,
Antinori's representations, warranties and covenants contained in this Agreement
will terminate as of the termination of this Agreement in accordance with its
terms.
10.1.2 CARREKER'S REPRESENTATIONS. All
representations, warranties and covenants of Carreker contained in this
Agreement will remain operative and in full force and effect (but only as of the
date they were made and as of the date of Closing) for a period of one year
after the Closing, regardless of any investigation made by or on behalf of the
parties to this Agreement. Except for Carreker's obligations under Section 11,
Carreker's representations, warranties and covenants contained in this Agreement
will terminate as of the termination of this Agreement in accordance with its
terms.
10.2 ANTINORI AGREEMENT TO INDEMNIFY.
10.2.1 ANTINORI SHAREHOLDERS INDEMNITY. Subject to
the limitations set forth in Section 10.2.3, the Antinori Shareholders will
indemnify and hold harmless Carreker and its respective officers, directors,
agents and employees, and each person, if any, who controls or may control
Carreker (hereinafter in this Section 10.2 referred to individually as an
"INDEMNIFIED PERSON" and collectively as "INDEMNIFIED PERSONS") from and against
any and all claims, demands, actions, causes of action, losses, costs, damages,
liabilities and expenses including, without limitation, reasonable legal fees,
net of any recoveries under insurance policies or tax savings known to Carreker
at the time of making of claim hereunder, arising out of any misrepresentation
or breach of or default in connection with any of the representations,
warranties and covenants given or made by Antinori in this Agreement or any
certificate, document or instrument delivered
AGREEMENT AND PLAN OF MERGER - Page 38
<PAGE>
by or on behalf of Antinori or by the Antinori Shareholders pursuant hereto
(hereafter in this Section 10.2 referred to as "CARREKER DAMAGES").
10.2.2 ANTINORI ESCROW SHARES. In seeking
indemnification for Carreker Damages under this Section 10.2 following the
Closing, the Indemnified Persons shall exercise their remedies only with
respect to the Escrow Shares and any other assets deposited in escrow
pursuant to the Antinori Escrow Agreement and the Antinori Shareholders shall
under no circumstances incur liability hereunder except the Escrow Shares;
provided, however, that the foregoing limitation on liability shall not apply
in respect of Ronald R. Antinori's indemnity obligations resulting from fraud
or intentional and willful misrepresentation or intentional and willful
concealment (in which event recourse shall be had first to any Carreker
Common Stock or other Carreker equity securities held by him). The
indemnification provided for in Section 10.2.1 will not apply unless and
until the aggregate Carreker Damages for which one or more Indemnified
Persons seeks indemnification under Section 10.2.1 exceeds $100,000, in which
event the indemnification provided for in Section 10.2.1 will include all
Carreker Damages in excess of such sum.
10.3 CARREKER AGREEMENT TO INDEMNIFY.
10.3.1 CARREKER INDEMNITY. Subject to the
limitations set forth in Section 10.3.2, J.D. Carreker will indemnify and
hold harmless Carreker and its respective officers, directors, agents and
employees, and each person, if any, other than himself who controls or may
control Carreker (hereinafter in this Section 10.3 referred to individually
as an "INDEMNIFIED PERSON" and collectively as "INDEMNIFIED PERSONS") from
and against any and all claims, demands, actions, causes of action, losses,
costs, damages, liabilities and expenses including, without limitation,
reasonable legal fees, net of any recoveries under insurance policies or tax
savings known to Carreker at the time of making of claim hereunder, arising
out of any misrepresentation or breach of or default in connection with any
of the representations, warranties and covenants given or made by Carreker in
this Agreement or any certificate, document or instrument delivered by or on
behalf of Carreker pursuant hereto (hereafter in this Section 10.3 referred
to as "ANTINORI DAMAGES").
10.3.2 CARREKER ESCROW SHARES. In seeking
indemnification for Antinori Damages under this Section 10.3 following the
Closing, the Indemnified Persons shall exercise their remedies only with
respect to the Escrow Shares and any other assets deposited in escrow
pursuant to the Carreker Escrow Agreement and J.D. Carreker shall under no
circumstances incur liability hereunder except the Escrow Shares; provided,
however, that the foregoing limitation on liability shall not apply in
respect of J.D. Carreker's indemnity obligations resulting from fraud or
intentional and willful misrepresentation or intentional and willful
concealment (in which event recourse shall be had first to any Carreker
Common Stock or other Carreker equity securities held by him). The
indemnification provided for in Section 10.3.1 will not apply unless and
until the aggregate Antinori Damages for which one or more Indemnified
Persons seeks indemnification under Section 10.3.1 exceeds $100,000, in which
event the indemnification provided for in Section 10.3.1 will include all
Antinori Damages in excess of such sum.
AGREEMENT AND PLAN OF MERGER - Page 39
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10.4 TAX AUDIT AGREEMENT. If, following the Closing,
Antinori receives notice of any audit or examination by any taxing authority
of any tax return for Antinori for any period prior to, or prior to and
including, the Closing, then Carreker shall promptly notify Ronald R.
Antinori, individually, of such notice and Ronald R. Antinori at his own
expense may, if Antinori (rather than Ronald R. Antinori) defends such audit
or examination, participate in such audit or examination and shall be kept
apprised by Carreker of the progress of such audit or examination. Carreker
agrees that it will not agree to, and that it will not permit Antinori to
agree to, any audit adjustment or revision that would adversely affect Ronald
R. Antinori, individually, without Ronald R. Antinori's approval or
agreement, which approval or agreement shall not be unreasonably withheld.
11. MISCELLANEOUS
11.1 GOVERNING LAW; DISPUTE RESOLUTION. 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. Any dispute hereunder
("DISPUTE") shall be settled 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.
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 a Dispute.
11.1.1 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 a reasonable
hourly or daily consulting rate for the arbitrator if the parties are not
able to agree upon his or her rate of compensation.
11.1.2 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 and
experienced in mergers and acquisitions; 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, 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.
11.1.3 PAYMENT OF COSTS. Carreker and Antinori
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; provided,
AGREEMENT AND PLAN OF MERGER - Page 40
<PAGE>
however, that the prevailing party in any arbitration will be entitled to an
award of attorneys' fees and costs, and all costs of arbitration, including
those provided for above, will be paid by the non-prevailing party, and the
arbitrator will be authorized to make such determinations.
11.1.4 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.
11.1.5 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.
11.1.6 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.
11.1.7 EXCLUSIVE REMEDY. Except as specifically
otherwise provided in this Agreement, arbitration will be the sole and
exclusive remedy of the parties for any Dispute arising out of this Agreement.
11.2 ASSIGNMENT; BINDING UPON SUCCESSORS AND ASSIGNS.
Neither party may assign any of its rights or obligations hereunder without
the prior written consent of the other party. This Agreement will be binding
upon and inure to the benefit of the parties and their respective successors
and permitted assigns.
11.3 SEVERABILITY. If any provision of this Agreement,
or the application thereof, is for any reason held to any extent to be
invalid or unenforceable, then the remainder of this Agreement and
application of such provision to other persons or circumstances will be
interpreted so as reasonably to effect the intent of the parties. The
parties further agree to replace such unenforceable provision of this
Agreement with a valid and enforceable provisions that will achieve, to the
extent possible, the economic, business and other purposes of the invalid or
unenforceable provisions.
11.4 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
all parties reflected hereon as signatories.
11.5 OTHER REMEDIES. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby
or by law on such party, and the exercise of any one remedy will not preclude
the exercise of any other.
11.6 AMENDMENT AND WAIVERS. Any term or provision of
this Agreement may be amended, and the observance of any term of this
Agreement may be waived (either generally
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or in a particular instance and either retroactively or prospectively), only
by a writing signed by the party to be bound thereby. The waiver by a party
of any breach hereof or default in the performance hereof will not be deemed
to constitute a waiver of any other default of any succeeding breach or
default. This Agreement may be amended by the parties at any time.
11.7 NO WAIVER. The failure of any party to enforce any
of the provisions hereof 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 hereof 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.
11.8 EXPENSES. Each party will bear its respective
expenses and fees of its own accountants, attorneys, investment bankers and
other professionals incurred with respect to this Agreement and the
transactions contemplated hereby. If the Merger is consummated, Antinori
will pay at or immediately before the Closing the reasonable accounting and
attorneys' fees and expenses and other fees and expenses incurred by Antinori
in connection with the Merger. Antinori will not incur in connection with
the Merger (and its related transactions, preparations and negotiations)
expenses of more than $350,000 for fees and expenses of lawyers, accountants
and other professionals (including, without limitation, the fees and expenses
of The Robinson-Humphrey Company, Inc.), unless any such fees or expenses
incurred by Antinori in excess of the applicable amount set forth for above
are paid by the Antinori Shareholders on or before the Closing (and if such
payment is not made on or before the Closing, then Antinori may (but shall
not be obligated to) pay such excess fees or expenses, in which event
Antinori will be entitled to be reimbursed by the Antinori Shareholders for
such payment and, if not so reimbursed, Antinori will be entitled to treat
the amount of payment as Carreker Damages recoverable under Section 10.2
(without regard to the $100,000 minimum specified in Section 10.2) and the
Antinori Escrow Agreement).
11.9 NOTICES. Any notice or other communication required
or permitted to be given under this Agreement will be in writing, will be
delivered personally or by mail or express delivery, postage prepaid, and
will be deemed given upon actual delivery or, if mailed by registered or
certified mail, on the third business day following deposit in the mails,
addressed as follows:
(i) If to Carreker:
The Carreker Group, Inc.
14001 North Dallas Parkway, Suite 1100
Dallas, Texas 75240
Attention: J. D. Carreker, Chief
Executive Officer
Phone: (972) 458-1981
Fax: (972) 458-2567
with a copy to:
Locke Purnell Rain Harrell
AGREEMENT AND PLAN OF MERGER - Page 42
<PAGE>
(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 Antinori:
Antinori Software, Inc.
400 Colony Square, Suite 450
1200 Peachtree Street NE
Atlanta, Georgia 30326
Attention: Ronald R. Antinori, Chairman
of the Board
Phone: (404) 873-6740
Fax: (404) 873-5554
with a copy to:
Morris, Manning & Martin
A Limited Liability Partnership
3343 Peachtree Road, N.E., Suite 1600
Atlanta, Georgia 30326
Attention: Charles R. Beaudrot, Jr.
Phone: (404) 233-7000
Fax: (404) 365-9532
or to such other address as the party in question may have furnished to the
other party by written notice given in accordance with this Section 11.9.
11.10 CONSTRUCTION OF AGREEMENT; KNOWLEDGE. The language
hereof will not be construed for or against either party. A reference to a
section, schedule or exhibit refers to a section in, or a schedule or an
exhibit to, this Agreement, unless otherwise explicitly set forth. The
titles and headings in this Agreement are for reference purposes only and
will not in any manner limit the construction of this Agreement. For the
purposes of such construction, this Agreement will be considered as a whole.
References in this Agreement to the knowledge of Antinori (or similar
phrases) refer to the actual knowledge of any one or more of Ronald A.
Antinori, Lawrence D. Duckworth and Michael Israel, each after due inquiry;
references in this Agreement to the knowledge of Carreker (or similar
phrases) refer to the actual knowledge of either or both of J. D. Carreker
and Terry Gage, each after due inquiry.
11.11 NO JOINT VENTURE. Nothing contained in this
Agreement will be deemed or construed as creating a joint venture or
partnership between the parties. No party is by virtue of this Agreement
authorized as an agent, employee or legal representative of any other party.
No party will have the power to control the activities and operations of any
other, and the parties' status is, and at all times, will continue to be,
that of independent contractors with respect to each
AGREEMENT AND PLAN OF MERGER - Page 43
<PAGE>
other. No party will have any power or authority to bind or commit any
other. No party will hold itself out as having any authority or relationship
in contravention of this Section 11.11.
11.12 FURTHER ASSURANCES. Each party agrees to cooperate
fully with the other party and to execute such further instruments, documents
and agreements and to give such further written assurances as may be
reasonably requested by the other party to evidence and reflect the
transactions provided for herein and to carry into effect the intent of this
Agreement.
11.13 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No
provisions of this Agreement are intended, nor will be interpreted, to
provide or create any third party beneficiary rights or any other rights of
any kind in any client, customer, affiliate, partner or employee of any party
or any other person or entity, unless specifically provided otherwise herein,
and, except as so provided, all provisions hereof will be personal solely
between the parties to this Agreement.
11.14 PUBLIC ANNOUNCEMENT. Carreker and Antinori will
issue a press release approved by both parties announcing the Merger as soon
as practicable following the execution of this Agreement.
11.15 CONFIDENTIALITY. Except as expressly authorized by
Carreker in writing, Antinori will not directly or indirectly divulge to any
person or entity or use any Carreker Confidential Information, except as
required for the performance of its duties under this Agreement. Except as
expressly authorized by Antinori in writing, Carreker will not directly or
indirectly divulge to any person or entity or use any Antinori Confidential
Information, except as required for the performance of its duties under this
Agreement. As used herein, "CARREKER CONFIDENTIAL INFORMATION" consists of
(a) any information designated by Carreker as confidential whether developed
by Carreker or disclosed to Carreker by a third party, (b) the source code to
any Carreker software and any trade secrets relating to any of the foregoing
and (c) any information relating to Carreker's product plans, product
designs, product costs, product prices, product names, finances, marketing
plans, business opportunities, personnel, research development or know-how.
As used herein, "ANTINORI CONFIDENTIAL INFORMATION" consists of (x) any
information designated by Antinori as confidential whether developed by
Antinori or disclosed to Antinori by a third party, (y) the source code to
any Antinori software, and any trade secrets related to any of the foregoing
and (z) any information relating to Antinori product plans, product designs,
product costs, product provides, product names, finances, marketing plan,
business opportunities, personnel, research, development or know-how.
"Carreker Confidential Information" and "Antinori Confidential Information"
also include the terms and conditions of this Agreement, except as disclosed
in accordance with Section 11.14. The foregoing restriction will apply to
information about a party whether or not it was obtained from such party's
employees, acquired or developed by the other party during such other party's
performance under this Agreement, or otherwise learned. The foregoing
restrictions will not apply to information that (i) has become publicly known
through no wrongful act of the receiving party, (ii) has been rightfully
received from a third party authorized by the party which is the owner,
creator or compiler to make such disclosure without restriction, (iii) has
been approved or released by written authorization of the party which is the
owner, creator or compiler, or (iv) is being or has therefore been disclosed
AGREEMENT AND PLAN OF MERGER - Page 44
<PAGE>
pursuant to a valid court order after a reasonable attempt has been made to
notify the party which is the owner, creator or compiler.
Following any termination of this Agreement pursuant to Section 9,
each party agrees that for a period of two years commencing January 31, 1997,
such party will not initiate discussions with respect to prospective
employment of the other party's employees.
11.16 TIME IS OF THE ESSENCE. The parties acknowledge and
agree that time is of the essence in connection with the execution, delivery
and performance of this Agreement, and that they will each use their best
efforts to satisfy all the conditions to Closing on or before January 31,
1997.
11.17 ENTIRE AGREEMENT. This Agreement, the schedules and
exhibits hereto constitute the entire understanding and agreement of the
parties hereto with respect to the subject matter hereof and supersede all
prior and contemporaneous agreements or understandings, inducements or
conditions, express or implied, written or oral, between the parties with
respect to the subject matter hereof (including, without limitation, that
certain letter of intent between them dated as of October 30, 1996, as
amended). The express
AGREEMENT AND PLAN OF MERGER - Page 45
<PAGE>
terms hereof control and supersede any course of performance or usage of
trade inconsistent with any of the terms hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
THE CARREKER GROUP, INC. ANTINORI SOFTWARE, INC.
By: /s/ J.D. Carreker By: /s/ Ronald R. Antinori
------------------------------ ------------------------------
J.D. Carreker Ronald R. Antinori
Chief Executive Officer Chairman of the Board
CAG NEWCO, INC.
By: /s/ Terry Gage
------------------------------
Terry Gage
Senior Vice President
AGREEMENT AND PLAN OF MERGER - Page 46
<PAGE>
Exhibit A-1
EXHIBIT A-1, A-2 and A-3
<PAGE>
Exhibit A-1
ARTICLES OF MERGER
OF
CAG NEWCO, INC.
WITH AND INTO
ANTINORI SOFTWARE, INC.
Pursuant to the provisions of Article 5.04 of the Texas Business
Corporation Act (the "TBCA") and Section 14-2-1105 of the Georgia Business
Corporation Code (the "GBCC"), the undersigned corporations (the "Constituent
Corporations") hereby adopt the following Articles of Merger for the purpose of
merging CAG Newco, Inc., a Texas corporation ("Newco"), with and into Antinori
Software Inc., a Georgia corporation ("ASI") (the "Merger"). These Articles of
Merger may be executed in a number of identical counterparts, each of which
shall be deemed to be an original and all of which shall collectively constitute
one and the same instrument.
FIRST: The laws of the States of Georgia and Texas permit the Merger.
SECOND: The name of the surviving corporation is Antinori Software, Inc.
and such corporation is to be governed by the laws of the State of Georgia.
THIRD: The Articles of Incorporation of ASI as it shall exist
immediately prior to the Effective Time (as defined below) shall, without
amendments or changes, be and remain the Articles of Incorporation of ASI, the
surviving corporation, immediately after the Effective Time until the same shall
be altered, amended or repealed as provided therein.
FOURTH: The Plan of Merger (the "Plan") duly authorized and approved by
each of the Constituent Corporations is attached hereto as Exhibit A and is
hereby incorporated by reference as part of these Articles of Merger.
FIFTH: As to each Constituent Corporation, the number of shares
outstanding and the designation and number of outstanding shares of each class
entitled to vote as a class on the Plan are as follows:
<TABLE>
Name of Number of Shares Designation of Number of
Corporation Outstanding Class Shares
----------- ----------- ----- -------
<S> <C> <C> <C>
ASI 1,010,101 Common 1,010,101
Newco 1,000 Common 1,000
</TABLE>
SIXTH: As to each Constituent Corporation the total number of shares
voted for and against the Plan, and as to each class entitled to vote as a class
thereon, the number of shares of such class voted for and against the Plan, are
as follows:
Page 1
<PAGE>
<TABLE>
Name of Total Voted Total Voted
Corporation For Against
----------- ----------- -----------
<S> <C> <C>
ASI 1,010,101 0
Newco 1,000 0
</TABLE>
SEVENTH: The number of votes cast in favor of the Plan by shareholders of
ASI and Newco was sufficient for approval as required under the TBCA.
EIGHTH: Shareholder approval was required for the Merger under the GBCC
and the Merger was duly approved by the shareholders of ASI and Newco as
required.
NINTH: The approval of the Merger and the Plan was duly authorized by
all action required by the laws of the States of Texas and Georgia and by the
constituent documents of the Constituent Corporations.
TENTH: The Effective Time of the Merger shall be at 11:59 p.m., Dallas,
Texas Time, January 31, 1997.
DATED: January ___, 1997
CAG NEWCO, INC. ANTINORI SOFTWARE, INC.
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<PAGE>
By: By:
---------------------------- ------------------------------------
Name: Terry Gage Name: Ronald R. Antinori
Title: Senior Vice President Title: Chairman of the Board
Page 3
<PAGE>
EXHIBIT A-2
THE STATE OF TEXAS
SECRETARY OF STATE
CERTIFICATE OF MERGER
The undersigned, as Secretary of State of Texas, hereby certifies that the
attached Articles of Merger of
CAG NEWCO, INC.
a Texas corporation
with
ANTINORI SOFTWARE, INC.
a Georgia no permit corporation
have been received in this office and are found to conform to law. ACCORDINGLY,
the undersigned, as Secretary of State, and by virtue of the authority vested in
the Secretary by law, hereby issues this Certificate of merger.
Dated January 31, 1997.
Effective January 31, 1997
/s/ Antonio O. Garza, Jr.
-----------------------------------
Antonio O. Garza, Jr.
Secretary of State
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<PAGE>
Secretary of State
Business Information and Services
Suite 315, West Tower
2 Martin Luther King Jr. Dr.
Atlanta, Georgia 30334-1530
DOCKET NUMBER: 970310862
CONTROL NUMBER: 8814241
EFFECTIVE DATE: 01/31/1997
REFERENCE: 0091
PRINT DATE: 01/31/1997
FORM NUMBER: 411
MORRIS, MANNING & MARTIN
LINDA L. FILER
3343 PEACHTREE RD NE, STE 16CO
ATLANTA, GA 30326
CERTIFICATE OF MERGER
I, the Secretary of State of the State of Georgia, do hereby issue this
certificate pursuant to Title 14 of the Official Code of Georgia Annotated
certifying that articles or a certificate of merger and fees have been filed
regarding the merger of the below entities, effective as of the date shown
above. Attached is a true and correct copy of said filing.
Surviving Entity:
ANTINORI SOFTWARE, INC., A GEORGIA CORPORATION
Nonsurviving Entity/Entities:
CAG NEWCO, INC., A TEXAS CORPORATION
Page 2
<PAGE>
/s/ Lewis A. Massey
-----------------------------------
LEWIS A MASSEY
SECRETARY OF STATE
Page 3
<PAGE>
EXHIBIT A-3
PLAN OF MERGER
OF
CAG NEWCO, INC.
WITH AND INTO
ANTINORI SOFTWARE, INC.
This Plan of Merger (this "PLAN") is entered into as of January 29, 1997
among The Carreker Group, Inc., a Texas corporation ("CARREKER"), CAG Newco,
Inc., a Texas corporation and a wholly-owned subsidiary of Carreker ("NEWCO"),
and Antinori Software, Inc., a Georgia corporation ("ANTINORI").
Page 1
<PAGE>
1. EFFECTIVE TIME OF MERGER. Pursuant to the Texas Business
Corporation Act and the Georgia Business Corporation Code, Newco will be merged
with and into Antinori (the "MERGER") and Antinori will be the surviving
corporation of the Merger. The Merger will be effective (the "EFFECTIVE TIME")
at 11:59 p.m., Dallas, Texas time, January 31, 1997, the date on which a copy of
this Plan is filed with the Secretary of State of Texas and the Secretary of
State of Georgia.
2. CONVERSION OF SECURITIES.
(a) CONVERSION OF SHARES. At the Effective Time, each share of
Antinori Common Stock, $.01 par value ("ANTINORI COMMON STOCK"), issued and
outstanding immediately prior to the Effective Time, will, by virtue of the
Merger, be converted into 0.50946871 fully paid and nonassessable shares of
Carreker Class A Voting Common Stock, no par value ("CARREKER COMMON STOCK").
No fractional shares of Carreker Common Stock will be issued in connection with
the Merger, but in lieu thereof, Carreker will pay an amount of cash equal to
$23.83 multiplied by the fraction of a share of Carreker Common Stock to which
such holder would otherwise be entitled. No Carreker Common Stock will be
issued or paid in exchange for any shares of Antinori Common Stock held by
Antinori as treasury stock.
(b) ESCROW SHARES. At the closing of the Merger, Carreker will
deduct from the shares of Carreker Common Stock to be delivered to former
holders of Antinori Common Stock (the "SHAREHOLDERS") a number of shares
equaling approximately (and less than) 5% of the shares of Carreker Common Stock
to be delivered to the Shareholders in the Merger pursuant to that certain
Escrow Agreement (the "ESCROW AGREEMENT"), dated of even date herewith among the
Shareholders, Carreker and U.S. Trust Company of Texas, N.A., as escrow agent
(the "ESCROW AGENT"), and will deliver such shares on behalf of the Shareholders
to the Escrow Agent, to be held in escrow pursuant to the Escrow Agreement to
secure the indemnification obligation of the Shareholders under the Agreement
(as hereinafter defined).
(c) NO CHANGE TO OUTSTANDING CARREKER STOCK. Each share of
Carreker Common Stock outstanding immediately prior to the Effective Time will
continue to be an identical outstanding share of Carreker Common Stock following
the Merger.
(d) NEWCO COMMON STOCK. At the Effective Time, each share of
Newco Common Stock that is issued and outstanding immediately prior to the
Effective Time shall be converted into one share of Antinori Common Stock.
(e) ANTINORI COMMON STOCK. At the Effective Time,
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<PAGE>
Carreker shall own all of the issued and outstanding shares of Antinori
Common Stock and Antinori shall become a wholly-owned subsidiary of Carreker.
3. DIRECTORS AND OFFICERS. The directors and officers of Carreker and
Antinori after the Effective Time shall be the persons set forth in ANNEX 1
hereto. Such directors and officers will hold their positions as directors and
officers until the election and qualifications of their respective successors or
until their tenure is otherwise terminated in accordance with the bylaws of
Carreker or Antinori respectively.
4. AGREEMENT. Antinori, Newco and Carreker are also parties to that
certain Agreement and Plan of Merger dated as of January 29, 1997 (the
"AGREEMENT"). The Agreement and this Plan are intended to be construed together
in order to effectuate their purposes.
5. FURTHER ASSURANCES. After the Effective Time, Carreker and any of
its officers and directors may execute and deliver such deeds, assignments and
assurances and do all other things necessary or desirable to carry out the
purposes of this Plan, in the name of Antinori, Newco or otherwise.
6. ARTICLES OF INCORPORATION; BYLAWS. The articles of incorporation
and bylaws of Antinori will not be amended by virtue of the Merger.
7. TERMINATION. This Plan may be terminated and the proposed Merger
abandoned at any time prior to the Effective Time, whether before or after
approval of this Plan or by the mutual consent of the Boards of Directors of
Carreker and Antinori.
8. ASSIGNMENT. None of the parties may assign any of its rights or
obligations hereunder without the prior written consent of the other parties.
This Plan will be binding upon and inure to the benefit of the parties and their
respective successors and permitted assigns.
9. 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 Plan, the construction of its terms and the
interpretation and enforcement of the rights and duties of the parties.
10. COUNTERPARTS. This Plan 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
Plan will become binding when one or more counterparts hereof, individually
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<PAGE>
or taken together, bear the signatures of both parties reflected hereon as
signatories.
IN WITNESS WHEREOF, the parties have executed this Plan as of the date
first above written.
THE CARREKER GROUP, INC. ANTINORI SOFTWARE, INC.
By: By:
--------------------------- ------------------------------
J. D. Carreker Ronald R. Antinori
Chief Executive Officer Chairman of the Board
CAG NEWCO, INC.
By:
---------------------------
Terry Gage
Senior Vice President
Page 4
<PAGE>
ANNEX 1
J.D. Carreker Chairman, CEO, and President; Director
Ronald Antinori Vice Chairman, Product and Business Development, Director
Richard Linting President of Consulting Group & COO, Director
Larry Duckworth President of Software Group & COO, Director
Terry Gage Senior Vice President & CFO, Treasurer, Assistant Secretary
Royce Brown Executive Vice President, Payment Systems Group
Jack Davis Executive Vice President, Software Group
Doug Eubanks Executive Vice President, Systems Integration Group
Wyn Lewis Executive Vice President, Yield Management
Bill Long Senior Vice President, PSN Group
George Noga Senior Vice President, Systems Integration Group
David Walker Senior Vice President, ECCHO Group
Maury Purnell Corporate Secretary
Kathi Huffines Assistant Corporate Secretary
Judi Grooters Assistant Corporate Treasurer
Jim Carreker Director
James Fischer Director
Richard Lee Director
David Sias Director
Larry Peck (SAIC) Director
Page 5
<PAGE>
EXHIBITS B-1, B-2, B-3 AND B-4
[Exhibit B-1: Employment Agreement of John D. Carreker, Jr. Filed as Exhibit
10.1 to the Company's Registration Statement on Form S-1]
[Exhibit B-2: Employment Agreement of Ronald R. Antinori Filed as Exhibit 10.2
to the Company's Registration Statement on Form S-1]
1
<PAGE>
EXHIBIT B-3
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "AGREEMENT") shall become effective as
of the Effective Date indicated below between The Carreker Group, Inc., a
Texas corporation ("CARREKER"), and Lawrence D. Duckworth ("MR. DUCKWORTH").
RECITALS
A. This Agreement is entered into connection with and is ancillary to
an Agreement and Plan of Merger (the "AGREEMENT") dated as of January 29,
1997 between Carreker and Antinori Software Inc., a Georgia corporation,
pursuant to which a wholly-owned subsidiary of Carreker is to merge with and
into Antinori Software, Inc. (the "MERGER"), such that Antinori Software,
Inc. will become a wholly-owned subsidiary of Carreker. The date on which
the Merger becomes effective will be the effective date of this Agreement
(the "EFFECTIVE DATE"). As provided in Section 9(h) below, this Agreement
will be void and have no effect if the Merger does not become effective,
i.e., the Effective Date does not occur, by February 1, 1997.
B. Mr. Duckworth is the President, Chief Executive Officer and a
director of Antinori Software, Inc., reporting to the Chairman of its board
of directors, and has been and remains actively involved in the development
and marketing of Antinori Software, Inc.'s products. Carreker intends to
continue the business of Antinori Software, Inc. after the Merger and
integrate such business into Carreker's ongoing business. To preserve and
protect the assets of Antinori Software, Inc., including Antinori Software,
Inc.'s goodwill, customers and trade secrets of which Mr. Duckworth has and
will have knowledge and to preserve and protect Carreker's goodwill and
business interests going forward, and in consideration for Carreker's
entering into and performing under the Agreement, Mr. Duckworth has agreed to
enter into this Agreement.
C. In addition, as contemplated by Section 7 below, Mr. Duckworth is
concurrently herewith entering into an Intellectual Property Rights Agreement
and a Confidentiality Agreement in favor of Carreker for the purpose of
protecting Carreker's proprietary rights.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements of the parties contained herein, Carreker and Mr. Duckworth hereby
agree as follows:
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<PAGE>
1. EMPLOYMENT. Carreker will employ Mr. Duckworth and Mr. Duckworth
accepts employment with Carreker for a period of two years from the Effective
Date (the "INITIAL PERIOD"), unless Mr. Duckworth's employment is sooner
terminated in accordance with this Agreement. Mr. Duckworth's employment may
continue after the Initial Period but will then be terminable by either party
at will, with or without cause, which determination may be made in its sole
discretion. The obligations of Carreker and Mr. Duckworth set forth in the
"Intellectual Property Rights Agreement" and the "Confidentiality Agreement"
(each as defined in Section 7) (referring to intellectual property and
confidentiality, respectively) and in Section 8 (referring to termination)
will survive termination of Mr. Duckworth's employment, regardless of cause.
Mr. Duckworth's primary location of employment shall be in
Atlanta, Georgia or its environs, and he shall undertake such business travel
as is reasonably required in the discharge of his duties set forth below.
2. DUTIES. Mr. Duckworth will be employed as a full-time employee of
Carreker and initially will serve as the President of its Software Group and
as a director. Unless and until the board of directors of Carreker changes
reporting responsibilities, which change the board may make in its sole
discretion, Mr. Duckworth shall report to the Chairman and Chief Executive
Officer of Carreker. Mr. Duckworth agrees that, to the best of his ability
and experience, he will at all times conscientiously perform all of the
duties and obligations assigned to him under this Agreement.
3. FULL-TIME EMPLOYMENT. Mr. Duckworth's employment will be on a
full-time basis, in accordance with standard employee policies for Carreker.
Mr. Duckworth 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.
Duckworth may (i) provide incidental assistance to family members on matters
of family business; and (ii) sit on the board of directors of corporations
and other organizations (including, without limitation, charitable and other
nonprofit organizations) that do not compete with Carreker; provided in each
case that such activities do not conflict with or interfere with Mr.
Duckworth's normal full-time and first priority obligations to Carreker. Mr.
Duckworth may make personal investments in nonpublicly traded corporations,
partnerships or other entities that, to the knowledge of Carreker, are not at
the time of such investment engaged in any business activities competitive
with Carreker. Notwithstanding anything to the contrary contained in this
Agreement, Mr. Duckworth may make personal investments in publicly traded
corporations regardless of the business they are engaged in, provided that
Mr. Duckworth does not at any time own in excess
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<PAGE>
of 1% of the issued and outstanding stock of any such corporation.
4. SALARY; POTENTIAL BONUS; OPTIONS. Mr. Duckworth's salary for the
term of the Initial Period will be not less than $250,000 per year, payable
on Carreker's regular payroll dates, less required withholdings. Carreker
agrees to review Mr. Duckworth's salary on or about six months after the
Effective Date; PROVIDED, HOWEVER, that such review shall not result in a
salary reduction, and a salary increase, if any, shall be totally within
Carreker's discretion.
The board of directors of Carreker has the sole discretion whether or
not to establish a bonus pool. If and to the extent the board of directors
of Carreker establishes a bonus pool for 1997 or any subsequent year, then
Mr. Duckworth will be entitled to participate in the same at a percentage
level reasonably consistent with the participation of other high level
executive officers (e.g., the chief executive officer and chief financial
officer, etc.) of Carreker.
On the Effective Date, Carreker shall grant to Mr. Duckworth options to
purchase up to 33,300 shares of Carreker's Class B Common Stock at an
exercise price of $19.07 per share. One such option shall be an incentive
stock option to the extent allowable by law and shall vest one-third on the
Effective Date, one-third on the first anniversary thereof and one-third on
the second anniversary thereof. The other such option shall be a
non-qualified option with identical vesting terms. Such options shall be
issued under and pursuant to Carreker's existing long term incentive plan,
with terms and conditions as provided therein except as expressly provided
above.
5. BENEFITS. Mr. Duckworth will also be entitled to insurance,
vacation and other benefits commensurate with his position in accordance with
Carreker's standard employee policies in effect from time to time. Mr.
Duckworth acknowledges receipt of a summary of Carreker's standard employee
benefits policies in effect as of the date hereof.
6. REIMBURSEMENT OF BUSINESS EXPENSES. Carreker will, in accordance
with Carreker's policies in effect from time to time, reimburse Mr. Duckworth
for all out-of-pocket reasonable business expenses incurred by Mr. Duckworth
in connection with the performance of his duties under this Agreement upon
submission of the required documentation required pursuant to Carreker's
standard policies and record-keeping procedures.
7. INTELLECTUAL PROPERTY. Simultaneously with the execution of this
Agreement, Mr. Duckworth is executing and delivering and hereby adopts and
agrees to be bound by Carreker's Intellectual Property Rights Agreement, a
copy of which is attached to this Agreement as ATTACHMENT A, and the
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<PAGE>
Confidentiality Agreement, a copy of which is attached to this Agreement as
ATTACHMENT B.
8. TERMINATION.
(a) CARREKER. Carreker may terminate Mr. Duckworth's employment
at any time during the Initial Period with or without cause upon written
notice to Mr. Duckworth.
(b) BY MR. DUCKWORTH. During the Initial Period, Mr. Duckworth
may terminate Mr. Duckworth's employment upon written notice to Carreker only
if Carreker is in material breach of this Agreement, provided that such
termination will become effective only upon the expiration of 30 days
following such notice and then only if the breach remains uncured. Such
termination shall be deemed a termination by Carreker of Mr. Duckworth's
employment under Section 8(a) for which Mr. Duckworth shall have the remedy
set forth in Section 8(c).
(c) REMEDY. Upon termination of Mr. Duckworth's employment
pursuant to Section 8(a) without cause or Section 8(b) only (at which time he
shall cease to be an employee of Carreker for all purposes, including for all
benefit plan, insurance and other purposes), Carreker will pay to Mr.
Duckworth, on Carreker's regular payroll dates and less required withholdings
(if any), salary at the rate paid to Mr. Duckworth immediately prior to such
termination, for the lesser of (i) the balance of the Initial Period or (ii)
one year (the "TERMINATION PAYMENTS"). Carreker's obligation to make the
Termination Payments pursuant to this Section 8(c) is in lieu of any damages
or any other payment or benefits, including without limitation stock
benefits, that Carreker might otherwise be obligated to pay Mr. Duckworth as
a result of Mr. Duckworth's termination of employment; PROVIDED, HOWEVER,
that if at any time Carreker terminates Mr. Duckworth's employment without
cause under circumstances in which Mr. Duckworth is not entitled to
Termination Payments, or is entitled to Termination Payments that in the
aggregate are less than a lump-sum severance payment consistent with
Carreker's standard severance payment policy, if any, as may be in effect at
the time of termination, determined with applicable credit for Mr.
Duckworth's time of service with Antinori Software, Inc., then Mr. Duckworth
shall be entitled to such lump-sum severance payment. (For purposes of
reference and example only, Carreker's standard severance payment policy as
of the date of this Agreement provides for the payment of one week's salary
at the time of termination for each year of service as an employee.)
Carreker and Mr. Duckworth agree that, in view of the nature of the issues
likely to arise in the event of such a termination, it would be impracticable
or extremely difficult to fix the actual damages resulting from such
termination and proving actual damages, causation and foreseeability in the
case of such termination would be costly, inconvenient and difficult. In
requiring Carreker to
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make the Termination Payments as set forth herein, it is the intent of the
parties to provide, as of the date of this Agreement, for a liquidated amount
of damages to be paid by Carreker to Mr. Duckworth. Such liquidated amount
shall be deemed full and adequate damages for such termination and is not
intended by either party to be a penalty.
(d) UPON DEATH. If Mr. Duckworth dies during the term of this
Agreement, then Carreker will pay his estate an amount equal to all salary
accrued, bonuses (if any) accrued and payable and benefits accrued as of the
date of his death.
(e) SURVIVAL. Mr. Duckworth's and Carreker's obligations under
Sections 7, 8 and 9(i) of this Agreement will survive the termination of
Carreker's employment of Mr. Duckworth.
(f) OPTIONS. Termination of Mr. Duckworth's employment with
Carreker shall not of itself make unexercisable any unexercised options to
purchase stock of Carreker except and to the extent expressly provided for
(or referenced) in the agreements evidencing such options.
(g) CAUSE. As used in this Agreement the term "with cause"
shall mean and be limited to: (i) a material breach of this Agreement by Mr.
Duckworth that is not corrected within thirty (30) days after written notice
of same from the board of directors of Carreker to Mr. Duckworth; (ii) gross
and willful neglect by Mr. Duckworth of his duties and responsibilities
hereunder; (iii) fraud, criminal misconduct, breach of fiduciary duty,
dishonesty, or gross and willful misconduct by Mr. Duckworth in connection
with the performance of his duties and responsibilities hereunder; (iv) Mr.
Duckworth being under the influence of alcohol or drugs during business
hours, or being habitually drunk or addicted to drugs; (v) the commission by
Mr. Duckworth of any crime of moral turpitude; (vi) material breach by Mr.
Duckworth of his obligations under any assignment of copyright and other
intellectual property rights, noncompetition agreement, trade secret
agreement or confidentiality agreement, which breach is not cured within
thirty (30) days after written notice of same from the board of directors of
Carreker to Mr. Duckworth; or (vii) habitual breach by Mr. Duckworth of any
of the material provisions of this Agreement or such other assignment or
agreements (regardless of any prior cure thereof).
9. MISCELLANEOUS.
(a) NOTICES. Any and all notice 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,
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<PAGE>
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, 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 9(a):
(i) If to Carreker: The Carreker Group, Inc.
14001 North Dallas Parkway, Suite 1100
Dallas, Texas 75240
Attention: J. D. Carreker, 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. Duckworth: Lawrence D. Duckworth
15 Old Stratton Chase
Atlanta, Georgia 30328
Phone: (404) 303-9944
with a copy to:
Morris, Manning & Martin
A Limited Liability Partnership
3343 Peachtree Road, N.E., Suite 1600
Atlanta, Georgia 30326
Attention: Charles R. Beaudrot, Jr.
Phone: (404) 233-7000
Fax: (404) 365-9532
(b) AMENDMENTS. This Agreement, including the Attachments
hereto, contains the entire agreement and supersedes and replaces all prior
agreements between Carreker and Mr. Duckworth, or between Antinori Software,
Inc. and Mr. Duckworth, concerning Mr. Duckworth's employment and employment
benefits (including, without limitation, that certain Letter of Agreement
dated October 24, 1995, as amended, between Mr. Duckworth and Antinori
Software, Inc.), and Mr. Duckworth hereby releases and discharges Antinori
Software, Inc. from its obligations under such prior agreements; PROVIDED,
HOWEVER, that this sentence does not supersede and is without prejudice to
Mr. Duckworth's vested option to purchase shares of Carreker from Ronald R.
Antinori
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<PAGE>
(individually) as set forth in paragraph 3 of such Letter of Agreement (and
the vesting and acceleration provisions of paragraph 4 of such Letter of
Agreement, to the extent they relate to such paragraph 3). 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. Duckworth or Carreker, except that the rights and
obligations of Carreker under this Agreement may be assigned to a corporation
which succeeds Carreker as the result of a merger or other corporate
reorganization and which continues the business of Carreker, or subsidiary of
Carreker, provided that Carreker guarantees the performance by such assignee
of Carreker'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 hereof 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 hereof 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. Duckworth and Carreker recognize that the
limitations contained in this Agreement are reasonably and properly required
for the adequate protection of the interests of Carreker. 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.
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<PAGE>
(h) EFFECT OF AGREEMENT. This Agreement will be void and have
no effect if the Effective Date does not occur on or before February 1, 1997.
(i) 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.
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.
(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 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. Carreker and Mr. Duckworth 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; PROVIDED, HOWEVER, that the
prevailing party in any arbitration will be entitled to an award of
attorneys' fees and costs, and all costs of arbitration, including
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<PAGE>
those provided for above, will be paid by the non-prevailing party, and the
arbitrator will be authorized to make such determinations.
(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) EXCLUSIVE REMEDY. Except as specifically otherwise
provided in this Agreement, 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 9(i) and the arbitration provided for herein, actions initiated
or maintained by the parties for injunctive or similar equitable relief may
not be 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.]
Page 9
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the Effective Date.
THE CARREKER GROUP, INC. /s/ Lawrence D. Duckworth
--------------------------------
LAWRENCE D. DUCKWORTH
By: /s/ J.D. Carreker
-------------------------
J.D. Carreker
Chief Executive Officer
Page 10
<PAGE>
EXHIBIT B-4
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "AGREEMENT") shall become effective as
of the Effective Date indicated below between The Carreker Group, Inc., a
Texas corporation ("CARREKER"), and Mr. Michael Israel ("MR. ISRAEL").
RECITALS
A. This Agreement is entered into connection with and is ancillary to
an Agreement and Plan of Merger (the "AGREEMENT") dated as of January 29,
1997 between Carreker and Antinori Software Inc., a Georgia corporation,
pursuant to which a wholly-owned subsidiary of Carreker is to merge with and
into Antinori Software, Inc. (the "MERGER"), such that Antinori Software,
Inc. will become a wholly-owned subsidiary of Carreker. The date on which
the Merger becomes effective will be the effective date of this Agreement
(the "EFFECTIVE DATE"). As provided in Section 9(h) below, this Agreement
will be void and have no effect if the Merger does not become effective,
i.e., the Effective Date does not occur, by February 1, 1997.
B. Mr. Israel is a Vice President and a shareholder of Antinori
Software, Inc. and has been and remains actively involved in the development
and marketing of Antinori Software, Inc.'s products. Carreker intends to
continue the business of Antinori Software, Inc. after the Merger and
integrate such business into Carreker's ongoing business. To preserve and
protect the assets of Antinori Software, Inc., including Antinori Software,
Inc.'s goodwill, customers and trade secrets of which Mr. Israel has and will
have knowledge and to preserve and protect Carreker's goodwill and business
interests going forward, and in consideration for Carreker's entering into
and performing under the Agreement, Mr. Israel has agreed to enter into this
Agreement.
C. In addition, as contemplated by Section 7 below, Mr. Israel is
concurrently herewith entering into an Intellectual Property Rights Agreement
and a Confidentiality Agreement in favor of Carreker for the purpose of
protecting Carreker's proprietary rights.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements of the parties contained herein, Carreker and Mr. Israel hereby
agree as follows:
Page 1
<PAGE>
1. EMPLOYMENT. Carreker will employ Mr. Israel and Mr. Israel
accepts employment with Carreker. Mr. Israel's employment is terminable by
either party at will, with or without cause, at any time. The obligations of
Carreker and Mr. Israel set forth in the "Intellectual Property Rights
Agreement" and the "Confidentiality Agreement") (each as defined in Section
7) (referring to intellectual property and confidentiality, respectively) and
in Section 8 (referring to termination) will survive termination of Mr.
Israel's employment, regardless of cause.
Mr. Israel's primary location of employment shall be in Atlanta,
Georgia or its environs, and he shall undertake such business travel as is
reasonably required in the discharge of his duties set forth below.
2. DUTIES. Mr. Israel will be employed as a full-time employee of
Carreker. Mr. Israel agrees that, to the best of his ability and experience,
he will at all times conscientiously perform all of the duties and
obligations assigned to him under this Agreement, which shall be reasonably
comparable to his duties and obligations at Antinori Software, Inc.
3. FULL-TIME EMPLOYMENT. Mr. Israel's employment will be on a
full-time basis, in accordance with standard employee policies for Carreker.
Mr. Israel 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. Israel
may (i) provide incidental assistance to family members on matters of family
business; and (ii) sit on the board of directors of corporations and other
organizations (including, without limitation, charitable and other nonprofit
organizations) that do not compete with Carreker; provided in each case that
such activities do not conflict with or interfere with Mr. Israel's normal
full-time and first priority obligations to Carreker. Mr. Israel may make
personal investments in nonpublicly traded corporations, partnerships or
other entities that, to the knowledge of Carreker, are not at the time of
such investment engaged in any business activities competitive with Carreker.
Notwithstanding anything to the contrary contained in this Agreement, Mr.
Israel may make personal investments in publicly traded corporations
regardless of the business they are engaged in, provided that Mr. Israel does
not at any time own in excess of 1% of the issued and outstanding stock of
any such corporation.
4. SALARY; OPTIONS. Mr. Israel's initial salary will be not less
than the rate of $130,000 per year, payable on Carreker's regular payroll
dates, less required withholdings. Changes in Mr. Israel's salary shall
occur only by mutual agreement.
On the Effective Date, Carreker shall grant to Mr. Israel
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<PAGE>
options to purchase up to 23,100 shares of Carreker's Class B Common Stock at
an exercise price of $19.07 per share. One such option shall be an incentive
stock option to the extent allowable by law and shall vest one-third on the
Effective Date, one-third on the first anniversary thereof and one-third on
the second anniversary thereof. The other such option shall be a
non-qualified option with identical vesting terms. Such options shall be
issued under and pursuant to Carreker's existing long term incentive plan,
with terms and conditions as provided therein except as expressly provided
above.
5. BENEFITS. Mr. Israel will be entitled to insurance, vacation and
other benefits commensurate with his position in accordance with Carreker's
standard employee policies in effect from time to time. Mr. Israel
acknowledges receipt of a summary of Carreker's standard employee benefits
policies in effect as of the date hereof.
6. REIMBURSEMENT OF BUSINESS EXPENSES. Carreker will, in accordance
with Carreker's policies in effect from time to time, reimburse Mr. Israel
for all out-of-pocket reasonable business expenses incurred by Mr. Israel in
connection with the performance of his duties under this Agreement upon
submission of the required documentation required pursuant to Carreker's
standard policies and record-keeping procedures.
7. INTELLECTUAL PROPERTY. Simultaneously with the execution of this
Agreement, Mr. Israel is executing and delivering and hereby adopts and
agrees to be bound by Carreker's Intellectual Property Agreement, a copy of
which is attached to this Agreement as ATTACHMENT A, and the Confidentiality
Agreement, a copy of which is attached to this Agreement as ATTACHMENT B.
8. SURVIVAL. Mr. Israel's and Carreker's obligations under Sections
7, 8 and 9(i) of this Agreement will survive the termination of Carreker's
employment of Mr. Israel.
9. MISCELLANEOUS.
(a) NOTICES. Any and all notice 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, 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 9(a):
Page 3
<PAGE>
(i) If to Carreker: The Carreker Group, Inc.
14001 North Dallas Parkway, Suite 1100
Dallas, Texas 75240
Attention: J. D. Carreker, 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. Israel: Michael Israel
127 Lanier Blvd.
Atlanta, Georgia 30306
Phone: (404) 881-8721
with a copy to:
Morris, Manning & Martin
A Limited Liability Partnership
3343 Peachtree Road, N.E., Suite 1600
Atlanta, Georgia 30326
Attention: Charles R. Beaudrot, Jr.
Phone: (404) 233-7000
Fax: (404) 365-9532
(b) AMENDMENTS. This Agreement, including the Attachments
hereto, contains the entire agreement and supersedes and replaces all prior
agreements between Carreker and Mr. Israel, or between Antinori Software,
Inc. and Mr. Israel, concerning Mr. Israel's employment and employment
benefits (including, without limitation, those certain Letters of Agreement
dated December 20, 1994 and September 13, 1996, each between Mr. Israel and
Antinori Software, Inc., but not his accrued rights to commissions as set
forth in those agreements). 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. Israel or Carreker, except that the rights and
obligations of Carreker under this Agreement may be assigned to a corporation
which succeeds Carreker as the result of a merger or other corporate
reorganization and which continues the business of Carreker, or a subsidiary
of Carreker, provided that
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<PAGE>
Carreker guarantees the performance by such assignee of Carreker'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 hereof 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 hereof 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. Israel and Carreker recognize that the
limitations contained in this Agreement are reasonably and properly required
for the adequate protection of the interests of Carreker. 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) EFFECT OF AGREEMENT. This Agreement will be void and have
no effect if the Effective Date does not occur on or before February 1, 1997.
(i) 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.
However, in all events, these arbitration provisions shall govern over any
conflicting rules that may now or hereafter be contained in the AAA Rules.
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<PAGE>
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.
(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 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. Carreker and Mr. Israel 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; PROVIDED, HOWEVER, that the
prevailing party in any arbitration will be entitled to an award of
attorneys' fees and costs, and all costs of arbitration, including those
provided for above, will be paid by the non-prevailing party, and the
arbitrator will be authorized to make such determinations.
(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.
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<PAGE>
(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) EXCLUSIVE REMEDY. Except as specifically otherwise
provided in this Agreement, 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 9(i) and the arbitration provided for herein, actions initiated
or maintained by the parties for injunctive or similar equitable relief may
not be 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.]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the Effective Date.
THE CARREKER GROUP, INC. /s/ Michael Israel
--------------------------------
MICHAEL ISRAEL
By: /s/ J.D. Carreker
-----------------------------
J.D. Carreker
Chief Executive Officer
Page 8
<PAGE>
EXHIBIT C
[Exhibit C includes a Noncompetition Agreement for each of Ronald R. Antinori,
Lawrence Duckwork, Michael Israel and Susan Antinori. A form of the
Noncompetition Agreement is filed herewith.]
<PAGE>
NONCOMPETITION AGREEMENT
This NONCOMPETITION AGREEMENT (this "AGREEMENT") is made as of the
Effective Date indicated below by and between The Carreker Group, Inc., a Texas
corporation ("CARREKER"), and __________________ ("SHAREHOLDER").
RECITALS
A. This Agreement is entered into in connection with and is ancillary to
that certain Agreement and Plan of Merger (the "Plan") dated as of January 29,
1997 among Carreker, Antinori Software, Inc., a Georgia corporation
("ANTINORI"), and CAG Newco, Inc., a Texas corporation and a wholly-owned
subsidiary of Carreker, pursuant to which CAG Newco, Inc. will merge with and
into Antinori (the "MERGER"). The date on which the Merger becomes effective
will be the effective date of this Agreement (the "EFFECTIVE DATE").
B. Shareholder is a principal shareholder of Antinori and has been
actively involved in the development and marketing of Antinori's products.
Carreker intends to continue the business of Antinori after the Merger and
integrate such business into Carreker's ongoing business. To preserve and
protect the assets of Antinori, including Antinori's goodwill, customers and
trade secrets of which Shareholder has and will have knowledge in his role as
an employee of Carreker and to preserve and protect Carreker's goodwill and
business interests going forward, and in consideration for Carreker's
entering into and performing under the Plan, Shareholder has agreed to enter
into this Agreement.
C. Shareholder and Carreker believe the limitation as to time,
geographical area and scope of activity contained in this Agreement are
reasonably necessary to, and no greater than that required to, protect the
goodwill and business interests of Carreker.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements of the parties contained herein, Carreker and Shareholder hereby
agree as follows:
1. TIME; SCOPE OF ACTIVITY. For the later of three years following the
Effective Date and two years after the termination of Shareholder's employment
by Carreker, Shareholder will not (except to the extent permitted in Section 3
of Shareholder's Employment Agreement with Carreker dated the date of this
Agreement) individually or as an employee, partner, officer, director or
shareholder or in any other capacity whatsoever of or
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<PAGE>
for any person, firm, partnership, company or corporation other than
Carreker, Antinori or other subsidiaries of Carreker:
(a) Own, manage, operate, sell, control or participate in the
ownership, management, operation, sales or control of any business engaged, in
the geographical area referred to in Section 2 below, in a business that is
substantially similar to or competitive with the development, marketing,
maintenance, administration, and consultation with respect to, computer software
for financial institutions or other computer software or other products created,
distributed or known by him to be under development by Carreker or any of its
subsidiaries prior to the termination of Shareholder's employment with Carreker;
or
(b) Directly or indirectly create, develop, sell, license or
otherwise market computer software, or related products or services, that are
substantially similar to or competitive with any computer software, or related
products or services, the creation, development, sale, licensing or other
marketing of which he participated in during Shareholder's employment with
Carreker; or
(c) Divulge, transmit or otherwise disclose or cause to be
divulged, transmitted or otherwise disclosed, any business contacts, client or
customer lists, technology, know-how, trade secrets, marketing techniques,
contracts or other confidential or proprietary information of Carreker and its
subsidiaries of whatever nature, whether existing on or prior to the date of
this Agreement or arising from and after the date of this Agreement (provided,
however, that for purposes of this Agreement, information (other than client or
customer lists) shall not be considered to be confidential or proprietary if (i)
it is a matter of public record, (ii) it is generally known in the industry, or
(iii) the Shareholder can demonstrate that such information was already known to
the recipient thereof other than by reason of any breach of any obligation under
this Agreement or any other confidentiality or non-disclosure agreement); or
(d) Recruit, attempt to hire, solicit, assist others in recruiting
or hiring, or refer to others concerning employment, in or with respect to the
geographical areas referred to in Section 2 below, any person who is an employee
of Carreker or any of their subsidiaries or induce or attempt to induce any such
employee to terminate his employment with Carreker or any of its subsidiaries.
2. GEOGRAPHICAL AREAS. The geographical areas in which the
restrictions provided for in this Agreement apply include all cities, counties
and states of the United States, and all other countries, in which Carreker or
Antinori has engaged in licensing or sales or otherwise conducted business or
selling or licensing efforts at any time during the two years prior to the
Effective Date of this Agreement or during the term of this Agreement.
Shareholder acknowledges that the scope and period of restrictions provided for
in Section 1 and the geographical area to which the
NONCOMPETITION AGREEMENT - Page 2
<PAGE>
restrictions apply as described in this Section 2 are fair and reasonable and
are reasonably required for the protection of Carreker and that this
Agreement accurately describes the business to which the restrictions are
intended to apply.
3. CONSENT TO INJUNCTION. Shareholder acknowledges that any breach of
the covenants of this Agreement will result in immediate and irreparable injury
to Carreker and, accordingly, consents to the application of injunctive relief
and such other equitable remedies for the benefit of Carreker as may be
appropriate if such a breach occurs or is threatened. The foregoing remedies
will be in addition to all other legal remedies to which Carreker may be
entitled hereunder, including, without limitation, monetary damages.
NONCOMPETITION AGREEMENT - Page 3
<PAGE>
4. MISCELLANEOUS.
(a) NOTICES. Any notice or other communication required or
permitted to be given under this Agreement will be in writing, will be delivered
personally or by mail or express delivery, postage prepaid, and will be deemed
given upon actual delivery or, if mailed by registered or certified mail, on the
third business day following deposit in the mails, addressed as follows:
(i) If to Carreker:
The Carreker Group, Inc.
14001 North Dallas Parkway, Suite 1100
Dallas, Texas 75240
Attention: J. D. Carreker, 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 Shareholder:
____________________________
____________________________
____________________________
Phone: _____________________
with a copy to:
Morris, Manning & Martin
A Limited Liability Partnership
3343 Peachtree Road, N.E., Suite 1600
Atlanta, Georgia 30326
Attention: Charles R. Beaudrot, Jr.
Phone: (404) 233-7000
Fax: (404) 365-9532
or to such other address as the party in question may have furnished to the
other party by written notice given in accordance with this Section 4(a).
(b) AMENDMENTS. This Agreement contains the entire agreement and
supersedes and replaces all prior agreements between Carreker and Shareholder or
Antinori and Shareholder concerning
NONCOMPETITION AGREEMENT - Page 4
<PAGE>
the subject matter hereof. 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 modification is sought.
(c) SUCCESSORS AND ASSIGNS. This Agreement will not be assignable
by either Shareholder or Carreker, except that the rights and obligations of
Carreker under this Agreement may be assigned to a corporation which becomes the
successor to Carreker as the result of a merger or other corporate
reorganization and which continues the business of Carreker, or any other
subsidiary of Carreker, provided that Carreker guarantees the performance by
such assignee of Carreker'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. Shareholder and Carreker recognize that the
limitations contained herein are reasonably and properly required for the
adequate protection of the interests of Carreker. The intent of the parties is
that the provisions of this Agreement be enforced to the fullest extent
permissible under applicable law. If for any reason a court of competent
jurisdiction or a binding arbitration proceeding finds any provision or position
of this Agreement or the application thereof, to be invalid or unenforceable,
then this Agreement will be deemed amended to revise that provision or position
to the minimum extent necessary to render it valid and enforceable and the
remaining provisions of this Agreement will be interpreted so as best to
reasonably effect the intent of the parties.
(g) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which will be an original as regards any party whose name 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) EFFECT OF AGREEMENT. This Agreement will be void and have no
effect if the Effective Date does not occur on or before February 1, 1997.
(i) DISPUTE RESOLUTION.
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<PAGE>
(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. 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.
(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 a reasonable hourly or daily consulting
rate for the arbitrator if the parties are not able to agree upon his or her
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 and experienced in
mergers and acquisitions; 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. Carreker and Shareholder 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; provided, however, that the prevailing
party in any arbitration will be entitled to an award of attorneys' fees and
costs, and all costs of arbitration, including those provided for above, will be
paid by the non-prevailing party, and the arbitrator will be authorized to make
such determinations.
(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
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<PAGE>
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) EXCLUSIVE REMEDY. Except as specifically otherwise
provided in this Agreement (including as provided in Section 3), arbitration
will be the sole and exclusive remedy of the parties for any dispute arising out
of this Agreement.
[THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
NONCOMPETITION AGREEMENT - Page 7
<PAGE>
IN WITNESS WHEREOF, this Agreement is made and effective as of the
Effective Date.
THE CARREKER GROUP, INC. SHAREHOLDER
By: /s/ J.D. Carreker /s/ Ronald R. Antinori
---------------------------- -----------------------------------
J.D. Carreker Name: Ronald R. Antinori
Chief Executive Officer
NONCOMPETITION AGREEMENT - Page 8
<PAGE>
EXHIBITS D-1 AND D-2
<PAGE>
EXHIBIT D-1
ESCROW AGREEMENT
This Escrow Agreement (this "AGREEMENT") is entered into as of January
31, 1997, among The Carreker Group, Inc., a Texas corporation ("CARREKER"),
Ronald R. Antinori, Susan Antinori and Michael Israel, who are the
shareholders (collectively, the "HOLDERS") of Antinori Software, Inc., a
Georgia corporation ("ANTINORI"), and U.S. Trust Company of Texas, N.A.
("ESCROW AGENT").
RECITALS
A. Antinori, Carreker and a wholly-owned subsidiary of Carreker have
entered into an Agreement and Plan of Merger dated as of January 29, 1997
(the "AGREEMENT") pursuant to which Antinori will merge with and into such
wholly-owned subsidiary of Carreker, with Antinori surviving the merger, such
that Antinori will become a wholly-owned subsidiary of Carreker. Capitalized
terms used in this Agreement and not otherwise defined herein have the
meanings given them in the Agreement. A copy of the Agreement has been
delivered to Escrow Agent.
B. Pursuant to the Agreement, an aggregate of 514,614 shares of
Carreker Class A Voting Common Stock, no par value ("CARREKER COMMON STOCK"),
are to be issued in the Merger to the Holders.
C. The Agreement provides for shares equaling approximately (and less
than) 5% of the shares of Carreker Common Stock that are issued in the Merger
(the "ESCROW SHARES") to be deducted from the shares of Carreker Common Stock
issued to the Holders and placed in an escrow account (the "ESCROW ACCOUNT")
to secure certain indemnification obligations of the Holders to Carreker and
the other Indemnified Persons (as defined in Section 10.2 of the Agreement)
under the Agreement on the terms and conditions set forth herein. The Escrow
Shares required to be deposited in the Escrow Account pursuant to this
Agreement are described on ATTACHMENT A.
D. The parties desire to establish the terms and conditions pursuant
to which the Escrow Shares will be deposited, held in, and disbursed from the
Escrow Account.
NOW, THEREFORE, the parties agree as follows:
1. ESCROW AND INDEMNIFICATION.
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(a) ESCROW OF SHARES. Promptly after the Effective Time of the
Merger, Carreker will deposit the Escrow Shares with Escrow Agent, who will
hold them in escrow as collateral for the indemnification obligations of the
Holders under Section 10.2 of the Agreement until such time as such Escrow
Shares are released pursuant to this Agreement. The Escrow Shares include
any "ADDITIONAL ESCROW SHARES" as that term is defined in Section 2(b) of
this Agreement. Escrow Agent agrees to accept delivery of the Escrow Shares
and to hold the Escrow Shares in escrow subject to the terms and conditions
of this Agreement.
(b) INDEMNIFICATION. Carreker and the other Indemnified Persons
are indemnified pursuant to the terms of Section 10.2 of the Agreement (which
terms are incorporated herein by reference) from and against any Carreker
Damages, subject to the limitations set forth in Section 10.2 of the
Agreement and in this Agreement. (For purposes of this Agreement, references
to Carreker will include all other Indemnified Persons, as applicable.) A
number of Shares equalling approximately (and less than) 5% of the shares of
Carreker Common Stock that are issued in the Merger to the Holders (the
"ESCROW SHARES") will be security for this indemnity obligation, subject to
the limitations, and in the manner provided, in Sections 10.2 of the
Agreement and this Agreement. Ronald R. Antinori shall act as Representative
of the Holders for purposes of this Agreement, is duly authorized to be such
Representative and may bind the Holders. Promptly after the receipt by
Carreker of notice or discovery of any claim, damage or legal action or
proceeding giving rise to indemnification rights under Section 10.2 of the
Agreement, Carreker will give the Representative and Escrow Agent written
notice of such claim, damage, legal action or proceeding (a "CLAIM") in
accordance with Section 3 of this Agreement. Within seven days of delivery of
such written notice, the Representative may, with Carreker's written consent,
which shall not be unreasonably withheld, at the expense of the Holders,
elect to take all necessary steps properly to contest any Claim involving
third parties or to prosecute or defend such Claim to conclusion or
settlement. If the Representative makes the foregoing election, then the
Representative will take all necessary steps to contest any such Claim or to
prosecute or defend such Claim to conclusion or settlement, and will notify
Carreker of the progress of any such Claim, will permit Carreker, at its
expense, to participate in such prosecution or defense (PROVIDED, HOWEVER,
that if a conflict of interest exists which would make it inappropriate, in
the reasonable opinion of Carreker, for the same counsel to represent both
Carreker and the Holders in the resolution of such Claim, then Carreker may
retain separate counsel, the fees and expenses of which shall not be borne by
Carreker but shall instead be borne by the Holders) and will provide Carreker
with reasonable access to all relevant information and documents relating to
the Claim and the Representative's prosecution or defense thereof. If the
Representative does not make such election, then Carreker shall be
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free to handle the prosecution or defense of any such Claim, will take all
necessary steps to contest any such Claim involving third parties or to
prosecute or defend such Claim to conclusion or settlement, will notify the
Representative of the progress of any such Claim, and will permit the
Representative, at the expense of the Holders, to participate in such
prosecution or defense and will provide the Representative with reasonable
access to all relevant information and documents relating to the Claim and
Carreker's prosecution or defense thereof. In either case, the party not in
control of a Claim will cooperate with the other party in the conduct of the
prosecution or defense of such Claim. Neither party will compromise or settle
any such Claim without the written consent of either Carreker (if the
Representative defends the Claim) or the Representative (if Carreker defends
the Claim), such consent not to be unreasonably withheld.
(c) LIMITATION ON LIABILITY. The maximum liability of a Holder
under Section 10.2 of the Agreement and under this Agreement, and Carreker's
sole and exclusive remedy under Section 10.2 of the Agreement and under this
Agreement, will be the number of Escrow Shares set forth next to each such
Holder's name on ATTACHMENT A; provided, however, that the foregoing
limitation on liability shall not apply in respect of Ronald R. Antinori's
indemnity obligations resulting from fraud or intentional and willful
misrepresentation or intentional and willful concealment.
2. DEPOSIT OF ESCROW SHARES; RELEASE FROM ESCROW.
(a) DELIVERY OF ESCROW SHARES. On the Closing Date, the Escrow
Shares allocable to a Holder (the "INITIAL ESCROW SHARES") will be delivered
by Carreker to Escrow Agent in the form of duly authorized stock certificates
issued in the respective names of the Holder thereof together with endorsed
stock powers. On the Closing Date, each of the Holders will deliver to
Carreker a duly endorsed stock power in the form of ATTACHMENT B. If
Carreker issues any Additional Escrow Shares (as defined below), then such
shares will be issued and delivered to Escrow Agent in the same manner as the
Escrow Shares delivered on the Closing Date.
(b) DIVIDENDS, VOTING AND RIGHTS OF OWNERSHIP. Except for
tax-free dividends paid in stock declared with respect to the Escrow Shares
pursuant to Section 305(a) of the Code ("ADDITIONAL ESCROW SHARES") and
returns of capital, any cash dividends, dividends payable in securities or
other distributions made in respect of the Escrow Shares will be distributed
by Carreker to each Holder. The Holder will have the right to vote the
Escrow Shares deposited in the Escrow Account for the account of such Holder
so long as such Escrow Shares are held in escrow, and Carreker will take all
reasonable steps necessary to allow the exercise of such rights. While the
Escrow Shares remain in Escrow Agent's possession pursuant to this Agreement,
the Holder will retain and will be able to exercise all other incidents of
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<PAGE>
ownership of said Escrow Shares that are not inconsistent with the terms and
conditions of this Agreement.
(c) DISTRIBUTIONS TO HOLDERS. On or before January 31, 1998
(the "FINAL RELEASE DATE"), Escrow Agent will release from escrow to each
Holder such Holder's Escrow Shares, plus that portion of all Additional
Escrow Shares related to the Escrow Shares, less (A) any Escrow Shares
delivered to Carreker in accordance with Section 4 in satisfaction of Claims
by Carreker pursuant to Section 1(b) and (B) any Escrow Shares subject to
delivery to Carreker in accordance with Section 4 with respect to any then
pending but unresolved Claims of Carreker pursuant to Section 1(b). Any
Escrow Shares held as a result of clause (B) will be released to the Holder
or released to Carreker for cancellation (as appropriate) promptly upon
resolution of each specific Claim involved.
(d) RELEASE OF SHARES. The Escrow Shares will be held by Escrow
Agent until required to be released pursuant to Section 2(c) above. Within
five business days after the applicable release condition is met, Escrow
Agent will deliver to the Holders the requisite number of Escrow Shares to be
released on such date as identified by Carreker and the Representative to
Escrow Agent in writing. Such delivery will be in the form of stock
certificate(s) issued in the names of such Holders. Carreker and the
Representative undertake to deliver a timely notice to Escrow Agent
identifying the number of Escrow Shares to be released within such five-day
period. Carreker will take such action as may be necessary to cause stock
certificates to be issued in the names of the Holders. Escrow Agent will have
such stock certificates in its possession no later than three business days
prior to the day on which Escrow Agent is to deliver such certificates to the
Holders. Certificates representing Escrow Shares will bear a legend
indicating that they are subject to resale restrictions. Cash will be paid
in lieu of fractions of Escrow Shares in an amount equal to the product
determined by multiplying such fraction by the per share value of Carreker
Common Stock as stated in Section 1.2 of the Agreement. Within five business
days after written request from the Representative, Carreker will submit a
certified schedule of the cash amounts payable for fractional shares and will
deposit with Escrow Agent sufficient funds to pay such cash amounts for
fractional shares.
(e) NO ENCUMBRANCE. No Escrow Shares or any beneficial interest
therein may be pledged, sold, assigned or transferred, including by operation
of law, by a Holder or be taken or reached by any legal or equitable process
in satisfaction of any debt or other liability of the Holder (other than such
Holder's obligations under Section 10.2 of the Agreement), prior to the
delivery to such Holder of the Escrow Shares by Escrow Agent.
(f) POWER TO TRANSFER ESCROW SHARES. Escrow Agent is
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hereby granted the power to effect any transfer of Escrow Shares contemplated
by this Agreement. Carreker will cooperate with Escrow Agent in promptly
issuing stock certificates to effect such transfers.
3. NOTICE OF CLAIM.
(a) Each notice of a Claim by Carreker pursuant to Section 1(b)
(the "NOTICE OF CLAIM") will be in writing and will contain the following
information to the extent reasonably available to Carreker:
(i) Carreker's good faith estimate of the reasonably
foreseeable maximum amount of the alleged Carreker Damages (which amount may
be the amount of damages claimed by a third party plaintiff in an action
brought against Carreker or Antinori based on alleged facts, which if true,
would constitute a breach of Antinori's representations and warranties); and
(ii) A brief description in reasonable detail of the
facts, circumstances or events giving rise to the alleged Carreker Damages
based on Carreker's good faith belief thereof, including, without limitation,
the identity and address of any third-party claimant (to the extent
reasonably available to Carreker) and copies of any formal demand or
complaint.
(b) Escrow Agent will not transfer any of the Escrow Shares held
in the Escrow Account to Carreker pursuant to a Notice of Claim until such
Notice of Claim has been resolved in accordance with Section 4.
4. RESOLUTION OF NOTICE OF CLAIM AND TRANSFER OF ESCROW SHARES. Any
Notice of Claim received by the Representative and Escrow Agent pursuant to
Section 3, or any notice of a claim received by the Representative and Escrow
Agent pursuant to Section 1(c) (a "LIQUIDATED DAMAGES CLAIM"), will be
resolved as follows:
(a) UNCONTESTED CLAIMS. If the Representative does not contest
a Notice of Claim or a Liquidated Damages Claim in writing to Escrow Agent
and Carreker and the Representative does not pay the amount demanded within
15 calendar days after the Notice of Claim or the Liquidated Damages Claim is
delivered pursuant to Section 4(b) below, then Escrow Agent will immediately
transfer to Carreker for cancellation that number of the Escrow Shares having
a value (determined pursuant to Section 4(c)) equal to the amount of Carreker
Damages specified in the Notice of Claim, or the amount of the Liquidated
Damages (in the case of a Liquidated Damages Claim), which number will be
allocated among the Holders in proportion to their percentage interests in
the Escrow Shares set forth on ATTACHMENT A, and will notify the
Representative of such transfer.
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(b) CONTESTED CLAIMS. To recover Claims under this Escrow it
will not be necessary to institute an arbitration proceeding pursuant to
Section 11.1 of the Agreement; the arbitrator hereunder being authorized to
determine the existence of Claims, as well as the amount of Carreker Damages
(in the case of a Claim under Section 1(b) above) associated therewith. If
the Representative gives written notice contesting all, or a portion of, a
Notice of Claim or Liquidated Damages Claim to Carreker and Escrow Agent (a
"CONTESTED CLAIM") within the 15-day period provided above, then matters that
are subject to a third party claim brought against Carreker or Antinori in
litigation or an arbitration proceeding will await the final decision, award
or settlement of such litigation or arbitration proceeding, while matters
that arise between Carreker on the one hand and Antinori on the other hand
("ARBITRABLE CLAIMS"), will be settled by binding arbitration. Any portion
of the Notice of Claim that is not contested will be resolved as set forth
above in Section 4(a). The final decision of the arbitrator will be
furnished to Escrow Agent, the Representative and Carreker in writing and
will constitute a conclusive determination of the issue in question, binding
upon the Holders and Carreker. After notice that the Notice of Claim is
contested by the Representative, Escrow Agent will continue to hold in the
Escrow Account Escrow Shares having a value (determined pursuant to Section
4(c)) sufficient to cover such Claim (notwithstanding the expiration of the
Final Release Date) until (i) execution of a settlement agreement by Carreker
and the Representative setting forth a resolution of the Notice of Claim, or
(ii) receipt of a copy of the final award of the arbitrator.
(i) ARBITRATION. Any contested Claim shall be settled
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. 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.
(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 a reasonable hourly or daily
consulting rate 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
lawyers who are familiar with Texas contract law and experienced in mergers
and acquisitions; provided, however, that such lawyers cannot work for a firm
then
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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. Carreker and the Holders 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; provided, however, that the
prevailing party in any arbitration will be entitled to an award of
attorneys' fees and costs, and all costs of arbitration, including those
provided for above, will be paid by the non-prevailing party, and the
arbitrator will be authorized to make such determinations. At Carreker's
option, the Holders' liability for such fees and costs and costs of
arbitration may be paid by Carreker and recovered by Carreker as a Claim
hereunder out of the Escrow Shares.
(v) BURDEN OF PROOF. For any Arbitrable Claim 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. In the case of an
award pursuant to a Liquidated Damages Claim, the amount of the award will be
equal to the Liquidated Damages plus costs of arbitration as provided above.
(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 or the Agreement.
(viii) EXCLUSIVE REMEDY. Except as specifically otherwise
provided in this Agreement or the Agreement, arbitration will be the sole and
exclusive remedy of the parties for any Arbitrable Claim arising out of this
Agreement.
(c) DETERMINATION OF AMOUNT OF CLAIMS. Any amount owed to
Carreker hereunder, determined pursuant to Section 4(a) or
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(b) above, will be immediately payable to Carreker out of the Escrow Shares
then held by Escrow Agent on a pro rata basis among the Holders at a per
share value for all Escrow Shares equal to $23.83.
(d) NO EXHAUSTION OF REMEDIES. Carreker need not exhaust any
other remedies that may be available to it but may proceed directly in
accordance with the provisions of this Agreement. Carreker may institute
Claims against the Escrow Shares and in satisfaction thereof may recover
Escrow Shares, in accordance with the terms of this Agreement, without making
any other Claims directly against the Holders and without rescinding or
attempting to rescind the transactions consummated pursuant to the Agreement.
The assertion of any single Claim for indemnification hereunder will not bar
Carreker from asserting other Claims hereunder.
5. LIMITATION OF ESCROW AGENT'S LIABILITY.
(a) Escrow Agent will incur no liability with respect to any
action taken or suffered by it in reliance upon any notice, direction,
instruction, consent, statement or other document believed by it to be
genuine and duly authorized, nor for any other action or inaction, except its
own willful misconduct or gross negligence. Escrow Agent shall have no duty
to inquire into or investigate the validity, accuracy or content or any
document delivered to it. Escrow Agent will not be responsible for the
validity or sufficiency of this Agreement. In all questions arising under
this Agreement, Escrow Agent may rely on the advice or opinion of counsel,
and for anything done, omitted or suffered in good faith by Escrow Agent
based on such advice, Escrow Agent will not be liable to anyone. Escrow
Agent will not be required to take any action hereunder involving its expense
unless the payment of such expense is made or provided for in a manner
satisfactory to it.
(b) If conflicting demands are made or conflicting notices are
served upon Escrow Agent with respect to the Escrow Account, then Escrow
Agent will have the absolute right, at Escrow Agent's election, to do either
or both of the following: (i) resign so a successor can be appointed
pursuant to Section 9 or (ii) file a suit in interpleader and obtain an order
from a court of competent jurisdiction requiring the parties to interplead
and litigate in such court their several claims and rights among themselves.
If such interpleader suit is brought, then Escrow Agent will thereby be fully
released and discharged from all further obligations imposed upon it under
this Agreement, and Carreker and the Holders will each pay Escrow Agent 50%
percent of all costs, expenses and reasonable attorney's fees expended or
incurred by Escrow Agent pursuant to the exercise of Escrow Agent's rights
under this Section 5 (such costs, fees and expenses being treated as
extraordinary fees and expenses for the purposes of Section 8); provided,
however, that Carreker and the Holders
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shall be entitled to reimbursement from the Holders and Carreker,
respectively, of any extraordinary fees and expenses of Escrow Agent paid by
Carreker and the Holders, respectively, if Carreker or the Holders,
respectively, prevails in the resolution of such claims and rights, in
accordance with Section 8.
(c) Each party hereto other than Escrow Agent, jointly and
severally (each an "INDEMNIFYING PARTY" and together the "INDEMNIFYING
PARTIES"), hereby covenants and agrees to reimburse, indemnify and hold
harmless Escrow Agent, Escrow Agent's officers, directors, employees, counsel
and agents (severally and collectively, "ESCROW AGENT"), from and against any
loss, damage, liability or loss suffered, incurred by, or asserted against
Escrow Agent (including amounts paid in settlement of any action, suit,
proceeding, or claim brought or threatened to be brought and including
reasonable expenses of legal counsel) arising out of, in connection with or
based upon any act or omission by Escrow Agent (and/or any of its officers,
directors, employees, counsel or agents) relating in any way to this
Agreement or Escrow Agent's services hereunder. This indemnity shall exclude
gross negligence and willful misconduct on Escrow Agent's part. Anything in
this Agreement to the contrary notwithstanding, Escrow Agent shall not be
liable for special, indirect or consequential loss or damage of any kind
(including but not limited to lost profits), even if Escrow Agent has been
advised of the likelihood of such loss or damage and regardless of the form
of action.
(d) Each Indemnifying Party may participate at its own expense
in the defense of any claim or action that may be asserted against Escrow
Agent, and if the Indemnifying Parties so elect, the Indemnifying Parties may
assume the defense of such claim or action; PROVIDED, HOWEVER, that if a
conflict of interest exists that would make it inappropriate, in the sole
discretion of Escrow Agent, for the same counsel to represent both Escrow
Agent and the Indemnifying Parties, then Escrow Agent's retention of separate
counsel shall be reimbursable as herein above provided. Escrow Agent's right
to indemnification hereunder shall survive Escrow Agent's resignation or
removal as Escrow Agent and shall survive the termination of this Agreement
by lapse of time or otherwise.
(e) Escrow Agent hereby warrants that Escrow Agent will notify
each Indemnifying Party by letter, or by telephone or telecopy confirmed by
letter, of any receipt by Escrow Agent of a written assertion of a claim
against Escrow Agent, or any action commenced against Escrow Agent, within
three business days after Escrow Agent's receipt of written notice of such
claim. However, Escrow Agent's failure to notify each Indemnifying Party
shall not operate to relieve an Indemnifying Party from any liability that it
may have on account of this Section 5 unless such failure prejudices such
Indemnifying Party's rights.
(f) Escrow Agent may execute any of its powers or
responsibilities hereunder and exercise any rights hereunder
Page 9
<PAGE>
either directly or by or through its agents or attorneys. Nothing in this
Agreement shall be deemed to impose upon Escrow Agent any duty to qualify to
do business or to act as a fiduciary or otherwise in any jurisdiction other
than the State of Texas.
6. NOTICES. All notices, instructions and other communications
required or permitted to be given hereunder or necessary or convenient in
connection herewith shall be in writing and will be deemed delivered (i) when
personally served or when delivered by facsimile (to the facsimile number of
the person to whom notice is given), (ii) the first business day following
the date of deposit with an overnight courier service or (iii) on the earlier
of actual receipt or the third business day following the date on which the
notice is deposited in the United States Mail, first class certified, postage
prepaid, addressed as follows:
(a) If to Escrow Agent:
U.S. Trust Company of Texas, N.A.
2001 Ross Avenue
Dallas, Texas 75201
Phone: 214-754-1200
Fax: 214-754-1303
(b) If to Carreker:
The Carreker Group, Inc.
14001 North Dallas Parkway, Suite 1100
Dallas, Texas 75240
Attention: J. D. Carreker, 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
(c) If to the Representative:
Ronald R. Antinori
238 15th Street #12
Atlanta, Georgia 30309
Phone: (404) 876-2762
with a copy to:
Morris, Manning & Martin
Page 10
<PAGE>
A Limited Liability Partnership
3343 Peachtree Road, N.E., Suite 1600
Atlanta, Georgia 30326
Attention: Charles R. Beaudrot, Jr.
Phone: (404) 233-7000
Fax: (404) 365-9532
or to such other address as the party in question may have furnished to the
other party by written notice given in accordance with this Section 6.
7. GENERAL.
(a) GOVERNING LAW, ASSIGNS. 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. This Agreement will be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns.
(b) COUNTERPARTS. This Agreement may be executed in
counterparts, each of which will be an original as regards any party whose
name 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
all parties reflected hereon as signatories.
(c) ENTIRE AGREEMENT. Except as otherwise set forth in the
Agreement, this Agreement constitute the entire understanding and agreement
of the parties with respect to the subject matter of this Agreement and
supersedes all prior agreements or understandings, written or oral, between
the parties with respect to the subject matter hereof.
(d) WAIVERS. No waiver by any party of any condition or of any
breach of any provision of this Agreement will be effective unless in
writing. No waiver by any party of any such condition or breach, in any one
instance, will be deemed to be a further or continuing waiver of any such
condition or breach or a waiver of any other condition or breach of any other
provision contained herein.
(e) TAX IDENTIFICATION NUMBERS. Each party, other than Escrow
Agent, shall provide Escrow Agent with its Tax Identification Number (TIN) as
assigned by the Internal Revenue Service.
8. EXPENSES OF ESCROW AGENT. All fees and expenses of Escrow Agent
incurred in the ordinary course of performing its responsibilities hereunder
will be paid 50% by Carreker and 50% by
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<PAGE>
the Holders, upon receipt of a written invoice from Escrow Agent. Any
extraordinary fees and expenses, including without limitation any fees or
expenses (including the fees or expenses of counsel to Escrow Agent) incurred
by Escrow Agent in connection with a dispute over the distribution of Escrow
Shares or the validity of a Notice of Claim, will be paid 50% by Carreker and
50% by the Holders upon receipt of a written invoice by Escrow Agent;
provided, however, that Carreker and the Holders shall be entitled to
reimbursement from the Holders and Carreker, respectively, of any
extraordinary fees and expenses of Escrow Agent paid by Carreker and the
Holders, respectively, if Carreker or the Holders, respectively, prevails in
such dispute.
9. SUCCESSOR ESCROW AGENT. If Escrow Agent becomes unavailable or
unwilling to continue in its capacity herewith, then Escrow Agent may resign
and be discharged from its duties or obligations hereunder by giving notice
of its resignation to the parties to this Agreement, specifying a date not
less than ten days following such notice date of when such resignation will
take effect. Carreker will designate a successor Escrow Agent prior to the
expiration of such ten-day period by giving written notice to Escrow Agent
and the Representative. Carreker may appoint an successor Escrow Agent
without the consent of the Representative so long as such successor is a bank
or trust company that, together with any parent, has assets of at least $100
million, and may appoint any other successor Escrow Agent with the consent of
the Representative, which will not be unreasonably withheld. Escrow Agent
will promptly transfer the Escrow Shares to such designated successor.
10. LIMITATION OF RESPONSIBILITY. Escrow Agent's duties are limited
to those set forth in this Agreement, and Escrow Agent, acting as such under
this Agreement, is not charged with knowledge of any duties or
responsibilities under any other document or agreement, including, without
limitation, the Agreement. Escrow Agent shall not be responsible for the
validity, binding effect, execution or sufficiency of this Escrow Agreement
or of any agreement amendatory or supplemental hereto.
11. AMENDMENT. This Agreement may be amended by the written agreement
of Carreker, Escrow Agent and the Representative, provided that, if Escrow
Agent does not agree to an amendment agreed upon by Carreker and the
Representative, then Escrow Agent will resign and Carreker will appoint a
successor Escrow Agent in accordance with Section 9. No amendment of the
Agreement shall increase Escrow Agent's responsibilities or liability
hereunder without Escrow Agent's written agreement.
12. HOLDER'S REPRESENTATIVE. For purposes of this Agreement, the
Holders hereby consent to the appointment of the Representative, as
representative of the Holders, and as the attorney-in-fact for and on behalf
of each Holder, and, subject to the express limitation set forth below, the
taking by the
Page 12
<PAGE>
Representative of any and all actions and the making of any decisions
required or permitted to be taken by the Representative under this Agreement,
including, without limitation, the exercise of the power to (i) authorize
delivery to Carreker of the Escrow Shares, or any portion thereof, in
satisfaction of any Claims, (ii) agree to, negotiate, enter into settlements
and compromises of, and demand arbitration and comply with orders of courts
and awards of arbitrators with respect to any Claims, (iii) resolve any
Claims, and (iv) take all actions necessary in the judgment of the
Representative for the accomplishment of the foregoing and all of the other
terms, conditions and limitations of this Agreement. The Representative will
have unlimited authority and power to act on behalf of each Holder with
respect to this Agreement and the disposition, settlement or other handling
of all Claims, rights or obligations arising under this Agreement so long as
all Holders are treated in the same manner. The Holders will be bound by all
actions taken by the Representative in connection with this Agreement, and
Carreker will be entitled to rely on any action or decision of the
Representative. In performing the functions specified in this Agreement, the
Representative will not be liable to the Holders in the absence of gross
negligence or willful misconduct. The Representative may resign from such
position, effective upon a new representative being appointed in writing by
Holders who beneficially own a majority of the Escrow Shares. The
Representative will not be entitled to receive any compensation from Carreker
or the Holders in connection with this Agreement. Any out-of-pocket costs
and expenses reasonably incurred by the Representative in connection with
actions taken pursuant to the terms of this Agreement will be paid by the
Holders to the Representative in proportion to their percentage interests in
the Escrow Shares as set forth on ATTACHMENT A.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
THE CARREKER GROUP, INC. REPRESENTATIVE:
By: /s/ J. D. Carreker /s/ Ronald R. Antinori
--------------------------------- -------------------------------------
J. D. Carreker, Chief Executive RONALD R. ANTINORI
Officer
Page 13
<PAGE>
ESCROW AGENT: HOLDERS:
U.S. TRUST COMPANY OF TEXAS, N.A. /s/ RONALD R. ANTINORI
-------------------------------------
RONALD R. ANTINORI
By:
---------------------------------
Authorized Signatory
/s/ SUSAN ANTINORI
-------------------------------------
SUSAN ANTINORI
/s/ MICHAEL ISRAEL
-------------------------------------
MICHAEL ISRAEL
Page 14
<PAGE>
ATTACHMENT A
<TABLE>
Total
Antinori Carreker Escrow
Holder Shares Shares Shares
- ------ -------- -------- ------
<S> <C> <C> <C>
Ronald R. Antinori 898,990 458,007 22,873
Susan Antinori 101,010 51,461 2,570
Michael Israel 10,101 5,146 257
1,010,101 514,614 25,700
--------- ------- ------
--------- ------- ------
</TABLE>
Page 15
<PAGE>
ATTACHMENT B
STOCK POWER AND ASSIGNMENT
SEPARATE FROM CERTIFICATE
In connection with the merger of Antinori Software, Inc. ("ANTINORI")
with a wholly-owned subsidiary of The Carreker Group, Inc. ("CARREKER"), the
undersigned is receiving shares of Carreker Class A Voting Common Stock, no
par value, in respect of the shares of Antinori Common Stock held by the
undersigned prior to such merger.
FOR VALUE RECEIVED, and pursuant to certain Agreement and Plan of Merger
dated as of January 29, 1997 among Antinori, such subsidiary and Carreker
(the "AGREEMENT") and that certain Escrow Agreement dated as of January 31,
1997 executed in connection therewith (the "ESCROW AGREEMENT"), the
undersigned hereby assigns and transfer unto U.S. Trust Company of Texas,
N.A., as Escrow Agent ("ESCROW AGENT") pursuant to the Escrow Agreement and
the Agreement shares (the "SHARES") of the Class A Voting Common
Stock of Carreker.
The undersigned does hereby irrevocably constitute Escrow Agent, as
attorney-in-fact, with full power of substitution and re-substitution, to
hold such Shares in escrow and to transfer such shares on the books of
Carreker if all or a portion of the Shares are retained by Carreker in
accordance with the Escrow Agreement in satisfaction of the undersigned's
indemnification obligations under the Agreement. The undersigned hereby
acknowledges that the Shares will be held in escrow until required to be
released pursuant to the Escrow Agreement and that the number of Shares
released from escrow will be equal to the number of Shares listed above less
any amount retained in satisfaction of Claims as set forth in the Agreement.
Dated: January 31, 1997.
------------------------------------------
Name:
-------------------------------------
Escrow Agreement - Page 1
<PAGE>
EXHIBIT D-2
ESCROW AGREEMENT
This Escrow Agreement (this "AGREEMENT") is entered into as of January
31, 1997, among The Carreker Group, Inc., a Texas corporation (the
"COMPANY"), J.D. Carreker ("HOLDER"), the principal shareholder of the
Company, and U.S. Trust Company of Texas, N.A. ("ESCROW AGENT").
RECITALS
A. Antinori Software, Inc., a Georgia corporation ("ANTINORI"), the
Company and a wholly-owned subsidiary of the Company have entered into an
Agreement and Plan of Merger dated as of January 29, 1997 (the "AGREEMENT"),
pursuant to which Antinori will merge with and into such wholly-owned
subsidiary, with Antinori surviving the merger, such that Antinori will
become a wholly-owned subsidiary of the Company. Capitalized terms used in
this Agreement and not otherwise defined herein have the meanings given them
in the Agreement. A copy of the Agreement has been delivered to Escrow Agent.
B. Pursuant to the Agreement, an aggregate of 514,614 shares of the
Company's Class A Voting Common Stock, no par value ("THE COMPANY COMMON
STOCK"), are to be issued in the Merger to the shareholders of Antinori.
C. The Agreement provides for Holder to place 25,700 shares of
Company Common Stock, being a number of shares equaling approximately (and
less than) 5% of the shares of the Company Common Stock that are issued in
the Merger (the "ESCROW SHARES"), in an escrow account (the "ESCROW ACCOUNT")
to secure certain indemnification obligations of Holder to the Company and
the other Indemnified Persons (as defined in Section 10.3 of the Agreement)
under the Agreement on the terms and conditions set forth herein.
D. The parties desire to establish the terms and conditions pursuant
to which the Escrow Shares will be deposited, held in, and disbursed from the
Escrow Account.
NOW, THEREFORE, the parties agree as follows:
1. ESCROW AND INDEMNIFICATION.
(a) ESCROW OF SHARES. Promptly after the Effective Time of the
Merger, Holder will deposit the Escrow Shares with Escrow Agent, who will
hold them in escrow as collateral for the indemnification obligations of
Holder under Section 10.3 of the Agreement until such time as such Escrow
Shares are released
ESCROW AGREEMENT - Page 1
<PAGE>
pursuant to this Agreement. The Escrow Shares include any "ADDITIONAL ESCROW
SHARES" as that term is defined in Section 2(b) of this Agreement. Escrow
Agent agrees to accept delivery of the Escrow Shares and to hold the Escrow
Shares in escrow subject to the terms and conditions of this Agreement.
(b) INDEMNIFICATION. The Company and the other Indemnified
Persons are indemnified pursuant to the terms of Section 10.3 of the
Agreement (which terms are incorporated herein by reference) from and against
any Antinori Damages, subject to the limitations set forth in Section 10.3 of
the Agreement and in this Agreement. (For purposes of this Agreement,
references to the Company will include all other Indemnified Persons, as
applicable.) 25,700 shares of the Company Common Stock held by Holder (the
"ESCROW SHARES") will be security for this indemnity obligation, subject to
the limitations, and in the manner provided, in Sections 10.3 of the
Agreement and this Agreement. Promptly after the receipt by the Company of
notice or discovery of any claim, damage or legal action or proceeding giving
rise to indemnification rights under Section 10.3 of the Agreement, the
Company will give Holder and Escrow Agent written notice of such claim,
damage, legal action or proceeding (a "CLAIM") in accordance with Section 3
of this Agreement. Within seven days of delivery of such written notice,
Holder may, with the Company's written consent, which shall not be
unreasonably withheld, at the expense of Holder, elect to take all necessary
steps properly to contest any Claim involving third parties or to prosecute
or defend such Claim to conclusion or settlement. If Holder makes the
foregoing election, then the Holder will take all necessary steps to contest
any such Claim or to prosecute or defend such Claim to conclusion or
settlement, and will notify the Company of the progress of any such Claim,
will permit the Company, at its expense, to participate in such prosecution
or defense (PROVIDED, HOWEVER, that if a conflict of interest exists which
would make it inappropriate, in the reasonable opinion of the Company, for
the same counsel to represent both the Company and Holder in the resolution
of such Claim, then the Company may retain separate counsel, the fees and
expenses of which shall not be borne by the Company but shall instead be
borne by Holder) and will provide the Company with reasonable access to all
relevant information and documents relating to the Claim and Holder's
prosecution or defense thereof. If Holder does not make such election, then
the Company shall be free to handle the prosecution or defense of any such
Claim, will take all necessary steps to contest any such Claim involving
third parties or to prosecute or defend such Claim to conclusion or
settlement, will notify Holder of the progress of any such Claim, and will
permit Holder, at his expense, to participate in such prosecution or defense
and will provide Holder with reasonable access to all relevant information
and documents relating to the Claim and the Company's prosecution or defense
thereof. In either case, the party not in control of a Claim will cooperate
with the other party in the conduct of the prosecution or defense of such
Claim. Neither party will compromise or settle any such Claim without the
written consent of either the Company (if Holder defends the Claim) or Holder
(if the Company defends
ESCROW AGREEMENT - Page 2
<PAGE>
the Claim), such consent not to be unreasonably withheld.
(c) LIMITATION ON LIABILITY. The maximum liability of a Holder
under Section 10.3 of the Agreement and under this Agreement, and the
Company's sole and exclusive remedy under Section 10.3 of the Agreement and
under this Agreement, will be the 25,700 Escrow Shares; provided, however,
that the foregoing limitation on liability shall not apply in respect of
Holder's indemnity obligations resulting from fraud or intentional and
willful misrepresentation or intentional and willful concealment.
2. DEPOSIT OF ESCROW SHARES; RELEASE FROM ESCROW.
(a) DELIVERY OF ESCROW SHARES. On the Closing Date, the Escrow
Shares (the "INITIAL ESCROW SHARES") will be delivered by the Company to
Escrow Agent in the form of duly authorized stock certificate(s) issued in
the respective names of Holder together with endorsed stock power(s). On the
Closing Date, Holder will deliver to the Company a duly endorsed stock power
in the form of ATTACHMENT A. If the Company issues any Additional Escrow
Shares (as defined below), then such shares will be issued and delivered to
Escrow Agent in the same manner as the Escrow Shares delivered on the Closing
Date.
(b) DIVIDENDS, VOTING AND RIGHTS OF OWNERSHIP. Except for
tax-free dividends paid in stock declared with respect to the Escrow Shares
pursuant to Section 305(a) of the Code ("ADDITIONAL ESCROW SHARES") and
returns of capital, any cash dividends, dividends payable in securities or
other distributions made in respect of the Escrow Shares will be distributed
by the Company to Holder. Holder will have the right to vote the Escrow
Shares deposited in the Escrow Account for the account of Holder so long as
such Escrow Shares are held in escrow, and the Company will take all
reasonable steps necessary to allow the exercise of such rights. While the
Escrow Shares remain in Escrow Agent's possession pursuant to this Agreement,
Holder will retain and will be able to exercise all other incidents of
ownership of said Escrow Shares that are not inconsistent with the terms and
conditions of this Agreement.
(c) DISTRIBUTIONS TO HOLDER. On or before January 31, 1998 (the
"FINAL RELEASE DATE"), Escrow Agent will release from escrow to Holder the
Escrow Shares, plus that portion of all Additional Escrow Shares related to
the Escrow Shares, less (A) any Escrow Shares delivered to the Company in
accordance with Section 4 in satisfaction of Claims by the Company pursuant
to Section 1(b) and (B) any Escrow Shares subject to delivery to the Company
in accordance with Section 4 with respect to any then pending but unresolved
Claims of the Company pursuant to Section 1(b). Any Escrow Shares held as a
result of clause (B) will be released to Holder or released to the Company
for cancellation (as appropriate) promptly upon resolution of each specific
Claim involved.
(d) RELEASE OF SHARES. The Escrow Shares will be held
ESCROW AGREEMENT - Page 3
<PAGE>
by Escrow Agent until required to be released pursuant to Section 2(c) above.
Within five business days after the applicable release condition is met,
Escrow Agent will deliver to Holder the requisite number of Escrow Shares to
be released on such date as identified by the Company and Holder to Escrow
Agent in writing. Such delivery will be in the form of stock certificate(s)
issued in the names of Holder. The Company and Holder undertake to deliver a
timely notice to Escrow Agent identifying the number of Escrow Shares to be
released within such five-day period. The Company will take such action as
may be necessary to cause stock certificates to be issued in the names of
Holder. Escrow Agent will have such stock certificates in its possession no
later than three business days prior to the day on which Escrow Agent is to
deliver such certificates to Holder. Certificates representing Escrow Shares
will bear a legend indicating that they are subject to resale restrictions.
Cash will be paid in lieu of fractions of Escrow Shares in an amount equal to
the product determined by multiplying such fraction by the per share value of
the Company Common Stock as stated in Section 1.2 of the Agreement. Within
five business days after written request from Holder, the Company will submit
a certified schedule of the cash amounts payable for fractional shares and
will deposit with Escrow Agent sufficient funds to pay such cash amounts for
fractional shares.
(e) NO ENCUMBRANCE. No Escrow Shares or any beneficial interest
therein may be pledged, sold, assigned or transferred, including by operation
of law, by Holder or be taken or reached by any legal or equitable process in
satisfaction of any debt or other liability of Holder (other than Holder's
obligations under Section 10.3 of the Agreement), prior to the delivery to
Holder of the Escrow Shares by Escrow Agent.
(f) POWER TO TRANSFER ESCROW SHARES. Escrow Agent is hereby
granted the power to effect any transfer of Escrow Shares contemplated by
this Agreement. The Company will cooperate with Escrow Agent in promptly
issuing stock certificates to effect such transfers.
3. NOTICE OF CLAIM.
(a) Each notice of a Claim by the Company pursuant to Section
1(b) (the "NOTICE OF CLAIM") will be in writing and will contain the
following information to the extent reasonably available to the Company:
(i) The Company's good faith estimate of the reasonably
foreseeable maximum amount of the alleged Antinori Damages (which amount may
be the amount of damages claimed by a third party plaintiff in an action
brought against the Company based on alleged facts, which if true, would
constitute a breach of the Company's representations and warranties); and
(ii) A brief description in reasonable detail of the
facts, circumstances or events giving rise to the alleged Antinori Damages
based on the Company's good faith belief thereof,
ESCROW AGREEMENT - Page 4
<PAGE>
including, without limitation, the identity and address of any third-party
claimant (to the extent reasonably available to the Company) and copies of
any formal demand or complaint.
(b) Escrow Agent will not transfer any of the Escrow Shares held
in the Escrow Account to the Company pursuant to a Notice of Claim until such
Notice of Claim has been resolved in accordance with Section 4.
4. RESOLUTION OF NOTICE OF CLAIM AND TRANSFER OF ESCROW SHARES. Any
Notice of Claim received by Holder and Escrow Agent pursuant to Section 3, or
any notice of a claim received by Holder and Escrow Agent pursuant to Section
1(c) (a "LIQUIDATED DAMAGES CLAIM"), will be resolved as follows:
(a) UNCONTESTED CLAIMS. If Holder does not contest a Notice of
Claim or a Liquidated Damages Claim in writing to Escrow Agent and the
Company and Holder does not pay the amount demanded within 15 calendar days
after the Notice of Claim or the Liquidated Damages Claim is delivered
pursuant to Section 4(b) below, then Escrow Agent will immediately transfer
to the Company for cancellation that number of the Escrow Shares having a
value (determined pursuant to Section 4(c)) equal to the amount of the
Company Damages specified in the Notice of Claim, or the amount of the
Liquidated Damages (in the case of a Liquidated Damages Claim), and will
notify Holder of such transfer.
(b) CONTESTED CLAIMS. To recover Claims under this Escrow it
will not be necessary to institute an arbitration proceeding pursuant to
Section 11.1 of the Agreement; the arbitrator hereunder being authorized to
determine the existence of Claims, as well as the amount of the Company
Damages (in the case of a Claim under Section 1(b) above) associated
therewith. If Holder gives written notice contesting all, or a portion of, a
Notice of Claim or Liquidated Damages Claim to the Company and Escrow Agent
(a "CONTESTED CLAIM") within the 15-day period provided above, then matters
that are subject to a third party claim brought against the Company in
litigation or an arbitration proceeding will await the final decision, award
or settlement of such litigation or arbitration proceeding, while matters
that arise between the Company on the one hand and Antinori on the other hand
("ARBITRABLE CLAIMS"), will be settled by binding arbitration. Any portion
of the Notice of Claim that is not contested will be resolved as set forth
above in Section 4(a). The final decision of the arbitrator will be
furnished to Escrow Agent, Holder and the Company in writing and will
constitute a conclusive determination of the issue in question, binding upon
Holder and the Company. After notice that the Notice of Claim is contested
by Holder, Escrow Agent will continue to hold in the Escrow Account Escrow
Shares having a value (determined pursuant to Section 4(c)) sufficient to
cover such Claim (notwithstanding the expiration of the Final Release Date)
until (i) execution of a settlement agreement by the Company and Holder
setting forth a resolution of the Notice of Claim, or (ii) receipt of a copy
of the final award of the arbitrator.
ESCROW AGREEMENT - Page 5
<PAGE>
(i) ARBITRATION. Any contested Claim shall be settled
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. 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.
(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 a reasonable hourly or daily
consulting rate 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
lawyers who are familiar with Texas contract law and experienced in mergers
and acquisitions; 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. The Company and Holder 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; provided, however, that the
prevailing party in any arbitration will be entitled to an award of
attorneys' fees and costs, and all costs of arbitration, including those
provided for above, will be paid by the non-prevailing party, and the
arbitrator will be authorized to make such determinations. At the Company's
option, Holder's liability for such fees and costs and costs of arbitration
may be paid by the Company and recovered by the Company as a Claim hereunder
out of the Escrow Shares.
(v) BURDEN OF PROOF. For any Arbitrable Claim 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
ESCROW AGREEMENT - Page 6
<PAGE>
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. In the case
of an award pursuant to a Liquidated Damages Claim, the amount of the award
will be equal to the Liquidated Damages plus costs of arbitration as provided
above.
(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 or the Agreement.
(viii) EXCLUSIVE REMEDY. Except as specifically otherwise
provided in this Agreement or the Agreement, arbitration will be the sole and
exclusive remedy of the parties for any Arbitrable Claim arising out of this
Agreement.
(c) DETERMINATION OF AMOUNT OF CLAIMS. Any amount owed to the
Company hereunder, determined pursuant to Section 4(a) or (b) above, will be
immediately payable to the Company out of the Escrow Shares then held by
Escrow Agent at a per share value for all Escrow Shares equal to $23.83.
(d) NO EXHAUSTION OF REMEDIES. The Company need not exhaust any
other remedies that may be available to it but may proceed directly in
accordance with the provisions of this Agreement. The Company may institute
Claims against the Escrow Shares and in satisfaction thereof may recover
Escrow Shares, in accordance with the terms of this Agreement, without making
any other Claims directly against Holder and without rescinding or attempting
to rescind the transactions consummated pursuant to the Agreement. The
assertion of any single Claim for indemnification hereunder will not bar the
Company from asserting other Claims hereunder.
ESCROW AGREEMENT - Page 7
<PAGE>
5. LIMITATION OF ESCROW AGENT'S LIABILITY.
(a) Escrow Agent will incur no liability with respect to any
action taken or suffered by it in reliance upon any notice, direction,
instruction, consent, statement or other document believed by it to be
genuine and duly authorized, nor for any other action or inaction, except its
own willful misconduct or gross negligence. Escrow Agent shall have no duty
to inquire into or investigate the validity, accuracy or content or any
document delivered to it. Escrow Agent will not be responsible for the
validity or sufficiency of this Agreement. In all questions arising under
this Agreement, Escrow Agent may rely on the advice or opinion of counsel,
and for anything done, omitted or suffered in good faith by Escrow Agent
based on such advice, Escrow Agent will not be liable to anyone. Escrow
Agent will not be required to take any action hereunder involving its expense
unless the payment of such expense is made or provided for in a manner
satisfactory to it.
(b) If conflicting demands are made or conflicting notices are
served upon Escrow Agent with respect to the Escrow Account, then Escrow
Agent will have the absolute right, at Escrow Agent's election, to do either
or both of the following: (i) resign so a successor can be appointed
pursuant to Section 9 or (ii) file a suit in interpleader and obtain an order
from a court of competent jurisdiction requiring the parties to interplead
and litigate in such court their several claims and rights among themselves.
If such interpleader suit is brought, then Escrow Agent will thereby be fully
released and discharged from all further obligations imposed upon it under
this Agreement, and the Company and Holder will each pay Escrow Agent 50%
percent of all costs, expenses and reasonable attorney's fees expended or
incurred by Escrow Agent pursuant to the exercise of Escrow Agent's rights
under this Section 5 (such costs, fees and expenses being treated as
extraordinary fees and expenses for the purposes of Section 8); provided,
however, that the Company and Holder shall be entitled to reimbursement from
Holder and the Company, respectively, of any extraordinary fees and expenses
of Escrow Agent paid by the Company and Holder, respectively, if the Company
or Holder, respectively, prevails in the resolution of such claims and
rights, in accordance with Section 8.
(c) Each party hereto other than Escrow Agent, jointly and
severally (each an "INDEMNIFYING PARTY" and together the "INDEMNIFYING
PARTIES"), hereby covenants and agrees to reimburse, indemnify and hold
harmless Escrow Agent, Escrow Agent's officers, directors, employees, counsel
and agents (severally and collectively, "ESCROW AGENT"), from and against any
loss, damage, liability or loss suffered, incurred by, or asserted against
Escrow Agent (including amounts paid in settlement of any action, suit,
proceeding, or claim brought or threatened to be brought and including
reasonable expenses of legal counsel) arising out of, in connection with or
based upon any act or omission by Escrow Agent (and/or any of its officers,
directors, employees, counsel or agents) relating in any way to this
Agreement or Escrow Agent's
ESCROW AGREEMENT - Page 8
<PAGE>
services hereunder. This indemnity shall exclude gross negligence and
willful misconduct on Escrow Agent's part. Anything in this Agreement to the
contrary notwithstanding, Escrow Agent shall not be liable for special,
indirect or consequential loss or damage of any kind (including but not
limited to lost profits), even if Escrow Agent has been advised of the
likelihood of such loss or damage and regardless of the form of action.
(d) Each Indemnifying Party may participate at its own expense
in the defense of any claim or action that may be asserted against Escrow
Agent, and if the Indemnifying Parties so elect, the Indemnifying Parties may
assume the defense of such claim or action; PROVIDED, HOWEVER, that if a
conflict of interest exists that would make it inappropriate, in the sole
discretion of Escrow Agent, for the same counsel to represent both Escrow
Agent and the Indemnifying Parties, then Escrow Agent's retention of separate
counsel shall be reimbursable as herein above provided. Escrow Agent's right
to indemnification hereunder shall survive Escrow Agent's resignation or
removal as Escrow Agent and shall survive the termination of this Agreement
by lapse of time or otherwise.
(e) Escrow Agent hereby warrants that Escrow Agent will notify
each Indemnifying Party by letter, or by telephone or telecopy confirmed by
letter, of any receipt by Escrow Agent of a written assertion of a claim
against Escrow Agent, or any action commenced against Escrow Agent, within
three business days after Escrow Agent's receipt of written notice of such
claim. However, Escrow Agent's failure to notify each Indemnifying Party
shall not operate to relieve an Indemnifying Party from any liability that it
may have on account of this Section 5 unless such failure prejudices such
Indemnifying Party's rights.
(f) Escrow Agent may execute any of its powers or
responsibilities hereunder and exercise any rights hereunder either directly
or by or through its agents or attorneys. Nothing in this Agreement shall be
deemed to impose upon Escrow Agent any duty to qualify to do business or to
act as a fiduciary or otherwise in any jurisdiction other than the State of
Texas.
6. NOTICES. All notices, instructions and other communications
required or permitted to be given hereunder or necessary or convenient in
connection herewith shall be in writing and will be deemed delivered (i) when
personally served or when delivered by facsimile (to the facsimile number of
the person to whom notice is given), (ii) the first business day following
the date of deposit with an overnight courier service or (iii) on the earlier
of actual receipt or the third business day following the date on which the
notice is deposited in the United States Mail, first class certified, postage
prepaid, addressed as follows:
ESCROW AGREEMENT - Page 9
<PAGE>
(a) If to Escrow Agent:
U.S. Trust Company of Texas, N.A.
2001 Ross Avenue
Dallas, Texas 75201
Phone: 214-754-1200
Fax: 214-754-1303
(b) If to the Company:
The Carreker Group, Inc.
14001 North Dallas Parkway, Suite 1100
Dallas, Texas 75240
Attention: J. D. Carreker, 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
ESCROW AGREEMENT - Page 10
<PAGE>
(c) If to Holder:
J.D. Carreker
4321 Overhill
Dallas, Texas 75205
Phone: (214) 528-8303
or to such other address as the party in question may have furnished to the
other party by written notice given in accordance with this Section 6.
7. GENERAL.
(a) GOVERNING LAW, ASSIGNS. 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. This Agreement will be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns.
(b) COUNTERPARTS. This Agreement may be executed in
counterparts, each of which will be an original as regards any party whose
name 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
all parties reflected hereon as signatories.
(c) ENTIRE AGREEMENT. Except as otherwise set forth in the
Agreement, this Agreement constitute the entire understanding and agreement
of the parties with respect to the subject matter of this Agreement and
supersedes all prior agreements or understandings, written or oral, between
the parties with respect to the subject matter hereof.
(d) WAIVERS. No waiver by any party of any condition or of any
breach of any provision of this Agreement will be effective unless in
writing. No waiver by any party of any such condition or breach, in any one
instance, will be deemed to be a further or continuing waiver of any such
condition or breach or a waiver of any other condition or breach of any other
provision contained herein.
(e) TAX IDENTIFICATION NUMBERS. Each party, other than Escrow
Agent, shall provide Escrow Agent with its Tax Identification Number (TIN) as
assigned by the Internal Revenue Service.
ESCROW AGREEMENT - Page 11
<PAGE>
8. EXPENSES OF ESCROW AGENT. All fees and expenses of Escrow Agent
incurred in the ordinary course of performing its responsibilities hereunder
will be paid 50% by the Company and 50% by Holder, upon receipt of a written
invoice from Escrow Agent. Any extraordinary fees and expenses, including
without limitation any fees or expenses (including the fees or expenses of
counsel to Escrow Agent) incurred by Escrow Agent in connection with a
dispute over the distribution of Escrow Shares or the validity of a Notice of
Claim, will be paid 50% by the Company and 50% by Holder upon receipt of a
written invoice by Escrow Agent; provided, however, that the Company and
Holder shall be entitled to reimbursement from Holder and the Company,
respectively, of any extraordinary fees and expenses of Escrow Agent paid by
the Company and Holder, respectively, if the Company or Holder, respectively,
prevails in such dispute.
9. SUCCESSOR ESCROW AGENT. If Escrow Agent becomes unavailable or
unwilling to continue in its capacity herewith, then Escrow Agent may resign
and be discharged from its duties or obligations hereunder by giving notice
of its resignation to the parties to this Agreement, specifying a date not
less than ten days following such notice date of when such resignation will
take effect. The Company will designate a successor Escrow Agent prior to the
expiration of such ten-day period by giving written notice to Escrow Agent
and Holder. The Company may appoint an successor Escrow Agent without the
consent of Holder so long as such successor is a bank or trust company that,
together with any parent, has assets of at least $100 million, and may
appoint any other successor Escrow Agent with the consent of Holder, which
will not be unreasonably withheld. Escrow Agent will promptly transfer the
Escrow Shares to such designated successor.
10. LIMITATION OF RESPONSIBILITY. Escrow Agent's duties are limited
to those set forth in this Agreement, and Escrow Agent, acting as such under
this Agreement, is not charged with knowledge of any duties or
responsibilities under any other document or agreement, including, without
limitation, the Agreement. Escrow Agent shall not be responsible for the
validity, binding effect, execution or sufficiency of this Escrow Agreement
or of any agreement amendatory or supplemental hereto.
11. AMENDMENT. This Agreement may be amended by the written agreement
of the Company, Escrow Agent and Holder, provided that, if Escrow Agent does
not agree to an amendment agreed upon by the Company and Holder, then Escrow
Agent will resign and the Company will appoint a successor Escrow Agent in
accordance with Section 9. No amendment of the Agreement shall increase
Escrow Agent's responsibilities or liability hereunder without Escrow Agent's
written agreement.
ESCROW AGREEMENT - Page 12
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
THE COMPANY: HOLDER
THE CARREKER GROUP, INC.
By: /s/ Terry Gage /s/ J.D. Carreker
---------------------------------- ----------------------------------
Terry Gage, Senior Vice President J.D. CARREKER
ESCROW AGENT:
U.S. TRUST COMPANY OF TEXAS, N.A.
By:
---------------------------------
Authorized Signatory
ESCROW AGREEMENT - Page 13
<PAGE>
ATTACHMENT A
STOCK POWER AND ASSIGNMENT
SEPARATE FROM CERTIFICATE
In connection with the merger of Antinori Software, Inc. ("ANTINORI")
with a wholly-owned subsidiary of The Carreker Group, Inc. ("THE COMPANY"),
the undersigned is receiving shares of the Company Class A Voting Common
Stock, no par value, in respect of the shares of Antinori Common Stock held
by the undersigned prior to such merger.
FOR VALUE RECEIVED, and pursuant to certain Agreement and Plan of Merger
dated as of January 22, 1997 among Antinori, such subsidiary and the Company
(the "AGREEMENT") and that certain Escrow Agreement dated as of January 31,
1997 executed in connection therewith (the "ESCROW AGREEMENT"), the
undersigned hereby assigns and transfer unto U.S. Trust Company of Texas,
N.A., as Escrow Agent ("ESCROW AGENT") pursuant to the Escrow Agreement and
the Agreement shares (the "SHARES") of the Class A Voting Common
Stock of the Company.
The undersigned does hereby irrevocably constitute Escrow Agent, as
attorney-in-fact, with full power of substitution and re-substitution, to
hold such Shares in escrow and to transfer such shares on the books of the
Company if all or a portion of the Shares are retained by the Company in
accordance with the Escrow Agreement in satisfaction of the undersigned's
indemnification obligations under the Agreement. The undersigned hereby
acknowledges that the Shares will be held in escrow until required to be
released pursuant to the Escrow Agreement and that the number of Shares
released from escrow will be equal to the number of Shares listed above less
any amount retained in satisfaction of Claims as set forth in the Agreement.
Dated: January 31, 1997.
-----------------------------------------
Name:
------------------------------------
ESCROW AGREEMENT - Page 14
<PAGE>
EXHIBITS E-1 AND E-2
<PAGE>
CERTIFICATE OF ANTINORI SOFTWARE, INC.
(RE TAX-FREE REORGANIZATION)
Antinori Software, Inc., a Georgia corporation ("ANTINORI"), hereby
represents, in connection with the proposed merger (the "MERGER") of CAG
Newco, Inc., a Texas corporation and a wholly-owned subsidiary of The
Carreker Group, Inc., also a Texas corporation ("CARREKER"), into Antinori
and related transactions set forth under that certain Agreement and Plan of
Merger dated January 29, 1997 among Carreker, Antinori and CAG Newco, Inc.
(the "AGREEMENT"), with Antinori surviving the Merger and becoming a
wholly-owned subsidiary of Carreker, that the following statements are true
as of the date of this certificate is executed and that the statements will
be true as of the effective date of the Merger unless the undersigned
provides a written statement to the contrary prior to the effective date of
the Merger:
A. Antinori's principal reasons for participating in the Merger are
bona fide business reasons.
B. The total fair market value of all consideration other than
Carreker Class A Voting Common Stock, no par value (the "CARREKER COMMON
STOCK"), received by Antinori's shareholders in exchange for their Antinori
Common Stock in the Merger (including, without limitation, cash paid in lieu
of a fractional shares) will be less than ten percent (10%) of the aggregate
fair market value of Antinori Common Stock outstanding immediately prior to
the Merger.
C. The payment of cash by Carreker in lieu of issuing fractional
shares of Carreker Common Stock does not represent separately bargained for
consideration.
D. Except with respect to payments of cash in lieu of fractional
shares of Carreker Common Stock, one hundred percent (100%) of the Antinori
Common Stock outstanding immediately prior to the Merger will be exchanged
solely for Carreker Common Stock. Thus, except as set forth in the preceding
sentence, Antinori intends that no consideration be paid or received
(directly or indirectly, actually or constructively) for Antinori Common
Stock other than Carreker Common Stock.
E. To the best knowledge of Antinori there is no plan or intention on
the part of the Antinori shareholders (a "PLAN") to sell, exchange, transfer,
distribute, pledge, or otherwise dispose of (a "SALE") (a) shares of the
Carreker Common Stock to be issued to Antinori shareholders in the Merger,
which shares would have an aggregate fair market value, as of the Effective
Time (as defined in the Agreement) of the Merger, in excess of fifty percent
(50%) of the aggregate fair market value, immediately prior to the Merger, of
all outstanding shares of Antinori Common Stock, or (b) more than fifty
percent (50%) of the shares of Carreker Common Stock to be received in
exchange for Antinori Common Stock in the Merger. For purposes of this
representation, shares of Antinori Common Stock (or the portion thereof) (i)
with respect to which Antinori shareholders received consideration in the
Merger other than Carreker Common Stock (including, without limitation, cash
received in lieu of fractional shares of Carreker Common Stock) and/or (ii)
with respect to which a Sale occurs during the period ending at the Effective
Time of the Merger and beginning with the commencement of negotiations
(whether formal or informal) between Antinori and Carreker regarding the
Merger (the "Pre-Merger Period"), shall be considered shares of outstanding
Antinori Common Stock exchanged for Carreker Common Stock in the Merger and
then disposed of pursuant to a Plan.
F. Antinori has not disposed of any assets (other than in the
ordinary course of business) or, except for a dividend consistent with past
practice, all or a portion of the proceeds of which will be used to discharge
tax liabilities resulting from share ownership, declared a dividend as part
of or in contemplation of the Merger except in accordance with and as
required by Antinori's Article of Incorporation.
G. The liabilities, if any, of Antinori assumed by operation of law
by CAG Newco,
Page 1
<PAGE>
Inc., and the liabilities, if any, to which the transferred assets of
Antinori are subject, were incurred by Antinori in the ordinary course of
business or to provide working capital.
H. No intercorporate indebtedness exists between Carreker and
Antinori that was issued or acquired at a discount or which will be settled
at a discount.
I. During the Pre-Merger Period, no indebtedness or other obligation
of Antinori has been or will be guaranteed by any shareholder of Antinori (or
any person or entity related to a shareholder of Antinori).
J. Antinori will pay its own expenses, if any, incurred in connection
with the Merger; provided, however that to the extent any expenses relating
to the Merger (or the "plan of reorganization" within the meaning of Treas.
Reg. Section 1.368-1(c) with respect to the Merger) are funded directly or
indirectly by a party other than the incurring party, then such expenses will
be within the guidelines established in Rev. Rul. 73-54. 1973-1 C.B. 187.
K. To the best knowledge of the management of Antinori, neither
Carreker nor CAG Newco, Inc. will assume any liabilities of any Antinori
shareholder in connection with the Merger.
L. Antinori is not an investment company as defined in Section
368(a)(2)(F) of the Internal Revenue Code of 1986, as amended.
M. The fair market value of the assets of Antinori transferred to CAG
Newco, Inc. will equal or exceed the sum of the liabilities assumed by CAG
Newco, Inc., plus the amount of liability, if any, to which the transferred
assets are subject.
N. The terms of the Agreement and all other agreements entered into
pursuant thereto are the product of arm's-length negotiations.
O. None of the compensation payments received by any shareholder of
Antinori will be separate consideration for, or allocable to, any of their
shares of Antinori Common Stock. None of the shares of Carreker Common Stock
received by any shareholder of Antinori will be separate consideration for,
or allocable to, any employment agreement, consulting agreement, any
covenants not to compete or otherwise for the performance of services; and
the compensation paid to any shareholder of Antinori will be for services
actually rendered and will be commensurate with amounts paid to third parties
bargaining at arm's-length for similar services.
Dated: January 31, 1997 ANTINORI SOFTWARE, INC.
By: /S/ RONALD R. ANTINORI
-------------------------------------
Page 2
<PAGE>
Ronald R. Antinori
Chairman of the Board
Page 3
<PAGE>
CERTIFICATE OF THE CARREKER GROUP, INC.
(RE TAX-FREE REORGANIZATION)
The Carreker Group, Inc., a Texas corporation ("CARREKER"), hereby
represents, in connection with the proposed merger (the "MERGER") of CAG
Newco, Inc., a Texas corporation and a wholly-owned subsidiary of Carreker,
into Antinori Software, Inc., a Georgia corporation ("ANTINORI"), and related
transactions as set forth under that certain Agreement and Plan of Merger
dated January 29, 1997 among Carreker, Antinori and CAG Newco, Inc. (the
"AGREEMENT"), with Antinori surviving the Merger and becoming a wholly-owned
subsidiary of Carreker, that the following statements are true as of the date
of this certificate is executed and that the statements will be true as of
the effective date of the Merger unless the undersigned provides a written
statement to the contrary prior to the effective date of the Merger:
A. CAG Newco, Inc. will be merged with and into Antinori in
accordance with the relevant merger provisions of Georgia and Texas
corporation law, and the shareholders of Antinori will receive solely
Carreker Class A Voting Common Stock, no par value (the "CARREKER COMMON
STOCK") (except for cash received in lieu of fractional shares), in
consideration therefor.
Page 1
<PAGE>
B. Carreker's and CAG Newco, Inc.'s principal reasons for
participating in the Merger are bona fide business reasons.
C. Carreker does not own, directly or indirectly, nor has it owned
during the past five years, directly or indirectly, any capital stock of
Antinori.
D. Carreker has not disposed of any assets or declared a special
dividend as part of the Merger.
E. Following the Merger, Carreker will cause Antinori to continue
Antinori's historic business or Carreker will use a significant portion of
Antinori's business assets in a business.
F. Carreker has no present plan or intention to sell or otherwise
dispose of, or to cause Antinori to sell or otherwise dispose of, any of the
assets acquired in the Merger (except for dispositions made in the ordinary
course of business) or transfers described in Section 368(a)(2)(C) of the
Internal Revenue Code of 1986, as amended (the "CODE").
G. Except for the possible reacquisition of shares pursuant to the
provisions of an escrow agreement, Carreker has no present plan or intention
to redeem or otherwise reacquire any of its stock to be issued in the Merger.
H. Carreker presently intends to continue to be a duly organized
corporation, validly existing, licensed and in good standing under the laws
of the State of Texas prior to and following the effective date of the Merger.
I. Carreker will pay its own expenses, if any, incurred in connection
with the Merger.
J. Carreker is not an investment company as defined in Section
368(a)(2)(F) of the Code.
K. No shareholder of Antinori is acting as an agent for Carreker in
connection with the Merger or approval thereof.
L. The payment of cash by Carreker in lieu of issuing fractional
shares of Carreker Common Stock is solely for the purpose of avoiding the
expense and inconvenience to Carreker of issuing fractional shares and does
not represent separately bargained for consideration. The Carreker
fractional share interests to which each Antinori shareholder may be entitled
in the Merger will be aggregated so that no Antinori shareholder will receive
cash in an amount which would equal or exceed, in the aggregate, the value of
one whole share of Carreker Common Stock.
M. Except with respect to payments in cash in lieu of fractional
shares of Carreker voting Common Stock, one hundred percent (100%) of the
Antinori Common Stock outstanding
Page 2
<PAGE>
immediately prior to the Merger will be exchanged solely for Carreker Common
Stock. Thus, except as set forth in the preceding sentence, Carreker
intends that no consideration be paid or received (directly or indirectly,
actually or constructively) for Antinori Common Stock other than Carreker
Common Stock.
N. The total fair market value of all consideration other than
Carreker Common Stock received by Antinori shareholders in exchange for their
Antinori Common Stock in the Merger (including, without limitation, cash paid
in lieu of fractional shares) will be less than ten percent (10%) of the
aggregate fair market value of Antinori Common Stock outstanding immediately
prior to the Merger. In addition, the total cash consideration that will be
paid in the Merger to Antinori shareholders in lieu of fractional shares of
Carreker Common Stock will not exceed one percent (1%) of the total
consideration that will be issued in the Merger to the Antinori shareholders
in exchange for their shares of Antinori Common Stock.
O. Carreker will pay separately its own expenses in connection with
the Merger as contemplated by the Agreement; provided, however, that to the
extent any expenses relating to the Merger (or the "plan of reorganization"
within the meaning of Treas. Reg. Section 1.368-1(c) with respect to the
Merger) are funded directly or indirectly by a party other than the incurring
party, such expenses will be within the guidelines established in Rev. Rul.
73-54. 1973-1 C.B. 187.
P. No intercorporate indebtedness exists between Carreker and
Antinori that was issued, acquired, or will be settled at a discount, and
neither Carreker nor CAG Newco, Inc. will assume any liabilities of any
Antinori shareholder in connection with the Merger.
Q. The terms of the Agreement and all other agreements entered into
pursuant thereto are the product of arm's-length negotiations.
R. None of the compensation payments that might be received by any
shareholder of Antinori will be separate consideration for, or allocable to,
any of their shares of Antinori Common Stock; none of the shares of Carreker
Common Stock to be received by any shareholder of Antinori will be separate
consideration for, or allocable to, any employment agreement, consulting
agreement or any covenants not to compete; and the compensation which might
be paid to any shareholder of Antinori will be for the services actually
rendered and will be commensurate with amounts paid to third parties
bargaining at arm's-length for similar services.
Dated: January 31, 1997 THE CARREKER GROUP, INC.
By: /S/ J.D. CARREKER
----------------------------
J.D. Carreker
Executive Officer
Page 3
<PAGE>
EXHIBIT F
<PAGE>
INTELLECTUAL PROPERTY RIGHTS AGREEMENT
This Intellectual Property Rights Agreement (this "IP AGREEMENT") is
entered into and made effective as of January 31, 1997 among Antinori
Software, Inc., a Georgia corporation ("ANTINORI"), The Carreker Group, Inc.,
a Texas corporation ("CARREKER"), and Ronald R. Antinori ("EMPLOYEE").
RECITALS
A. Carreker, Antinori and CAG Newco, Inc., a Texas corporation and a
wholly-owned subsidiary of Carreker, have entered into an Agreement and Plan
of Merger dated January 29, 1997 (the "AGREEMENT"), pursuant to which CAG
Newco, Inc. will be merged into Antinori, with Antinori surviving the merger
and becoming a wholly-owned subsidiary of Carreker.
B. Employee is a developer or co-developer of, and/or a contributor
or collaborator to, the software listed on Exhibit A (the "SOFTWARE") and
Employee will become an employee of Carreker upon consummation of the merger
contemplated by the Agreement.
C. The parties desire to ensure that all the intellectual property
rights in and to the Software are vested in Antinori prior to the Closing (as
defined in the Agreement).
D. The parties further desire to ensure that all intellectual
property rights in and to all inventions, software programs or otherwise
which Employee may develop during the term of his/her employment with
Carreker are vested in Carreker.
NOW, THEREFORE, in consideration of the above premises and as an
inducement to Carreker to enter into the Agreement with Antinori, the parties
agree as follows:
INTELLECTUAL PROPERTY RIGHTS AGREEMENT - Page 1
<PAGE>
1. ASSIGNMENT. Employee hereby irrevocably assigns to Antinori all
of Employee's right, title and interest in and to all Software, computer
software programs and documentation that have been or are used, marketed or
licensed by Antinori on or before the effective date of this IP Agreement,
including but not limited to the Software listed on EXHIBIT A attached
hereto, and all intellectual property rights therein, including all source
code, object code, patents, patent rights, patent applications, copyrights
(including moral rights), copyright registrations, trade secrets, rights of
priority, technology, know-how, trademarks and service marks and all goodwill
related thereto, trademark and service mark registrations, related goodwill
and confidential and proprietary information related thereto (collectively,
the "INTELLECTUAL PROPERTY RIGHTS"), including, but not limited to the right
to secure renewals, reissuances and extensions of the foregoing.
2. PROPERTY RIGHTS. Employee hereby agrees to promptly from time to
time fully inform and disclose to Carreker all inventions, computer software
programs, designs, improvements, discoveries or otherwise that Employee may
develop during the term of his/her employment with Carreker which pertain or
relate to the business of Carreker or Antinori, or to any experimental work
carried on by Carreker or Antinori, whether conceived by Employee alone or
otherwise and whether conceived during regular working hours or otherwise.
Employee further acknowledges and agrees that all such inventions, computer
software program, designs, improvements and discoveries and all the
Intellectual Property Rights therein belong solely to and are the exclusive
property of Carreker.
3. RECORDATION OR REGISTRATION. Employee hereby agrees to assist
Antinori, Carreker and any of their successor corporations, for no additional
consideration, in any recordation or registration of any Intellectual
Property Rights or of this IP Agreement by executing, acknowledging and
delivering any documents that may be necessary to protect, preserve or
perfect rights of Antinori and/or Carreker provided for herein.
4. REPRESENTATION AND WARRANTIES. Employee represents and warrants
to Carreker that (a) except for a grant of rights to Antinori, Employee has
not previously granted and will not grant or attempt to grant any rights in
the Intellectual Property Rights in the Software or any derivative work based
on the Intellectual Property Rights in the Software to any third party; and
(b) Employee has full power to enter into this IP Agreement, to carry out
Employee's obligations under this IP Agreement and to grant the rights
granted to Carreker hereunder.
5. NO MODIFICATION. This IP Agreement may not be modified except by
actual written consent of the parties. This IP
INTELLECTUAL PROPERTY RIGHTS AGREEMENT - Page 2
<PAGE>
Agreement will not be effective if the Agreement is terminated in accordance
with its terms.
6. 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 IP Agreement, the construction
of its terms, and the interpretation and enforcement of the rights and duties
of the parties.
IN WITNESS WHEREOF, the parties have executed this IP Agreement to be
effective as of the date first above written.
THE CARREKER GROUP, INC. ANTINORI SOFTWARE, INC.
By: By:
----------------------------- --------------------------------
J.D. Carreker Ronald R. Antinori
Chief Executive Officer Chairman of the Board
EMPLOYEE
- ----------------------------
Name: Ronald R. Antinori
INTELLECTUAL PROPERTY RIGHTS AGREEMENT - Page 3
<PAGE>
EXHIBIT G
<PAGE>
TO: The Carreker Group, Inc.
14001 North Dallas Parkway,
Suite 1100
Dallas, Texas 75240
Antinori Software, Inc.
400 Colony Square,
Suite 450
Atlanta, Georgia 30326
ANTINORI AFFILIATE AGREEMENT
This Antinori Affiliate Agreement (this "AGREEMENT") is being delivered
concurrently with the execution and delivery of that certain Agreement and Plan
of Merger dated as of January 29, 1997 (the "MERGER AGREEMENT") among The
Carreker Group, Inc., a Texas corporation ("CARREKER"), Antinori Software, Inc.,
a Georgia corporation ("ANTINORI"), and CAG Newco, Inc., a Texas corporation and
a wholly-owned subsidiary of Carreker. The Merger Agreement provides for the
merger ("MERGER") of CAG Newco, Inc. with and into Antinori in a transaction in
which each share of Antinori Common Stock, par value $.01 per share ("ANTINORI
COMMON STOCK"), will be converted into Carreker Class A Voting Common Stock, no
par value ("CARREKER COMMON STOCK"), as described in the Merger Agreement.
Unless otherwise defined herein, capitalized terms used in this Agreement have
the meanings given to them in the Merger Agreement.
The undersigned understands that, because the Merger will be accounted for
as a "pooling-of-interests," shares of Carreker Common Stock which the
undersigned may acquire hereafter may only be disposed of in conformity with the
limitations described herein.
The undersigned has been informed that the treatment of the Merger as a
pooling-of-interests for financial accounting purposes may depend upon the
accuracy of certain of the representations and warranties and the compliance
with certain of the agreements set forth in this Agreement. The undersigned
further understands that the representations, warranties and agreements set
forth herein will be relied upon by Carreker, Carreker's shareholders, Antinori,
Antinori's shareholders and Carreker's and Antinori's respective counsel and
accounting firms, for accounting purposes, for federal income tax purposes, for
securities law compliance purposes and for other purposes material to the Merger
Agreement and the consummation of the Merger.
G. The undersigned represents, warrants and agrees as follows:
1. The undersigned has full power to execute this Agreement and
to make the representations, warranties and agreements herein and to perform the
undersigned's obligations hereunder.
2. The undersigned is the beneficial owner of no shares of
Antinori Common Stock. Except as may be indicated on the last page of this
Agreement, the undersigned does not
Page 1
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beneficially own any shares of Antinori Common Stock, or any options,
warrants or other rights to acquire shares of Antinori Common Stock or other
equity securities of Antinori (the "ANTINORI SECURITIES"). At the date of
this Agreement, the Antinori Securities are, and at all times until the
"EXPIRATION DATE" (as defined below), the Antinori Securities will be, free
and clear of any liens, claims, options, charges or other encumbrances,
except for the rights and obligations created under the Escrow Agreement and
except as may be indicated on the last page of this Agreement. As used
herein, the term "Termination Date" means the earliest to occur of (i) the
distribution to shareholders of record of Carreker of the first financial
statements of Carreker that include at least 30 days combined operating
results of Carreker and Antinori, or (ii) such time as the Merger Agreement
may be terminated in accordance with its terms.
3. The undersigned has no present intention or plan to sell,
exchange or otherwise dispose of Carreker Common Stock to be received by the
undersigned.
4. The undersigned is an officer of Antinori and has been
actively involved in the development and marketing of Antinori's products. The
undersigned is a knowledgeable and sophisticated investor, capable by virtue of
his educational, business and financial background to assess the risks and
merits of investments in Carreker Common Stock. The undersigned has had the
opportunity to ask questions of and receive full answers from Carreker as to all
matters deemed pertinent by the undersigned to his decision to enter into this
Agreement and to consent to the Merger and the Merger Agreement, and he has
obtained all documents from Carreker that he has requested with respect to such
matters. The undersigned has not obtained from Carreker or relied upon any
information or documents that are inconsistent with the representations and
covenants made by Carreker in the Merger Agreement. The undersigned will hold
options to purchase shares of Carreker Common Stock (such options and shares
being the "RESTRICTED SECURITIES") for the undersigned's own account, for
investment and not with a view to resale or other disposition.
H. The undersigned agrees as follows:
1. At any time prior to the Expiration Date, without the prior
written consent of Carreker, the undersigned will not sell, transfer, encumber
or dispose of, or offer to sell, transfer, encumber or dispose of, (i) any of
the Antinori Securities or (ii) any shares of Antinori Common Stock that the
undersigned purchases or otherwise acquires after the execution of this
Agreement and prior to the Expiration Date (the "NEW ANTINORI SECURITIES"). All
New Antinori Securities will be subject to the terms of this Agreement to the
same extent and in the same manner as they were Antinori Securities.
2. Until the Expiration Date, the undersigned will vote any New
Antinori Securities in any vote of the share of Antinori Common Stock, with
respect to the matters referred to in (i) or (ii) immediately below and in every
written consent as a Antinori shareholder solicited with respect to any of the
matters referred to in (i) or (ii) immediately below, as follows: (i) in favor
of approval of the Merger Agreement and the Merger and (ii) against approval of
any proposal that might be in opposition to or in competition with consummation
of the Merger. The undersigned will not, directly or indirectly, solicit,
facilitate or encourage any offer from any person or entity
Page 2
<PAGE>
concerning the possible disposition of all or any portion of Antinori's
business, assets or capital stock by merger, sale or other means in
contravention of the Merger Agreement.
3. The undersigned will not, and will not permit any entity under
the undersigned's control to, (i) solicit support in opposition to or in
competition with the consummation of the Merger or otherwise encourage or assist
any person or entity in taking or planning any action that would compete with,
restrain or otherwise serve to interfere with or inhibit the timely consummation
of the Merger in accordance with the terms of the Merger Agreement; or (ii)
initiate a Antinori shareholder vote or action by consent of any Antinori
shareholder in opposition to or in competition with the consummation of the
Merger.
4. The undersigned hereby (i) grants any consent or waivers that
are reasonably required, under the terms of any agreement to which the
undersigned and Antinori (or the undersigned, Antinori and another or others)
are parties, for the consummation of the Merger; and (ii) subject to his Letter
Agreement dated October 24, 1996 and Amendment to Letter Agreement dated
January 31, 1997, waives, effective as of the Effective Time, any liquidation,
redemption, anti-dilution, registration rights, information rights, rights of
first refusal, co-sale or other similar rights under terms of the Articles of
Incorporation of Antinori or any agreement with Antinori or its security holders
in effect immediately prior to the Effective Time with respect to the Antinori
Securities.
5. The undersigned will execute and deliver any additional
documents reasonably necessary or desirable, in the opinion of Antinori or
Carreker, to carry out the intent of this Agreement.
I. The undersigned understands that (a) in addition to the restrictions
imposed under this Agreement, the Restricted Securities have not been registered
under the Securities Act of 1933, as amended (the "SECURITIES ACT"), or
registered or qualified under applicable state securities laws, in reliance upon
the exemptions from the registration or qualification requirements of the
Securities Act of 1933 and such state securities laws, and (b) as a result, the
Restricted Securities may not be offered, resold or otherwise transferred
without registration under the Securities Act and registration and qualification
under applicable state securities laws unless the offer, resale or other
transfer is exempt from the registration or qualification requirements of the
Securities Act and such state securities laws. The undersigned acknowledges
that, unless registered under the Securities Act, the Restricted Securities may
not be publicly resold except in compliance with Rule 144 or another exemption
from such registration, and that Rule 144 is not presently and for the
foreseeable future will not be available to permit the Restricted Securities to
be resold.
J. The undersigned understands that there will be placed on the
certificates evidencing the Restricted Securities that are shares, among other
legends, legends stating in substance:
"THE SECURITIES REPRESENTED HEREBY MAY BE OFFERED, SOLD OR HYPOTHECATED
ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE REGISTERED HOLDER
THEREOF AND
Page 3
<PAGE>
CARREKER-ANTINORI GROUP, INC. (THE "COMPANY"). A COPY OF SUCH AGREEMENT IS
ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.
THE SECURITIES REPRESENTED HEREBY MAY BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED ONLY IN ACCORDANCE WITH (A) AN EFFECTIVE
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND UNDER APPLICABLE
STATE SECURITIES LAWS OR (B) EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF
SUCH ACT AND LAWS. THE COMPANY MAY REQUIRE AN OPINION OF LEGAL COUNSEL, IN FORM
AND SUBSTANCE SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT SUCH EXEMPTIONS
ARE AVAILABLE."
After release of the distribution described in Section 2(i), certificates
evidencing the Restricted Securities that are shares delivered at or after the
Effective Time may, at the undersigned's election, be surrendered for
cancellation and reissuance without the first of the above legends. Carreker
agrees that the second legend above will be removed promptly if the provisions
of this Agreement, the Securities Act and applicable state law are otherwise
complied with.
K. The undersigned hereby agrees to, and agrees to be bound by, the
indemnification obligations provided for in Section 10.2 of the Merger Agreement
as if the undersigned were a party to the Merger Agreement.
L. If any provision of this Agreement (or of the Merger Agreement or
the Escrow Agreement), or the application thereof, is for any reason held to any
extent to be invalid or unenforceable, then the remainder of this Agreement (or
of such of the Merger Agreement or the Escrow Agreement) and application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties. The parties further agree to replace such
unenforceable provision of this Agreement with a valid and enforceable
provisions that will achieve, to the extent possible, the economic, business and
other purposes of the invalid or unenforceable provisions.
M. This Agreement will be binding upon and inure to the benefit of the
parties and their respective successors and permitted assigns, but, except as
otherwise specifically provided herein, neither this Agreement nor any of the
rights, interests or obligations of the parties hereto may be assigned by any of
the parties without prior written consent of the others.
N. This Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
O. The undersigned acknowledges that Carreker and Antinori will each be
irreparably harmed and that there will be no adequate remedy at law for a
violation of any of the covenants or agreements of the undersigned set forth
herein. Therefore, it is agreed that, in addition to any other remedies which
may be available to Carreker and Antinori upon any such violation, Carreker and
Antinori will have the right to enforce such covenants and agreements by
specific performance,
Page 4
<PAGE>
injunctive relief or by any other means available at law or in equity.
P. 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.
Q. This Agreement contains the entire understanding of the parties with
respect to the subject matter hereof, and supersedes all prior negotiations and
understandings between the parties with respect to such subject matter.
R. 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.
S. This Agreement may be executed in counterparts, each of which will
be an original as regards any party whose name 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 all parties reflected hereon as signatories.
Number of shares of Antinori Common Stock
beneficially owned by the undersigned:
-----------------------------------------
Date: January ___, 1997
Very truly yours,
-----------------------------------------
-----------------------------------------
Agreed to and accepted:
THE CARREKER GROUP, INC.
By:
-------------------------
J.D. Carreker,
Chief Executive Officer
ANTINORI SOFTWARE, INC.
By:
------------------------
Ron Antinori,
Chairman of the Board
Page 5
<PAGE>
Antinori Software, Inc.
400 Colony Square,
Suite 450
Atlanta, Georgia 30326
ANTINORI AFFILIATE AGREEMENT
This Antinori Affiliate Agreement (this "AGREEMENT") is being delivered
concurrently with the execution and delivery of that certain Agreement and
Plan of Merger dated as of January 29, 1997 (the "MERGER AGREEMENT") among
The Carreker Group, Inc., a Texas corporation ("CARREKER"), Antinori
Software, Inc., a Georgia corporation ("ANTINORI"), and CAG Newco, Inc., a
Texas corporation and a wholly-owned subsidiary of Carreker. The Merger
Agreement provides for the merger ("MERGER") of CAG Newco, Inc. with and into
Antinori in a transaction in which each share of Antinori Common Stock, par
value $.01 per share ("ANTINORI COMMON STOCK"), will be converted into
Carreker Class A Voting Common Stock, no par value ("CARREKER COMMON STOCK"),
as described in the Merger Agreement. Unless otherwise defined herein,
capitalized terms used in this Agreement have the meanings given to them in
the Merger Agreement.
The undersigned understands that, because the Merger will be accounted
for as a "pooling-of-interests" and because the shares of Carreker Common
Stock to be received by the undersigned in the Merger will not be registered
under the Securities Act of 1933, as amended (the "SECURITIES ACT"), such
shares and any shares of Carreker Common Stock which the undersigned may
acquire hereafter may only be disposed of in conformity with the limitations
described herein.
The undersigned has been informed that the treatment of the Merger as a
pooling-of-interests for financial accounting purposes may depend upon the
accuracy of certain of the representations and warranties and the compliance
with certain of the agreements set forth in this Agreement. The undersigned
further understands that the representations, warranties and agreements set
forth herein will be relied upon by Carreker, Carreker's shareholders,
Antinori, Antinori's shareholders and Carreker's and Antinori's respective
counsel and accounting firms, for accounting purposes, for federal income tax
purposes, for securities law compliance purposes and for other purposes
material to the Merger Agreement
ANTINORI AFFILIATE AGREEMENT - Page 1
<PAGE>
and the consummation of the Merger.
ANTINORI AFFILIATE AGREEMENT - Page 2
<PAGE>
T. The undersigned represents, warrants and agrees as follows:
1. The undersigned has full power to execute this Agreement and
to make the representations, warranties and agreements herein and to perform
the undersigned's obligations hereunder.
2. The undersigned is the beneficial owner of the shares of
Antinori Common Stock indicated on the last page of this Agreement (the
"ANTINORI SECURITIES"). Except for the Antinori Securities and except as may
be indicated on the last page of this Agreement, the undersigned does not
beneficially own any shares of Antinori Common Stock, or any options,
warrants or other rights to acquire shares of Antinori Common Stock or other
equity securities of Antinori. At the date of this Agreement, the Antinori
Securities are, and at all times until the "EXPIRATION DATE" (as defined
below), the Antinori Securities will be, free and clear of any liens, claims,
options, charges or other encumbrances, except for the rights and obligations
created under the Escrow Agreement and except as may be indicated on the last
page of this Agreement. As used herein, the term "EXPIRATION DATE" means the
earliest to occur of (i) the distribution to shareholders of record of
Carreker of the first financial statements of Carreker that include at least
30 days combined operating results of Carreker and Antinori, or (ii) such
time as the Merger Agreement may be terminated in accordance with its terms.
3. The undersigned has no present intention or plan to sell,
exchange or otherwise dispose of Carreker Common Stock to be received by the
undersigned in the Merger such that the undersigned would retain a continuing
interest through stock ownership in Carreker that is equal in value, as of
the Effective Time, to less than fifty percent (50%) of the value of all
formerly outstanding stock of Antinori that was held by the undersigned. For
purposes of this representation, shares of Antinori Common Stock (or the
portion thereof) (i) with respect to which a Antinori shareholder received
consideration in the Merger other than Carreker Common Stock (including,
without limitation, cash received pursuant to any exercise of dissenters'
rights) and/or (ii) with respect to which a sale occurs during the pre-Merger
period shall be considered shares of outstanding Antinori Common Stock
exchanged for Carreker Common Stock in the Merger and
ANTINORI AFFILIATE AGREEMENT - Page 3
<PAGE>
then disposed of pursuant to a plan.
4. Pursuant to the Merger, the undersigned will receive no
consideration, directly or indirectly, actually or constructively, for the
undersigned's shares of Antinori Common Stock other than shares of Carreker
Common Stock and cash for any fractional shares.
ANTINORI AFFILIATE AGREEMENT - Page 4
<PAGE>
5. The undersigned is a shareholder and officer of Antinori and
has been actively involved in the development and marketing of Antinori's
products. The undersigned is a knowledgeable and sophisticated investor,
capable by virtue of his educational, business and financial background to
assess the risks and merits of investments in Carreker Common Stock. The
undersigned has had the opportunity to ask questions of and receive full
answers from Carreker as to all matters deemed pertinent by the undersigned
to his decision to enter into this Agreement and to consent to the Merger and
the Merger Agreement, and he has obtained all documents from Carreker that he
has requested with respect to such matters. The undersigned has not obtained
from Carreker or relied upon any information or documents that are
inconsistent with the representations and covenants made by Carreker in the
Merger Agreement. The undersigned will acquire the shares of Carreker Common
Stock to be issued to the undersigned in the Merger (the "RESTRICTED
SECURITIES") for the undersigned's own account, for investment and not with a
view to resale or other disposition.
U. The undersigned agrees as follows:
1. At any time prior to the Expiration Date, without the prior
written consent of Carreker, the undersigned will not sell, transfer,
encumber or dispose of, or offer to sell, transfer, encumber or dispose of,
(i) any of the Antinori Securities or (ii) any shares of Antinori Common
Stock that the undersigned purchases or otherwise acquires after the
execution of this Agreement and prior to the Expiration Date (the "NEW
ANTINORI SECURITIES"). All New Antinori Securities will be subject to the
terms of this Agreement to the same extent and in the same manner as they
were Antinori Securities.
2. Until the Expiration Date, the undersigned will vote the
Antinori Securities and any New Antinori Securities in any vote of the share
of Antinori Common Stock, with respect to the matters referred to in (i) or
(ii) immediately below and in every written consent as a Antinori shareholder
solicited with respect to any of the matters referred to in (i) or (ii)
immediately below, as follows: (i) in favor of approval of the Merger
Agreement and the Merger and (ii) against approval of any proposal that might
be in opposition to or in competition with consummation of the Merger. The
undersigned will not, directly or
ANTINORI AFFILIATE AGREEMENT - Page 5
<PAGE>
indirectly, solicit, facilitate or encourage any offer from any person or
entity concerning the possible disposition of all or any portion of
Antinori's business, assets or capital stock by merger, sale or other means
in contravention of the Merger Agreement.
3. The undersigned will not, and will not permit any entity
under the undersigned's control to, (i) solicit support in opposition to or
in competition with the consummation of the Merger or otherwise encourage or
assist any person or entity in taking or planning any action that would
compete with, restrain or otherwise serve to interfere with or inhibit the
timely consummation of the Merger in accordance with the terms of the Merger
Agreement; or (ii) initiate a Antinori shareholder vote or action by consent
of any Antinori shareholder in opposition to or in competition with the
consummation of the Merger.
4. The undersigned hereby (i) grants any consent or waivers
that are reasonably required, under the terms of any agreement to which the
undersigned and Antinori (or the undersigned, Antinori and another or others)
are parties, for the consummation of the Merger; and (ii) waives, effective
as of the Effective Time, any liquidation, redemption, anti-dilution,
registration rights, information rights, rights of first refusal, co-sale or
other similar rights under terms of the Articles of Incorporation of Antinori
or any agreement with Antinori or its security holders in effect immediately
prior to the Effective Time with respect to the Antinori Securities.
5. The undersigned will execute and deliver any additional
documents reasonably necessary or desirable, in the opinion of Antinori or
Carreker, to carry out the intent of this Agreement.
V. The undersigned understands that (a) in addition to the
restrictions imposed under this Agreement, the Restricted Securities have not
been registered under the Securities Act or registered or qualified under
applicable state securities laws, in reliance upon the exemptions from the
registration or qualification requirements of the Securities Act of 1933 and
such state securities laws, and (b) as a result, the Restricted Securities
may not be offered, resold or otherwise transferred without registration
under the Securities Act and registration and qualification under applicable
state securities laws unless the offer, resale or other transfer is exempt
from the registration or
ANTINORI AFFILIATE AGREEMENT - Page 6
<PAGE>
qualification requirements of the Securities Act and such state securities
laws. The undersigned acknowledges that, unless registered under the
Securities Act, the Restricted Securities may not be publicly resold except
in compliance with Rule 144 or another exemption from such registration, and
that Rule 144 is not presently and for the foreseeable future will not be
available to permit the Restricted Securities to be resold.
W. The undersigned understands that there will be placed on the
certificates evidencing the Restricted Securities, among other legends,
legends stating in substance:
"THE SECURITIES REPRESENTED HEREBY MAY BE OFFERED, SOLD OR HYPOTHECATED
ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE REGISTERED
HOLDER THEREOF AND CARREKER-ANTINORI GROUP, INC. (THE "COMPANY"). A COPY OF
SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.
THE SECURITIES REPRESENTED HEREBY MAY BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED ONLY IN ACCORDANCE WITH (A) AN EFFECTIVE
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND UNDER
APPLICABLE STATE SECURITIES LAWS OR (B) EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT AND LAWS. THE COMPANY MAY REQUIRE AN OPINION OF
LEGAL COUNSEL, IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY, TO THE
EFFECT THAT SUCH EXEMPTIONS ARE AVAILABLE."
After release of the distribution described in Section 2(i),
certificates evidencing the Restricted Securities delivered at or after the
Effective Time may, at the undersigned's election, be surrendered for
cancellation and reissuance without the first of the above legends. Carreker
agrees that the second legend above will be removed promptly if the
provisions of this Agreement, the Securities Act and applicable state law are
otherwise complied with.
X. The undersigned hereby agrees to, and agrees to be bound by, the
indemnification obligations provided for in Section 10.2 of the Merger
Agreement as if the undersigned were a party to the Merger Agreement.
Y. If any provision of this Agreement (or of the Merger Agreement or
the Escrow Agreement), or the application thereof, is for any reason held to
any extent to be invalid or unenforceable,
ANTINORI AFFILIATE AGREEMENT - Page 7
<PAGE>
then the remainder of this Agreement (or of such of the Merger Agreement or
the Escrow Agreement) and application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of
the parties. The parties further agree to replace such unenforceable
provision of this Agreement with a valid and enforceable provisions that will
achieve, to the extent possible, the economic, business and other purposes of
the invalid or unenforceable provisions.
Z. This Agreement will be binding upon and inure to the benefit of
the parties and their respective successors and permitted assigns, but,
except as otherwise specifically provided herein, neither this Agreement nor
any of the rights, interests or obligations of the parties hereto may be
assigned by any of the parties without prior written consent of the others.
AA. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
ANTINORI AFFILIATE AGREEMENT - Page 8
<PAGE>
BB. The undersigned acknowledges that Carreker and Antinori will each
be irreparably harmed and that there will be no adequate remedy at law for a
violation of any of the covenants or agreements of the undersigned set forth
herein. Therefore, it is agreed that, in addition to any other remedies
which may be available to Carreker and Antinori upon any such violation,
Carreker and Antinori will have the right to enforce such covenants and
agreements by specific performance, injunctive relief or by any other means
available at law or in equity.
CC. 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.
DD. This Agreement contains the entire understanding of the parties
with respect to the subject matter hereof, and supersedes all prior
negotiations and understandings between the parties with respect to such
subject matter.
L. 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.
[THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
ANTINORI AFFILIATE AGREEMENT - Page 9
<PAGE>
M. This Agreement may be executed in counterparts, each of which will
be an original as regards any party whose name 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 all parties reflected hereon as
signatories.
Number of shares of Antinori Common Stock
beneficially owned by the undersigned (1):
------------------------------------------
Date: January 31, 1997
Very truly yours,
------------------------------------------
Ronald R. Antinori
Agreed to and accepted:
THE CARREKER GROUP, INC.
By:
----------------------------
J.D. Carreker, Chief
Executive Officer
ANTINORI SOFTWARE, INC.
By:
----------------------------
Ron Antinori, Chairman
of the Board
- -----------
(1) 51,462 shares of Carreker are subject to a purchase option in favor of
Lawrence Duckworth.
ANTINORI AFFILIATE AGREEMENT - Page 10
<PAGE>
EXHIBIT H
<PAGE>
EXHIBIT H
TO: The Carreker Group, Inc.
14001 North Dallas Parkway,
Suite 1100
Dallas, Texas 75240
CARREKER AFFILIATE AGREEMENT
This Carreker Affiliate Agreement (this "AGREEMENT") is being delivered
in connection with the execution and delivery of that certain Agreement and
Plan of Merger dated as of January 29, 1997 (the "MERGER AGREEMENT"), among
The Carreker Group, Inc., a Texas corporation ("CARREKER"), Antinori
Software, Inc., a Georgia corporation ("ANTINORI"), and CAG Newco, Inc., a
Texas corporation and a wholly-owned subsidiary of Carreker. The Merger
Agreement provides for the merger (the "MERGER") of CAG Newco, Inc. with and
into Antinori in a transaction in which each share of Antinori Common Stock,
par value $.01 per share, will be converted into shares of Carreker Class A
Voting Common Stock, no par value ("CARREKER CLASS A STOCK").
The undersigned understands that, since the Merger will be accounted for
as a "pooling-of-interests," the shares of Carreker Class A Stock which the
undersigned holds or may hereafter acquire may be disposed of only in
conformity with the limitations described herein. The undersigned has been
informed that the treatment of the Merger as a pooling-of-interests for
financial accounting purposes is dependent upon the accuracy of certain of
the representations and warranties and the compliance with certain of the
agreements set forth herein. The undersigned further understands that the
representations, warranties and agreements set forth herein will be relied
upon by Carreker and its counsel and accounting firm.
1. The undersigned represents, warrants and agrees as follows:
(a) The undersigned has full power to execute this Agreement and
to make the representations, warranties and agreements herein and to perform
the undersigned's obligations hereunder.
Page 1
<PAGE>
(b) The undersigned is the beneficial owner of (and has sole or
shared voting or investment power with respect to) all the shares of Carreker
Class A Stock and options to purchase shares of Carreker Class B Non-Voting
Common Stock as indicated on the last page hereof (collectively, and together
with any such shares acquired after the date hereof, the "CARREKER
SECURITIES"). Except for the Carreker Securities, the undersigned does not
beneficially own any shares of Carreker Class A Stock or any other equity
securities of Carreker or any options, warrants or other rights to acquire
shares of Carreker Class A Stock or other equity securities of Carreker.
(c) The undersigned will not sell, transfer, encumber, or
otherwise dispose of any of the Carreker Securities or offer or agree to
sell, transfer, encumber, or otherwise dispose of, or in any other way reduce
the undersigned's risk of ownership or investments in, any of such Carreker
Securities from and after the date hereof until Carreker shall have
distributed to its shareholders of record its first financial statements that
include at least 30 days of combined operating results of Carreker and
Antinori; provided, however, that nothing in this paragraph will be deemed to
prohibit charitable contributions of such securities without consideration to
transferees who agree to all of the restrictions in this Agreement and
provided further that, if the Merger Agreement should be terminated in
accordance with its terms prior to the effectiveness of the Merger, the
undersigned will have no obligations under this Agreement from and after the
date of such termination.
2. This Agreement will be binding upon and enforceable against
administrators, executors, representatives, heirs, legatees and devisees of
the undersigned and any pledgee holding Carreker Securities as collateral. If
the Merger Agreement is terminated in accordance with its terms prior to the
effectiveness of the Merger, then this Agreement will automatically terminate.
Number of shares of Carreker Class A Stock
(and options to purchase shares of Carreker
Class B Non-Voting Common Stock) beneficially
owned by the undersigned:
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--------------------------------------------
Date: January ____, 1997 Very truly yours,
--------------------------------------------
Name:
---------------------------------------
Title (if applicable):
----------------------
Agreed to and accepted:
THE CARREKER GROUP, INC.
By:
------------------------------------------
J.D. Carreker, Chief Executive Officer
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EXHIBIT I
<PAGE>
January 31, 1997
Antinori Software, Inc.
400 Colony Square, Suite 450
Peachtree Street NE
Atlanta, Georgia 30326
Attention: Ronald R. Antinori, Chairman of the Board
Re: Agreement and Plan of Merger dated as of January 29, 1997 among The
Carreker Group, Inc., CAG Newco, Inc. and Antinori Software, Inc.
Ladies and Gentlemen:
We have acted as counsel to The Carreker Group, Inc., a Texas
corporation (the "Company"), and J.D. Carreker ("Carreker") in connection
with the preparation of that certain Agreement and Plan of Merger (the
"Agreement") between the Company, CAG Newco, Inc., a Texas corporation
("Newco"), and Antinori Software, Inc. ("ASI"). As such, we have
participated in the closing of the merger of Newco with and into the Company
and the receipt of shares of the Company by the shareholders of ASI (the
"Transaction"). This opinion is rendered pursuant to Section 7.4 of the
Agreement.
The various documents and agreements executed and delivered pursuant to
the Agreement and in connection with the consummation of the Transaction are
sometimes referred to herein as the Transaction Documents. To the extent not
otherwise defined herein, defined terms have the meaning ascribed to them in
the Agreement.
This opinion is governed by, and is to be interpreted in accordance
with, the Legal Opinion Accord (the "Accord") of the ABA Section of Business
Law (1991). As a consequence, it is subject to the assumptions,
qualifications (including the General Qualifications), exceptions,
definitions, limitations on coverage and other limitations, all as more
particularly described in the Accord. This opinion should be read in
conjunction therewith.
In the capacity described above, we have considered such matters of law
and of fact, including the examination of originals or copies, certified or
otherwise identified to our satisfaction, of such records and documents of
the Company, certificates of officers and representatives of the Company,
certificates of public officials and such other documents as we have deemed
appropriate as a basis for the opinions hereinafter set forth.
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The opinions set forth herein are limited to the laws of The State of
Texas and applicable federal laws as applied therein.
Based upon the foregoing, it is our opinion that:
(1) The Company was duly organized as a corporation, and is existing
and in good standing under the laws of the State of Texas.
(2) The Company has the corporate power to execute and deliver the
Agreement and the other Transaction Documents, to perform its obligations
thereunder, to own and use its assets and to conduct its business.
(3) The Company has duly authorized the execution and delivery of the
Agreement and all performance by the Company thereunder. The Company and
Carreker have duly executed and delivered the Agreement and the other
Transaction Documents to which each is a party.
(4) The execution and delivery by the Company and Carreker of the
Transaction Documents to which each is a party do not, and performance by the
Company and Carreker of their respective obligations under the Agreement and
the other Transaction Documents will not, result in any:
(i) violation of the Company's articles of incorporation or bylaws;
(ii) violation of any existing federal or state constitution, law,
statute, regulation or rule to which the Company or its assets or
Carreker is subject;
(iii) breach of or default under any material written agreements;
(iv) creation or imposition of a contractual lien or security interest
in, on or against the assets of the Company under any material
written agreements; or
(v) violation of any judicial or administrative decree, writ, judgment
or order to which, to our knowledge, the Company or its assets or
Carreker is subject.
With your permission we have assumed that the term "material written
agreements" used in clauses (iii) and (iv) above includes only those
agreements identified in ATTACHMENT 1 to this letter.
(5) Other than the filing of the Articles of Merger with the Secretary
of State of The
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State of Texas, no consent, approval, authorization or other action by, or
filing with, any governmental authority of the United States of America or
The State of Texas is required for the Company's execution and delivery of
the Agreement and consummation of the Transaction.
(6) The Transaction Documents are enforceable against the Company and
Carreker, respectively, as applicable.
(7) The Company's authorized shares consist of 12,000,000 shares of
Class A Voting Common Stock, 500,000 shares of Class B Non-Voting Common
Stock, and 5,000,000 shares of Preferred Stock, each no par value, of which
961,071 shares of Class A Voting Common Stock and 3,167 shares of Class B
Non-Voting Common Stock are issued and outstanding as of the Closing Date and
are held of record as set forth in SCHEDULE 3.3 to the Agreement. Except as
disclosed on the Schedules to the Agreement, as of the Closing Date, to our
knowledge there are no other options, warrants, or other agreements pursuant
to which any other person could acquire shares or other any interest in the
shares of the Company.
(8) The shares of Class A Voting Common Stock of the Company to be
issued in the Merger have been duly authorized and upon their issuance will
be validly issued, fully paid and nonassessable.
Based upon the limitations and qualifications set forth above, we also
confirm to you that:
(1) To our knowledge, no litigation or other proceeding against the
Company or any of its property is pending or overtly threatened by a written
communication to the Company.
(2) The Company is incorporated under the laws of The State of Texas,
but is not qualified to conduct business in any state other than The State of
Texas.
In addition to other limitations noted in the Accord, the enforceability
of the Transaction Documents may be limited by:
(i) the possible unenforceability of waivers or advance consents that
have the effect of waiving statutes of limitation, marshalling of
assets or similar requirements, or, as to the jurisdiction of
courts, the venue of actions, the right to jury trial, or in
certain cases, notices;
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(ii) the possible unenforceability of provisions that waivers or
consents by a party may not be given effect unless in writing or in
compliance with particular requirements or that a person's course
of dealing, course of performance, or the like or failure or delay
in taking actions may not constitute a waiver of related rights or
provisions or that one or more waivers may not, under certain
circumstances, constitute a waiver of other matters of the same
kind;
(iii) the effect of course of dealing, course of performance, or the like
that would modify the terms of an agreement or the respective
rights or obligations of the parties under an agreement;
(iv) the possible unenforceability of provisions that enumerated
remedies are non-exclusive or that a party has the right to pursue
multiple remedies without regard to other remedies elected or that
all remedies are cumulative;
(v) the possible unenforceability of provisions that determination by a
party or a party's designee are conclusive;
(vi) the possible unenforceability of provisions that the provisions of
an agreement are severable in all circumstances;
(vii) the effect of laws requiring mitigation of damages;
(viii) the possible unenforceability of provisions permitting the
exercise, under certain circumstances, of rights without notice or
without providing opportunity to cure failures to perform;
(ix) the effect of agreements as to rights of setoff otherwise than in
accordance with applicable law; and
(x) the possible unenforceability of any covenant not to compete set
forth in the Transaction Documents if its limitations as to time,
geographical area and scope of activity to be restrained are not
reasonable or impose a greater restraint than is necessary to
protect the goodwill or other business interest of the Company.
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This opinion is provided to you for your exclusive use solely in
connection with the Transaction, and may not be relied upon by any other
person or for any other purpose without our prior written consent.
Very truly yours,
LOCKE PURNELL RAIN HARRELL
(A Professional Corporation)
By:
--------------------------------
Russell F. Coleman
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EXHIBIT J
<PAGE>
January 31, 1997
The Carreker Group, Inc.
Attn: J. D. Carreker, Chief Executive Officer
Suite 1100
14001 North Dallas Parkway
Dallas, Texas 75240
Locke Purnell Rain Harrell
(A Professional Corporation)
Attn: Russell F. Coleman
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201-6776
Re: Agreement and Plan of Merger between The Carreker Group, Inc., CAG
Newco, Inc. and Antinori Software, Inc. dated as of January 30, 1997
Ladies and Gentlemen:
We have acted as counsel to Antinori Software, Inc., a Georgia
corporation, and Ronald R. Antinori, its controlling shareholder, in
connection with the preparation of the Agreement and Plan of Merger (the
"Agreement") between The Carreker Group, Inc. ("Carreker"), CAG Newco, Inc.
("Newco") and Antinori Software, Inc. ("ASI") and have participated in the
closing of the merger of Newco with and into ASI and the receipt of shares of
Carreker by the existing shareholders (the "Shareholders") of ASI ("the
Transaction"). This opinion letter is rendered pursuant to Section 8.4 of
the Agreement.
The various documents and agreements executed and delivered pursuant to
the Agreement and in connection with the consummation of the Transaction are
sometimes referred to herein as the Transaction Documents. To the extent not
otherwise defined herein, defined terms have the meaning ascribed to them in
the Agreement.
This Opinion Letter is governed by, and is to be interpreted in
accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section
of Business Law (1991). As a consequence, it is subject to the assumptions,
qualifications (including the General Qualifications), exceptions,
definitions, limitations on coverage and other limitations, all as more
particularly described in the Accord. This Opinion Letter should be read in
conjunction therewith.
In the capacity described above, we have considered such matters of law and
of fact, including the examination of originals or copies, certified or
otherwise identified to our satisfaction, of such records and documents of ASI,
certificates of officers and representatives of ASI, certificates of public
officials and such other documents as we have deemed appropriate as a basis for
the opinions hereinafter set forth.
The opinions set forth herein are limited to the laws of the State of
Georgia and applicable federal laws as applied therein. To the extent that any
document or agreement is governed by the laws of the State of Texas, we have
assumed at your request and with your permission, that the laws of the State of
Georgia are identical to, the laws of the State of Texas.
Based upon the foregoing, it is our opinion that:
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(1) ASI was duly organized as a corporation, and is existing and in
good standing, under the laws of the State of Georgia.
(2) ASI has the corporate power to execute and deliver the Agreement
and other Transaction Documents, to perform its obligations thereunder, to
own and use its assets and to conduct its business.
(3) ASI has duly authorized the execution and delivery of the
Agreement and all performance by ASI thereunder and ASI and the Shareholders
have duly executed and delivered the Agreement and the other Transaction
Documents to which each is a party.
(4) The execution and delivery by ASI and the Shareholders of the
Transaction Documents do not, and performance by ASI and the Shareholders of
their respective obligations under the Agreement and the Transaction
Documents will not result in any:
(i) violation of ASI's articles of incorporation or bylaws;
(ii) violation of any existing federal or state constitution,
statute, regulation, rule, order, or law to which ASI or its assets or the
Shareholders are subject;
(iii) breach of or default under any material written agreements;
(iv) creation or imposition of a contractual lien or security
interest in, on or against the assets of ASI under any material written
agreement; or
(v) violation of any judicial or administrative decree, writ
judgment or order to which, to our knowledge, ASI or its assets or the
Shareholders are subject.
With your permission we have assumed that the term "material written
agreements" used in clauses (iii) and (iv) above includes only those
agreements identified in the Schedules delivered pursuant to the Agreement.
(5) Other than the filing of the Certificate of Merger with the
Secretary of State of Georgia, no consent, approval, authorization or other
action by, or filing with, any governmental authority of the United States or
the State of Georgia is required for ASI's execution and delivery of the
Agreement and consummation of the Transaction.
(6) The Transaction Documents are enforceable against ASI and the
Shareholders respectively as applicable.
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(7) ASI's authorized shares consist of 10,000,000 shares of Common
Stock one cent ($.01) par value per share of which 1,010,101 shares were
issued and outstanding and are owned of record by the persons identified in
Schedule 2.3 to the Agreement. The outstanding shares have been duly
authorized and validly issued and are fully paid and nonassessable. Except
for a certain agreement between Lawrence D. Duckworth and Ronald R. Antinori
dated October 24, 1995 with respect to options on certain shares of ASI held
by Ronald R. Antinori, as amended to apply to certain of the shares of
Carreker issued to Ronald R. Antinori in the merger, as of the closing, to
our knowledge there are no other options, warrants, or other agreements
pursuant to which any other person could acquire shares or other any interest
in the shares of ASI.
(8) Immediately prior to the consummation of the Transaction, the
Shareholders were the sole registered owners of the shares of ASI. Following
the consummation of the Transaction, Carreker is the sole registered owner of
all shares of ASI.
Based upon the limitations and qualifications set forth above, we also
confirm to you that:
(1) To our knowledge, no litigation or other proceeding against ASI
or any of its property is pending or overtly threatened by a written
communication to ASI.
(2) ASI is incorporated under the laws of the State of Georgia, but
is not qualified to conduct business in any state other than the State of
Georgia.
In addition to other limitations noted in the Accord, the enforceability
of the Transaction Documents may be limited by:
(i) the possible unenforceability of waivers or advance consents that
have the effect of waiving statutes of limitation, marshalling of assets or
similar requirements, or, as to the jurisdiction of courts, the venue of
actions, the right to jury trial, or in certain cases, notices;
(ii) the possible unenforceability of provisions that waivers or
consents by a party may not be given effect unless in writing or in
compliance with particular requirements or that a person's course of dealing,
course of performance, or the like or failure or delay in taking actions may
not constitute a waiver of related rights or provisions or that one or more
waivers may not, under certain circumstances, constitute a waiver of other
matters of the same kind;
(iii) the effect of course of dealing, course of performance, or the
like that would modify the terms of an agreement or the respective rights or
obligations of the parties under an agreement;
(iv) the possible unenforceability of provisions that enumerated
remedies are non-exclusive or that a party has the right to pursue multiple
remedies without regard to other
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remedies elected or that all remedies are cumulative;
(v) the effect of O.C.G.A. Section 13-1-11 on provisions relating to
attorneys' fees;
(vi) the possible unenforceability of provisions that determination by
a party or a party's designee are conclusive;
(vii) the possible unenforceability of provisions permitting
modifications of an agreement only in writing;
(viii) the possible unenforceability of provisions that the provisions
of an agreement are severable in all circumstances;
(ix) the effect of laws requiring mitigation of damages;
(x) the possible unenforceability of provisions permitting the
exercise, under certain circumstances, of rights without notice or without
providing opportunity to cure failures to perform;
(xi) the effect of agreements as to rights of setoff otherwise than in
accordance with applicable law; and
(xii) the possible unenforceability of any covenant not to compete set
forth in the Transaction Documents if its limitations as to time,
geographical area and scope of activity to be restrained are not reasonable
or impose a greater restraint than is necessary to protect the goodwill or
other business interest of Carreker.
This opinion letter is provided to you for your exclusive use solely in
connection with the Transaction, and may not be relied upon by any other
person or for any other purpose without our prior written consent.
Very truly yours,
MORRIS, MANNING & MARTIN
a Limited Liability Partnership
By:
---------------------------------
Charles R. Beaudrot, Jr., Partner
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EXHIBIT K
<PAGE>
SHAREHOLDERS AGREEMENT
THIS SHAREHOLDERS AGREEMENT (this "Agreement") is made as of January 31,
1997, among The Carreker Group, Inc., a Texas corporation (the "Company"),
J.D. Carreker ("Carreker") and Ronald R. Antinori ("Antinori"), Susan Antinori,
Lawrence D. Duckworth and Michael Israel (together with Antinori, the "Antinori
Shareholders" and, together with Carreker, the "Shareholders").
RECITALS
A. This Agreement is entered into in connection with and is ancillary
to an Agreement and Plan of Merger (the "Merger Agreement") dated as of
January 29, 1997, among the Company, CAG Newco, Inc., a Texas corporation and
a wholly-owned subsidiary of the Company, and Antinori Software, Inc., a
Georgia corporation, pursuant to which such subsidiary is to merge with and
into Antinori Software, Inc., such that Antinori Software, Inc. will become a
wholly-owned subsidiary of the Company (the "Merger").
B. In the Merger all of the ASI Shareholders, other than Lawrence D.
Duckworth, will receives shares of Class A Voting Common Stock of the Company.
In connection with the Merger, Lawrence D. Duckworth will receive options to
purchase shares of Class B Non-Voting Common Stock of the Company.
C. The parties deem it in their best interests and in the best interest
of the Company to restrict the sale, assignment, transfer, encumbrance, or other
transfer of shares of capital stock of the Company owned by the Shareholders,
and to provide for certain rights and obligations in respect thereto as
hereinafter provided.
NOW, THEREFORE, in consideration of the above premises and of the mutual
agreements and understandings set forth herein, the parties hereby agree as
follows:
I. DEFINITIONS
1.1 DEFINITIONS. When used in this Agreement, the following terms shall
have the respective meanings set forth below:
"Affiliate" means, when used with respect to a specified Person, any Person
that (a) directly or indirectly controls, is controlled by or is under common
control with such specified Person, (b) owns or controls 10% or more of the
outstanding voting equity interests of such Person, (c) is an
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officer, director, trustee, manager, administrator, representative or agent
of, or owns or controls 10% or more of the outstanding voting equity
interests of, a Person described in clause (a) or (b) of this sentence. As
used in this definition, the term "control" means possession, directly or
indirectly, of the power to direct or cause the direction of management and
policies of a Person through an ownership of equity interests, contract,
voting trust or otherwise.
"Commission" means the United States Securities and Exchange Commission, or
a successor commission or agency.
"Person" means an individual, partnership, limited partnership, limited
liability company, foreign limited liability company, trust, corporation,
association, enterprise, custodian, trustee, executor, administrator, nominee,
entity in a representative capacity or other enterprise.
"Qualified Public Offering" means a registered public offering under the
Securities Act of capital stock of the Company, which public offering is made
pursuant to a Registration Statement on Form S-1 (or Form SB-1) or a successor
form and which yields gross proceeds of at least $15 million and results in at
least beneficial 250 holders of capital stock of the Company.
"Registration Statement" means any registration statement of the Company
under the Securities Act that covers any of the Registrable Shares pursuant to
the provisions of this Agreement, including the related prospectus, all
amendments and supplements to such registration statement (including
post-effective amendments), all exhibits and all material incorporated by
reference or deemed incorporated by reference in such registration statement.
"Rule 144" means Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means shares of the Class A Voting Common Stock and the Class B
Non-Voting Common Stock of the Company, or any shares received in exchange
therefor in connection with a recapitalization of the Company.
"Transfer" means any sale, assignment, hypothecation, gift, inter vivos
transfer, pledge, mortgage, or other encumbrance, or any other transfer, whether
voluntary or involuntary. Notwithstanding the foregoing, any transfer that
might otherwise be deemed to result from the merger or consolidation of the
Company with or into another entity or any recapitalization of the Shares shall
not be deemed to constitute a "Transfer" for purposes of this Agreement.
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"Underwritten offering" means a registration in which securities of the
Company are sold to an underwriter for reoffering to the public.
1.2 SHARES SUBJECT TO AGREEMENT. This Agreement shall apply to all
Shares now owned by each of the Shareholders and to all Shares that may
hereafter be acquired by any of the Shareholders (including, without limitation,
pursuant to the exercise of a stock option or options), whether such Shares
constitute separate property or community property of any of the individual
Shareholders, and regardless of the capacity in which title to such Shares is
held or taken. Without limiting the foregoing, this Agreement shall apply to
all Shares held in either of the two escrows established pursuant to the Merger
Agreement. This Agreement shall also apply to all Shares to which the spouse of
any Shareholder is entitled by virtue of any community property or any other
law.
II. RESTRICTIONS ON TRANSFER OF SHARES
II.1. RESTRICTIONS ON TRANSFER.
(a) The Shareholders shall not make any Transfer of any Shares,
or any right or interest therein, except as provided in this Article II.
(b) Anything in this Agreement to the contrary notwithstanding,
no Transfer of any Shares otherwise permitted or required by this Agreement
shall be made unless such Transfer is in compliance with federal and state
securities laws, including, without limitation, the Securities Act. In
connection with any Transfer or proposed Transfer of Shares, if requested by the
Company before such Transfer, the Shareholder proposing to effect such Transfer
shall provide to the Company either (i) a written opinion of legal counsel who
shall be reasonably satisfactory to the Company, addressed to the Company and
reasonably satisfactory in form and substance to the Company, to the effect that
the proposed Transfer of the Shares may be effected without registration under
the Securities Act and applicable state securities laws, or (ii) a "no-action"
letter from the staff of the Commission to the effect that the proposed Transfer
of such Shares without registration under the Securities Act would not result in
a recommendation by the staff that action be taken in respect thereof.
(c) Anything in this Agreement to the contrary notwithstanding,
unless otherwise agreed to in writing by the Company and the Shareholders, no
Transfer of Shares otherwise permitted or required by this Agreement shall be
effective unless and until the transferee shall execute and deliver to the
Company an agreement in a form satisfactory to the Company in which such
transferee agrees in writing to be bound by this Agreement and to observe and
comply with this Agreement and with all obligations and restrictions imposed on
the Shareholders hereby.
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Each person to whom a Transfer of Shares is permitted by this Agreement who
receives a Transfer of Shares during the period when this Agreement is in
effect, and who so agrees in writing to be bound by the provisions hereof,
shall thereafter become a "Shareholder" for all purposes of this Agreement.
(d) Transfers of the Shares may only be made in strict compliance
with all applicable terms of this Agreement. Any purported Transfer of the
Shares that does not comply with all applicable provisions of this Agreement
shall be null and void and of no force or effect, and the Company shall not
recognize nor will be bound by any such purported Transfer and shall not effect
any such purported Transfer on its stock transfer books.
(e) Any offer to Transfer Shares by a Shareholder shall be deemed
to include an offer to sell all Shares or interest therein (including community
property interest) owned by or for the benefit of the spouse of the Shareholder,
whether or not stated in the offer. By executing this Agreement, a
Shareholder's spouse hereby agrees to be bound by all terms and provisions of
this Agreement.
(f) Any Transfer of Shares by a Shareholder to his or her
immediate family (i.e., the spouse, children, parents or siblings of the
Shareholder), or to a trust for the benefit of the Shareholder or his or her
immediate family, shall not be prohibited under this Agreement, provided each
such transferee receives the Shares subject to the terms and provisions of this
Agreement as a Shareholder as provided in Section 2.1(c) above.
2.2 RIGHT OF FIRST REFUSAL.
(a) If any Shareholder proposes to Transfer any Shares owned by
him to a third party (a "Proposed Transfer"), then such Shareholder (the
"Offering Shareholder") shall first offer such Shares to the Company by sending
a written offer (the "Offer") to the Company, and by sending a copy of the Offer
to each other Shareholder, in each case as provided in Section 6.1. The Offer
shall set forth (i) the number of Shares subject to the Proposed Transfer (the
"Offered Shares"), (ii) a description of the Proposed Transfer, (iii) the
identity of each prospective purchaser (the "Transferee"), and (iv) any and all
other material terms (the "Terms") of the Proposed Transfer, including without
limitation, the purchase price per Offered Share offered by the Transferee, the
manner in which such purchase price shall be paid and the description of any
non-cash consideration.
(b) Within fifteen (15) business days after receipt of the Offer
(the "Offer Date") the Company may elect to purchase all, but not less than all,
of the Offered Shares. The Company shall exercise its election to purchase the
Offered Shares by giving written notice to the Offering Shareholder specifying a
date for the closing of the purchase, which date shall not be more than forty
(40) days after the Offer Date.
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(c) The Company, if it elects to accept the Offer, shall purchase
the Offered Shares at the price and upon the Terms set forth in the Offer. At
the closing of such purchase, the Company shall deliver the consideration for
the Offered Shares and the Offering Shareholder shall deliver to the Company
stock certificates representing the Offered Shares duly endorsed in blank or
accompanied by appropriate stock powers duly executed in blank.
(d) If the Offered Shares are not purchased by the Company
pursuant to this Section 2.2, then the Offering Shareholder shall comply with
the provisions of Section 2.3. If the Offering Shareholder does not consummate
the sale of the Offered Shares to the Transferee within ninety (90) days after
the Offer Date, then the Offered Shares shall again become subject to all of the
restrictions of this Agreement.
(e) The right of first refusal established pursuant to this
Section 2.2 shall not apply to a Transfer of Shares by Antinori to Lawrence D.
Duckworth pursuant to Section 2 of that Amendment to Letter Agreement dated as
of even date herewith between them.
2.3 RIGHT OF PARTICIPATION IN SALES.
(a) If the Offered Shares are not purchased by the Company
pursuant to Section 2.2 above, then all Shareholders other than the Offering
Shareholder (each, a "Non-offering Shareholder," and together, the "Non-offering
Shareholders") shall be entitled to participate in the Proposed Transfer in the
manner and to the extent set forth in this Section 2.3. Each Non-offering
Shareholder who desires to participate in the Proposed Transfer shall give
written notice of such desire to the Offering Shareholder within twenty (20)
business days following the Offer Date. Each Non-offering Shareholder who gives
such notice shall be entitled to sell in the Proposed Transfer, in accordance
with the Terms, a portion of the Shares then held by the Non-offering
Shareholder as described in subsection (b) below. The Offering Shareholder
shall assign so much of his or her interest in any instrument or agreement
governing the Proposed Transfer as each electing Non-offering Shareholder shall
be entitled to and shall request hereunder, and each Non-offering Shareholder
shall assume such part of the obligations of the Offering Shareholder under such
instrument or agreement as it shall relate to the sale of securities by the
Offering Shareholder.
(b) Each Non-offering Shareholder may sell up to a Pro Rata
portion of the Offered Shares in the Proposed Transfer if the same are not sold
pursuant to Section 2.2. As to a Non-offering Shareholder, "Pro Rata" means in
the proportion of the number of Shares owned by such Non-offering Shareholder
bears to the aggregate number of Shares owned by all Shareholders as of the
Offer Date; provided, however, that if Carreker is the Offering Shareholder,
then as to a Non-offering Shareholder "Pro Rata" means in the proportion of the
number of Shares owned by such Non-offering Shareholder bears to the aggregate
number of Shares owned as of the Offer Date
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by all Shareholders and David Sias (if David Sias elects to exercise his
right to sell Shares in the Proposed Transfer pursuant to the provisions of
that certain Stock Purchase Agreement dated as of November 5, 1993 among the
Company, David Sias and Carreker).
(c) To the extent that a Non-offering Shareholder who is
otherwise entitled to does not elect to sell all of his or her Pro Rata portion
of the Offered Shares in the Proposed Transfer pursuant to this Section 2.3,
then the Offering Shareholder may sell the Offered Shares (less that number of
Shares sold in the Proposed Transfer by Non-offering Shareholders, if any) to
the Transferee in accordance with the Terms for a period of ninety (90) days
following the Offer Date. If the Offering Shareholder fails to make any such
sale within ninety (90) days after the Offer Date, then such Offered Shares
shall again become subject to all of the restrictions of this Agreement.
(d) The right of participation established by this Section 2.3
shall not apply in respect of the redemption by the Company of Shares held by a
Shareholder out of either of the two escrows established pursuant to the Merger
Agreement.
III. REGISTRATION RIGHTS
III.1. DEMAND REGISTRATION.
(a) At any time from and after one year after the closing of a
Qualified Public Offering, Shareholders holding not less than fifty percent
(50%), on a fully-diluted basis, of the capital stock of the Company entitled to
vote in the election of directors (the "Selling Shareholders") may by written
notice (a "Demand Notice") to the Company require the registration under the
Securities Act of all or part of the Shares held by the Selling Shareholders (a
"Demand Registration"); provided, however, that the amount of Shares to be
offered for sale under a Demand Registration (the "Registrable Shares") shall
have either a fair market value of $10 million or more. The Company shall not
be obligated to effect more than two (2) Demand Registrations under this Section
3.1, plus two (2) Demand Registrations as to which the Demand Notice is given by
Selling Shareholders that include Antinori (on behalf of the ASI Shareholders,
as provided in Section 3.1(h)). No Demand Notice may be given prior to six
months after the effective date of the immediately preceding Demand
Registration.
(b) Demand Registrations shall be on such appropriate
registration form of the Commission (i) as shall be selected by the Company and
as shall be reasonably acceptable to the Selling Shareholders and (ii) as shall
permit the Transfer of the Registrable Shares in accordance with the intended
method of Transfer specified by the Selling Shareholders in their Demand Notice.
(c) The Company will file a Registration Statement relating to
any Demand
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Registration within sixty (60) days of the date of the applicable Demand
Notice and will use all reasonable efforts to cause the same to be declared
effective by the Commission within one hundred twenty (120) days of the date
of such Demand Notice. If any Demand Registration is requested to be
effected as a "shelf" registration, then the Company will keep the
Registration Statement filed in respect thereof effective for a period of up
to four (4) months from the date on which the Commission declares such
Registration Statement effective, or such shorter period that will terminate
when all Registrable Shares covered by such Registration Statement have been
sold pursuant to such Registration Statement.
(d) A registration requested pursuant to this Section 3.1 will
not count as a Demand Registration (i) unless a Registration Statement with
respect thereto has become effective, (ii) if after such Registration Statement
has become effective, such registration is interfered with by any stop order,
injunction or other order or requirement of the Commission or other governmental
agency or court not due to any fault of the Selling Shareholders, (iii) if,
solely due to the fault of the Company, the conditions to closing specified in
the purchase agreement or underwriting agreement entered into in connection with
such registration are not satisfied, or (iv) if the Registration Statement is
withdrawn because the Selling Shareholders determine, with the Company's prior
written consent, that the price to be received in connection with the offering
of the Registrable Shares is inadequate. Subject to the provision relating to
the payment of costs and expenses set forth in Section 3.5, the Company agrees
to withdraw any Registration Statement filed pursuant to this Section 3.1 upon
the request of the Selling Shareholders who gave a Demand Notice in respect of
same.
(e) If the offering of Registrable Shares pursuant to a Demand
Registration is to be an underwritten offering, then the Selling Shareholders
shall select the managing underwriters in connection with such offering and any
additional investment bankers to be used in connection with the offering,
subject to the approval of the Company, which shall not be unreasonably
withheld.
(f) If the managing underwriter or underwriters of an
underwritten offering to which such Demand Registration relates advises the
Selling Shareholders that the total amount of Registrable Shares intended to be
included in such Demand Registration is in the aggregate such as to materially
and adversely affect the success of such offering, then the number of
Registrable Shares to be included in such Demand Registration will, if
necessary, be reduced and there will be included in such underwritten offering
the number of Registrable Shares that, in the opinion of such managing
underwriter or underwriters, can be sold without materially and adversely
affecting the success of such offering, allocated PRO RATA among the Selling
Shareholders on the basis of the amount of Registrable Shares requested to be
included therein by each such Selling Shareholder.
(g) The Company will be entitled to postpone the filing of any
Demand Registration for a reasonable period of time not in excess of 120
calendar days, if the Company
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determines, in the good faith exercise of the business judgment of its board
of directors, that such registration and offering could materially interfere
with BONA FIDE financing plans of the Company or would require disclosure of
information the premature disclosure of which could adversely affect the
Company. If the Company postpones the filing of a Registration Statement,
then it will promptly notify the Selling Shareholders in writing when the
events or circumstances permitting such postponement have ended.
(h) For purposes of this Section 3.1, the ASI Shareholders
hereby irrevocably consent to the appointment of Antinori, as representative of
the ASI Shareholders, and as attorney-in-fact for and on behalf of each ASI
Shareholder, for purposes of giving a Demand Notice.
III.2. INCIDENTAL REGISTRATION.
(a) If the Company proposes to file a Registration Statement
under the Securities Act on Form S-1, S-2 or S-3 (or any successor form)
relating to any offering of Shares to be offered for its own account for cash
(other than a Demand Registration or a Registration Statement filed in
connection with an exchange offer or offering of securities solely to the
Company's existing shareholders), then the Company shall (i) provide prompt
written notice of the proposed offering to the Shareholders, include in such
written notice a description of the intended method of distribution, and
(ii) use all reasonable efforts to register pursuant to such Registration
Statement (an "Incidental Registration") such number of Shares ("Registrable
Shares") as shall be specified in a written request by a Shareholder (each, a
"Selling Shareholder") made within ten (10) days after such written notice from
the Company, subject to subsection (b) below.
(b) Notwithstanding any other provision of this Section 4.2, if
a registration pursuant to this Section 4.2 involves a firm commitment,
underwritten offering of the securities so being registered, and if the managing
underwriter of such offering informs the Company and the Selling Shareholders by
letter of its belief that marketing factors require a limitation of the number
of shares to be underwritten, then the Company may limit the number of
Registrable Shares to be included in the registration and underwriting, with
first priority being given to Shares proposed to be issued by the Company, and
second priority being given to Shares proposed to be sold by a Selling
Shareholder, and, if more than one Selling Shareholder exists, then by the
Selling Shareholders on a pro rata basis (determined by the inclusion of any
Shares held by David Sias, in the manner provided in Section 2.3(b), if J.D.
Carreker is a Selling Shareholder and if David Sias elects to exercise his right
to sell Shares in the Proposed Transfer pursuant to the provisions of that
certain Stock Purchase Agreement dated as of November 5, 1993 among the Company,
David Sias and Carreker).
(c) Notwithstanding the foregoing, if, at any time after giving
written notice to the Selling Shareholders of its proposal to file a
Registration Statement pursuant to subsection (a)
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above and prior to the effective date of such Registration Statement, the
Company shall determine for any reason not to register the Shares proposed to
be covered thereby, then the Company may, at its election, give written
notice of such determination to the Selling Shareholders and thereupon shall
be relieved of its obligation to register any Registrable Shares in
connection with such registration (but not from its obligation to pay certain
expenses in connection therewith as provided in Section 3.5), without
prejudice, however, to the rights the Shareholders otherwise may have to
request that such registration be effected under Section 3.1. No
registration effected under this Section shall relieve the Company of its
obligation to effect any Demand Registration under Section 3.1
III.3. COOPERATION. Each Selling Shareholder hereby agrees to cooperate
and provide all information necessary to assure that any Registration Statement
required hereunder shall be filed promptly and be declared effective by the
Commission as soon as reasonably practicable after the filing thereof.
III.4. RESTRICTIONS ON PUBLIC SALE BY SHAREHOLDERS. Each Shareholder
agrees not to effect any public sale or distribution of the Registrable Shares,
including a sale pursuant to Rule 144 under the Securities Act, during the
twenty (20) days prior to, and during the one hundred eighty (180) day period
beginning on, the effective date of a Registration Statement (except as part of
such registration) if and to the extent requested by the Company in the case of
a non-underwritten offering or if and to the extent requested by the managing
underwriter in the case of an underwritten offering.
III.5. REGISTRATION EXPENSES. In connection with each Demand
Registration and each Incidental Registration, the Company shall, except as
otherwise specifically provided, pay all expenses incurred in connection with
such registration, including without limitation (a) filing fees with the
Commission; (b) fees and expenses of compliance with the securities or "blue
sky" laws in connection with "blue sky" registrations or qualifications of the
Registrable Shares, (c) preparation and printing expenses, (d) fees and expenses
of counsel and independent certified public accountants for the Company;
(e) fees and expenses of one counsel for the Selling Shareholders, which counsel
shall be designated by the Selling Shareholders in the written notice sent to
the Company requesting the Demand Registration or Incidental Registration and
shall be subject to the approval by the Company, and (g) fees and expenses of
any additional experts retained by the Company in connection with such
registration. The Selling Shareholders shall pay any underwriting discounts or
commissions or brokers' fees or commissions attributable to the sale of the
Registrable Shares. Notwithstanding the foregoing, if the Selling Shareholders
request the Company to withdraw a Registration Statement for a Demand
Registration that has become effective, then the Selling Shareholders agree to
reimburse the Company an amount equal to fifty percent (50%) of the total fees
and expenses incurred by the Company up to the time of the withdrawal.
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III.6. INDEMNIFICATION BY THE COMPANY. The Company agrees to, and hereby
does, indemnify and hold harmless each Selling Shareholder from and against any
and all losses, claims, damages and liabilities caused by any untrue statement
or alleged untrue statement of a material fact contained in any Registration
Statement or prospectus relating to the Registrable Shares or any amendment or
supplement thereto, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or when necessary to make
the statements therein not misleading, and will reimburse each Selling
Shareholder for any legal or other out-of-pocket expenses reasonably incurred in
connection with investigating or defending any such losses, claims, damages or
liabilities (or any proceeding in respect thereof), except insofar as such
losses, claims, damages or liabilities are caused by such untrue statement or
omission or alleged untrue statement or omission based upon and in conformity
with information furnished to the Company by or on behalf of the Selling
Shareholder expressly for use therein.
III.7. INDEMNIFICATION BY THE SELLING SHAREHOLDERS. Each Selling
Shareholder severally, but not jointly, agrees to and hereby does, indemnify and
hold harmless the Company, its officers and directors, and each person, if any,
who controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended,
to the same extent as the foregoing indemnity from the Company to the Selling
Shareholders, but only with reference to information furnished by or on behalf
of such Selling Shareholders, expressly for use in any Registration Statement or
prospectus relating to the Registrable Shares, or any amendment or supplement
thereto.
III.8. ASSIGNMENT. Subject to the provisions of this Agreement, the
right to cause the Company to register Registrable Shares under this Article may
be assigned to any assignee of Registrable Shares or transferred to any
successor of the Shareholders.
III.9. CROW FAMILY HOLDINGS, L.P. Notwithstanding anything herein to the
contrary, Article III of this Agreement shall be subject to and construed so as
to give effect to and not create any conflict with, Section 9 (captioned "Right
of Inclusion") of that certain Stock Purchase Agreement dated as of January 10,
1997 by and between Crow Family Partnership, L.P. and The Carreker Group, Inc.
III.10. CESSATION OF STATUS AS REGISTRABLE SHARES. Notwithstanding any
provision herein to the contrary, Shares shall cease to be Registrable Shares
(a) if they are effectively registered under the Securities Act and disposed
of in accordance with the Registration Statement wherein they are registered,
(b) if they are saleable by the Shareholder thereof pursuant to Rule 144(k),
or (c) they are distributed to the public by the Shareholder thereof pursuant
to Rule 144.
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IV. GOVERNANCE
IV.1. BOARD REPRESENTATION. The board of directors of the Company will
be comprised of such number of directors as is determined by the board of
directors or otherwise as provided in the constituent documents of the Company.
At each annual shareholders meeting of the Company, and at each special
shareholders meeting of the Company called for the purpose of electing directors
of the Company, and at any time at which shareholders of the Company shall have
the right to, or shall, vote for directors of the Company, then, and in each
event, the Shareholders hereby agree to vote all Shares owned by them for the
nomination and election of a board of directors that will include the following:
(i) Antinori and one other individual designated by him;
(ii) Carreker and three other individuals designated by him; and
(iii) one individual designated by Science Applications International
Corporation ("SAIC") (or such greater number of individuals as SAIC shall be
entitled to designate pursuant to that certain Shareholders Agreement dated as
of October 10, 1996 among the Company, Carreker and SAIC).
Notwithstanding any other provision of this Agreement, however, no Shareholder
will be required to cause the election of any designee, or to support the
continued service of any director, if the board of directors of the Company
determines in good faith, based as to legal matters on the advice of counsel,
that the election or continued service of such designee would be inconsistent
with the fiduciary duty owed by the board of directors of the Company to the
shareholders of the Company, provided, however, that the foregoing shall not
detract from the right of an individual who designated such designee to nominate
another designee for such position.
In addition, if a person entitled to designate another person for election
as a director of the Company desires to cause his designee to be removed from
the board of directors of the Company, then the Shareholders hereby agree to, if
necessary, but subject to all applicable requirements of law, use their best
efforts to take or cause to be taken all such action as may be required to
remove such designee from the board of directors of the Company.
IV.2. CASH SALES OF STOCK TO AFFILIATES. The Shareholders hereby agree
to use their best efforts to cause the Company to amend its Bylaws to require an
affirmative vote of at least the Requisite Number of directors to approve an
issuance for cash of new shares of capital stock of the Company to an Affiliate;
provided, however, that such amendment shall not require such affirmative vote
to approve the issuance of capital stock upon the exercise of a stock option or
options or to approve the grant of a stock option or options. The Requisite
Number as used herein shall mean the total number of directors of the Company
then constituting its board of directors,
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less two. This Section 4.2 shall not apply in respect of sale of capital
stock to Science Applications International Corporation resulting from its
exercise of its contractual preemptive right as set forth in Section 2.1
(captioned "SAIC Right of First Refusal on Future Securities") of that
certain Shareholder Agreement among the Company, Carreker and Science
Applications International Corporation, as the same may be amended from time
to time.
V. TERMINATION OF PROVISIONS
V.1. TERMINATION. Except for the provisions of Article II and Article
IV, which shall terminate immediately prior to the first consummation of a
Qualified Public Offering (and to which Article II shall not apply in respect of
a Qualified Public Offering), this Agreement shall remain in effect until
terminated by the agreement of the Company, Antinori (acting as representative
and attorney-in-fact for the ASI Shareholders) and Carreker. This Agreement
shall also terminate upon the closing of the sale of all or substantially all of
the assets of the Company, the consolidation or merger of the Company in which
the Company is not the surviving corporation or the liquidation of the Company
in accordance with the Texas Business Corporation Act.
VI. MISCELLANEOUS
VI.1. 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, 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 6.1:
(i) If to the Company: The Carreker Group, Inc.
14001 North Dallas Parkway, Suite 1100
Dallas, Texas 75240
Attention: J.D. Carreker, 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
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<PAGE>
Dallas, Texas 75201
Attention: Russell F. Coleman
Phone: (214) 740-8686
Fax: (214) 740-8800
(ii) If to an ASI Shareholder: c/o Ronald R. Antinori
238 15th Street, #12
Atlanta, Georgia 30309
Phone: (404) 876-2762
with a copy to:
Morris, Manning & Martin
A Limited Liability Partnership
3343 Peachtree Road, N.E., Suite 1600
Atlanta, Georgia 30326
Attention: Charles R. Beaudrot, Jr.
Phone: (404) 233-7000
Fax: (404) 365-9532
(iii) If to Carreker: J.D. Carreker
4321 Overhill
Dallas, Texas 75205
Phone: (214) 528-8303
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
VI.2. AMENDMENTS. This Agreement, including any attachments, contains
the entire agreement and supersedes and replaces all prior agreement by and
among the Company and the Shareholders regarding its subject matter. 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 modification is
sought. Notwithstanding the prior sentence, Sections 3.1 and Section 4.1 may be
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amended by Antinori and Carreker only, without the consent or agreement of any
other Shareholder.
VI.3. SUCCESSORS AND ASSIGNS. Except as provided in Section 3.8, this
Agreement will not be assignable by any party without the prior written consent
of all other parties.
VI.4. 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.
VI.5. NO WAIVER. The failure of any party to enforce any of the
provisions hereof 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 hereof 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.
VI.6. SEVERABILITY. The parties hereto recognize that the limitations
contained in this Agreement are reasonably and properly required for the
adequate protection of their interests. 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.
VI.7. 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.
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VI.8. DISPUTE RESOLUTION.
(a) 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. 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.
(b) 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 hourly or daily consulting
rates for the arbitrator if the parties are not able to agree upon his or her
rate of compensation.
(c) 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 corporation law and 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.
(d) PAYMENT OF COSTS. The parties to the arbitration will each
pay an equal share of the initial compensation to be paid to the arbitrator in
any such arbitration and of the costs of transcripts and other normal and
regular expenses of the arbitration proceedings; provided, however, that the
prevailing party in any arbitration will be entitled to an award of attorneys'
fees and costs, and all costs of arbitration, including those provided for
above, will be paid by the non-prevailing party or parties, and the arbitrator
will be authorized to make such determinations.
(e) 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.
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(f) 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.
(g) 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.
(h) NATURE OF REMEDY. Except as specifically otherwise provided
in this Agreement, arbitration will be the sole and exclusive remedy of the
parties for any dispute arising out of this Agreement.
(i) EQUITABLE REMEDY. Notwithstanding the provisions of this
Section 6.8 and the arbitration provided for herein, actions initiated or
maintained by the parties for injunctive or similar equitable relief may not be
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.
VI.9. LEGEND. A legend referring to the restrictions imposed by this
Agreement and otherwise complying with Article 2.30 of the Texas Business
Corporation Act may be placed upon any certificate issued to evidence Shares.
[THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first set forth above.
THE CARREKER GROUP, INC. SHAREHOLDERS
By:
--------------------------- -----------------------------------
J.D. Carreker J.D. Carreker
Chairman and Chief Executive Officer
-----------------------------------
Name: Connie Carreker
Spouse of J.D. Carreker
-----------------------------------
Ronald R. Antinori
-----------------------------------
Name: Susan Antinori
Spouse of Ronald R. Antinori
-----------------------------------
Susan Antinori
-----------------------------------
Name: Ronald R. Antinori
Spouse of Susan Antinori
-----------------------------------
Lawrence D. Duckworth
-----------------------------------
Name: Sharon Duckworth
Spouse of Lawrence D. Duckworth
-----------------------------------
Michael Israel
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<PAGE>
EXHIBITS L-1, L-2, L-3, L-4, L-5 AND L-6
<PAGE>
EXHIBIT L-1
THE CARREKER GROUP, INC.
1994 LONG TERM INCENTIVE PLAN
INCENTIVE STOCK OPTION AGREEMENT
(CLASS B NON-VOTING COMMON STOCK)
This Agreement ("Agreement") is dated this ________ day of January, 1997
by and among The Carreker Group, Inc., a Texas corporation (the "Company") and
Lawrence D. Duckworth ("Employee").
WHEREAS, the Board of Directors of the Company (the "Board") has adopted,
and the shareholders of the Company have approved, The Carreker Group, Inc.
Amended and Restated 1994 Long Term Incentive Plan (the "Plan");
WHEREAS, the Plan provides for the granting of incentive stock options by
the Compensation Committee of the Board or any successor committee thereto (the
"Committee") to officers and key employees of the Company or any subsidiary of
the Company and its subsidiaries to purchase shares of the Company's Class B
Non-Voting Common Stock, no par value (the "Stock"), in accordance with the
terms and provisions thereof; and
WHEREAS, the Committee considers Employee to be a person who is eligible
for a grant of incentive stock options under the Plan, and has determined that
it would be in the best interest of the Company to grant the incentive stock
option described herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. GRANT OF OPTION. Subject to the terms and conditions
hereinafter set forth, the Company, with the approval and at the direction of
the Committee, hereby grants to the Employee, as of the date hereof, an option
(the "Option") to purchase 15,720 shares of Stock (the "Option Shares") at a
price of $19.07 per share (the "Exercise Price"), representing the Fair Market
Value per Share (or, if Employee is the owner of stock possessing more than 10
percent of the total combined voting power of all classes of stock of the
Company, or its parent or subsidiary corporation, if any, 110% of the Fair
Market Value per
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Share) as of the Date of Grant as determined by the Committee in accordance
with the Plan. The Option is intended by the parties hereto to be, and shall
be treated as, an incentive stock option (as such term is defined under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")).
2. VESTING. The Option shall vest and become exercisable during the
two-year period following the date hereof (herein the "Vesting Period") as
follows:
(a) The Option shall be immediately vested and exercisable with
respect to one-third (1/3) of the Option Shares on the date hereof;
(b) The Option shall vest and shall be exercisable with respect to
an additional one-third (1/3) of the Option Shares on the first anniversary date
of this Agreement, provided Employee is employed by the Company or one of its
subsidiaries as of such date and has been continuously employed during the term
of this Agreement, and further provided that the Option has not otherwise
terminated in accordance with the terms of Section 4 hereof; and
(c) The Option shall vest and shall be exercisable with respect to
the remaining one-third (1/3) of the Option Shares on the second anniversary
date of this Agreement, provided Employee is employed by the Company or one of
its subsidiaries as of such date and has been continuously employed by the
Company or one of its subsidiaries during the term of this Agreement, and
further provided that the Option has not otherwise terminated in accordance with
the terms of Section 4 hereof.
3. EXERCISE OF OPTION. The Option, to the extent vested, may be
exercised as follows:
(a) The Employee may exercise the Option with respect to all or
any part of the Option Shares then vested by giving the Secretary of the Company
written notice (the "Notice") of intent to exercise. The Notice shall specify
the number of Option Shares to be exercised (which shall be an amount no less
than 50 shares or the number of shares as to which the Option is then
exercisable, if less than 50) and the date of the proposed exercise thereof (the
"Exercise Date"), which date shall be at least ten (10) but no more than thirty
(30) calendar days after the giving of such notice unless an earlier time shall
have been mutually agreed upon.
(b) Full payment (in U.S. dollars) by the Employee of
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<PAGE>
the Exercise Price shall be made on or before the Exercise Date in cash or
certified check.
(c) On or before the Exercise Date, Employee and his spouse, if
any, shall execute and deliver to the Company an agreement restricting the
transferability of the Option Shares substantially in the form of Exhibit A
attached hereto (the "Right of First Refusal Agreement");
(d) On the Exercise Date or as soon thereafter as practicable
thereafter, the Company shall cause to be delivered to the Employee a
certificate or certificates for the Option Shares then being purchased upon full
payment for such Option Shares. Such certificate or certificates shall bear a
restrictive legend in the form set forth in the Transfer Restriction Agreement.
The obligation of the Company to deliver the Option Shares shall, however, be
subject to the condition that if at any time the Committee shall determine in
its discretion that the listing, registration or qualification of the Option or
the Option Shares upon any securities exchange or under any state or federal
law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the Option or
the issuance or purchase of Stock thereunder, the Option may not be exercised in
whole or in part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Committee.
(e) If Employee fails to pay the Exercise Price by the Exercise
Date for any of the Option Shares specified in the Notice or fails to deliver
the Transfer Restriction Agreement, the Employee's right to purchase such Option
Shares may be terminated by the Company upon written notice to Employee.
4. TERMINATION OF OPTION. The Option, and all rights hereunder with
respect thereto, to the extent such rights shall not have been exercised, shall
terminate and become null and void on the earliest to occur of the following
dates as follows:
(a) the tenth (10th) anniversary date of the date hereof, or, if
Employee is the owner of stock possessing more than 10 percent of the total
combined voting power of all classes of stock of the Company, or its parent or
subsidiary corporation, if any, the fifth (5th) anniversary date of the date
hereof (the "Expiration Date");
(b) in the event Employee's employment with the Company or any
subsidiary is terminated, other than by reason of death or Disability (as
defined below) or termination for Cause (as defined below), then (i) this Option
shall continue to vest
Page 3
<PAGE>
and shall be exercisable as though Employee's employment with the Company
continued for a period of two (2) years following the date of termination of
employment, and (ii) this Option shall terminate and shall no longer be
exercisable after the passage of two (2) years from the date of termination
of employment, but in no event later than the Expiration Date (and further
provided that in the event this Option is exercised following the expiration
of three (3) months from the date of termination of employment, the portion
of this Option so exercised will be treated as a non-qualified option as
required by the Code). In such a case, the Employee's only rights hereunder
shall be those which have been properly exercised prior to the termination or
earlier expiration of this Option;
(c) in the event Employee's employment with the Company or any
subsidiary is terminated for Cause (as defined below), then no further
installments of this Option shall vest or otherwise become exercisable, if such
termination occurs during the Vesting Period, and this Option shall terminate
and shall no longer be exercisable effective on the date of such termination.
For purposes hereof, the term "Cause" shall mean conduct involving one or more
of the following as determined by the Committee in its reasonable discretion:
(i) the substantial and continuing failure of the Employee, after notice
thereof, to render services to the Company or any subsidiary in accordance with
the terms or requirements of the Employee's employment with the Company or any
subsidiary; (ii) disloyalty, gross negligence, willful misconduct, dishonesty or
breach of fiduciary duty 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 which results in direct or indirect loss, damage or
injury to the Company or any subsidiary; (v) the unauthorized disclosure of any
trade secret or confidential information of the Company or any subsidiary; or
(vi) the commission of an act which constitutes unfair competition with the
Company or any subsidiary or which induces any customer or supplier to break a
contract with the Company or any subsidiary;
(d) in the event Employee dies while employed with the Company or
any subsidiary, this Option may be exercised, to the extent vested on the date
of his death, by the Employee's executor, estate, personal representative or
beneficiary, as the case may be, and to whom this Option is transferred by
operation of law, at any time within one (1) year after the date of death, but
not later than the Expiration Date. Following the expiration of such one-year
period, this Option shall terminate;
(e) in the event Employee's employment with the Company or any
subsidiary is terminated by reason of his Disability (which shall mean
"permanent and total disability" as
Page 4
<PAGE>
defined in Section 22(e)(3) of the Code, or any successor statute), this
Option may be exercised, to the extent vested on the date of such Disability,
at any time within one (1) year after the date of such Disability, but not
later than Expiration Date. Following the expiration of such one-year
period, this Option shall terminate;
(f) the closing date of any Capital Transaction (as defined in
Section 6 hereof); or
(g) the date the Company gives written notice to Employee of
Employee's failure to pay the Exercise Price as provided in Section 3(e) hereof.
5. ADJUSTMENT OF AND CHANGES IN STOCK OF THE COMPANY. In the event of
a reorganization, recapitalization, change of shares, stock split, spin-off,
stock dividend, reclassification, subdivision or combination of shares, merger,
consolidation, rights offering, or any other change in the corporate structure
or shares of capital stock of the Company, the Committee shall make such
adjustment as it deems appropriate in the number and kind of shares of Stock
subject to the Option or in the Exercise Price; PROVIDED HOWEVER, that no such
adjustment shall give the Employee any additional benefits under the Option.
6. CAPITAL TRANSACTIONS. In the event that following the date of this
Agreement during the term hereof and prior to the termination of the Option in
accordance with Section 4 hereof, 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 (for purposes of this Section 6,
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, (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, or (d) a distribution of the Company's equity securities to the public
pursuant to a registration statement filed under the Securities Act of 1933, as
amended, or any successor statute (any such transaction being referred to herein
as a "Capital Transaction"), then the Company shall provide Employee with thirty
(30) days advance written notice of such transaction and Employee, without the
necessity of any further action by the Committee, shall be entitled to purchase,
prior to the effective date of such Capital Transaction and in addition to the
number of Option Shares which Employee shall be entitled to purchase as
determined under Section 2 hereof, the number of remaining Option Shares which
have not then become vested. The unexercised portion of the Option shall be
deemed cancelled and terminated as of the effective date
Page 5
<PAGE>
of such transaction.
7. RIGHTS OF SHAREHOLDER. Neither the Employee nor any heir, personal
representative or other person shall be, or shall have any of the rights and
privileges of, a shareholder of the Company with respect to any shares of Stock
purchasable or issuable upon the exercise of the Option, in whole or in part,
prior to the date of exercise of the Option.
8. TRANSFERABILITY OF OPTION. During Employee's lifetime, the Option
hereunder shall be exercisable only by the Employee or any guardian or legal
representative of the Employee, and the Option shall not be transferable except,
in case of the death of the Employee, by will or the laws of descent and
distribution, nor shall the Option be subject to attachment, execution or other
similar process. In the event of (a) any attempt by Employee to alienate,
assign, pledge, hypothecate or otherwise dispose of the Option, except as
provided for herein, or (b) the levy of any attachment, execution or similar
process upon the rights or interest hereby conferred, the Company may terminate
the Option by notice to the Employee and it shall thereupon become null and
void.
9. EMPLOYMENT NOT AFFECTED. Neither the granting of the Option nor its
exercise shall be construed as granting to the Employee any right with respect
to continuance of employment. Except as may otherwise be limited by a written
agreement between the Company or one of its subsidiaries, as the case may be,
and the Employee, the right of the Company (or one of its subsidiaries) to
terminate the Employee's employment at any time is specifically reserved.
10. AMENDMENT OF OPTION. The Option and this Agreement may be amended
by the Board or the Committee at any time without the consent of Employee (i) if
the Board or the Committee determines, in its sole discretion, that the
amendment is necessary or advisable in the light of any addition to or change in
the Code or in the regulations issued thereunder, or any federal or state
securities law or other law or regulation, which change occurs after the date
hereof and by its terms applies to the Option; or (ii) in order to make the
adjustments set forth in Section 5 hereof. Other than the matters set forth in
the preceding sentence, the consent of Employee shall be required in order to
amend any other provision of this Agreement. Notwithstanding the foregoing, the
Committee may, in its sole discretion, accelerate the exercisability of the
Option at any time.
11. NOTICES. Any notice to the Company provided for in this Agreement
shall be addressed to it in care of its Secretary at the Company's executive
offices. Any notice to the Employee
Page 6
<PAGE>
shall be addressed to Employee at the current address shown on the payroll
records of the Company. Any notice shall be deemed to be duly given if and
when properly addressed and posted by registered or certified mail, postage
prepaid.
Page 7
<PAGE>
12. INCORPORATION OF PLAN BY REFERENCE. The Option is granted pursuant
to the terms of the Plan, the terms of which are incorporated herein by
reference, and the Option shall in all respects be interpreted in accordance
with the Plan. The Committee shall interpret and construe the Plan and this
Agreement, and its interpretations and determinations shall be conclusive and
binding on the parties hereto and any other person claiming an interest
hereunder, with respect to any issue arising hereunder or thereunder. In the
event any of the terms and conditions set forth in this Agreement are in
conflict or are inconsistent with the terms of the Plan, the terms of the Plan
shall control.
13. GOVERNING LAW. The validity, construction, interpretation and
effect of this instrument shall exclusively be governed by and determined in
accordance with the law of the State of Texas.
14. CAPITALIZED TERMS. Unless otherwise defined herein, each
capitalized term appearing in this Agreement shall have the same meaning as the
corresponding term in the Plan.
15. BINDING EFFECT. This Agreement shall be binding upon the parties
hereto, together with their respective executors, administrators, successors,
personal representatives, heirs and assigns.
16. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to the
subject matter hereof (including but not limited to that certain agreement dated
October 24, 1995 between Antinori Software, Inc. and Employee, which is hereby
terminated effective as of the date hereof).
17. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one instrument.
18. GEORGIA SECURITIES ACT. THESE SECURITIES HAVE BEEN ISSUED OR SOLD
IN RELIANCE ON PARAGRAPH (13) OF CODE SECTION 10-5-9 OF THE GEORGIA SECURITIES
ACT OF 1973 AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS
EXEMPT UNDER SUCH ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT.
Employee acknowledges that the foregoing does not preclude the Company from
relying on other applicable exemptions from registration under the Georgia
Securities Act.
Page 8
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
THE CARREKER GROUP, INC.
By:
- ------------------------------ ----------------------------------
Its:
-------------------------------
EMPLOYEE
- ------------------------------ --------------------------------------
Lawrence D. Duckworth
Page 9
<PAGE>
EXHIBIT L-2
<PAGE>
THE CARREKER GROUP, INC.
1994 LONG TERM INCENTIVE PLAN
INCENTIVE STOCK OPTION AGREEMENT
(CLASS B NON-VOTING COMMON STOCK)
This Agreement ("Agreement") is dated this ________ day of January, 1997
by and among The Carreker Group, Inc., a Texas corporation (the "Company") and
Michael Israel ("Employee").
WHEREAS, the Board of Directors of the Company (the "Board") has adopted,
and the shareholders of the Company have approved, The Carreker Group, Inc.
Amended and Restated 1994 Long Term Incentive Plan (the "Plan");
WHEREAS, the Plan provides for the granting of incentive stock options by
the Compensation Committee of the Board or any successor committee thereto (the
"Committee") to officers and key employees of the Company or any subsidiary of
the Company and its subsidiaries to purchase shares of the Company's Class B
Non-Voting Common Stock, no par value (the "Stock"), in accordance with the
terms and provisions thereof; and
WHEREAS, the Committee considers Employee to be a person who is eligible
for a grant of incentive stock options under the Plan, and has determined that
it would be in the best interest of the Company to grant the incentive stock
option described herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. GRANT OF OPTION. Subject to the terms and conditions
hereinafter set forth, the Company, with the approval and at the direction of
the Committee, hereby grants to the Employee, as of the date hereof, an option
(the "Option") to purchase 15,720 shares of Stock (the "Option Shares") at a
price of $19.07 per share (the "Exercise Price"), representing the Fair Market
Value per Share (or, if Employee is the owner of stock possessing more than 10
percent of the total combined voting power of all classes of stock of the
Company, or its parent or subsidiary corporation, if any, 110% of the Fair
Market Value per Share) as of the Date of Grant as determined by the Committee
in accordance with the Plan. The Option is intended by the parties hereto to
be, and shall be treated as, an incentive stock option (as such term is defined
under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code")).
1
<PAGE>
2. VESTING. The Option shall vest and become exercisable during the
two-year period following the date hereof (herein the "Vesting Period") as
follows:
(a) The Option shall be immediately vested and exercisable with
respect to one-third (1/3) of the Option Shares on the date hereof;
(b) The Option shall vest and shall be exercisable with respect to
an additional one-third (1/3) of the Option Shares on the first anniversary date
of this Agreement, provided Employee is employed by the Company or one of its
subsidiaries as of such date and has been continuously employed during the term
of this Agreement, and further provided that the Option has not otherwise
terminated in accordance with the terms of Section 4 hereof; and
(c) The Option shall vest and shall be exercisable with respect to
the remaining one-third (1/3) of the Option Shares on the second anniversary
date of this Agreement, provided Employee is employed by the Company or one of
its subsidiaries as of such date and has been continuously employed by the
Company or one of its subsidiaries during the term of this Agreement, and
further provided that the Option has not otherwise terminated in accordance with
the terms of Section 4 hereof.
3. EXERCISE OF OPTION. The Option, to the extent vested, may be
exercised as follows:
(a) The Employee may exercise the Option with respect to all or
any part of the Option Shares then vested by giving the Secretary of the Company
written notice (the "Notice") of intent to exercise. The Notice shall specify
the number of Option Shares to be exercised (which shall be an amount no less
than 50 shares or the number of shares as to which the Option is then
exercisable, if less than 50) and the date of the proposed exercise thereof (the
"Exercise Date"), which date shall be at least ten (10) but no more than thirty
(30) calendar days after the giving of such notice unless an earlier time shall
have been mutually agreed upon.
(b) Full payment (in U.S. dollars) by the Employee of the Exercise
Price shall be made on or before the Exercise Date in cash or certified check.
(c) On or before the Exercise Date, Employee and his spouse, if
any, shall execute and deliver to the Company an
2
<PAGE>
agreement restricting the transferability of the Option Shares substantially
in the form of Exhibit A attached hereto (the "Right of First Refusal
Agreement");
(d) On the Exercise Date or as soon thereafter as practicable
thereafter, the Company shall cause to be delivered to the Employee a
certificate or certificates for the Option Shares then being purchased upon full
payment for such Option Shares. Such certificate or certificates shall bear a
restrictive legend in the form set forth in the Right of First Refusal
Agreement. The obligation of the Company to deliver the Option Shares shall,
however, be subject to the condition that if at any time the Committee shall
determine in its discretion that the listing, registration or qualification of
the Option or the Option Shares upon any securities exchange or under any state
or federal law, or the consent or approval of any governmental regulatory body,
is necessary or desirable as a condition of, or in connection with, the Option
or the issuance or purchase of Stock thereunder, the Option may not be exercised
in whole or in part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Committee.
(e) If Employee fails to pay the Exercise Price by the Exercise
Date for any of the Option Shares specified in the Notice or fails to deliver
the Right of First Refusal Agreement, the Employee's right to purchase such
Option Shares may be terminated by the Company upon written notice to Employee.
4. TERMINATION OF OPTION. The Option, and all rights hereunder with
respect thereto, to the extent such rights shall not have been exercised, shall
terminate and become null and void on the earliest to occur of the following
dates as follows:
(a) the tenth (10th) anniversary date of the date hereof, or, if
Employee is the owner of stock possessing more than 10 percent of the total
combined voting power of all classes of stock of the Company, or its parent or
subsidiary corporation, if any, the fifth (5th) anniversary date of the date
hereof (the "Expiration Date");
(b) in the event Employee's employment with the Company or any
subsidiary is terminated, other than by reason of death or Disability (as
defined below) or termination for Cause (as defined below), then (i) this Option
shall continue to vest and shall be exercisable as though Employee's employment
with the Company continued for a period of two (2) years following the date
3
<PAGE>
of termination of employment, and (ii) this Option shall terminate and shall
no longer be exercisable after the passage of two (2) years from the date of
termination of employment, but in no event later than the Expiration Date
(and further provided that in the event this Option is exercised following
the expiration of three (3) months from the date of termination of
employment, the portion of this Option so exercised will be treated as a
non-qualified option as required by the Code). In such a case, the
Employee's only rights hereunder shall be those which have been properly
exercised prior to the termination or earlier expiration of this Option;
(c) in the event Employee's employment with the Company or any
subsidiary is terminated for Cause (as defined below), then no further
installments of this Option shall vest or otherwise become exercisable, if such
termination occurs during the Vesting Period, and this Option shall terminate
and shall no longer be exercisable effective on the date of such termination.
For purposes hereof, the term "Cause" shall mean conduct involving one or more
of the following as determined by the Committee in its reasonable discretion:
(i) the substantial and continuing failure of the Employee, after notice
thereof, to render services to the Company or any subsidiary in accordance with
the terms or requirements of the Employee's employment with the Company or any
subsidiary; (ii) disloyalty, gross negligence, willful misconduct, dishonesty or
breach of fiduciary duty 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 which results in direct or indirect loss, damage or
injury to the Company or any subsidiary; (v) the unauthorized disclosure of any
trade secret or confidential information of the Company or any subsidiary; or
(vi) the commission of an act which constitutes unfair competition with the
Company or any subsidiary or which induces any customer or supplier to break a
contract with the Company or any subsidiary;
(d) in the event Employee dies while employed with the Company or
any subsidiary, this Option may be exercised, to the extent vested on the date
of his death, by the Employee's executor, estate, personal representative or
beneficiary, as the case may be, and to whom this Option is transferred by
operation of law, at any time within one (1) year after the date of death, but
not later than the Expiration Date. Following the expiration of such one-year
period, this Option shall terminate;
(e) in the event Employee's employment with the Company or any
subsidiary is terminated by reason of his
4
<PAGE>
Disability (which shall mean "permanent and total disability" as defined in
Section 22(e)(3) of the Code, or any successor statute), this Option may be
exercised, to the extent vested on the date of such Disability, at any time
within one (1) year after the date of such Disability, but not later than
Expiration Date. Following the expiration of such one-year period, this
Option shall terminate;
(f) the closing date of any Capital Transaction (as defined in
Section 6 hereof); or
(g) the date the Company gives written notice to Employee of
Employee's failure to pay the Exercise Price as provided in Section 3(e) hereof.
5. ADJUSTMENT OF AND CHANGES IN STOCK OF THE COMPANY. In the event of
a reorganization, recapitalization, change of shares, stock split, spin-off,
stock dividend, reclassification, subdivision or combination of shares, merger,
consolidation, rights offering, or any other change in the corporate structure
or shares of capital stock of the Company, the Committee shall make such
adjustment as it deems appropriate in the number and kind of shares of Stock
subject to the Option or in the Exercise Price; PROVIDED HOWEVER, that no such
adjustment shall give the Employee any additional benefits under the Option.
6. CAPITAL TRANSACTIONS. In the event that following the date of this
Agreement during the term hereof and prior to the termination of the Option in
accordance with Section 4 hereof, 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 (for purposes of this Section 6,
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, (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, or (d) a distribution of the Company's equity securities to the public
pursuant to a registration statement filed under the Securities Act of 1933, as
amended, or any successor statute (any such transaction being referred to herein
as a "Capital Transaction"), then the Company shall provide Employee with thirty
(30) days advance written notice of such transaction and Employee, without the
necessity of any further action by the Committee, shall be entitled to purchase,
prior to the effective date of such Capital Transaction and in addition to the
number of Option Shares
5
<PAGE>
which Employee shall be entitled to purchase as determined under Section 2
hereof, the number of remaining Option Shares which have not then become
vested. The unexercised portion of the Option shall be deemed cancelled and
terminated as of the effective date of such transaction.
7. RIGHTS OF SHAREHOLDER. Neither the Employee nor any heir, personal
representative or other person shall be, or shall have any of the rights and
privileges of, a shareholder of the Company with respect to any shares of Stock
purchasable or issuable upon the exercise of the Option, in whole or in part,
prior to the date of exercise of the Option.
8. TRANSFERABILITY OF OPTION. During Employee's lifetime, the Option
hereunder shall be exercisable only by the Employee or any guardian or legal
representative of the Employee, and the Option shall not be transferable except,
in case of the death of the Employee, by will or the laws of descent and
distribution, nor shall the Option be subject to attachment, execution or other
similar process. In the event of (a) any attempt by Employee to alienate,
assign, pledge, hypothecate or otherwise dispose of the Option, except as
provided for herein, or (b) the levy of any attachment, execution or similar
process upon the rights or interest hereby conferred, the Company may terminate
the Option by notice to the Employee and it shall thereupon become null and
void.
9. EMPLOYMENT NOT AFFECTED. Neither the granting of the Option nor its
exercise shall be construed as granting to the Employee any right with respect
to continuance of employment. Except as may otherwise be limited by a written
agreement between the Company or one of its subsidiaries, as the case may be,
and the Employee, the right of the Company (or one of its subsidiaries) to
terminate the Employee's employment at any time is specifically reserved.
10. AMENDMENT OF OPTION. The Option and this Agreement may be amended
by the Board or the Committee at any time without the consent of Employee (i) if
the Board or the Committee determines, in its sole discretion, that the
amendment is necessary or advisable in the light of any addition to or change in
the Code or in the regulations issued thereunder, or any federal or state
securities law or other law or regulation, which change occurs after the date
hereof and by its terms applies to the Option; or (ii) in order to make the
adjustments set forth in Section 5 hereof. Other than the matters set forth in
the preceding sentence, the consent of Employee shall be required in order to
6
<PAGE>
amend any other provision of this Agreement. Notwithstanding the foregoing, the
Committee may, in its sole discretion, accelerate the exercisability of the
Option at any time.
11. NOTICES. Any notice to the Company provided for in this Agreement
shall be addressed to it in care of its Secretary at the Company's executive
offices. Any notice to the Employee shall be addressed to Employee at the
current address shown on the payroll records of the Company. Any notice shall
be deemed to be duly given if and when properly addressed and posted by
registered or certified mail, postage prepaid.
12. INCORPORATION OF PLAN BY REFERENCE. The Option is granted pursuant
to the terms of the Plan, the terms of which are incorporated herein by
reference, and the Option shall in all respects be interpreted in accordance
with the Plan. The Committee shall interpret and construe the Plan and this
Agreement, and its interpretations and determinations shall be conclusive and
binding on the parties hereto and any other person claiming an interest
hereunder, with respect to any issue arising hereunder or thereunder. In the
event any of the terms and conditions set forth in this Agreement are in
conflict or are inconsistent with the terms of the Plan, the terms of the Plan
shall control.
13. GOVERNING LAW. The validity, construction, interpretation and
effect of this instrument shall exclusively be governed by and determined in
accordance with the law of the State of Texas.
14. CAPITALIZED TERMS. Unless otherwise defined herein, each
capitalized term appearing in this Agreement shall have the same meaning as the
corresponding term in the Plan.
15. BINDING EFFECT. This Agreement shall be binding upon the parties
hereto, together with their respective executors, administrators, successors,
personal representatives, heirs and assigns.
16. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to the
subject matter hereof (including but not limited to those certain letter
agreements dated December 20, 1994 and September 13, 1996 between Antinori
Software, Inc. and Employee, which are hereby terminated effective as of the
date hereof).
7
<PAGE>
17. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one instrument.
18. GEORGIA SECURITIES ACT. THESE SECURITIES HAVE BEEN ISSUED OR SOLD
IN RELIANCE ON PARAGRAPH (13) OF CODE SECTION 10-5-9 OF THE GEORGIA SECURITIES
ACT OF 1973 AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS
EXEMPT UNDER SUCH ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT.
Employee acknowledges that the foregoing does not preclude the Company from
relying on other applicable exemptions from registration under the Georgia
Securities Act.
8
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
THE CARREKER GROUP, INC.
By:
--------------------------------
Its:
-----------------------------
EMPLOYEE
------------------------------------
Michael Israel
9
<PAGE>
Exhibit L-3
THE CARREKER GROUP, INC.
1994 LONG TERM INCENTIVE PLAN
INCENTIVE STOCK OPTION AGREEMENT
(CLASS B NON-VOTING COMMON STOCK)
This Agreement ("Agreement") is dated this __________ day of January,
1997 by and among The Carreker Group, Inc., a Texas corporation (the
"Company") and Ruth McCullough ("Employee").
WHEREAS, the Board of Directors of the Company (the "Board") has
adopted, and the shareholders of the Company have approved, The Carreker
Group, Inc. Amended and Restated 1994 Long Term Incentive Plan (the "Plan");
WHEREAS, the Plan provides for the granting of incentive stock options
by the Compensation Committee of the Board or any successor committee thereto
(the "Committee") to officers and key employees of the Company or any
subsidiary of the Company and its subsidiaries to purchase shares of the
Company's Class B Non-Voting Common Stock, no par value (the "Stock"), in
accordance with the terms and provisions thereof; and
WHEREAS, the Committee considers Employee to be a person who is
eligible for a grant of incentive stock options under the Plan, and has
determined that it would be in the best interest of the Company to grant the
incentive stock option described herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree
as follows:
1. GRANT OF OPTION. Subject to the terms and conditions
hereinafter set forth, the Company, with the approval and at the direction of
the Committee, hereby grants to the Employee, as of the date hereof, an
option (the "Option") to purchase 1,300 shares of Stock (the "Option Shares")
at a price of $19.07 per share (the "Exercise Price"), representing the Fair
Market Value per Share (or, if Employee is the owner of stock possessing more
than 10 percent of the total combined voting power of all classes of stock of
the Company, or its parent or subsidiary corporation, if any, 110% of the
Fair Market Value per Share) as of the Date of Grant as determined by the
Committee in accordance with the Plan. The Option is intended by the parties
hereto to be, and shall be treated as, an incentive stock option (as such
term is defined under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code")).
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2. VESTING. The Option shall be immediately vested and exercisable
with respect to all of the Option Shares on the date hereof.
3. EXERCISE OF OPTION. The Option, to the extent vested, may be
exercised as follows:
(a) The Employee may exercise the Option with respect to all or
any part of the Option Shares then vested by giving the Secretary of the
Company written notice (the "Notice") of intent to exercise. The Notice
shall specify the number of Option Shares to be exercised (which shall be an
amount no less than 50 shares or the number of shares as to which the Option
is then exercisable, if less than 50) and the date of the proposed exercise
thereof (the "Exercise Date"), which date shall be at least ten (10) but no
more than thirty (30) calendar days after the giving of such notice unless an
earlier time shall have been mutually agreed upon.
(b) Full payment (in U.S. dollars) by the Employee of the
Exercise Price shall be made on or before the Exercise Date in cash or
certified check.
(c) On or before the Exercise Date, Employee and his spouse, if
any, shall execute and deliver to the Company an agreement restricting the
transferability of the Option Shares substantially in the form of Exhibit A
attached hereto (the "Right of First Refusal Agreement");
(d) On the Exercise Date or as soon thereafter as practicable
thereafter, the Company shall cause to be delivered to the Employee a
certificate or certificates for the Option Shares then being purchased upon
full payment for such Option Shares. Such certificate or certificates shall
bear a restrictive legend in the form set forth in the Right of First Refusal
Agreement. The obligation of the Company to deliver the Option Shares shall,
however, be subject to the condition that if at any time the Committee shall
determine in its discretion that the listing, registration or qualification
of the Option or the Option Shares upon any securities exchange or under any
state or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in
connection with, the Option or the issuance or purchase of Stock thereunder,
the Option may not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not
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acceptable to the Committee.
(e) If Employee fails to pay the Exercise Price by the Exercise
Date for any of the Option Shares specified in the Notice or fails to deliver
the Right of First Refusal Agreement, the Employee's right to purchase such
Option Shares may be terminated by the Company upon written notice to
Employee.
4. TERMINATION OF OPTION. The Option, and all rights hereunder with
respect thereto, to the extent such rights shall not have been exercised,
shall terminate and become null and void on the earliest to occur of the
following dates as follows:
(a) the tenth (10th) anniversary date of the date hereof, or, if
Employee is the owner of stock possessing more than 10 percent of the total
combined voting power of all classes of stock of the Company, or its parent
or subsidiary corporation, if any, the fifth (5th) anniversary date of the
date hereof (the "Expiration Date");
(b) in the event Employee's employment with the Company or any
subsidiary is terminated, other than by reason of death or Disability (as
defined below) or termination for Cause (as defined below), then (i) this
Option shall continue to vest and shall be exercisable as though Employee's
employment with the Company continued for a period of two (2) years following
the date of termination of employment, and (ii) this Option shall terminate
and shall no longer be exercisable after the passage of two (2) years from
the date of termination of employment, but in no event later than the
Expiration Date (and further provided that in the event this Option is
exercised following the expiration of three (3) months from the date of
termination of employment, the portion of this Option so exercised will be
treated as a non-qualified option as required by the Code). In such a case,
the Employee's only rights hereunder shall be those which have been properly
exercised prior to the termination or earlier expiration of this Option;
(c) in the event Employee's employment with the Company or any
subsidiary is terminated for Cause (as defined below), then no further
installments of this Option shall vest or otherwise become exercisable, if
such termination occurs during the Vesting Period, and this Option shall
terminate and shall no longer be exercisable effective on the date of such
termination. For purposes hereof, the term "Cause" shall mean conduct
involving one or more of the following as determined by the Committee in its
reasonable discretion: (i) the substantial and continuing failure
3
<PAGE>
of the Employee, after notice thereof, to render services to the Company or
any subsidiary in accordance with the terms or requirements of the Employee's
employment with the Company or any subsidiary; (ii) disloyalty, gross
negligence, willful misconduct, dishonesty or breach of fiduciary duty 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
which results in direct or indirect loss, damage or injury to the Company or
any subsidiary; (v) the unauthorized disclosure of any trade secret or
confidential information of the Company or any subsidiary; or (vi) the
commission of an act which constitutes unfair competition with the Company or
any subsidiary or which induces any customer or supplier to break a contract
with the Company or any subsidiary;
(d) in the event Employee dies while employed with the Company
or any subsidiary, this Option may be exercised, to the extent vested on the
date of his death, by the Employee's executor, estate, personal
representative or beneficiary, as the case may be, and to whom this Option is
transferred by operation of law, at any time within one (1) year after the
date of death, but not later than the Expiration Date. Following the
expiration of such one-year period, this Option shall terminate;
(e) in the event Employee's employment with the Company or any
subsidiary is terminated by reason of his Disability (which shall mean
"permanent and total disability" as defined in Section 22(e)(3) of the Code,
or any successor statute), this Option may be exercised, to the extent vested
on the date of such Disability, at any time within one (1) year after the
date of such Disability, but not later than Expiration Date. Following the
expiration of such one-year period, this Option shall terminate;
(f) the closing date of any Capital Transaction (as defined in
Section 6 hereof); or
(g) the date the Company gives written notice to Employee of
Employee's failure to pay the Exercise Price as provided in Section 3(e)
hereof.
5. ADJUSTMENT OF AND CHANGES IN STOCK OF THE COMPANY. In the event
of a reorganization, recapitalization, change of shares, stock split,
spin-off, stock dividend, reclassification, subdivision or combination of
shares, merger, consolidation, rights offering, or any other change in the
corporate structure or shares of capital stock of the Company, the Committee
shall make
4
<PAGE>
such adjustment as it deems appropriate in the number and kind of shares of
Stock subject to the Option or in the Exercise Price; PROVIDED HOWEVER, that
no such adjustment shall give the Employee any additional benefits under the
Option.
6. CAPITAL TRANSACTIONS. In the event that following the date of
this Agreement during the term hereof and prior to the termination of the
Option in accordance with Section 4 hereof, 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 (for purposes of this Section
6, 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, (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, or (d) a distribution of the Company's equity securities
to the public pursuant to a registration statement filed under the Securities
Act of 1933, as amended, or any successor statute (any such transaction being
referred to herein as a "Capital Transaction"), then the Company shall
provide Employee with thirty (30) days advance written notice of such
transaction and Employee, without the necessity of any further action by the
Committee, shall be entitled to purchase, prior to the effective date of such
Capital Transaction and in addition to the number of Option Shares which
Employee shall be entitled to purchase as determined under Section 2 hereof,
the number of remaining Option Shares which have not then become vested. The
unexercised portion of the Option shall be deemed cancelled and terminated as
of the effective date of such transaction.
7. RIGHTS OF SHAREHOLDER. Neither the Employee nor any heir,
personal representative or other person shall be, or shall have any of the
rights and privileges of, a shareholder of the Company with respect to any
shares of Stock purchasable or issuable upon the exercise of the Option, in
whole or in part, prior to the date of exercise of the Option.
8. TRANSFERABILITY OF OPTION. During Employee's lifetime, the Option
hereunder shall be exercisable only by the Employee or any guardian or legal
representative of the Employee, and the Option shall not be transferable
except, in case of the death of the Employee, by will or the laws of descent
and distribution, nor shall the Option be subject to attachment, execution or
other similar process. In the event of (a) any attempt by Employee to
alienate, assign, pledge, hypothecate or otherwise dispose of the
5
<PAGE>
Option, except as provided for herein, or (b) the levy of any attachment,
execution or similar process upon the rights or interest hereby conferred,
the Company may terminate the Option by notice to the Employee and it shall
thereupon become null and void.
9. EMPLOYMENT NOT AFFECTED. Neither the granting of the Option nor
its exercise shall be construed as granting to the Employee any right with
respect to continuance of employment. Except as may otherwise be limited by
a written agreement between the Company or one of its subsidiaries, as the
case may be, and the Employee, the right of the Company (or one of its
subsidiaries) to terminate the Employee's employment at any time is
specifically reserved.
10. AMENDMENT OF OPTION. The Option and this Agreement may be amended
by the Board or the Committee at any time without the consent of Employee (i)
if the Board or the Committee determines, in its sole discretion, that the
amendment is necessary or advisable in the light of any addition to or change
in the Code or in the regulations issued thereunder, or any federal or state
securities law or other law or regulation, which change occurs after the date
hereof and by its terms applies to the Option; or (ii) in order to make the
adjustments set forth in Section 5 hereof. Other than the matters set forth
in the preceding sentence, the consent of Employee shall be required in order
to amend any other provision of this Agreement. Notwithstanding the
foregoing, the Committee may, in its sole discretion, accelerate the
exercisability of the Option at any time.
11. NOTICES. Any notice to the Company provided for in this Agreement
shall be addressed to it in care of its Secretary at the Company's executive
offices. Any notice to the Employee shall be addressed to Employee at the
current address shown on the payroll records of the Company. Any notice
shall be deemed to be duly given if and when properly addressed and posted by
registered or certified mail, postage prepaid.
12. INCORPORATION OF PLAN BY REFERENCE. The Option is granted pursuant
to the terms of the Plan, the terms of which are incorporated herein by
reference, and the Option shall in all respects be interpreted in accordance
with the Plan. The Committee shall interpret and construe the Plan and this
Agreement, and its interpretations and determinations shall be conclusive and
binding on the parties hereto and any other person claiming an interest
hereunder, with respect to any issue arising hereunder or thereunder. In the
event any of the terms and
6
<PAGE>
conditions set forth in this Agreement are in conflict or are inconsistent
with the terms of the Plan, the terms of the Plan shall control.
13. GOVERNING LAW. The validity, construction, interpretation and
effect of this instrument shall exclusively be governed by and determined in
accordance with the law of the State of Texas.
14. CAPITALIZED TERMS. Unless otherwise defined herein, each
capitalized term appearing in this Agreement shall have the same meaning as
the corresponding term in the Plan.
15. BINDING EFFECT. This Agreement shall be binding upon the parties
hereto, together with their respective executors, administrators, successors,
personal representatives, heirs and assigns.
16. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
and understanding between the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and understandings relating
to the subject matter hereof (including but not limited to those certain
letter agreements dated December 20, 1994 and September 13, 1996 between
Antinori Software, Inc. and Employee, which are hereby terminated effective
as of the date hereof).
17. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
THE CARREKER GROUP, INC.
By:
--------------------------------
Its:
-----------------------------
EMPLOYEE
-----------------------------------
Ruth McCullough
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<PAGE>
EXHIBIT L-4
THE CARREKER GROUP, INC.
1994 LONG TERM INCENTIVE PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
(CLASS A VOTING COMMON STOCK)
This Agreement ("Agreement") is dated this _____________ day of
January, 1997 by and among The Carreker Group, Inc., a Texas corporation (the
"Company") and Frank Basset ("Employee").
WHEREAS, the Board of Directors of the Company (the "Board") has
adopted, and the shareholders of the Company have approved, The Carreker
Group, Inc. Amended and Restated 1994 Long Term Incentive Plan (the "Plan");
WHEREAS, the Plan provides for the granting of non-qualified stock
options by the Compensation Committee of the Board or any successor committee
thereto (the "Committee") to officers and key employees of the Company or any
subsidiary of the Company and its subsidiaries to purchase shares of the
Company's Class A Voting Common Stock, no par value (the "Stock"), in
accordance with the terms and provisions thereof; and
WHEREAS, the Committee considers Employee to be a person who is
eligible for a grant of non-qualified stock options under the Plan, and has
determined that it would be in the best interest of the Company to grant the
non-qualified stock option described herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree
as follows:
1. GRANT OF OPTION. Subject to the terms and conditions
hereinafter set forth, the Company, with the approval and at the direction of
the Committee, hereby grants to the Employee, as of the date hereof, an
option (the "Option") to purchase 5,146 shares of Stock (the "Option Shares")
at a price of $17.53 per share (the "Exercise Price"). The Option is not
intended by the parties hereto to be, and shall not be treated as, an
incentive stock option (as such term is defined under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code")).
2. VESTING. The Option shall vest and become exercisable during the
period commencing on the date hereof and ending on April 1, 1999 (herein the
"Vesting Period") as follows:
(a) The Option shall vest and shall become exercisable with
respect to one-third (1/3) of the Option Shares on April 1, 1997, provided
Employee is employed by the Company or one of its subsidiaries as of such
date and has been continuously employed during the term of this Agreement,
and further provided that the Option has not otherwise terminated in
accordance with the terms of Section 4 hereof;
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<PAGE>
(b) The Option shall vest and shall be exercisable with respect
to an additional one-third (1/3) of the Option Shares on April 1, 1998,
provided Employee is employed by the Company or one of its subsidiaries as of
such date and has been continuously employed during the term of this
Agreement, and further provided that the Option has not otherwise terminated
in accordance with the terms of Section 4 hereof; and
(c) The Option shall vest and shall be exercisable with respect
to the remaining one-third (1/3) of the Option Shares on April 1, 1999,
provided Employee is employed by the Company or one of its subsidiaries as of
such date and has been continuously employed by the Company or one of its
subsidiaries during the term of this Agreement, and further provided that the
Option has not otherwise terminated in accordance with the terms of Section 4
hereof.
3. EXERCISE OF OPTION. The Option, to the extent vested, may be
exercised as follows:
(a) The Employee may exercise the Option with respect to all or
any part of the Option Shares then vested by giving the Secretary of the
Company written notice (the "Notice") of intent to exercise. The Notice
shall specify the number of Option Shares to be exercised (which shall be an
amount no less than 50 shares or the number of shares as to which the Option
is then exercisable, if less than 50) and the date of the proposed exercise
thereof (the "Exercise Date"), which date shall be at least ten (10) but no
more than thirty (30) calendar days after the giving of such notice unless an
earlier time shall have been mutually agreed upon.
(b) Full payment (in U.S. dollars) by the Employee of the
Exercise Price shall be made on or before the Exercise Date in cash or
certified check.
(c) On or before the Exercise Date, Employee and his spouse, if
any, shall execute and deliver to the Company an agreement restricting the
transferability of the Option Shares substantially in the form of Exhibit A
attached hereto (the "Right of First Refusal Agreement");
(d) On the Exercise Date or as soon thereafter as practicable
thereafter, the Company shall cause to be delivered to the Employee a
certificate or certificates for the Option Shares then being purchased upon
full payment for such Option Shares.
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<PAGE>
Such certificate or certificates shall bear a restrictive legend in the form
set forth in the Right of First Refusal Agreement. The obligation of the
Company to deliver the Option Shares shall, however, be subject to the
condition that if at any time the Committee shall determine in its discretion
that the listing, registration or qualification of the Option or the Option
Shares upon any securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the Option or the
issuance or purchase of Stock thereunder, the Option may not be exercised in
whole or in part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Committee.
(e) If Employee fails to pay the Exercise Price by the Exercise
Date for any of the Option Shares specified in the Notice or fails to deliver
the Right of First Refusal Agreement, the Employee's right to purchase such
Option Shares may be terminated by the Company upon written notice to
Employee.
4. TERMINATION OF OPTION. The Option, and all rights hereunder with
respect thereto, to the extent such rights shall not have been exercised,
shall terminate and become null and void on the earliest to occur of the
following dates as follows:
(a) the tenth (10th) anniversary date of the date hereof (the
"Expiration Date");
(b) the date Employee ceases for any reason to be employed by
the Company or one of its subsidiaries, other than by reason of death or
Disability (as defined below). For purposes hereof, a transfer of Employee's
employment between the Company and any subsidiary of the Company, or between
any subsidiaries of the Company, shall not be deemed to be a termination of
the Employee's employment.
(c) in the event Employee dies while employed with the Company
or any subsidiary, this Option may be exercised, to the extent vested on the
date of his death, by the Employee's executor, estate, personal
representative or beneficiary, as the case may be, and to whom this Option is
transferred by operation of law, at any time within one (1) year after the
date of death, but not later than the Expiration Date. Following the
expiration of such one-year period, this Option shall terminate;
(d) in the event Employee's employment with the
3
<PAGE>
Company or any subsidiary is terminated by reason of his Disability (which
shall mean "permanent and total disability" as defined in Section 22(e)(3) of
the Code, or any successor statute), this Option may be exercised, to the
extent vested on the date of such Disability, at any time within one (1) year
after the date of such Disability, but not later than Expiration Date.
Following the expiration of such one-year period, this Option shall terminate;
(e) the closing date of any Capital Transaction (as defined in
Section 6 hereof); or
(f) the date the Company gives written notice to Employee of
Employee's failure to pay the Exercise Price as provided in Section 3(e)
hereof.
5. ADJUSTMENT OF AND CHANGES IN STOCK OF THE COMPANY. In the event
of a reorganization, recapitalization, change of shares, stock split,
spin-off, stock dividend, reclassification, subdivision or combination of
shares, merger, consolidation, rights offering, or any other change in the
corporate structure or shares of capital stock of the Company, the Committee
shall make such adjustment as it deems appropriate in the number and kind of
shares of Stock subject to the Option or in the Exercise Price; PROVIDED
HOWEVER, that no such adjustment shall give the Employee any additional
benefits under the Option.
6. CAPITAL TRANSACTIONS. In the event that following the date of
this Agreement during the term hereof and prior to the termination of the
Option in accordance with Section 4 hereof, 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 (for purposes of this Section
6, 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, (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, or (d) a distribution of the Company's equity securities
to the public pursuant to a registration statement filed under the Securities
Act of 1933, as amended, or any successor statute (any such transaction being
referred to herein as a "Capital Transaction"), then the Company shall
provide Employee with thirty (30) days advance written notice of such
transaction and Employee, without the necessity of any further action by the
Committee, shall be entitled to purchase, prior to the effective date of such
4
<PAGE>
Capital Transaction and in addition to the number of Option Shares which
Employee shall be entitled to purchase as determined under Section 2 hereof,
the number of remaining Option Shares which have not then become vested. The
unexercised portion of the Option shall be deemed cancelled and terminated as
of the effective date of such transaction.
7. RIGHTS OF SHAREHOLDER. Neither the Employee nor any heir,
personal representative or other person shall be, or shall have any of the
rights and privileges of, a shareholder of the Company with respect to any
shares of Stock purchasable or issuable upon the exercise of the Option, in
whole or in part, prior to the date of exercise of the Option.
8. TRANSFERABILITY OF OPTION. During Employee's lifetime, the Option
hereunder shall be exercisable only by the Employee or any guardian or legal
representative of the Employee, and the Option shall not be transferable
except, in case of the death of the Employee, by will or the laws of descent
and distribution, nor shall the Option be subject to attachment, execution or
other similar process. In the event of (a) any attempt by Employee to
alienate, assign, pledge, hypothecate or otherwise dispose of the Option,
except as provided for herein, or (b) the levy of any attachment, execution
or similar process upon the rights or interest hereby conferred, the Company
may terminate the Option by notice to the Employee and it shall thereupon
become null and void.
9. EMPLOYMENT NOT AFFECTED. Neither the granting of the Option nor
its exercise shall be construed as granting to the Employee any right with
respect to continuance of employment. Except as may otherwise be limited by
a written agreement between the Company or one of its subsidiaries, as the
case may be, and the Employee, the right of the Company (or one of its
subsidiaries) to terminate the Employee's employment at any time is
specifically reserved.
10. AMENDMENT OF OPTION. The Option and this Agreement may be amended
by the Board or the Committee at any time without the consent of Employee (i)
if the Board or the Committee determines, in its sole discretion, that the
amendment is necessary or advisable in the light of any addition to or change
in the Code or in the regulations issued thereunder, or any federal or state
securities law or other law or regulation, which change occurs after the date
hereof and by its terms applies to the Option; or (ii) in order to make the
adjustments set forth in Section 5 hereof. Other than the matters set forth
in the preceding
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<PAGE>
sentence, the consent of Employee shall be required in order to amend any
other provision of this Agreement. Notwithstanding the foregoing, the
Committee may, in its sole discretion, accelerate the exercisability of the
Option at any time.
11. NOTICES. Any notice to the Company provided for in this Agreement
shall be addressed to it in care of its Secretary at the Company's executive
offices. Any notice to the Employee shall be addressed to Employee at the
current address shown on the payroll records of the Company. Any notice
shall be deemed to be duly given if and when properly addressed and posted by
registered or certified mail, postage prepaid.
12. INCORPORATION OF PLAN BY REFERENCE. The Option is granted pursuant
to the terms of the Plan, the terms of which are incorporated herein by
reference, and the Option shall in all respects be interpreted in accordance
with the Plan. The Committee shall interpret and construe the Plan and this
Agreement, and its interpretations and determinations shall be conclusive and
binding on the parties hereto and any other person claiming an interest
hereunder, with respect to any issue arising hereunder or thereunder. In the
event any of the terms and conditions set forth in this Agreement are in
conflict or are inconsistent with the terms of the Plan, the terms of the
Plan shall control.
13. GOVERNING LAW. The validity, construction, interpretation and
effect of this instrument shall exclusively be governed by and determined in
accordance with the law of the State of Texas.
14. CAPITALIZED TERMS. Unless otherwise defined herein, each
capitalized term appearing in this Agreement shall have the same meaning as
the corresponding term in the Plan.
15. BINDING EFFECT. This Agreement shall be binding upon the parties
hereto, together with their respective executors, administrators, successors,
personal representatives, heirs and assigns.
16. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
and understanding between the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and understandings relating
to the subject matter hereof (including but not limited to that certain
agreement dated March 8, 1996 between Antinori Software, Inc. and Employee,
which is hereby terminated effective as of the date hereof).
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<PAGE>
17. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
THE CARREKER GROUP, INC.
By:
----------------------------------
Its:
-------------------------------
EMPLOYEE
-------------------------------------
Frank Basset
7
<PAGE>
EXHIBIT L-5
THE CARREKER GROUP, INC.
1994 LONG TERM INCENTIVE PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
(CLASS B NON-VOTING COMMON STOCK)
This Agreement ("Agreement") is dated this __________ day of January,
1997 by and among The Carreker Group, Inc., a Texas corporation (the
"Company") and Lawrence D. Duckworth ("Employee").
WHEREAS, the Board of Directors of the Company (the "Board") has
adopted, and the shareholders of the Company have approved, The Carreker
Group, Inc. Amended and Restated 1994 Long Term Incentive Plan (the "Plan");
WHEREAS, the Plan provides for the granting of non-qualified stock
options by the Compensation Committee of the Board or any successor committee
thereto (the "Committee") to officers and key employees of the Company or any
subsidiary of the Company and its subsidiaries to purchase shares of the
Company's Class B Non-Voting Common Stock, no par value (the "Stock"), in
accordance with the terms and provisions thereof; and
WHEREAS, the Committee considers Employee to be a person who is
eligible for a grant of non-qualified stock options under the Plan, and has
determined that it would be in the best interest of the Company to grant the
non-qualified stock option described herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree
as follows:
1. GRANT OF OPTION. Subject to the terms and conditions
hereinafter set forth, the Company, with the approval and at the direction of
the Committee, hereby grants to the Employee, as of the date hereof, an
option (the "Option") to purchase 17,580 shares of Stock (the "Option
Shares") at a price of $19.07 per share (the "Exercise Price"). The Option
is not intended by the parties hereto to be, and shall not be treated as, an
incentive stock option (as such term is defined under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code")).
2. VESTING. The Option shall vest and become exercisable during the
two-year period following the date hereof (herein the "Vesting Period") as
follows:
(a) The Option shall be immediately vested and exercisable with
respect to one-third (1/3) of the Option Shares on the date hereof;
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<PAGE>
(b) The Option shall vest and shall be exercisable with respect
to an additional one-third (1/3) of the Option Shares on the first
anniversary date of this Agreement, provided Employee is employed by the
Company or one of its subsidiaries as of such date and has been continuously
employed during the term of this Agreement, and further provided that the
Option has not otherwise terminated in accordance with the terms of Section 4
hereof; and
(c) The Option shall vest and shall be exercisable with respect
to the remaining one-third (1/3) of the Option Shares on the second
anniversary date of this Agreement, provided Employee is employed by the
Company or one of its subsidiaries as of such date and has been continuously
employed by the Company or one of its subsidiaries during the term of this
Agreement, and further provided that the Option has not otherwise terminated
in accordance with the terms of Section 4 hereof.
3. EXERCISE OF OPTION. The Option, to the extent vested, may be
exercised as follows:
(a) The Employee may exercise the Option with respect to all or
any part of the Option Shares then vested by giving the Secretary of the
Company written notice (the "Notice") of intent to exercise. The Notice
shall specify the number of Option Shares to be exercised (which shall be an
amount no less than 50 shares or the number of shares as to which the Option
is then exercisable, if less than 50) and the date of the proposed exercise
thereof (the "Exercise Date"), which date shall be at least ten (10) but no
more than thirty (30) calendar days after the giving of such notice unless an
earlier time shall have been mutually agreed upon.
(b) Full payment (in U.S. dollars) by the Employee of the
Exercise Price shall be made on or before the Exercise Date in cash or
certified check.
(c) On or before the Exercise Date, Employee and his spouse, if
any, shall execute and deliver to the Company an agreement restricting the
transferability of the Option Shares substantially in the form of Exhibit A
attached hereto (the "Right of First Refusal Agreement");
(d) On the Exercise Date or as soon thereafter as practicable
thereafter, the Company shall cause to be delivered to the Employee a
certificate or certificates for the Option Shares then being purchased upon
full payment for such Option Shares. Such certificate or certificates shall
bear a restrictive legend
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<PAGE>
in the form set forth in the Right of First Refusal Agreement. The
obligation of the Company to deliver the Option Shares shall, however, be
subject to the condition that if at any time the Committee shall determine in
its discretion that the listing, registration or qualification of the Option
or the Option Shares upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental regulatory body,
is necessary or desirable as a condition of, or in connection with, the
Option or the issuance or purchase of Stock thereunder, the Option may not be
exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free
of any conditions not acceptable to the Committee.
(e) If Employee fails to pay the Exercise Price by the Exercise
Date for any of the Option Shares specified in the Notice or fails to deliver
the Right of First Refusal Agreement, the Employee's right to purchase such
Option Shares may be terminated by the Company upon written notice to
Employee.
4. TERMINATION OF OPTION. The Option, and all rights hereunder with
respect thereto, to the extent such rights shall not have been exercised,
shall terminate and become null and void on the earliest to occur of the
following dates as follows:
(a) the tenth (10th) anniversary date of the date hereof (the
"Expiration Date");
(b) in the event Employee's employment with the Company or any
subsidiary is terminated, other than by reason of death or Disability (as
defined below) or termination for Cause (as defined below), then (i) this
Option shall continue to vest and shall be exercisable as though Employee's
employment with the Company continued for a period of two (2) years following
the date of termination of employment, and (ii) this Option shall terminate
and shall no longer be exercisable after the passage of two (2) years from
the date of termination of employment, but in no event later than the
Expiration Date. In such a case, the Employee's only rights hereunder shall
be those which have been properly exercised prior to the termination or
earlier expiration of this Option;
(c) in the event Employee's employment with the Company or any
subsidiary is terminated for Cause (as defined below), then no further
installments of this Option shall vest or otherwise become exercisable, if
such termination occurs during the Vesting Period, and this Option shall
terminate and shall no
3
<PAGE>
longer be exercisable effective on the date of such termination. For purposes
hereof, the term "Cause" shall mean conduct involving one or more of the
following as determined by the Committee in its reasonable discretion: (i)
the substantial and continuing failure of the Employee, after notice thereof,
to render services to the Company or any subsidiary in accordance with the
terms or requirements of the Employee's employment with the Company or any
subsidiary; (ii) disloyalty, gross negligence, willful misconduct, dishonesty
or breach of fiduciary duty 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 which results in direct or indirect
loss, damage or injury to the Company or any subsidiary; (v) the unauthorized
disclosure of any trade secret or confidential information of the Company or
any subsidiary; or (vi) the commission of an act which constitutes unfair
competition with the Company or any subsidiary or which induces any customer
or supplier to break a contract with the Company or any subsidiary;
(d) in the event Employee dies while employed with the Company
or any subsidiary, this Option may be exercised by the Employee's executor,
estate, personal representative or beneficiary, as the case may be, and to
whom this Option is transferred by operation of law, at any time within two
(2) years after the date of death, but not later than the Expiration Date.
This Option shall continue to vest following the date of death of Employee as
though Employee were employed by the Company for a period of two (2) years
following the date of death. Following the expiration of such two-year
period, this Option shall terminate;
(e) in the event Employee's employment with the Company or any
subsidiary is terminated by reason of his Disability (which shall mean
"permanent and total disability" as defined in Section 22(e)(3) of the Code,
or any successor statute), this Option may be exercised at any time within
two (2) years after the date of such Disability, but not later than
Expiration Date. This Option shall continue to vest following the date of
Disability of Employee as though Employee were employed by the Company for a
period of two (2) years following the date of Disability. Following the
expiration of such two-year period, this Option shall terminate;
(f) the closing date of any Capital Transaction (as defined in
Section 6 hereof); or
(g) the date the Company gives written notice to
4
<PAGE>
Employee of Employee's failure to pay the Exercise Price as provided in
Section 3(e) hereof.
5. ADJUSTMENT OF AND CHANGES IN STOCK OF THE COMPANY. In the event
of a reorganization, recapitalization, change of shares, stock split,
spin-off, stock dividend, reclassification, subdivision or combination of
shares, merger, consolidation, rights offering, or any other change in the
corporate structure or shares of capital stock of the Company, the Committee
shall make such adjustment as it deems appropriate in the number and kind of
shares of Stock subject to the Option or in the Exercise Price; PROVIDED
HOWEVER, that no such adjustment shall give the Employee any additional
benefits under the Option.
6. CAPITAL TRANSACTIONS. In the event that following the date of
this Agreement during the term hereof and prior to the termination of the
Option in accordance with Section 4 hereof, 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 (for purposes of this Section
6, 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, (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, or (d) a distribution of the Company's equity securities
to the public pursuant to a registration statement filed under the Securities
Act of 1933, as amended, or any successor statute (any such transaction being
referred to herein as a "Capital Transaction"), then the Company shall
provide Employee with thirty (30) days advance written notice of such
transaction and Employee, without the necessity of any further action by the
Committee, shall be entitled to purchase, prior to the effective date of such
Capital Transaction and in addition to the number of Option Shares which
Employee shall be entitled to purchase as determined under Section 2 hereof,
the number of remaining Option Shares which have not then become vested. The
unexercised portion of the Option shall be deemed cancelled and terminated as
of the effective date of such transaction.
7. RIGHTS OF SHAREHOLDER. Neither the Employee nor any heir,
personal representative or other person shall be, or shall have any of the
rights and privileges of, a shareholder of the Company with respect to any
shares of Stock purchasable or issuable upon the exercise of the Option, in
whole or in part, prior to the date of exercise of the Option.
5
<PAGE>
8. TRANSFERABILITY OF OPTION. During Employee's lifetime, the Option
hereunder shall be exercisable only by the Employee or any guardian or legal
representative of the Employee, and the Option shall not be transferable
except, in case of the death of the Employee, by will or the laws of descent
and distribution, nor shall the Option be subject to attachment, execution or
other similar process. In the event of (a) any attempt by Employee to
alienate, assign, pledge, hypothecate or otherwise dispose of the Option,
except as provided for herein, or (b) the levy of any attachment, execution
or similar process upon the rights or interest hereby conferred, the Company
may terminate the Option by notice to the Employee and it shall thereupon
become null and void.
9. EMPLOYMENT NOT AFFECTED. Neither the granting of the Option nor
its exercise shall be construed as granting to the Employee any right with
respect to continuance of employment. Except as may otherwise be limited by
a written agreement between the Company or one of its subsidiaries, as the
case may be, and the Employee, the right of the Company (or one of its
subsidiaries) to terminate the Employee's employment at any time is
specifically reserved.
10. AMENDMENT OF OPTION. The Option and this Agreement may be amended
by the Board or the Committee at any time without the consent of Employee (i)
if the Board or the Committee determines, in its sole discretion, that the
amendment is necessary or advisable in the light of any addition to or change
in the Code or in the regulations issued thereunder, or any federal or state
securities law or other law or regulation, which change occurs after the date
hereof and by its terms applies to the Option; or (ii) in order to make the
adjustments set forth in Section 5 hereof. Other than the matters set forth
in the preceding sentence, the consent of Employee shall be required in order
to amend any other provision of this Agreement. Notwithstanding the
foregoing, the Committee may, in its sole discretion, accelerate the
exercisability of the Option at any time.
11. NOTICES. Any notice to the Company provided for in this Agreement
shall be addressed to it in care of its Secretary at the Company's executive
offices. Any notice to the Employee shall be addressed to Employee at the
current address shown on the payroll records of the Company. Any notice
shall be deemed to be duly given if and when properly addressed and posted by
registered or certified mail, postage prepaid.
6
<PAGE>
12. INCORPORATION OF PLAN BY REFERENCE. The Option is granted pursuant
to the terms of the Plan, the terms of which are incorporated herein by
reference, and the Option shall in all respects be interpreted in accordance
with the Plan. The Committee shall interpret and construe the Plan and this
Agreement, and its interpretations and determinations shall be conclusive and
binding on the parties hereto and any other person claiming an interest
hereunder, with respect to any issue arising hereunder or thereunder. In the
event any of the terms and conditions set forth in this Agreement are in
conflict or are inconsistent with the terms of the Plan, the terms of the
Plan shall control.
13. GOVERNING LAW. The validity, construction, interpretation and
effect of this instrument shall exclusively be governed by and determined in
accordance with the law of the State of Texas.
14. CAPITALIZED TERMS. Unless otherwise defined herein, each
capitalized term appearing in this Agreement shall have the same meaning as
the corresponding term in the Plan.
15. BINDING EFFECT. This Agreement shall be binding upon the parties
hereto, together with their respective executors, administrators, successors,
personal representatives, heirs and assigns.
16. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
and understanding between the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and understandings relating
to the subject matter hereof (including but not limited to that certain
agreement dated October 24, 1995 between Antinori Software, Inc. and
Employee, which is hereby terminated effective as of the date hereof).
17. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one instrument.
18. GEORGIA SECURITIES ACT. THESE SECURITIES HAVE BEEN ISSUED OR SOLD
IN RELIANCE ON PARAGRAPH (13) OF CODE SECTION 10-5-9 OF THE GEORGIA
SECURITIES ACT OF 1973 AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A
TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER SUCH ACT. Employee acknowledges that the foregoing does
not preclude the Company from relying on other applicable exemptions from
registration under the Georgia Securities Act.
7
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
THE CARREKER GROUP, INC.
By:
---------------------------------
Its:
------------------------------
EMPLOYEE
------------------------------------
Lawrence D. Duckworth
8
<PAGE>
EXHIBIT L-6
THE CARREKER GROUP, INC.
1994 LONG TERM INCENTIVE PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
(CLASS B NON-VOTING COMMON STOCK)
This Agreement ("Agreement") is dated this ___________ day of January,
1997 by and among The Carreker Group, Inc., a Texas corporation (the
"Company") and Michael Israel ("Employee").
WHEREAS, the Board of Directors of the Company (the "Board") has
adopted, and the shareholders of the Company have approved, The Carreker
Group, Inc. Amended and Restated 1994 Long Term Incentive Plan (the "Plan");
WHEREAS, the Plan provides for the granting of non-qualified stock
options by the Compensation Committee of the Board or any successor committee
thereto (the "Committee") to officers and key employees of the Company or any
subsidiary of the Company and its subsidiaries to purchase shares of the
Company's Class B Non-Voting Common Stock, no par value (the "Stock"), in
accordance with the terms and provisions thereof; and
WHEREAS, the Committee considers Employee to be a person who is
eligible for a grant of non-qualified stock options under the Plan, and has
determined that it would be in the best interest of the Company to grant the
non-qualified stock option described herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree
as follows:
1. GRANT OF OPTION. Subject to the terms and conditions
hereinafter set forth, the Company, with the approval and at the direction of
the Committee, hereby grants to the Employee, as of the date hereof, an
option (the "Option") to purchase 7,380 shares of Stock (the "Option Shares")
at a price of $19.07 per share (the "Exercise Price"). The Option is not
intended by the parties hereto to be, and shall not be treated as, an
incentive stock option (as such term is defined under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code")).
1
<PAGE>
2. VESTING. The Option shall vest and become exercisable during the
two-year period following the date hereof (herein the "Vesting Period") as
follows:
(a) The Option shall be immediately vested and exercisable with
respect to one-third (1/3) of the Option Shares on the date hereof;
(b) The Option shall vest and shall be exercisable with respect
to an additional one-third (1/3) of the Option Shares on the first
anniversary date of this Agreement, provided Employee is employed by the
Company or one of its subsidiaries as of such date and has been continuously
employed during the term of this Agreement, and further provided that the
Option has not otherwise terminated in accordance with the terms of Section 4
hereof; and
(c) The Option shall vest and shall be exercisable with respect
to the remaining one-third (1/3) of the Option Shares on the second
anniversary date of this Agreement, provided Employee is employed by the
Company or one of its subsidiaries as of such date and has been continuously
employed by the Company or one of its subsidiaries during the term of this
Agreement, and further provided that the Option has not otherwise terminated
in accordance with the terms of Section 4 hereof.
3. EXERCISE OF OPTION. The Option, to the extent vested, may be
exercised as follows:
(a) The Employee may exercise the Option with respect to all or
any part of the Option Shares then vested by giving the Secretary of the
Company written notice (the "Notice") of intent to exercise. The Notice
shall specify the number of Option Shares to be exercised (which shall be an
amount no less than 50 shares or the number of shares as to which the Option
is then exercisable, if less than 50) and the date of the proposed exercise
thereof (the "Exercise Date"), which date shall be at least ten (10) but no
more than thirty (30) calendar days after the giving of such notice unless an
earlier time shall have been mutually agreed upon.
(b) Full payment (in U.S. dollars) by the Employee of the
Exercise Price shall be made on or before the Exercise Date in cash or
certified check.
(c) On or before the Exercise Date, Employee and his spouse, if
any, shall execute and deliver to the Company an agreement restricting the
transferability of the Option Shares substantially in the form of Exhibit A
attached hereto (the "Right of First Refusal Agreement");
(d) On the Exercise Date or as soon thereafter as practicable
thereafter, the Company shall cause to be delivered to the Employee a
certificate or certificates for the Option Shares then being purchased upon
full payment for such Option Shares. Such certificate or certificates shall
bear a restrictive legend in the form set forth in the Right of First Refusal
Agreement.
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<PAGE>
The obligation of the Company to deliver the Option Shares shall, however, be
subject to the condition that if at any time the Committee shall determine in
its discretion that the listing, registration or qualification of the Option
or the Option Shares upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental regulatory body,
is necessary or desirable as a condition of, or in connection with, the
Option or the issuance or purchase of Stock thereunder, the Option may not be
exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free
of any conditions not acceptable to the Committee.
(e) If Employee fails to pay the Exercise Price by the Exercise
Date for any of the Option Shares specified in the Notice or fails to deliver
the Right of First Refusal Agreement, the Employee's right to purchase such
Option Shares may be terminated by the Company upon written notice to
Employee.
4. TERMINATION OF OPTION. The Option, and all rights hereunder with
respect thereto, to the extent such rights shall not have been exercised,
shall terminate and become null and void on the earliest to occur of the
following dates as follows:
(a) the tenth (10th) anniversary date of the date hereof (the
"Expiration Date");
(b) in the event Employee's employment with the Company or any
subsidiary is terminated, other than by reason of death or Disability (as
defined below) or termination for Cause (as defined below), then (i) this
Option shall continue to vest and shall be exercisable as though Employee's
employment with the Company continued for a period of two (2) years following
the date of termination of employment, and (ii) this Option shall terminate
and shall no longer be exercisable after the passage of two (2) years from
the date of termination of employment, but in no event later than the
Expiration Date. In such a case, the Employee's only rights hereunder shall
be those which have been properly exercised prior to the termination or
earlier expiration of this Option;
(c) in the event Employee's employment with the Company or any
subsidiary is terminated for Cause (as defined below), then no further
installments of this Option shall vest or otherwise become exercisable, if
such termination occurs during the Vesting Period, and this Option shall
terminate and shall no longer be exercisable effective on the date of such
termination. For purposes hereof, the term "Cause" shall mean conduct
involving
3
<PAGE>
one or more of the following as determined by the Committee in its reasonable
discretion: (i) the substantial and continuing failure of the Employee, after
notice thereof, to render services to the Company or any subsidiary in
accordance with the terms or requirements of the Employee's employment with
the Company or any subsidiary; (ii) disloyalty, gross negligence, willful
misconduct, dishonesty or breach of fiduciary duty 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 which results in
direct or indirect loss, damage or injury to the Company or any subsidiary;
(v) the unauthorized disclosure of any trade secret or confidential
information of the Company or any subsidiary; or (vi) the commission of an
act which constitutes unfair competition with the Company or any subsidiary
or which induces any customer or supplier to break a contract with the
Company or any subsidiary;
(d) in the event Employee dies while employed with the Company
or any subsidiary, this Option may be exercised, by the Employee's executor,
estate, personal representative or beneficiary, as the case may be, and to
whom this Option is transferred by operation of law, at any time within two
(2) years after the date of death, but not later than the Expiration Date.
This Option shall continue to vest following the date of death of Employee as
though Employee were employed by the Company for a period of two (2) years
following the date of death. Following the expiration of such two-year
period, this Option shall terminate;
(e) in the event Employee's employment with the Company or any
subsidiary is terminated by reason of his Disability (which shall mean
"permanent and total disability" as defined in Section 22(e)(3) of the Code,
or any successor statute), this Option may be exercised at any time within
two (2) years after the date of such Disability, but not later than
Expiration Date. This Option shall continue to vest following the date of
Disability of Employee as though Employee were employed by the Company for a
period of two (2) years following the date of Disability. Following the
expiration of such two-year period, this Option shall terminate;
(f) the closing date of any Capital Transaction (as defined in
Section 6 hereof); or
(g) the date the Company gives written notice to Employee of
Employee's failure to pay the Exercise Price as provided in Section 3(e)
hereof.
4
<PAGE>
5. ADJUSTMENT OF AND CHANGES IN STOCK OF THE COMPANY. In the event
of a reorganization, recapitalization, change of shares, stock split,
spin-off, stock dividend, reclassification, subdivision or combination of
shares, merger, consolidation, rights offering, or any other change in the
corporate structure or shares of capital stock of the Company, the Committee
shall make such adjustment as it deems appropriate in the number and kind of
shares of Stock subject to the Option or in the Exercise Price; PROVIDED
HOWEVER, that no such adjustment shall give the Employee any additional
benefits under the Option.
6. CAPITAL TRANSACTIONS. In the event that following the date of
this Agreement during the term hereof and prior to the termination of the
Option in accordance with Section 4 hereof, 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 (for purposes of this Section
6, 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, (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, or (d) a distribution of the Company's equity securities
to the public pursuant to a registration statement filed under the Securities
Act of 1933, as amended, or any successor statute (any such transaction being
referred to herein as a "Capital Transaction"), then the Company shall
provide Employee with thirty (30) days advance written notice of such
transaction and Employee, without the necessity of any further action by the
Committee, shall be entitled to purchase, prior to the effective date of such
Capital Transaction and in addition to the number of Option Shares which
Employee shall be entitled to purchase as determined under Section 2 hereof,
the number of remaining Option Shares which have not then become vested. The
unexercised portion of the Option shall be deemed cancelled and terminated as
of the effective date of such transaction.
7. RIGHTS OF SHAREHOLDER. Neither the Employee nor any heir,
personal representative or other person shall be, or shall have any of the
rights and privileges of, a shareholder of the Company with respect to any
shares of Stock purchasable or issuable upon the exercise of the Option, in
whole or in part, prior to the date of exercise of the Option.
8. TRANSFERABILITY OF OPTION. During Employee's lifetime, the Option
hereunder shall be exercisable only by the Employee or any guardian or legal
representative of the Employee, and the
5
<PAGE>
Option shall not be transferable except, in case of the death of the
Employee, by will or the laws of descent and distribution, nor shall the
Option be subject to attachment, execution or other similar process. In the
event of (a) any attempt by Employee to alienate, assign, pledge, hypothecate
or otherwise dispose of the Option, except as provided for herein, or (b) the
levy of any attachment, execution or similar process upon the rights or
interest hereby conferred, the Company may terminate the Option by notice to
the Employee and it shall thereupon become null and void.
9. EMPLOYMENT NOT AFFECTED. Neither the granting of the Option nor
its exercise shall be construed as granting to the Employee any right with
respect to continuance of employment. Except as may otherwise be limited by
a written agreement between the Company or one of its subsidiaries, as the
case may be, and the Employee, the right of the Company (or one of its
subsidiaries) to terminate the Employee's employment at any time is
specifically reserved.
10. AMENDMENT OF OPTION. The Option and this Agreement may be amended
by the Board or the Committee at any time without the consent of Employee (i)
if the Board or the Committee determines, in its sole discretion, that the
amendment is necessary or advisable in the light of any addition to or change
in the Code or in the regulations issued thereunder, or any federal or state
securities law or other law or regulation, which change occurs after the date
hereof and by its terms applies to the Option; or (ii) in order to make the
adjustments set forth in Section 5 hereof. Other than the matters set forth
in the preceding sentence, the consent of Employee shall be required in order
to amend any other provision of this Agreement. Notwithstanding the
foregoing, the Committee may, in its sole discretion, accelerate the
exercisability of the Option at any time.
11. NOTICES. Any notice to the Company provided for in this Agreement
shall be addressed to it in care of its Secretary at the Company's executive
offices. Any notice to the Employee shall be addressed to Employee at the
current address shown on the payroll records of the Company. Any notice
shall be deemed to be duly given if and when properly addressed and posted by
registered or certified mail, postage prepaid.
12. INCORPORATION OF PLAN BY REFERENCE. The Option is granted pursuant
to the terms of the Plan, the terms of which are incorporated herein by
reference, and the Option shall in all respects be interpreted in accordance
with the Plan. The Committee shall interpret and construe the Plan and this
6
<PAGE>
Agreement, and its interpretations and determinations shall be conclusive and
binding on the parties hereto and any other person claiming an interest
hereunder, with respect to any issue arising hereunder or thereunder. In the
event any of the terms and conditions set forth in this Agreement are in
conflict or are inconsistent with the terms of the Plan, the terms of the
Plan shall control.
13. GOVERNING LAW. The validity, construction, interpretation and
effect of this instrument shall exclusively be governed by and determined in
accordance with the law of the State of Texas.
14. CAPITALIZED TERMS. Unless otherwise defined herein, each
capitalized term appearing in this Agreement shall have the same meaning as
the corresponding term in the Plan.
15. BINDING EFFECT. This Agreement shall be binding upon the parties
hereto, together with their respective executors, administrators, successors,
personal representatives, heirs and assigns.
16. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
and understanding between the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and understandings relating
to the subject matter hereof (including but not limited to those certain
letter agreements dated December 20, 1994 and September 13, 1996 between
Antinori Software, Inc. and Employee, which are hereby terminated effective
as of the date hereof).
17. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one instrument.
18. GEORGIA SECURITIES ACT. THESE SECURITIES HAVE BEEN ISSUED OR SOLD
IN RELIANCE ON PARAGRAPH (13) OF CODE SECTION 10-5-9 OF THE GEORGIA
SECURITIES ACT OF 1973 AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A
TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER SUCH ACT. Employee acknowledges that the foregoing does
not preclude the Company from relying on other applicable exemptions from
registration under the Georgia Securities Act.
7
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
THE CARREKER GROUP, INC.
By:
---------------------------------
Its:
------------------------------
EMPLOYEE
------------------------------------
Michael Israel
8
<PAGE>
EXHIBIT M
<PAGE>
J.D. CARREKER EMPLOYEE CONFIDENTIALITY AGREEMENT
The undersigned employee (the "Employee") of J. D. Carreker and Associates,
Inc. (the "Company") as a condition of employment or continued employment,
enters into this Agreement with the Company for the acknowledged purpose of
protecting the Company against acts by the undersigned or others that would
adversely affect the best interests of the Company or its customers or the
ability of the Employee to carry on a satisfying professional relationship
with J. D. Carreker and Associates, Inc. To that end, this Agreement
identifies basic obligations which are binding during the Employee's term of
employment with the Company and, where applicable, beyond the termination of
such employment.
BASIC OBLIGATION
The Employee accepts the following obligations:
a. Employee will perform assigned duties and abide by the published and
unpublished policies of the Company.
b. Employee understands and acknowledges that J. D. Carreker and Associates,
Inc., in its business activities, has developed and uses commercially
valuable technical and nontechnical information, and to guard the
legitimate interest of the company, it is necessary for the Company to
protect certain of the information as confidential.
c. In consideration of employment or continued employment by Company and as
a material inducement to the Company to pay Employee compensation for
services, Employee agrees that confidential information of a special and
unique nature and value relating to such matters as J. D. Carreker and
Associates, Inc.'s trade secrets, computer programs, system documentation
manuals, confidential reports and other proprietary materials is regarded
by the Company as exceptionally valuable and that its use and disclosure
must be carefully and continuously controlled. The Employee agrees to
deliver all such items in Employee's possession to the Company at any
time during employment and will do so upon termination of employment.
d. Employee will never, without Company's prior written consent, disclose to
or use for the benefit of any person, corporation or other entity, any
files, trade secrets or other confidential information concerning the
business, clients, methods, operations, financing, services or any trade
secret or confidential information of J. D. Carreker and Associates, Inc.
CONFIDENTIAL INFORMATION
Trade secrets and confidential information shall mean all information
pertaining to the prior,
<PAGE>
current, or contracted business of the Company or any other information not
known to the general public.
Without limitation, Employee agrees that the following constitutes trade
secret and proprietary information:
a. All information pertaining to any customer of the Company, concerning
prior, current or future research or development activities.
b. All information which the Employee has reasonable basis to know was
accepted by the Company from any third party under any obligation of
confidentiality.
c. All computer programs, system documentation, manuals and other materials
or technical know-how developed, owned or used by the Company.
INVENTIONS - COPYRIGHTS
Employee assigned to Company, Employee's entire right, title and interest in
any and all inventions, improvements, discoveries, processes, programs,
systems, writings or ideas, whether or not subject to copyright, patent or
trademark protections which was (or, in the future, may be) conceived,
developed, discovered or made while in the employ of Company (whether or not
during regular hours of work or on the Company's promises), which relates in
any manner or is capable of being used in the existing or contemplated
business of the Company. Employee shall fully disclose same to the President
of the Company, instruments which Company shall deem necessary to apply for
or obtain ownership rights or protection for Company's interest therein.
POTENTIAL CONFLICTS OF INTEREST
<PAGE>
a. Hold an interest in (as owner, stockholder, partner, lender, or other
investor, director, officer, contractor or consultant) any business
activity that is competitive with the existing or contemplated business
of the Company or which will interfere with the Employee's ability to
perform assigned duties for the Company.
b. Solicit for Employee's own benefit or organization, other than on behalf
of the Company, the employment or services of any Company employee.
c. Solicit for Employee's own benefit or organization, any employee of a
customer of J. D. Carreker and Associates, Inc.
d. Solicit for Employee's own benefit or organization, any business or
customer of Company or any contemplated business or potential customer of
the Company.
Additionally, Employee agrees to inform Company of any interest of Employee
(as owner, stockholder, partner, investor, officer, director or otherwise) in
any business from which the Company buys or obtains services or products or
sells services or provides products. This Agreement shall not apply to the
ownership of an Employee of less than one percent (1%) of the outstanding
securities of any class of corporations that are listed on a National
Securities Exchange or traded over-the-counter.
GENERAL
The Employee recognizes that the Company would be irreparably damaged by
violation of the Agreement, and this Agreement shall be governed and
construed by the laws of the State of Texas and shall be binding on Employee.
It is agreed that this Agreement may be modified or amended only by a
written instrument executed by the Company and Employee.
The Employee understands that this Agreement shall be effective when signed
by both Company and Employee.
ACCEPTED AND AGREED
/s/ J.D. Carreker /s/ J.D. Carreker
- ------------------------------- -----------------------------------
Employee J. D. Carreker and Associates, Inc.
Date 1/31/97 Date 1/31/97
-------------------------- ------------------------------
<PAGE>
EXHIBIT 21.1
LIST OF SUBSIDIARIES
Antinori Software, Inc. Georgia
<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
March 18, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CARREKER
ANTINORI, INC. CONSOLIDATED FINANCIAL STATEMENTS, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-01-1997
<PERIOD-END> JAN-31-1998
<CASH> 1,975
<SECURITIES> 0
<RECEIVABLES> 13,211
<ALLOWANCES> (456)
<INVENTORY> 26
<CURRENT-ASSETS> 16,147
<PP&E> 3,069
<DEPRECIATION> (1,489)
<TOTAL-ASSETS> 20,319
<CURRENT-LIABILITIES> 8,713
<BONDS> 0
0
0
<COMMON> 4,198
<OTHER-SE> 6,426
<TOTAL-LIABILITY-AND-EQUITY> 20,319
<SALES> 40,501
<TOTAL-REVENUES> 40,501
<CGS> 20,515
<TOTAL-COSTS> 35,492
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 690
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,108
<INCOME-TAX> 2,053
<INCOME-CONTINUING> 3,055
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,055
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.23
</TABLE>
