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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 30, 1998
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TOWNE SERVICES, INC.
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(Exact Name of Registrant
as Specified in its Charter)
Georgia 000-24695 62-1618121
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(State or Other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
3295 River Exchange Drive, Suite 350, Norcross, Georgia 30092
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (770) 734-2680
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N/A
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Pursuant to the terms of a Stock Purchase Agreement dated November 30,
1998 (the "Agreement"), Towne Services, Inc. ("Towne") has acquired Banking
Solutions, Inc. ("BSI"), a McKinney, Texas-based provider of accounts receivable
processing products and services to banks and their commercial customers under
the name CashFlow(sm) Manager. The transaction was accomplished by the purchase
of all outstanding shares of BSI capital stock by BSI Acquisition Corp., a
wholly-owned subsidiary of Towne. Under the terms of the Agreement, the BSI
shareholders received an aggregate of $10,473,341 in cash and $3,607,780 in
Towne common stock (the "Purchase Price"). Towne paid the cash portion of the
Purchase Price using proceeds from its initial public offering of common stock.
The number of Towne shares issued to the BSI shareholders was based upon the
average closing price of Towne's common stock for the 15 trading days
immediately preceding the date of the Agreement.
In addition to their portion of the Purchase Price and pursuant to the
Agreement, Donald G. Shafer and David R. Frank, who were the Chief Executive
Officer and President, respectively, and the principal shareholders of BSI, may
receive a contingent earnout in cash based on the future performance of BSI.
Also, certain sales personnel of BSI who continue to work for BSI in the future
will receive, in the aggregate, a signing bonus of up to $909,450, payable in
the form of restricted shares of Towne common stock. Towne also will establish a
bonus plan, pursuant to which these sales personnel, as well as future sales
personnel identified by Towne's officers, will be eligible to receive, in the
aggregate, up to $2,728,350 in cash, which may be earned, if at all, over a
two-year performance period beginning January 1, 1999.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
It is impractical to provide the required financial statements for BSI
at the date of the filing of this Form 8-K. The required financial
statements will be provided as soon as practicable but not later than
sixty days after the date on which this Form 8-K must be filed.
(B) PRO FORMA FINANCIAL INFORMATION.
It is impractical to provide the required pro forma financial
information at the date of the filing of this Form 8-K. The required
pro forma financial information will be provided as soon as practicable
but not later than sixty days after the date on which this Form 8-K
must be filed.
(C) EXHIBITS.
2.1 Stock Purchase Agreement dated November 30, 1998 by and
between Towne Services, Inc., BSI Acquisition Corp., Banking Solutions,
Inc. ("BSI"), and certain shareholders of BSI.*
99.1 Press Release dated November 30, 1998.
*Pursuant to Item 601(b)(2) of Regulation S-K, Towne agrees to furnish
supplementally a copy of any omitted schedule or exhibit to the
Securities and Exchange Commission upon request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TOWNE SERVICES, INC.
By: /s/ Bruce F. Lowthers, Jr.
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Bruce F. Lowthers, Jr.
Senior Vice President and
Chief Financial Officer
Dated: December 15, 1998
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EXHIBIT INDEX
Exhibit
2.1 Stock Purchase Agreement dated November 30, 1998 by and between Towne
Services, Inc., BSI Acquisition Corp., Banking Solutions, Inc. ("BSI"),
and certain shareholders of BSI.*
99.1 Press Release dated November 30, 1998.
*Pursuant to Item 601(b)(2) of Regulation S-K, Towne agrees to furnish
supplementally a copy of any omitted schedule or exhibit to the Securities and
Exchange Commission upon request.
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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
NOVEMBER 30, 1998
BY AND AMONG
TOWNE SERVICES, INC.
BSI ACQUISITION CORP.
(GEORGIA CORPORATIONS)
AND
BANKING SOLUTIONS, INC.
(A TEXAS CORPORATION)
AND
DAVID R. FRANK
DONALD G. SHAFER
AND
JAMES R. PEIRCE
(TEXAS RESIDENTS)
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TABLE OF CONTENTS
<TABLE>
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ARTICLE 1 THE PURCHASE....................................................... 1
Section 1.1 Purchase and Sale of Shares................................. 1
Section 1.2 Time and Place of Closing .................................. 1
ARTICLE 2 OFFICERS AND DIRECTORS OF THE COMPANY.............................. 2
ARTICLE 3 PURCHASE PRICE AND PAYMENT OF PURCHASE PRICE ...................... 2
Section 3.1 Purchase Price ............................................. 2
Section 3.2 Payment of Purchase Price .................................. 2
Section 3.3 Fair Market Value .......................................... 2
Section 3.4 Surrender and Exchange of Certificates ..................... 3
Section 3.5 Legending of Securities .................................... 4
ARTICLE 4 RULES OF CONSTRUCTION.............................................. 4
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE
SHAREHOLDERS....................................................... 6
Section 5.1 Organization ............................................... 7
Section 5.2 Capitalization ............................................. 7
Section 5.3 Authority; No Violation .................................... 7
Section 5.4 Financial Statements ....................................... 8
Section 5.5 Broker's and Other Fees .................................... 9
Section 5.6 Absence of Certain Changes or Events ....................... 9
Section 5.7 Legal Proceedings .......................................... 9
Section 5.8 Taxes and Tax Returns ......................................10
Section 5.9 Employee Benefit Plans and Relations .......................11
Section 5.10 Compliance with Applicable Laws ............................12
Section 5.11 Certain Contracts ..........................................13
Section 5.12 Properties and Insurance ...................................14
Section 5.13 Environmental Matters ......................................15
Section 5.14 Intellectual Property ......................................16
Section 5.15 Adequacy of Technical Documentation ........................17
Section 5.16 Third-Party Components in Software .........................17
Section 5.17 Third-Party Interests or Marketing Rights in Software ......17
Section 5.18 No Parachute Payments ......................................17
Section 5.19 Absence of Certain Agreements and Practices ................17
Section 5.20 Major Vendors and Customers ................................18
Section 5.21 Accounts Receivable ........................................18
Section 5.22 Bank Accounts ..............................................18
Section 5.23 Corporate Records ..........................................19
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Section 5.24 Combinations Involving the Company .........................19
Section 5.25 Labor Relations ............................................19
Section 5.26 Year 2000 Matters. .........................................19
Section 5.27 Change in Control Provisions. ..............................19
Section 5.28 Disclosure. ................................................20
Section 5.29 Securities Act Compliance ..................................20
Section 5.30 No Prior Convictions .......................................20
Section 5.31 Tax Advice .................................................20
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PARENT AND
ACQUISITION CORP...................................................20
Section 6.1 Corporate Organization .....................................21
Section 6.2 Capitalization .............................................21
Section 6.3 Authority; No Violation. ...................................21
Section 6.4 Broker's and Other Fees ....................................22
Section 6.5 Current Public Information; Financial Statements ...........22
Section 6.6 Legal Proceedings ..........................................23
Section 6.7 Buyer Common Stock .........................................23
Section 6.8 Disclosure .................................................23
ARTICLE 7 COVENANTS AND AGREEMENTS OF THE PARTIES............................24
Section 7.1 Conduct of Business ........................................24
Section 7.2 Negative Covenants .........................................24
Section 7.3 No Solicitation ............................................26
Section 7.4 Current Information ........................................27
Section 7.5 Access to Properties and Records; Confidentiality ..........28
Section 7.6 Regulatory Matters; Consents; Cooperation, etc. ............28
Section 7.7 Parties' Efforts; Further Assurances; Cooperation ..........28
Section 7.8 Public Announcements .......................................29
Section 7.9 Failure to Fulfill Conditions ..............................29
Section 7.10 Disclosure Supplements .....................................29
Section 7.11 Release; Covenant Not to Sue ...............................29
Section 7.12 Intentionally omitted ......................................30
Section 7.13 No Transfers ...............................................30
Section 7.14 Special Provisions with Respect to Seller ..................30
Section 7.15 Cooperation and Exchange of Information ....................30
Section 7.16 Customer Contacts ..........................................30
Section 7.17 Key Sales Personnel ........................................30
ARTICLE 8 CLOSING CONDITIONS.................................................31
Section 8.1 Conditions of Each Party's Obligations Under this Agreement.31
Section 8.2 Approvals and Regulatory Filings ...........................31
(a) Suits and Proceedings ......................................31
(b) Registration Rights Agreement...............................31
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Section 8.3 Conditions to the Obligations of Parent and Acquisition
Corp. under this Agreement .................................31
(a) Representations and Warranties; Covenants and Agreements;
Consents ...................................................32
(b) Opinion of Counsel .........................................32
(c) Certificates................................................32
(d) Noncompetition, Nonsolicitation and Confidentiality
Agreements .................................................32
(e) Spousal Consents............................................32
(f) Work Product Agreements.....................................32
(g) Completion of Due Diligence on Seller.......................32
(h) No Material Adverse Effect on Seller........................32
(i) Customer Inquiries..........................................33
(j) No Interest in Software.....................................33
(k) Termination or Assignment of Certain Agreements.............33
(l) Spinoff.....................................................33
(m) Sullivan and O'Reilly Interests.............................33
(n) Release of Obligations......................................33
Section 8.4 Conditions to the Obligations of Seller and the Shareholders
under this Agreement .......................................34
(a) Representations and Warranties; Covenants and Agreements;
Consents ...................................................34
(b) Certificates ...............................................34
(c) No Material Adverse Effect on Parent........................34
(d) Approvals...................................................34
ARTICLE 9 TERMINATION, AMENDMENT AND WAIVER..................................34
Section 9.1 Termination ................................................34
Section 9.2 Effect of Termination ......................................35
Section 9.3 Specific Performance .......................................36
Section 9.4 Amendment ..................................................36
Section 9.5 Extension; Waiver ..........................................36
ARTICLE 10 INDEMNIFICATION....................................................36
Section 10.1 Indemnification by the Company and Shareholders ............36
Section 10.2 Indemnification by Buyer ...................................37
Section 10.3 Claims for Indemnification .................................37
Section 10.4 Defense of Claim by Third Parties ..........................37
Section 10.5 Third Party Claim Assistance ...............................38
Section 10.6 Settlement of Indemnification Claims .......................38
Section 10.7 Manner of Indemnification by the Company and Shareholders ..38
Section 10.8 Certain Limitations ........................................38
Section 10.9 Other Indemnifications .....................................39
ARTICLE 11 MISCELLANEOUS......................................................39
Section 11.1 Expenses ...................................................39
Section 11.2 Notices ....................................................39
Section 11.3 Parties in Interest ........................................41
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Section 11.4 Entire Agreement. ..........................................41
Section 11.5 Counterparts ...............................................41
Section 11.6 Governing Law ..............................................41
Section 11.7 Arbitration ................................................42
Section 11.8 Invalidity of any Part .....................................42
Section 11.9 Time of the Essence; Computation of Time ...................42
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "AGREEMENT") is dated and executed
effective as of November 30, 1998, by and among TOWNE SERVICES, INC., a Georgia
corporation ("PARENT"), BSI ACQUISITION CORP., a Georgia corporation and a
wholly-owned subsidiary of Parent ("ACQUISITION CORP."), BANKING SOLUTIONS,
INC., a Texas corporation ("COMPANY"), and DAVID R. FRANK, a resident of the
State of Texas, DONALD G. SHAFER, a resident of the State of Texas, and JAMES R.
PEIRCE, a resident of the State of Texas (each a "SHAREHOLDER" and,
collectively, the "SHAREHOLDERS"). Parent, Acquisition Corp., the Company and
the Shareholders are hereinafter collectively called the "PARTIES."
W I T N E S S E T H :
WHEREAS, the Shareholders, together with the other persons listed on
Company Disclosure Schedule 5.2 (collectively, the "HOLDERS"), own 100% of the
issued and outstanding shares of the Company's common stock, without par value
(the "COMPANY COMMON STOCK");
WHEREAS, the Parties have agreed that it is in their best interests for
Acquisition Corp. to purchase and for the Holders to sell all of the Company
Common Stock; and
WHEREAS, the Boards of Directors of Parent and Acquisition Corp. have
approved the purchase of the Company Common Stock upon the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
Parties agree as follows:
ARTICLE 1
THE PURCHASE
1.1 PURCHASE AND SALE OF SHARES. Upon the terms and subject to the
conditions of this Agreement, the Holders shall sell to Acquisition Corp., and
Acquisition Corp. shall purchase from the Holders, all of the Company Common
Stock.
1.2 TIME AND PLACE OF CLOSING. The consummation of the transactions
contemplated by this Agreement (the "CLOSING") shall take place at the offices
of Nelson Mullins Riley & Scarborough, L.L.P., 999 Peachtree Street, N.E., Suite
1400, Atlanta, Georgia 30309 at 10:00 a.m. on the first business day after all
conditions set forth in Article 8 (other than the delivery of certificates,
opinions and other instruments and documents to be delivered at the Closing)
have been satisfied or waived in writing, or at such other place and time as
Parent and the Company may agree (the "CLOSING DATE"). The Parties agree to use
all commercially reasonable efforts to hold the Closing on or before November
30, 1998. At the
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Closing, the parties shall execute and deliver the certificates, opinions and
other instruments and documents referred to in Article 8.
ARTICLE 2
OFFICERS AND DIRECTORS OF THE COMPANY
Effective immediately upon the Closing, the Shareholders shall resign as
officers and directors of the Company, and the following officers and directors
of Acquisition Corp. shall be appointed as officers and directors of the
Company:
(a) Drew W. Edwards, Chief Executive Officer and Chairman of the
Company's Board of Directors;
(b) Henry M. Baroco, President, Chief Operating Officer and Director;
and
(c) Bruce F. Lowthers, Jr., Chief Financial Officer, Treasurer and
Secretary.
ARTICLE 3
PURCHASE PRICE AND PAYMENT OF PURCHASE PRICE
3.1 PURCHASE PRICE. Subject to the terms of this Agreement and the
related agreements and documents, the purchase price ("PURCHASE PRICE") for all
of the Company Common Stock shall be (i) $10,473,341 in cash, without interest
and less any required Taxes (as defined herein) and (ii) such number of shares
of common stock, no par value, of Parent ("PARENT COMMON STOCK") the total Fair
Market Value (as defined herein) of which equals $3,607,780.
3.2 PAYMENT OF PURCHASE PRICE. At the Closing, Acquisition Corp. shall
deliver (or cause to be delivered) the Purchase Price as follows:
(a) to the escrow agent designated in the Escrow Agreement in the
form of Exhibit 3.2(a) hereto ("ESCROW AGREEMENT"), a certificate for Parent
Common Stock representing such number of shares, rounded up to the next higher
share, that is equal to $800,000 divided by the Fair Market Value (as defined
herein); and
(b) to the Holders, wire transfers in the aggregate amount of
$10,473,341 and certificates for Parent Common Stock representing such number of
shares, rounded down to the next lower share, that is equal to $2,807,780
divided by the Fair Market Value (as defined herein), in the proportion and
pursuant to the delivery instructions indicated on Exhibit 3.2(b) attached
hereto.
3.3 FAIR MARKET VALUE. For purposes of this Agreement, "Fair Market
Value" means the average closing price of the Parent Common Stock as reported on
the Nasdaq National Market ("NASDAQ") for the fifteen (15) trading days
immediately preceding the Closing Date. No fractional shares of Parent Common
Stock shall be issued or delivered.
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3.4 SURRENDER AND EXCHANGE OF CERTIFICATES.
(a) Surrender of Certificates. At the Closing, Acquisition Corp.
shall deliver certificates for the number of shares of Parent Common Stock
provided for in Section 3.1 in a manner as provided in Section 3.2. Upon
surrender to Acquisition Corp. of certificates representing Company Common Stock
(the "CERTIFICATES"), and subject to the Escrow Agreement, the Holder of such
Certificates shall be entitled to receive at the Closing in exchange therefor,
one or more certificates as requested by the Holder (properly issued, executed
and countersigned, as appropriate) representing that number of whole shares of
Parent Common Stock to which such Holder shall have become entitled pursuant to
the provisions of Section 3.1 and the Certificates so surrendered shall
forthwith be canceled. All payments in respect of Company Common Stock that are
made in accordance with the terms hereof shall be deemed to have been made in
full satisfaction of all rights pertaining to such securities.
(b) Lost Certificates. In the case of any lost, misplaced, stolen
or destroyed Certificate, the holder thereof will be required, as a condition
precedent to delivery to such holder of the Purchase Price, to deliver to Parent
and Acquisition Corp. an indemnity agreement and a bond in such reasonable sum
as Parent and Acquisition Corp. may direct as indemnity against any claim that
may be made against Parent or Acquisition Corp. with respect to the Certificate
alleged to have been lost, misplaced, stolen or destroyed.
(c) Dividends on Parent Common Stock. No holder of a Certificate
shall be entitled to delivery of any dividend or other distribution from Parent
having a record date after the Closing Date until surrender of such holder's
Certificate pursuant to this Section 3.4. Upon such surrender, there shall be
paid to the holder the amount of any dividends or other distributions (without
interest) that theretofore became payable by Parent, but were not paid by reason
of the foregoing with respect to the number of whole shares of Parent Common
Stock represented by the Certificate(s) issued upon such surrender. From and
after the Closing Date, Parent shall, however, be entitled to treat any such
Certificate that has not yet been surrendered pursuant to Section 3.4(a) as
evidencing the ownership of the aggregate Purchase Price represented by such
Certificate, notwithstanding any failure to surrender such Certificate.
(d) Adjustments. In the event that at any time after the date
hereof and prior to the Closing Date, Parent shall effect (i) a dividend or
other distribution with respect to Parent Common Stock payable in Parent Common
Stock or other property (other than cash), (ii) a combination or conversion of
outstanding shares of Parent Common Stock into a smaller number of shares of
such Parent Common Stock, or (iii) any reorganization or reclassification, or
any consolidation or merger of Parent with another corporation, or the sale of
all or substantially all of its assets to another corporation, in such a way
that holders of outstanding Parent Common Stock shall be entitled to receive
(either directly or upon subsequent liquidation) stock, securities or other
property with respect to or in exchange for such Parent Common Stock (any such
event described in (i)-(iii) above referred to as a "DILUTING EVENT"), then, as
a condition of such Diluting Event, lawful and adequate provision shall be made
whereby the Shareholders shall thereafter be entitled to receive (under the same
terms otherwise applicable to their receipt of Parent Common Stock), in addition
to or in lieu of (as
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the case may be) the number of shares of Parent Common Stock to which such
Shareholders are entitled immediately prior to such Diluting Event, such shares
of stock, securities or other property as may be issued or payable with respect
to or in exchange for that number of shares of Parent Common Stock to which the
Shareholders were so entitled, and in any case appropriate provision shall also
be made with respect to such Shareholders' rights and interests to the end that
the provisions of this Section 3.4 shall thereafter be applicable in relation to
any shares of stock, securities or other property thereafter deliverable to such
Shareholders pursuant to the provisions hereof.
3.5 LEGENDING OF SECURITIES.
(a) The shares of Parent Common Stock to be delivered in
connection with this Agreement will be issued in a transaction exempt from
registration under the Securities Act of 1933, as amended (the "SECURITIES ACT")
by reason of Section 4(2) thereof or Regulation D promulgated thereunder, and
Parent and Acquisition Corp. are relying on the representations of the
Shareholders with respect to such exemption. Each Shareholder understands and
agrees that stop transfer instructions with respect to the shares of Parent
Common Stock received by each Holder pursuant to this Agreement will be given to
Parent's transfer agent and that there will be placed on the certificates for
such shares a legend stating in substance as follows:
The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, and may not be offered, sold,
transferred or otherwise disposed of unless registered with the United
States Securities and Exchange Commission and the securities regulatory
authorities of applicable states or unless an exemption from such
registration is available.
The securities represented hereby are subject to the provisions of a
Stock Purchase Agreement dated November 30, 1998, and a Registration
Rights Agreement dated as of November 30, 1998, and may not be sold or
otherwise transferred, except in accordance therewith. Copies of such
agreements may be obtained at the principal executive offices of Towne
Services, Inc.
(b) The foregoing legends will also be placed on any certificate
representing securities issued subsequent to the original issuance of the Parent
Common Stock pursuant to this Agreement as a result of any transfer of such
shares or any stock dividend, stock split or other recapitalization as long as
the Parent Common Stock issued to the Holders pursuant to this Agreement has not
been transferred in such a manner as to justify the removal of the legend
therefrom.
ARTICLE 4
RULES OF CONSTRUCTION
In the interpretation of this Agreement, unless otherwise
provided or the context otherwise requires:
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(a) The singular includes the plural and vice versa and, in
particular (but without limiting the generality of the foregoing), any word or
expression defined in the singular has the corresponding meaning used in the
plural and vice versa;
(b) Any reference to any gender includes the other gender;
(c) Any reference to an Article, Section, Exhibit, clause,
subclause, paragraph, subparagraph, Schedule or recital is a reference to an
Article, Section, Exhibit, clause, subclause, paragraph, subparagraph, Schedule
or recital of this Agreement;
(d) Any reference to any agreement, instrument or other document
(i) shall include all appendices, exhibits and schedules thereto and all
agreements, documents or other writings incorporated by reference therein, and
(ii) shall be a reference to such agreement, instrument or other document as
amended, supplemented, modified, suspended, restated or novated from time to
time;
(e) Any reference to any statute shall be construed as including
all statutory provisions consolidating, amending or replacing such statute and
all governmental regulations and rules promulgated thereunder;
(f) Any reference to "WRITING" includes printing, typing,
lithography and other means of reproducing words in a visible form;
(g) Any reference to a time or date or to a local time or date is
a reference to the time and date in Atlanta, Georgia;
(h) The headings and Article, Section and paragraph numbering
contained in this Agreement are used solely for convenience and do not
constitute a part of this Agreement, nor shall such headings and numbering be
used in any manner to aid in the construction of this Agreement;
(i) References herein to the "COMPANY DISCLOSURE SCHEDULES" mean
the disclosure schedules, dated as of the date hereof, which have been delivered
by the Company and/or the Shareholders to Parent and Acquisition Corp. and all
other documents, agreements, and other items disclosed by the Company and/or the
Shareholders in writing to the Parent and the Acquisition Corp. and attached to
such schedules in connection with this Agreement, and references to a numbered
Company Disclosure Schedule shall mean that portion of the Company Disclosure
Schedules that refers to the specific section or subsection of Article 5 of this
Agreement;
(j) The term "INCLUDING" means "including, without limitation";
(k) The term "GOVERNMENTAL AUTHORITY" means any United States
federal, state or local, or foreign, governmental, regulatory or administrative
authority, agency, department, board, investigative body or commission or any
court, tribunal, or judicial or arbitral body;
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(l) The term "KNOWLEDGE" as used with respect to the Shareholders
(including any references to the Shareholders being aware of a particular
matter) means the actual knowledge of the Shareholders and information which
they reasonably should have known, given the nature of the disclosure;
(m) The term "MATERIAL ADVERSE EFFECT" with respect to a person
or entity means any circumstance, change in, or effect on the business and
affairs of such person or entity or any Subsidiary thereof that, individually or
in the aggregate with any other circumstances, changes in, or effects on, the
business and affairs of such person or entity and its Subsidiaries: (i) is, or
would reasonably be expected to be, materially adverse to the business,
operations, assets or liabilities, prospects, results of operations or financial
condition of such person or entity and its Subsidiaries, taken as a whole, or
(ii) would reasonably be expected to materially adversely affect the ability of
such person or entity and its Subsidiaries to operate or conduct its or their
business and affairs in the manner in which it is currently operated or
conducted or contemplated by such person or entity to be operated or conducted;
(n) The term "PERSON" means any individual, partnership, limited
liability company, firm, corporation, association, trust, joint venture,
unincorporated organization or other entity, as well as any syndicate or group
that would be deemed to be a person under Section 13(d)(3) of the Exchange Act
(as defined herein);
(o) The term "SUBSIDIARY" means any corporation, partnership,
joint venture or other legal entity in which a specified person or entity,
directly or indirectly, owns or controls the voting of at least a 50% share or
other equity interest or for which such person or entity, directly or
indirectly, acts as a general partner or managing member;
(p) The term "DISCLOSED BY PARENT" means, with respect to
information concerning any event, fact or circumstance, information contained in
Parent's SEC Reports (as defined herein), annual and other reports furnished by
Parent to its shareholders as a group, and press releases of Parent disseminated
to (i) major news wire services and (ii) the Nasdaq or a United States national
securities exchange, as well as information disclosed directly to the Company or
the Shareholders by Parent and Acquisition Corp. in this Agreement or otherwise
delivered to the Shareholders; and
(q) Each of the Parties acknowledges that it has had the
opportunity to negotiate the terms and provisions of this Agreement, with the
assistance and review of its counsel. This Agreement, therefore, shall be
construed without regard to any presumption or other rule requiring construction
against the party causing the Agreement to be drafted.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
To induce Parent and Acquisition Corp. to enter into this Agreement and
the other Purchase Agreements, the Shareholders, jointly and severally, hereby
represent and warrant to Parent and Acquisition Corp. as follows:
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5.1 ORGANIZATION.
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Texas. The Company
has the corporate power and authority to own or lease all of its properties and
assets and to carry on its business as it is now being conducted, and, except as
disclosed on Company Disclosure Schedule 5.1(a), is duly licensed or qualified
to do business and is in good standing in each jurisdiction in which the nature
of the business conducted by it or the character or location of the properties
and assets owned or leased by it makes such licensing or qualification
necessary. The failure of the Company to be licensed, qualified or in good
standing in the jurisdictions listed on Company Disclosure 5.1(a) does not have
and is not reasonably likely to have a Material Adverse Effect on the Company.
(b) Company Disclosure Schedule 5.1(b) sets forth true and
correct copies of the Articles of Incorporation and Bylaws and amendments
thereto of the Company.
(c) Except as disclosed on Company Disclosure Schedule 5.1(c),
the Company does not own or control, directly or indirectly, any equity interest
in any corporation, company, association, partnership, joint venture or other
entity.
5.2 CAPITALIZATION. The authorized capital stock of the Company consists
of 2,000,000 shares of Company Common Stock and no shares of preferred stock or
any other form of capital stock. As of the date hereof, there are 1,076,446
shares of Company Common Stock issued and outstanding. Company Disclosure
Schedule 5.2 sets forth the number of shares of Company Common Stock owned by
each Shareholder. There are no options, warrants, or other rights to acquire
Company Common Stock. All issued and outstanding shares of Company Common Stock
have been duly authorized and validly issued and are fully paid and
nonassessable, were not issued in violation of any preemptive rights and were
issued under available exemptions from federal and state securities laws.
Neither the Company nor the Shareholders has granted or is bound by any
outstanding subscriptions, options, warrants, calls, commitments or agreements
of any character calling for the transfer, purchase, subscription or issuance of
any shares of capital stock of the Company or any securities representing the
right to purchase, subscribe or otherwise receive any shares of such capital
stock or any securities convertible into any such shares, and there are no
agreements or understandings with respect to voting any such shares.
5.3 AUTHORITY; NO VIOLATION.
(a) Except as disclosed on Company Disclosure Schedule 5.3(a)
(collectively, the "COMPANY APPROVALS"), no consents, approvals, authorizations,
clearances or orders of, filings or registrations with or notices to
(collectively "AUTHORIZATIONS") any third party or any Governmental Authority
are necessary on behalf of the Company or the Shareholders in connection with
(i) the execution and delivery by the Company and the Shareholders of this
Agreement and (ii) the consummation by the Company and the Shareholders of the
transactions contemplated hereby. The Company has the full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions
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contemplated hereby in accordance with the terms hereof. The execution and
delivery of this Agreement and the other Purchase Agreement (as defined herein)
and the consummation of the transactions contemplated hereby and thereby have
been duly and validly approved by the Board of Directors of the Company in
accordance with the Articles of Incorporation and Bylaws of the Company and with
applicable Laws (as defined below). Except for the Company Approvals, no other
corporate proceedings on the part of the Company are necessary for the Company
and the Shareholders to execute and deliver this Agreement and the other
Purchase Agreements to which they are a party and for the Company and the
Shareholders to be bound by the terms hereof and thereof. This Agreement and the
other Purchase Agreements to which they are a party have been duly and validly
executed and delivered by the Company and the Shareholders and constitute the
valid and binding obligation of the Company and the Shareholders enforceable
against the Company and the Shareholders in accordance with its and their terms.
(b) Neither the execution and delivery by the Company and the
Shareholders of this Agreement and the other Purchase Agreements to which they
are a party, nor the consummation by the Company and the Shareholders of the
transactions contemplated hereby and thereby in accordance with the terms hereof
and thereof, nor compliance by the Company and the Shareholders with any of the
terms or provisions hereof, will: (i) violate any provision of the Company's
Articles of Incorporation or Bylaws; (ii) assuming that the Company Approvals
are duly obtained, violate any United States federal, state or local or foreign
statute, code, ordinance, rule, regulation, judgment, order, writ, ruling,
decree or injunction of any Governmental Authority (collectively, "LAWS")
applicable to the Company, the Shareholders or any of its or their respective
properties or assets; or (iii) assuming that the Company Approvals are duly
obtained, violate, conflict with, result in a breach of any provisions of,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination of, accelerate the
performance required by, or result in the creation of any lien, mortgage,
security interest, pledge, charge, other right of third parties or other
encumbrance (collectively, "LIENS") upon any of the respective properties or
assets of the Company or the Shareholders under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which the Company or the
Shareholders is a party, or by which they or any of their respective properties
or assets may be bound or affected, except, with respect to (ii) and (iii)
above, such as individually or in the aggregate will not have a Material Adverse
Effect on the Company or the Shareholders, and which will not prevent or delay
the consummation of the transactions contemplated hereby.
5.4 FINANCIAL STATEMENTS.
(a) Company Disclosure Schedule 5.4(a) sets forth copies of: (i)
the balance sheets of the Company as of October 31, 1998, June 30, 1998, June
30, 1997 and June 30, 1996, and (ii) the statements of income for the periods
ended October 31, 1998, June 30, 1998, June 30, 1997 and June 30, 1996 (together
with the related notes, collectively, the "COMPANY FINANCIAL STATEMENTS");
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(b) The Company Financial Statements present fairly, in all
material respects, the financial position of the Company as of the respective
dates set forth therein, and the results of the Company's operations and its
cash flows for the respective periods set forth therein.
(c) The books and records of the Company have been maintained in
material compliance with applicable legal and accounting requirements.
(d) Except as and to the extent reflected, disclosed or reserved
against in the Company Financial Statements, or as disclosed in Company
Disclosure Schedule 5.4(d), since June 30, 1998, the Company has not incurred
any liabilities or obligations of any kind, whether absolute, accrued,
contingent or otherwise ("LIABILITIES"), except in the ordinary course of
business and consistent with past practice (which, in the aggregate, are not
material).
(e) Since June 30, 1998 there has not been any change, occurrence
or circumstance affecting the business, results of operations or financial
condition of the Company that has had, individually or in the aggregate, a
Material Adverse Effect, other than changes, occurrences and circumstances
disclosed by the Company on the Company Disclosure Schedules.
5.5 BROKER'S AND OTHER FEES. Except as disclosed in Company Disclosure
Schedule 5.5, neither Company nor any of the Shareholders have employed any
broker or finder or incurred any liability for any broker's or finder's fees or
commissions in connection with any of the transactions contemplated by this
Agreement and the other Purchase Agreements.
5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Except as disclosed in Company Disclosure Schedule 5.6(a), to
the best Knowledge of the Shareholders, no facts or conditions exist which will
cause a Material Adverse Effect on the Company in the future.
(b) Except as set forth in Company Disclosure Schedule 5.6(b),
neither the Company nor the Shareholders has taken or permitted any of the
actions set forth in Section 7.2(a) since June 30, 1998 and, except for
execution of this Agreement and the other Purchase Agreements, the Company has
conducted its business only in the ordinary course, consistent with past
practice. Prior to June 30, 1998, neither the Company nor the Shareholders has
taken or permitted any of the actions set forth in Section 7.2(a) that are not
reflected in the Company Financial Statements.
5.7 LEGAL PROCEEDINGS. Except as disclosed in Company Disclosure
Schedule 5.7, neither the Company nor any of the Shareholders is a party to any,
and there are no pending or, to the Shareholders' Knowledge, threatened, legal,
administrative, arbitral or other proceedings, claims, actions or governmental
investigations of any nature against the Company or the Shareholders. Except as
disclosed in Company Disclosure Schedule 5.7, the Company is not a party to any
order, judgment or decree entered in any lawsuit or proceeding. Without limiting
the foregoing, except as disclosed in Company Disclosure Schedule 5.7, no
actions, suits, demands, notices, claims, investigations or proceedings are
pending or, to the
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Shareholders' Knowledge, threatened against or otherwise involving, directly or
indirectly, any officer, director, employee or agent of the Company (in
connection with such officer's, director's, employee's or agent's activities on
behalf of the Company or that otherwise relate, directly or indirectly to the
Company or its properties or securities) including without limitation any
notices, demand letters or requests from any Governmental Authority relating to
such potential Liabilities, nor, to the Shareholders' Knowledge, are there any
circumstances which could lead to such actions, suits, demands, notices, claims,
investigations or proceedings. The matters referenced on Company Disclosure
Schedule 5.7, if resolved against the Company or the Shareholders, would not
have a Material Adverse Effect on the Company. The Shareholders agree to
cooperate fully with the Company and Acquisition Corp. in the defense of any
claim or action referenced on Company Disclosure Schedule 5.7 or otherwise
brought against the Company after the date of Closing.
5.8 TAXES AND TAX RETURNS. Except as disclosed in Company Disclosure
Schedule 5.8:
(a) The Company has duly filed (and until the Closing Date will
so file) all returns, declarations, reports, information returns and statements
("RETURNS") required to be filed by it in respect of any United States federal,
state or local, or foreign, Taxes and has duly paid (and until the Closing Date
will so pay) all such Taxes due and payable, other than Taxes which are being
contested in good faith (and disclosed by the Shareholders to Parent and
Acquisition Corp. in writing). As used herein, "TAX" or "TAXES" means and
includes any and all taxes, fees, levies, assessments, duties, tariffs, imposts,
and other charges of any kind (together with any and all interest, penalties,
additions to tax and additional amounts imposed with respect thereto) imposed by
any Governmental Authority, including, without limitation: foreign, domestic,
central, local, state or other jurisdictional taxes or other charges on or with
respect to income, estimated income, franchises, business, occupation, windfall
or other profits, gross receipts, property, sales, use, capital stock, payroll,
employment, social security, workers' compensation, unemployment compensation,
or net worth; taxes or other charges in the nature of excise, withholding, ad
valorem, stamp, transfer, value added, or gains taxes; license, registration and
documentation fees; and customs duties, tariffs, and similar charges. The
Company has established (and until the Closing Date will establish) on its books
and records reserves that are adequate for the payment of all Taxes not yet due
and payable, but are incurred in respect of the Company through such date.
(b) None of the Returns of the Company have been examined by the
Internal Revenue Service (the "IRS"), or any other United States federal, state
or local or any foreign Governmental Authority within the past six years. To the
best Knowledge of the Shareholders, there are no audits or other Governmental
Authority proceedings presently pending nor any other disputes pending with
respect to, or claims asserted for, Taxes upon the Company, nor has the Company
given any currently outstanding waivers or comparable consents regarding the
application of any statute of limitations with respect to any Taxes or Returns.
There are no Liens for Taxes upon the assets of the Company, except Liens for
Taxes not yet due. The Company and the Shareholders have complied (and until the
Closing Date will comply) in all respects with all applicable Laws relating to
the payment and withholding of Taxes.
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(c) The Company (i) has not requested any extension of time
within which to file any Return which Return has not since been filed except for
its tax return for the fiscal year ended June 30, 1998; (ii) is not a party to
any agreement providing for the indemnification, allocation or sharing of Taxes;
(iii) is not required to include in income any adjustment by reason of a
voluntary change in accounting method initiated by the Company (nor to the
Shareholders' Knowledge has any Governmental Authority proposed any such
adjustment or change of accounting method); (iv) has not filed a consent with
any Governmental Authority pursuant to which the Company has agreed to recognize
gain (in any manner) relating to or as a result of this Agreement or the
transactions contemplated hereby; or (v) has not been a member of an affiliated
group other than one of which the Company was the common parent.
5.9 EMPLOYEE BENEFIT PLANS AND RELATIONS. Except as disclosed in Company
Disclosure Schedule 5.9:
(a) The Company does not maintain or contribute to any "employee
pension benefit plan" (the "COMPANY PENSION PLANS"), as such term is defined in
Section 3 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), including any pension, profit-sharing, retirement, thrift or stock
bonus plan, "employee welfare benefit plan" (the "COMPANY WELFARE PLANS"), as
such term is defined in Section 3 of ERISA, or any other stock option plan,
stock purchase plan, restricted stock plan, deferred compensation plan,
severance plan, phantom stock plan, bonus plan or other similar plan, program or
arrangement (collectively the "EMPLOYEE PLANS"). The Company has not contributed
to, or been required to contribute to, any "MULTIEMPLOYER PLAN," as such term is
defined in Section 3(37) of ERISA.
(b) Each of the Company Pension Plans is intended to be a
qualified plan within the meaning of Section 401(a) of the Internal Revenue Code
of 1986, as amended (the "CODE"), and the Shareholders are not aware of any fact
or circumstance that would adversely affect the qualified status of any such
plan.
(c) Each of the Company Pension Plans, Company Welfare Plans and
other Employee Plans has been operated in compliance in all material respects
with the provisions of ERISA, the Code, and all other applicable Laws.
(d) Neither the Company nor, to the Shareholders' Knowledge, any
trustee, fiduciary or administrator of any Company Pension Plan or Company
Welfare Plan or any trust created thereunder, has engaged in a "PROHIBITED
TRANSACTION" as such term is defined in Section 4975 of the Code, which could
subject the Company or any such trustee, fiduciary or administrator thereof, to
the tax or penalty on prohibited transactions imposed by said Section 4975.
(e) No Company Pension Plan or any trust created thereunder has
been terminated, nor have there been any "REPORTABLE EVENTS" for which the 30
day notice has not been waived with respect to any Company Pension Plan, as that
term is defined in Section 4043(b) of ERISA.
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(f) There are no pending or, to the Shareholders' Knowledge,
threatened or anticipated claims (other than routine claims for benefits) by, on
behalf of or against any of the Company Pension Plans or the Company Welfare
Plans or any trusts related thereto.
(g) Accruals; Funding.
(i) Pension Plans. None of the Employee Plans is a Pension
Plan subject to ERISA Title IV (including those for retired, terminated or other
former employees and agents).
(ii) Other Plans. Company Disclosure Schedule 5.9(g) fully
and accurately sets forth any funding liability under each Employee Plan not
subject to ERISA Title IV, whether insured or otherwise, specifically setting
forth any liabilities under any retiree medical arrangement and specifically
designating any insured plan which provides for retroactive premium or other
adjustments. To the best of the Shareholders' Knowledge, the levels of insurance
reserves and accrued liabilities with regard to each such Employee Plan are
reasonable and are sufficient to provide for all incurred but unreported claims
and any retroactive premium adjustments.
(iii) Contributions. Except as set forth on Company
Disclosure Schedule 5.9(g): (A) the Company and each trade or business (whether
or not incorporated), which together with the Company is treated as a single
employer pursuant to Code Section 414(b),(c),(m) or (o) (an "ERISA AFFILIATE"),
has made full and timely payment of all amounts required to be contributed under
the terms of each Employee Plan and applicable Law, or required to be paid as
expense under such Employee Plan, including the Pension Benefit Guaranty
Corporation ("PBGC") premiums and amounts required to be contributed under Code
Section 412; (B) where applicable, all contributions have been made in
accordance with the actuarial recommendations; and (C) no excise taxes are
assessable as a result of any nondeductible or other contributions made or not
made to an Employee Plan.
(h) To the best of the Shareholders' Knowledge, summary plan
descriptions and all other returns, reports, registration statements,
prospectuses, documents, statements and communications required to have been
filed, published or disseminated under ERISA or other Laws and the rules and
regulations promulgated by the Department of Labor under ERISA and the Treasury
Department or by the Securities and Exchange Commission ("SEC") with respect to
the Employee Plans have been so filed, published or disseminated.
5.10 COMPLIANCE WITH APPLICABLE LAWS. Except as set forth in Company
Disclosure Schedule 5.10, the Company holds all licenses, franchises, permits,
consents and authorizations ("LICENSES") necessary for the lawful conduct of its
business, except to the extent a failure to hold such Licenses would not have a
Material Adverse Effect. No proceeding is pending or threatened seeking the
revocation or suspension of any License. Except as set forth on Company
Disclosure Schedule 5.10, the Company is and has been in compliance in all
material respects with all applicable Laws, and neither the Company nor any
Shareholder has received any notices of any allegation of any violation by the
Company of any Laws or Licenses.
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5.11 CERTAIN CONTRACTS.
(a) Company Disclosure Schedule 5.11(a) lists the following
agreements (collectively, the "MATERIAL CONTRACTS"), including, without
limitation, leases, purchase contracts and commitments, to which the Company is
a party or by which the Company or any of its properties or assets is bound:
(i) all agreements involving an annual commitment or payment
by any party thereto of more than $10,000 individually or $25,000 in the
aggregate or which have a fixed term extending more than 12 months from the date
hereof;
(ii) all joint venture, sales agency, sales representative
or distributorship, broker, franchise, license or similar agreements;
(iii) all leases of real property and all leases of personal
property that is material to the Company's business;
(iv) all notes, bonds, mortgages, security agreements,
guarantees and other agreements and instruments for or relating to any lending
or borrowing by the Company in any amount (exclusive of advances to employees
for expenses in the ordinary course of business);
(v) all powers of attorney, guarantees, suretyships or
similar agreements; and
(vi) all other written agreements the breach of or default
under which could have a Material Adverse Effect on the Company.
(b) Except as set forth on Company Disclosure Schedule 5.11(b),
each of the Material Contracts is in full force and effect, has not been
modified, rescinded, cancelled, or amended and, to the best of the Shareholders'
Knowledge, is valid, binding and enforceable on the parties thereto in
accordance with its terms. The Company has provided a copy of each Material
Contract to Parent and Acquisition Corp.
(c) Except as disclosed in Company Disclosure Schedule 5.11(c),
(i) the Company is not a party to or bound by any agreement or understanding
(whether written or oral) with respect to the employment of any officers,
employees, directors or consultants, and (ii) the consummation of the
transactions contemplated by this Agreement and the other Purchase Agreements
will not (either alone or upon the occurrence of any additional acts or events)
result in any payment (whether of severance pay or otherwise) becoming due from
the Company to any officer, employee, director, shareholder or consultant
thereof. Company Disclosure Schedule 5.11(c) sets forth true and correct copies
of all severance or employment agreements with officers, directors, employees,
agents or consultants to which the Company is a party.
(d) Except as disclosed in Company Disclosure Schedule 5.11(d),
no agreement or understanding to which the Company or any Shareholder is a party
or by which
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any of them is bound limits the freedom of the Company or any Shareholder to
compete in any line of business or with any person.
(e) Except as disclosed in Company Disclosure Schedule 5.11(e),
neither the Company nor, to the Knowledge of the Shareholders, any other party
thereto, is in default under any of the Material Contracts or any other
agreement to which the Company or any Shareholder is a party or to which its or
their properties is bound; to the best of the Shareholders' Knowledge, no event
has occurred which (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute a default
thereunder entitling any party to terminate a Material Contract or other such
agreement; and the continuation, validity and effectiveness of all such Material
Contracts and agreements under the current terms thereof and the current rights
and obligations of the Company and the Shareholders thereunder will in no way be
affected, altered or impaired by the consummation of the transactions
contemplated hereby. Except as disclosed in Company Disclosure Schedule 5.11(e),
upon consummation of the transactions contemplated by this Agreement and the
other Purchase Agreements, the Company will be entitled to continue to enjoy the
advantages and benefits of the business arrangements, agreements, opportunities
and relationships of the Company as it enjoyed on the Closing Date without
interference or interruption.
5.12 PROPERTIES AND INSURANCE.
(a) Except as disclosed in Company Disclosure Schedule 5.12(a),
the Company has good and marketable title to all assets and properties, whether
real or personal, tangible or intangible, reflected in the Company Financial
Statements as of October 31, 1998, or owned or acquired subsequent thereto
(except to the extent that such assets and properties have been disposed of for
fair value in the ordinary course of business since such date), subject to no
Liens except (i) statutory liens for amounts not yet delinquent or which are
being contested in good faith (and for which adequate reserves have been made)
and (ii) such Liens and title imperfections that do not in the aggregate have a
Material Adverse Effect on the Company. The Company as lessee has the right
under valid and subsisting leases to occupy, use, possess and control all real
property leased by the Company as presently occupied, used, possessed and
controlled by the Company or necessary in the operation of its businesses as
currently conducted.
(b) The business operations and all insurable properties and
assets of the Company are insured for their benefit against all risks which, in
the reasonable judgment of the Shareholders, should be insured against, in each
case under policies or bonds issued by insurers of recognized responsibility, in
such amounts with such deductibles and against such risks and losses as are in
the opinion of the Shareholders adequate for the business engaged in by the
Company. Copies of all such policies as in effect on the date hereof are
attached hereto as Company Disclosure Schedule 5.12(b). Neither the Company nor
any of the Shareholders has received any notice of cancellation or notice of a
material amendment of any such insurance policy or bond and the Company is not
in default under any such policy or bond, no coverage thereunder is being
disputed and all material claims thereunder have been filed in a timely fashion.
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(c) No person other than the Company is currently entitled to
possession of any of the properties of the Company, whether owned or leased by
the Company. To the Shareholders' Knowledge, the real property, buildings,
structures and improvements owned or leased by the Company conform to all
applicable Laws, including zoning regulations, none of which would upon
consummation of the transactions contemplated hereby adversely interfere with
the use of such properties, buildings, structures or improvements for the
purposes for which they are now utilized. The Company has not received notice
of, and to the Shareholders Knowledge, there does not exist (i) any pending or
contemplated condemnation or eminent domain proceeding affecting the properties
owned or leased by the Company, (ii) any proposal for increasing the assessed
value of any such properties for state, county, local or other ad valorem Taxes
or (iii) any pending or contemplated proceedings or public improvements that
would result in the levy of any special Tax or assessment against any such
properties; and there are no outstanding requirements or recommendations by the
Company's insurance providers requiring or recommending any repairs or work to
be done with reference to any such properties or any basis for such. The
properties and assets owned or leased by the Company constitute all of the
property and assets that the Company uses or may reasonably need in connection
with the operation of its business as conducted on the Closing Date, and all
such property and assets are in good repair and operating condition, normal wear
and tear excepted. The consummation of the transactions contemplated by this
Agreement and the other Purchase Agreements will not impair the ability of the
Company to continue to use such properties and assets.
5.13 ENVIRONMENTAL MATTERS.
(a) The operations of the Company comply, and have complied, in
all material respects with all applicable Laws relating to pollution or
protection of the environment ("ENVIRONMENTAL LAWS").
(b) The Company has obtained all environmental, health and safety
Licenses and other authorizations necessary for the operation of the Company's
business, all of which are valid and in good standing and are not subject to any
modification or revocation proceeding, and the Company is in compliance in all
material respects with all terms and conditions thereof.
(c) Neither the Company nor any of the Shareholders has received
any notice of any pending or threatened investigation, proceeding or claim to
the effect that the Company is or may be liable to any person or entity, or
responsible or potentially responsible for the costs of any remedial or removal
action or other cleanup costs, as a result of noncompliance with any
Environmental Laws or arising out of the presence, generation, storage or
disposal of hazardous waste, including liability under the United States
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, any state superfund law or any Environmental Law, and there is no past
or present action, or to the best of the Shareholders' Knowledge, activity,
condition or circumstance that could be expected to give rise to any such
liability on the part of the Company or Acquisition Corp. to any person or
entity or for any such cleanup costs.
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5.14 INTELLECTUAL PROPERTY. The Company develops, markets and licenses
certain proprietary application software products and systems to retail
institutions (the "SOFTWARE PROGRAMS"), and in connection therewith the Company
has developed certain related technical documentation and user reference manuals
(the "DOCUMENTATION"). The Software Programs and the Documentation are
collectively referred to as the "SOFTWARE." The Software Programs are listed on
Company Disclosure Schedule 5.14.
(a) Ownership. Except as set forth in Company Disclosure Schedule
5.14(a), the Company owns all patents, trademarks, service marks, trade names
and copyrights (including registrations, licenses and applications pertaining
thereto) and all other proprietary information used by the Company in the
conduct of its business. Company Disclosure Schedule 5.14(a) sets
forth all domestic and foreign patents, trademarks, service marks, trade names
and copyrights owned or used by the Company and all applications therefor and
registrations thereof.
(b) Procedures for Copyright Protection. Company Disclosure
Schedule 5.14(b) sets forth the form and placement of the proprietary legends
and copyright notices displayed in or on the Software including screen displays.
To the best of the Shareholders' Knowledge, the eligibility of the Software for
protection under copyright law has not been forfeited to the public domain.
(c) Procedures for Trade Secret Protection. Neither the Company
nor any Shareholder has ever disclosed source code for any of the Software to a
third party other than the persons identified in Company Disclosure Schedule
5.14(c). The Company discloses its source code to employees only on a
need-to-know basis in connection with the performance of their duties to the
Company. The source code and system documentation comprising the Software have
at all times been maintained by the Company in confidence and the Company has
not taken (nor has it failed to take) any action which would result in such
source code and system documentation not being protectable as a trade secret
under applicable Laws.
(d) Ownership of Software. Except as disclosed on Company
Disclosure Schedule 5.14(d), all persons who have contributed to or participated
in the conception and development of the Software on behalf of the Company have
been full-time employees of the Company hired to prepare such works within the
scope of employment. As a consequence, the Company has all ownership interests
in the Software.
(e) Absence of Claims. Except as set forth in Company Disclosure
Schedule 5.14(e), no claims have been asserted by any person to rights in the
Software, and no valid basis for any such claim exists. To the best of the
Shareholders' Knowledge, the use of the Software by the Company and its
licensees does not infringe on the rights of any person (whether arising under
copyright, trade secret, patent, unfair competition or other Laws which protect
intellectual property rights). To the best of the Shareholders' Knowledge, the
use by the Company of the patents, trademarks, service marks, trade names and
copyrights identified in Company Disclosure Schedule 5.14(a) does not infringe
the rights of any person, and no claim has been asserted that the use by the
Company of any of the foregoing infringes the rights of any person. No claim has
been asserted by any person to the effect that any current
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or former employee of the Company has violated the provisions of any noncompete
or nondisclosure agreement with such person, or has disclosed any proprietary
information of such person to the Company or any third party.
5.15 ADEQUACY OF TECHNICAL DOCUMENTATION. The Software includes the
source code, system documentation and schematics for all Software Programs, as
well as any programmer comments for documentation and pertinent commentary or
explanation that may be reasonably necessary to render such materials
understandable and usable by a trained computer programmer. The Software (with
the Third Party Components identified on Company Disclosure Schedule 5.16) also
includes the programs (including compilers), workbenches, tools and higher level
language, if any, used for the development, maintenance and implementation of
the Software Programs.
5.16 THIRD-PARTY COMPONENTS IN SOFTWARE. The Company has validly
obtained the right and license to use, copy, modify and distribute any
third-party programming and materials contained in the Software pursuant to the
contracts identified in Company Disclosure Schedule 5.16, subject to no further
license fee, royalty or other payment obligations not identified in Company
Disclosure Schedule 5.16, other than software maintenance payments customarily
associated therewith. The Software contains no other programming or materials in
which any third party may claim superior, joint or common ownership, including
any right or license. To the best of the Shareholders' Knowledge, the Software
does not contain derivative works of any programming or materials not owned in
their entirety by the Company.
5.17 THIRD-PARTY INTERESTS OR MARKETING RIGHTS IN SOFTWARE. The Company
has not granted, transferred or assigned any right or interest in the Software
to any person except pursuant to the contracts identified on Company Disclosure
Schedule 5.17(i). There are no contracts, agreements, licenses, commitments or
arrangements in effect with respect to the marketing, distribution, licensing or
promotion of the Software by any independent salesperson, distributor,
sublicensor or other remarketer or sales organization except as set forth on
Company Disclosure Schedule 5.17(ii).
5.18 NO PARACHUTE PAYMENTS. Except as disclosed on Company Disclosure
Schedule 5.18, no officer, director, employee, shareholder or agent (or former
officer, director, employee, shareholder or agent) of the Company is entitled
now, or will or may be entitled to as a consequence of this Agreement and the
other Purchase Agreements, to any payment or benefit from the Company, Parent or
Acquisition Corp. which if paid or provided would constitute an "excess
parachute payment," as defined in Section 280G of the Code.
5.19 ABSENCE OF CERTAIN AGREEMENTS AND PRACTICES.
(a) Except as set forth in Company Disclosure Schedule 5.19(a) or
in connection with customary transactions in the ordinary course of business, no
present or former officer, director or shareholder of the Company:
(i) owes money to the Company;
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(ii) has any claim (as defined in Section 101 of the United
States Bankruptcy Code) against the Company;
(iii) has any interest in any property or assets used by the
Company in its business;
(iv) has any benefits that are contingent on the
transactions contemplated by this Agreement, other than as stated herein;
(v) has any agreement with the Company that is not
terminable by the Company without penalty or notice;
(vi) has any agreement providing severance benefits or other
benefits after the termination of employment of such employee (before or after a
change in control) regardless of the reason for such termination of employment;
or
(vii) has any agreement or plan, any of the benefits of
which will be increased, vested or accelerated by the occurrence of any of the
transactions contemplated by this Agreement.
(b) Neither the Company nor any of its directors, officers,
agents, affiliates or employees, nor any other person acting on behalf of the
Company or the Shareholders has (i) given or agreed to give any gift or similar
benefit having a value of $1,000 or more to any customer, supplier or
governmental employee or official or any other person, for the purpose of
directly or indirectly furthering the business of the Company, (ii) used any
corporate funds for contributions, payments, gifts or entertainment, or made any
expenditures relating to political activities to government officials or others
in violation of any applicable Laws or (iii) received any unlawful
contributions, payments, gifts or expenditures in connection with the business
of the Company.
5.20 MAJOR VENDORS AND CUSTOMERS. Company Disclosure Schedule 5.20 sets
forth a list of each licensor, developer, remarketer, distributor and supplier
of property or services to, and each licensee, end-user or customer of, the
Company, to whom the Company paid or billed in the aggregate in excess of
$25,000 during calendar year 1995, 1996 or 1997 and through October 31, 1998.
5.21 ACCOUNTS RECEIVABLE. Company Disclosure Schedule 5.21 sets forth
the accounts receivable of the Company as of October 31, 1998, together with an
aging of these accounts. These accounts receivable, and all accounts receivable
of the Company created after October 31, 1998, arose from valid transactions in
the ordinary course of business and will be good and collectible at the recorded
amounts thereof, except to the extent adequate reserves therefor have been made
on the Company Financial Statements. No portion of the accounts receivable is
subject to counterclaim or setoff.
5.22 BANK ACCOUNTS. Company Disclosure Schedule 5.22 lists all bank,
money market, savings and similar accounts and safe deposit boxes of the
Company, specifying the account numbers and the authorized signatories or
persons having access to them.
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5.23 CORPORATE RECORDS. The corporate record books (including the share
records) of the Company are complete, accurate and up to date with all necessary
signatures and set forth all meetings and actions taken by the shareholders and
directors of the Company and all transactions involving the shares of the
Company (and contain all canceled share certificates).
5.24 COMBINATIONS INVOLVING THE COMPANY. All mergers, consolidations or
other business combinations involving the Company and all liquidations,
purchases or other transactions by which the Company or any of its Subsidiaries
acquired or disposed of any of their business and property were conducted in
accordance with applicable certificates of incorporation, bylaws, any other
applicable agreements, instruments and documents and applicable Laws.
5.25 LABOR RELATIONS. Except as disclosed on Company Disclosure Schedule
5.25, the Company is in compliance with all federal and state Laws respecting
employment and employment practices, terms and conditions of employment, wages
and hours, and is not engaged in any unfair labor or unlawful employment
practice except where a failure to so comply would not have a Material Adverse
Effect on the Company. There is no unlawful employment practice or
discrimination charge pending before the United States Equal Employment
Opportunity Commission ("EEOC") or any EEOC recognized state "referral agency."
There is no unfair labor practice charge or complaint against the Company
pending before the National Labor Relations Board ("NLRB"). There is no labor
strike, dispute, slowdown or stoppage actually pending or, to the Shareholders'
Knowledge, threatened against or involving or affecting the Company and no NLRB
representation question exists respecting any of its employees. No grievance or
arbitration proceeding is pending and no written claim therefor exists. There is
no collective bargaining agreement that is binding on the Company. Except for
any Material Contract disclosed pursuant to Section 5.11, the Company is not a
party to or bound by any agreement, arrangement or understanding with any
employee or consultant that cannot be terminated on notice of ninety (90) or
fewer days without liability to the Company or that entitles the employee or
consultant to receive any salary continuation or severance payment or retain any
specified position with the Company.
5.26 YEAR 2000 MATTERS. Except as provided on Company Disclosure
Schedule 5.26, the Software is designed to be used prior to, during, and after
the calendar year 2000 AD, and the Software will operate during each such time
period without error relating to date data, specifically including any error
relating to, or the product of, date data which represents or references
different centuries or more than one century or any leap year. The Company's
internal systems and software and the network connections it maintains are
adequately programmed to address the Year 2000 issue.
5.27 CHANGE IN CONTROL PROVISIONS. Company Disclosure Schedule 5.27
contains a true and complete copy of all agreements in effect to which the
Company is a party and which contain any provisions which become effective upon
a change in control, merger, consolidation, sale of assets or other business
combination involving the Company or otherwise require any payment or
performance by the Company or any officer, director or shareholder thereof, now
or in the future, in connection with or as a result of any of the transactions
contemplated by this Agreement.
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5.28 DISCLOSURE. No representation, warranty or statement made by the
Company and/or the Shareholders in this Agreement, the other Purchase Agreements
or in any document or certificate furnished or to be furnished to Parent or
Acquisition Corp. pursuant to this Agreement or the other Purchase Agreements
contains or will contain any untrue or incomplete statement or omits or will
omit to state any fact necessary to make the statements contained herein or
therein not misleading in any material respect. The Company and the Shareholders
have completely and accurately responded to all diligence inquiries made by
Parent or its officers, directors, attorneys, accountants and other
representatives in connection with this Agreement and the other Purchase
Agreements. All facts known or reasonably available to the Company or the
Shareholders that are material to the financial condition, operation, or
prospects of the business and assets of the Company have been disclosed by the
Company and the Shareholders to Parent and Acquisition Corp.
5.29 SECURITIES ACT COMPLIANCE. Shareholders acknowledge that none of
the shares of the Parent Common Stock to be delivered to the Shareholders
pursuant to this Agreement will, at the time of delivery, be registered under
the securities laws of any state or federal authority (the "SECURITIES LAWS").
The Shareholders represent and warrant that they are acquiring the Parent Common
Stock for investment, and not with a view toward, or for resale in connection
with, a distribution of the Parent Common Stock. The Shareholders acknowledge
that the Parent Common Stock may be sold, pledged, hypothecated, disposed of, or
otherwise transferred or distributed only (i) pursuant to registration of the
Parent Common Stock under the Securities Laws, or (ii) pursuant to an exemption
from the registration requirements of the Securities Laws.
5.30 NO PRIOR CONVICTIONS. No Shareholder has been convicted of,
arrested for, or has any action pending for, a crime involving fraud,
embezzlement or theft or any similar crime.
5.31 TAX ADVICE. Each Shareholder has reviewed with his tax advisor the
United States federal, state, local and foreign tax consequences of an
investment in the Parent Common Stock and the transactions contemplated by this
Agreement and the other Purchase Agreements. Each Shareholder is relying solely
on such advisor and not on any statements or representations of Parent or
Acquisition Corp or any of its agents, and understands that he (and not Parent,
Acquisition Corp. or any other person or entity) shall be responsible for his
own tax liability that may arise as a result of this investment or the
transactions contemplated by this Agreement and the other Purchase Agreements.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION CORP.
To induce the Company and the Shareholders to enter into this Agreement
and the other Purchase Agreements, Parent and Acquisition Corp. hereby represent
and warrant to the Company and the Shareholders as follows:
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6.1 CORPORATE ORGANIZATION.
(a) Parent is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Georgia. Parent has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted, and is duly licensed
or qualified to do business and is in good standing in each jurisdiction in
which the nature of the business conducted by it or the character or location of
the properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed, qualified
or in good standing would not have a Material Adverse Effect on Parent.
(b) Acquisition Corp. is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Georgia.
Acquisition Corp. has the corporate power and authority to own or lease all of
its properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business and is in good
standing in each jurisdiction in which the nature of the business conducted by
it or the character or location of the properties and assets owned or leased by
it makes such licensing or qualification necessary, except where the failure to
be so licensed, qualified or in good standing would not have a Material Adverse
Effect on Acquisition Corp.
6.2 CAPITALIZATION.
(a) The authorized capital stock of Parent consists of 50,000,000
shares of Parent Common Stock and 20,000,000 shares of preferred stock, without
par value ("PARENT PREFERRED STOCK"). As of November 27, 1998, there were
18,697,059 shares of Parent Common Stock issued and outstanding, and no shares
of Parent Preferred Stock issued and outstanding. As of November 27, 1998, there
were 3,839,943 shares of Parent Common Stock reserved for issuance upon the
exercise of outstanding stock options and warrants ("STOCK OPTIONS"). All issued
and outstanding shares of Parent Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable.
(b) The authorized capital stock of Acquisition Corp. consists of
1,000 shares of common stock, without par value ("ACQUISITION STOCK"). As of
November 30, 1998, there were 1,000 shares of Acquisition Stock issued and
outstanding. All issued and outstanding shares of Acquisition Stock have been
duly authorized and validly issued and are fully paid and nonassessable.
6.3 AUTHORITY; NO VIOLATION.
(a) No Authorizations of any third party or Governmental
Authority are necessary on behalf of Parent in connection with the execution and
delivery by Parent of this Agreement and the consummation by Parent of the
transactions contemplated hereby. Parent has the full corporate power and
authority to execute and deliver this Agreement and the other Purchase
Agreements to which it is a Party and to consummate the transactions
contemplated hereby in accordance with the terms hereof and thereof. The
execution and delivery of this Agreement and the other Purchase Agreements to
which it is a Party and the consummation of
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the transactions contemplated hereby and thereby have been duly and validly
approved by the Board of Directors of Parent in accordance with the Articles of
Incorporation and Bylaws of Parent and with applicable Laws. No other corporate
proceedings on the part of Parent are necessary for Parent to execute and
deliver this Agreement and for Parent to be bound by the terms hereof. This
Agreement and the other Purchase Agreements to which they are a Party have been
duly and validly executed and delivered by Parent and constitute the valid and
binding obligation of Parent enforceable against Parent in accordance with its
and their terms.
(b) Neither the execution and delivery of this Agreement and the
other Purchase Agreements to which it is a Party by Parent, nor the consummation
by Parent of the transactions contemplated hereby and thereby in accordance with
the terms hereof and thereof, nor compliance by Parent with any of the terms or
provisions hereof and thereof, will (i) violate any provision of Parent's
Articles of Incorporation or Bylaws, (ii) violate any Laws applicable to Parent
or any of its properties or assets, or (iii) violate, conflict with, result in a
breach of any provisions of, constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, result in
the termination of, accelerate the performance required by, or result in the
creation of any Lien upon any of the respective properties or assets of Parent
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which Parent is a party, or by which it or any of its properties
or assets may be bound or affected except, with respect to (ii) and (iii) above,
such as individually or in the aggregate will not have a Material Adverse Effect
on Parent, and which will not prevent or delay the consummation of the
transactions contemplated hereby.
(c) Acquisition Corp. has the full corporate power and authority
to execute and deliver this Agreement and the other Purchase Agreements to which
it is a Party and to consummate the transactions contemplated hereby and thereby
in accordance with the terms hereof and thereof. The execution and delivery of
this Agreement and the other Purchase Agreements to which it is a Party and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly approved by the Board of Directors and the sole shareholder of
Acquisition Corp. in accordance with the Articles of Incorporation and Bylaws of
Acquisition Corp. and applicable Laws. No other corporate proceedings on the
part of Acquisition Corp. are necessary to consummate the transactions so
contemplated. This Agreement and the other Purchase Agreements to which it is a
Party have been duly and validly executed and delivered by Acquisition Corp. and
constitute the valid and binding obligation of Acquisition Corp. enforceable
against Acquisition Corp. in accordance with their terms.
6.4 BROKER'S AND OTHER FEES. Neither Parent nor Acquisition Corp. nor
any of their directors or officers has employed any broker or finder or incurred
any liability for any broker's or finder's fees or commissions in connection
with any of the transactions contemplated by this Agreement.
6.5 CURRENT PUBLIC INFORMATION; FINANCIAL STATEMENTS. Parent represents
and warrants to the Company and the Shareholders that it is a "reporting issuer"
and has a class of securities registered under Section 12(g) of the Securities
Exchange Act of 1934, as amended
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(the "EXCHANGE ACT"). Parent has made available to the Company and the
Shareholders copies of its (i) Registration Statement on Form S-1 (Registration
No. 333-53341) as declared effective by the SEC on July 30, 1998, and (ii)
Quarterly Reports on Form 10-Q for the periods ended June 30, 1998 and September
30, 1998 as filed with the SEC (collectively, the "SEC REPORTS"). The SEC
Reports, at the time filed, complied as to form in all material respects with
the requirements of the Exchange Act and Securities Act. None of the SEC Reports
contained, when filed with the SEC, any untrue statement of material fact or
omitted to state a material fact necessary in order to make the statements made,
in light of the circumstances under which they were made, not misleading. The
financial statements (including, in each case, any notes thereto) contained in
the SEC Reports were prepared in accordance with generally accepted accounting
principles and practices ("GAAP") and fairly presented the financial position,
results of operations and cash flows of Parent at the respective dates thereof
and for the respective periods indicated therein (subject, in the case of
unaudited statements, to normal and recurring year-end adjustments which were
not and are not expected, individually or in the aggregate, to be material in
amount).
6.6 LEGAL PROCEEDINGS. Except as disclosed in the SEC Reports or
otherwise disclosed by Parent to the Company and/or the Shareholders, there is
no action, suit or proceeding before or by any court or governmental agency or
body, domestic or foreign, now pending or, to the knowledge of Parent's chief
executive officer, chief operating officer and chief financial officer,
threatened, against or affecting Parent, or any of its properties, which (a)
could reasonably be expected to result in any material adverse change in the
business, financial condition or results of operations of Parent, or which could
reasonably be expected to materially and adversely affect the properties or
assets of Parent or (b) could reasonably be expected to materially and adversely
affect the ability of Parent to perform its obligations pursuant to this
Agreement and the other Purchase Agreements.
6.7 PARENT COMMON STOCK. At the Closing Date, the Parent Common Stock to
be delivered to the Holders will be duly authorized and validly issued, fully
paid and nonassessable, free of preemptive rights and free and clear of all
Liens created by or through Parent (except as set forth in this Agreement and
the documents and agreements executed in connection herewith).
6.8 DISCLOSURE. No representation or warranty of Parent or Acquisition
Corp. in this Agreement and the other Purchase Agreements, nor any financial
statements or other written statements or certificates furnished to the
Shareholders in connection with the transactions contemplated by this Agreement,
contains or as of the Closing Date will contain, any untrue statement of a
material fact, or omit or as of the Closing Date will omit to state a material
fact necessary to make the statements herein or therein not misleading in any
material respect.
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ARTICLE 7
COVENANTS AND AGREEMENTS OF THE PARTIES
7.1 CONDUCT OF BUSINESS. The Company and the Shareholders agree that
from the date hereof to the Closing Date, the Company shall conduct its business
only in the ordinary course and consistent with prudent business practice and
past practice, except for transactions permitted hereunder or with the prior
written consent of Parent. Without limiting the generality of the foregoing, the
Shareholders and the Company agree that the Company shall use all commercially
reasonable efforts to:
(a) maintain its existence and status in good standing in all
jurisdictions in which it is required to be qualified or registered to conduct
its business, except where the failure to do so would not have a Material
Adverse Effect on the Company;
(b) maintain all of its tangible assets in good operating
condition and maintain the protection of all intellectual property in
substantially the same standing as exists on the date hereof;
(c) continue performance in the ordinary course of its
obligations under its contracts and agreements;
(d) preserve its business organization intact, use all
commercially reasonable efforts to keep available its present officers and
employees and preserve its present relationships with suppliers, customers and
others having business relationships with it; and
(e) maintain its existing insurance, subject to variations in
amount required by the ordinary operations of its business.
7.2 NEGATIVE COVENANTS.
(a) Except as indicated on Company Disclosure Schedule 7.2, the
Company and the Shareholders agree that from the date hereof to the Closing
Date, except as otherwise approved by Parent in writing, or as permitted or
required by this Agreement, the Company will not:
(i) change any provision of its Articles of Incorporation or
Bylaws;
(ii) issue any additional shares of Company Common Stock or
other securities or change the number of shares of its authorized or issued
capital stock or issue or grant any option, warrant, call, commitment,
subscription, right to purchase or agreement of any character relating to the
authorized or issued capital stock of the Company or any securities convertible
into shares of such stock, or split, combine or reclassify any shares of its
capital stock, or declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock;
(iii) directly or indirectly redeem, purchase or otherwise
acquire any capital stock of the Company;
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(iv) grant any severance or termination pay to, or enter
into or amend any employment or severance agreement with, any of its directors,
officers or employees; adopt any new employee benefit plan or arrangement of any
type; or award any increase in compensation or benefits to its directors,
officers or employees except with respect to employee increases in the ordinary
course of business and consistent with past practices and policies and, with
regard to bonuses in amounts that do not result in a material variance from the
amounts reserved for such payments through the date of the most recent balance
sheet included in the Company Financial Statements;
(v) sell or dispose of any assets other than in the ordinary
course of business consistent with past practices;
(vi) make any capital expenditures outside the ordinary
course of business;
(vii) acquire in any manner whatsoever any business or
entity;
(viii) enter into, terminate, modify or amend any agreement
or arrangement with any officer or director of the Company or any "affiliate" of
any such officer or director, as that term is defined in Regulation 14A of the
Exchange Act (an "AFFILIATE");
(ix) make any change in its accounting methods or practices;
(x) incur, create, assume or guarantee any Liabilities
except in the ordinary course of business and as would not have a Material
Adverse Effect on the Company;
(xi) increase, or make any change in any assumptions
underlying the method of calculating any bad debt, contingency or other reserves
from those reflected in the Company Financial Statements;
(xii) make any change in the method of valuing assets
included in the Company Financial Statements;
(xiii) pay, discharge or satisfy any Liabilities, other than
by payment, discharge or satisfaction in the ordinary course of business;
(xiv) permit or allow any of its assets (real, personal or
mixed, tangible or intangible) to be subjected to any Lien, except for Liens
which are in existence on the date hereof and which are disclosed on the Company
Disclosure Schedules and Liens for amounts not yet due and payable which Liens
are contested in good faith and for which adequate reserves have been made;
(xv) write down the value of any inventory or write off as
uncollectible any notes or accounts receivable, except for write-downs and
write-offs in the ordinary course of business;
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(xvi) cancel or waive any claims or rights, or sell,
transfer, distribute or otherwise dispose of any assets or properties, except in
the ordinary course of business;
(xvii) declare, file or permit to be filed any voluntary or
involuntary bankruptcy, receivership, insolvency or other similar proceeding or
petition with any Governmental Authority with respect to the Company or any of
the Shareholders;
(xviii)fail to perform its obligations under any Material
Contract (except those being contested in good faith) or enter into, assume or
amend any agreement that would be a Material Contract other than agreements to
provide services entered into in the ordinary and usual course of business;
(xix) take any action that would or could reasonably be
expected to result in (A) a Material Adverse Effect on the Company or (B) any of
his or their representations and warranties contained in Article 5 not being
true and correct in any material respect at the Closing Date, or that would
cause any of the conditions to Closing not to be satisfied; or
(xx) directly or indirectly agree to do any of the
foregoing.
(b) Parent and Acquisition Corp. agree that from the date hereof
to the Closing Date, except as otherwise approved by the Company in writing, or
as permitted or required by this Agreement, it will not:
(i) declare, set aside or pay any dividend or other
distribution of cash or property (other than capital stock) in respect of its
capital stock;
(ii) make any material change in its accounting methods or
practices as shown in its financial statements, other than changes required by
GAAP or by Governmental Authorities;
(iii) take any action that would result in any of its
representations and warranties contained in Article 6 not being true and correct
in any material respect at the Closing Date or that would cause any of the
conditions to Closing not to be satisfied; or
(iv) directly or indirectly agree to do any of the
foregoing.
7.3 NO SOLICITATION. Except as indicated on Company Disclosure Schedule
7.3, from the date hereof to the Closing Date or the earlier termination of this
Agreement in accordance with its terms, the Company and the Shareholders:
(a) agree that neither the Company nor any of its present or
future subsidiaries or other affiliates, nor any of its or their directors,
officers, shareholders, employees, representatives or other agents
(collectively, the "COMPANY AFFILIATES") shall, directly or indirectly, (i)
enter into any agreement (or agree to do so), or solicit, initiate or knowingly
encourage the invitation of inquiries or proposals or offers from any person or
entity (other than Parent, Acquisition Corp. or its or their directors,
officers, employees,
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representatives and agents) concerning: (A) any sale of assets or transfer or
liabilities of the Company or any of its present or future subsidiaries,
divisions or other affiliates (other than any such sale or transfer in the
ordinary course of business); (B) any issuance, purchase or sale of capital
stock or debt or other securities of the Company or any of its present or future
subsidiaries, divisions or other affiliates (other than the incurrence of
liabilities in the ordinary course of its business); or (C) any merger,
consolidation, restructuring, recapitalization or other significant transaction
involving the Company or any of its present or future subsidiaries, divisions or
other affiliates; or (ii) provide any confidential information to, participate
in discussions or negotiations relating to any such transaction with, or
otherwise cooperate with or assist or participate in any effort to take such
action by any person or entity (other than Parent, Acquisition Corp. or its or
their directors, officers, shareholders, employees, representatives and agents).
The Company shall immediately advise Parent and Acquisition Corp. if any such
inquiry, offer or proposal is made or received by the Company or any of the
Company Affiliates;
(b) will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing, and the Company and the
Shareholders will take the necessary steps to inform the individuals or entities
referred to above of the obligations undertaken in this Section 7.3; and
(c) will notify Parent and Acquisition Corp. immediately of the
identity of any potential acquiror and the terms of any proposal or offer
(including, without limitation, any proposal or offer to any of the
Shareholders) with respect to a proposed or potential merger, acquisition,
consolidation, business combination, transfer or similar transaction involving,
or any purchase of all or any significant portion of the assets, equity
securities of or rights with respect to any assets or securities of, the Company
whether or not permitted by this Section 7.3.
7.4 CURRENT INFORMATION.
(a) During the period from the date of this Agreement to the
Closing Date or the earlier termination of this Agreement in accordance with its
terms, on a frequent basis:
(b) The Company and the Shareholders will cause one or more of
the Company's representatives to confer with representatives of Parent and
Acquisition Corp. regarding its business, operations, properties, assets and
financial condition; each of the Parties will cause one or more of its
representatives to confer with representatives of the other Parties regarding
matters relating to the completion of the transactions contemplated herein; and
(c) Each of the Parties will notify the other Parties as soon as
practicable after any determination or discovery by it of any fact or
circumstance relating to any Party which it has discovered through the course of
investigation and which represents, or is reasonably likely to represent, a
material breach of any representation, warranty, covenant or agreement of any
Party or which has or is reasonably likely to have a Material Adverse Effect on
any Party.
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7.5 ACCESS TO PROPERTIES AND RECORDS; CONFIDENTIALITY.
(a) The Company and the Shareholders shall permit Parent and
Acquisition Corp. and their representatives reasonable access to its properties
and shall disclose and make available to Parent, Acquisition Corp. and their
representatives all books, papers and records and information relating to it,
its assets, stock ownership, properties, operations, obligations and
liabilities, including, but not limited to, all books of account (including the
general ledger), tax records, minute books of directors' and shareholders'
meetings, organizational documents, agreements, filings with any Governmental
Authority, accountants' work papers, litigation files, plans affecting
employees, and any other records and information in which Parent, and
Acquisition Corp. and their representatives and their may have a reasonable
interest; provided that such investigation shall be reasonably related to the
transactions contemplated by this Agreement and shall not interfere
unnecessarily with the normal business operations of the Company.
(b) The Parties agree that the terms of that certain
Confidentiality and Standstill Agreement dated November 6, 1998 (the
"CONFIDENTIALITY AGREEMENT"), a copy of which is attached hereto as Exhibit 7.5,
shall continue to be applicable to the Parties from the date hereof to the
Closing Date. If the Closing shall occur, the terms of the Confidentiality
Agreement shall remain in effect until two (2) years following the Closing Date.
If the Closing does not occur, the Confidentiality Agreement shall continue in
effect pursuant to the terms thereof.
7.6 REGULATORY MATTERS; CONSENTS; COOPERATION, ETC.
(a) Each of the Parties will promptly furnish each other with
copies of written communications received by them or any of their respective
Subsidiaries from, or delivered by any of the foregoing to, any Governmental
Authorities in respect of the transactions contemplated hereby.
(b) As soon as practicable following the date hereof, each of the
Parties will use its commercially reasonable efforts to obtain all material
consents, waivers and other Approvals under any of its or its Subsidiaries'
agreements, contracts, licenses or leases required to be obtained by such Party
in connection with the consummation of the transactions contemplated hereby.
7.7 PARTIES' EFFORTS; FURTHER ASSURANCES; COOPERATION. Subject to the
other provisions in this Agreement, the Parties shall in good faith perform
their obligations under this Agreement before, at and after the Closing Date,
and shall each use all commercially reasonable efforts to do, or cause to be
done, all things necessary, proper or advisable under applicable Laws to obtain
all Authorizations and satisfy all conditions to the obligations of the Parties
under this Agreement and to cause the transactions contemplated by this
Agreement to be carried out promptly in accordance with the terms hereof and
shall cooperate fully with each other and their respective officers, directors,
employees, agents, counsel, accountants and other designees in connection with
any steps required to be taken as part of their respective obligations under
this Agreement. Upon the execution of this Agreement and thereafter, each
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party shall take such actions and execute and deliver such documents as may be
reasonably requested by the other Parties in order to consummate the
transactions contemplated by this Agreement.
7.8 PUBLIC ANNOUNCEMENTS. Prior to the Closing Date or the earlier
termination of this Agreement in accordance with its terms, the Parties shall
consult and cooperate with each other as to the timing, content and form of any
press release or other public disclosure related to this Agreement or the
transactions contemplated herein, and will not issue a press release or make any
such public disclosure without the prior consent of the other party, which shall
not be unreasonably withheld, conditioned or delayed. After the Closing Date,
none of the Shareholders shall make any public announcement regarding any aspect
of this Agreement without Parent's prior written consent. Nothing in this
Section 7.8 shall be deemed to prohibit any Party from making any disclosure
which its counsel deems necessary in order to satisfy such Party's disclosure
obligations imposed by Law or Governmental Authority.
7.9 FAILURE TO FULFILL CONDITIONS. In the event that any Party
determines that a material condition to its or the other's obligation to
consummate the transactions contemplated hereby cannot be fulfilled on or prior
to December 1, 1998 (the "DEADLINE DATE"), it will promptly notify the other
Party. Except for any acquisition or merger discussions Parent may enter into
with Persons, each Party will promptly inform the other Parties of any facts
applicable to it that would be likely to prevent or materially delay
consummation of the transactions contemplated by this Agreement.
7.10 DISCLOSURE SUPPLEMENTS. From time to time prior to the Closing
Date, each Party hereto will promptly notify the other Party of any inaccuracy
in its respective Disclosure Schedules delivered pursuant hereto including,
without limitation, any matter which, if existing, occurring or known at the
date of this Agreement, would have been required to be set forth or described in
such Schedule or which is necessary to correct any information in such Schedule
that has been rendered inaccurate. Notwithstanding the foregoing, for the
purpose of determining satisfaction of the conditions set forth in Article 8, no
such notification shall be deemed to amend such Disclosure Schedules or shall be
deemed to be part hereof unless agreed to by the other Parties.
7.11 RELEASE; COVENANT NOT TO SUE.
(a) If the Closing occurs, then the Shareholders hereby release
Parent, the Acquisition Corp. and the Company, and their agents,
representatives, successors and assigns (collectively, the "RELEASED PARTIES")
from any and all Claims (as defined herein) that any of the Shareholders may
have or may have had against any or all of the Released Parties arising out of
or in connection with any transactions between the Shareholders and any or all
of the Released Parties prior to, or arising from or with respect to any fact,
circumstance, act or omissions occurring prior to or on the Closing Date.
(b) If the Closing occurs, the Shareholders covenant not to sue
or otherwise institute, cause to be instituted or in any way participate in, any
legal or administrative proceeding against any of the Released Parties with
respect to any claims (as defined by
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Section 101 of the United States Bankruptcy Code, as amended), debts, demands,
actions, causes of action, suits, accounts, damages and liabilities of every
name and nature, both at law and in equity, whether known or unknown
(collectively, the "CLAIMS"), that the Shareholder or the Company now has, ever
had or may, at any time, claim to have had against any of the Released Parties.
This covenant shall not apply to Claims based upon acts or omissions by a
Released Party first occurring after the Closing Date. The Shareholders
represent and warrant that they have not voluntarily or involuntarily assigned
or suffered any transfer of any of the Claims to any other person or entity, and
they agree to indemnify and hold harmless the Released Parties from and against
any loss, damage, liability, cost and expense (including, but not limited to,
attorneys' fees incurred in connection therewith or in connection with enforcing
this indemnity) asserted against, imposed on or incurred by any Released Parties
by reason of any such Claims which were effectively or purportedly assigned or
transferred by the Company or the Shareholders.
7.12 [INTENTIONALLY OMITTED.]
7.13 NO TRANSFERS. Except pursuant to this Agreement or with the prior
written consent of Parent and Acquisition Corp., none of the Shareholders shall
transfer, assign, convey or otherwise dispose of any of the Company Common Stock
or any rights with respect to such Company Common Stock (including voting and
conversion or option rights) after the date of this Agreement.
7.14 SPECIAL PROVISIONS WITH RESPECT TO THE COMPANY. If the Closing
occurs as provided herein, then at that time all representations, warranties,
covenants and agreements to the extent made or adopted by the Company (and only
to such extent) shall expire and be of no further force and effect, and the
Company's having made representations, warranties, covenants and agreements
shall in no way limit the liability of the Shareholders for those
representations, warranties, covenants and agreements pursuant to this
Agreement.
7.15 COOPERATION AND EXCHANGE OF INFORMATION. The Parties agree to
furnish, or to cause to be furnished in good faith to each other, such
cooperation and assistance as is reasonably necessary to file any future
returns, to respond to audits, to negotiate settlements with Tax authorities and
to prosecute and defend against Tax claims.
7.16 CUSTOMER CONTACTS. The Company shall permit Parent and Acquisition
Corp. to conduct a survey or otherwise inquire of certain or all of the
Company's key customers, as selected by Parent and Acquisition Corp., regarding
the relationship between such customer and the Company and the impact of a
change in control on such relationship. The Company shall assist Parent and
Acquisition Corp. in making such survey or inquiries and shall have the right to
have a representative of its choice participate therein.
7.17 KEY SALES PERSONNEL. After Closing, the new officers of the Company
shall identify those key sales personnel ("KSPS") of the Company with whom the
Company desires to maintain relationships, and the Company shall offer such KSPs
such new or additional terms for such relationship as the Company elects. The
KSPs that continue to perform services for the Company pursuant to agreements
which are reasonably satisfactory to the Company shall
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receive, in the aggregate, a bonus in the form of restricted shares of Parent
Common Stock with a total fair market value of up to $909,450. In addition,
these KSPs (and any future KSPs, as determined by the new officers of the
Company after Closing) shall be eligible to receive, in the aggregate, up to a
maximum of $2,728,350 in bonuses in the form of cash payments which are to be
earned, if at all, over a 2-year performance period beginning January 1, 1999.
The Company (or Parent) shall establish a bonus plan for these KSPs, the terms
and conditions of which will be established promptly after Closing.
ARTICLE 8
CLOSING CONDITIONS
8.1 CONDITIONS OF EACH PARTY'S OBLIGATIONS UNDER THIS AGREEMENT. The
respective obligations of each party under this Agreement shall be subject to
the satisfaction, or, where permissible under applicable Law, waiver at or prior
to the Closing Date of the following conditions:
(a) Approvals and Regulatory Filings. All necessary
Authorizations of Governmental Authorities required to consummate the
transactions contemplated hereby shall have been obtained without any term or
condition which would materially impair the value of the Company, Acquisition
Corp. or Parent. All conditions required to be satisfied prior to the Closing
Date by the terms of such approvals and consents shall have been satisfied; and
all statutory waiting periods in respect thereof shall have expired.
(b) Suits and Proceedings. The consummation of the transactions
contemplated hereby will not violate the provisions of any injunction, order,
judgment, decree or Law applicable or effective with respect to Parent,
Acquisition Corp. or the Company or their officers and directors. No suit or
proceeding shall have been instituted by any person, or, to the knowledge of
Parent, Acquisition Corp. or the Shareholders, shall have been threatened by any
Governmental Authority, and not subsequently withdrawn, dismissed or otherwise
eliminated, which seeks (i) to prohibit, restrict or delay consummation of the
transactions contemplated hereby or to limit in any material respect the right
of Parent or Acquisition Corp. to control any material aspect of the business of
Parent, Acquisition Corp. or the Company after the Closing Date, or (ii) to
subject Parent, Acquisition Corp. or the Company or their respective directors
or officers to material liability on the ground that it or they have breached
any Law or otherwise acted improperly in relation to the transactions
contemplated by this Agreement.
(c) Registration Rights Agreement. Parent and the Shareholders
shall have executed and delivered the Registration Rights Agreement
substantially in the form attached hereto as Exhibit 8.1(c).
8.2 CONDITIONS TO THE OBLIGATIONS OF PARENT AND ACQUISITION CORP. UNDER
THIS AGREEMENT. The obligations of Parent and Acquisition Corp. under this
Agreement shall be further subject to the satisfaction or waiver, at or prior to
the Closing Date (and continued until the Closing Date), of the following
conditions:
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(a) Representations and Warranties; Covenants and Agreements;
Consents. The representations and warranties of the Shareholders contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and shall also be true and correct in all material respects on the
Closing Date as though made on and as of the Closing Date, except that those
representations and warranties which are confined to a particular date shall
speak only as of such date, and the Company and the Shareholders shall have
performed in all material respects the agreements, covenants and obligations to
be performed by it or them at or prior to the Closing Date. All Authorizations
of or with any Governmental Authority or other third party that are required for
or in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby by the Company and the
Shareholders shall have been obtained or made.
(b) Opinion of Counsel. Parent and Acquisition Corp. shall have
received an opinion of counsel to the Company and the Shareholders, dated the
Closing Date, in form and substance reasonably satisfactory to Parent and
Acquisition Corp., covering the matters set forth on Exhibit 8.2(b).
(c) Certificates. The Shareholders shall have furnished Parent
with such certificates of the Company and its authorized officers, Shareholders
or others and such other documents to evidence fulfillment of the conditions set
forth in this Article 8 and otherwise to consummate the transactions
contemplated pursuant to this Agreement as Parent and Acquisition Corp. may
reasonably request, including certificates in the form attached hereto as
Exhibit 8.2(c).
(d) Noncompetition, Nonsolicitation and Confidentiality
Agreements. The Shareholders required by Parent and Acquisition Corp. shall have
executed and delivered to Parent and Acquisition Corp. Noncompetition,
Nonsolicitation and Confidentiality Agreements substantially in the form
attached hereto as Exhibit 8.2(d).
(e) Spousal Consents. The Shareholders shall have delivered to
Parent and Acquisition Corp. consent letters from their respective spouses in
the form attached hereto as Exhibit 8.2(e).
(f) Work Product Agreements. The Shareholders shall have
delivered to Parent and Acquisition Corp. an Assignment of Work Product
Agreement in the form attached hereto as Exhibit 8.2(f), signed by all persons
who have developed, modified or otherwise had access to the source code for the
Software.
(g) Completion of Due Diligence on the Company. Parent and
Acquisition Corp. shall have completed their review of the Company, the results
of which shall be acceptable to Parent and Acquisition Corp. in their absolute
discretion.
(h) No Material Adverse Effect on the Company. No event shall
have occurred and no fact or circumstance shall have arisen which, in the
judgment of Parent and Acquisition Corp., is reasonably likely to have a
Material Adverse Effect on the Company or materially and adversely affect the
value of this transaction to Parent and Acquisition Corp.,
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since the date of the most recent Company Financial Statements except (i) the
announcement of this Agreement or (ii) conditions effecting global economy or
regional economy in which Parent operates any part of its or their business.
(i) Customer Inquiries. Parent and Acquisition Corp. shall be
reasonably satisfied with the results of their inquiries of the Company's
customers with respect to the impact of a change in control on their
relationship with the Company.
(j) No Interest in Software. Except as set forth in Company
Disclosures Schedule 8.2(j), the Company shall have eliminated or provided for
the elimination of any and all claims to ownership, access, copies, source code
and license and royalty interests in all software and systems associated with
the Company's CashFlow Manager system, which shall include the following, each
of which shall be satisfactory to Parent and Acquisition Corp. and their counsel
in all respects:
(i) executed agreements providing an option to the Company
to purchase the royalty interest of Steve Wood; and
(ii) executed agreements providing an option to the Company
to purchase the royalty interest of Bryan Frank.
(k) Termination or Assignment of Certain Agreements. The Company
shall have terminated the agreements and contracts listed on Schedule 8.2(k)
hereto.
(l) Spinoff. The Company and their Subsidiaries and their
shareholders shall have executed and delivered agreements, the terms of which
are acceptable to Parent and Acquisition Corp., with respect to which the
Company shall have transferred, assigned, sold or otherwise conveyed certain of
the Company's assets and all of its liabilities, other than the Company's
CashFlow Manager software systems and product line and related assets and
liabilities, including accounts receivable, customer agreements, intellectual
property rights, commission tracking software, and any other support systems
necessary to ensure continuity in the business and operations to be transferred
to Parent and Acquisition Corp. pursuant to this Agreement.
(m) Sullivan and O'Reilly Interests. The Shareholders shall have
delivered executed settlement agreements, releases or other evidence that all
obligations owed by the Company to Ed Sullivan and Robert O'Reilly have been
paid and that all related Claims against the Company, its successors,
shareholders and assigns have been waived and released.
(n) Release of Obligations. All obligations of the Company
pursuant to any loan, lease, guaranty, commitment or other undertaking of the
Company, the Shareholders or any of its or their Subsidiaries and other
Affiliates, whether as maker, guarantor or otherwise, including those
obligations listed on Schedule 8.2(n), shall have been fully and permanently
released or satisfied, or payoff letters shall have been executed and delivered,
pursuant to documents and agreements satisfactory in all respects to Parent,
Acquisition Corp. and their counsel.
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8.3 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS
UNDER THIS AGREEMENT. The obligations of the Company and the Shareholders under
this Agreement shall be further subject to the satisfaction or waiver, at or
prior to the Closing Date, of the following conditions:
(a) Representations and Warranties; Covenants and Agreements;
Consents. The representations and warranties of Parent and Acquisition Corp.
contained in this Agreement shall be true and correct in all material respects
as of the date hereof and shall also be true and correct in all material
respects on the Closing Date as though made on and as of the Closing Date, and
Parent and Acquisition Corp. shall have performed in all material respects the
agreements, covenants and obligations to be performed by it and them at or prior
to the Closing Date. All Authorizations of or with any Governmental Authority or
other third party that are required for or in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby by Parent and Acquisition Corp. shall have been obtained or made, except
where the failure to obtain any such Authorizations would not have a Material
Adverse Effect on Parent.
(b) Certificates. Parent and Acquisition Corp. shall have
furnished the Company with such certificates of its officers or others and such
other documents to evidence fulfillment of the conditions set forth in this
Article 8 and otherwise to consummate the transactions contemplated pursuant to
this Agreement as the Company may reasonably request.
(c) No Material Adverse Effect on Parent. No Material Adverse
Effect with respect to Parent shall have occurred since the date of this
Agreement except (i) the announcement of this Agreement, and (ii) conditions
effecting global economy or regional economy in which Parent operates any part
of its business.
(d) Approvals. This Agreement and the transactions contemplated
hereby shall have received all Required Government Consents and other consents
or approvals from third parties (including lenders, licensees and lessors)
required to consummate the transactions contemplated hereby which, either
individually or in the aggregate, if not obtained would have a Material Adverse
Effect.
ARTICLE 9
TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION. This Agreement may be terminated prior to the Closing
Date, whether before or after approval of this Agreement by the Shareholders,
Parent or Acquisition Corp.:
(a) by mutual written consent of Parent or Acquisition Corp. and
the Shareholders;
(b) by Parent or Acquisition Corp. or the Shareholders if the
Closing Date shall not have occurred on or prior to the Deadline Date; provided,
however, that the right to terminate this Agreement under this Section 9.1(b)
shall not be available to any Party whose
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action or failure to act has been a principal cause of or resulted in the
failure of the transaction contemplated by this Agreement to occur on or before
such date and such action or failure to act constitutes a willful and material
breach of this Agreement;
(c) by Parent or Acquisition Corp., if there has been a material
breach of any representation, warranty, covenant, agreement or obligation of the
Company or any Shareholder hereunder in each case which either is not capable of
being remedied, or, if capable of being remedied, shall not have been remedied
within 10 days after receipt by the Company or the Shareholders, as appropriate,
of notice in writing from Parent or Acquisition Corp. specifying the nature of
such breach and requesting that it be remedied;
(d) by the Shareholders, if there has been a material breach in
any representation, warranty, covenant, agreement or obligation of Parent or
Acquisition Corp. hereunder in each case which either is not capable of being
remedied, or, if capable of being remedied, shall not have been remedied within
10 days after receipt by Parent or Acquisition Corp. of notice in writing from
the Shareholders specifying the nature of such breach and requesting that it be
remedied;
(e) by Parent or Acquisition Corp. if any of the conditions set
forth in Section 8.1 or 8.2 is not satisfied and is no longer capable of being
satisfied by the Closing Date; or
(f) by the Shareholders if any of the conditions set forth in
Section 8.1 or 8.3 is not satisfied and is no longer capable of being satisfied
by the Closing Date;
9.2 EFFECT OF TERMINATION.
(a) If either Parent, Acquisition Corp. or the Shareholders
terminates and abandons this Agreement pursuant to Section 9.1, this Agreement,
other than Section 7.5(b), this Section 9.2, Section 9.3, Article 10 and Section
11.1 (each of which shall survive termination), shall forthwith become void and
have no effect, without any liability on the part of any Party or its officers,
directors or shareholders; provided, however, that nothing contained in this
Section 9.2, shall relieve any Party from any liability for any material breach
of this Agreement or the Confidentiality Agreement.
(b) In the event this Agreement is terminated pursuant to
Sections 9.1(b), 9.1(e) or 9.1(f) as a result of the willful and material breach
of this Agreement by the Company or the Shareholders, or pursuant to 9.1(c) or
in the event this Agreement is terminated due to the failure of the Company or
the Shareholders to obtain the required consent of third parties in connection
with the transactions contemplated by this Agreement, then the Company shall
immediately pay Parent a lump sum cash payment equal to One Hundred Thousand
Dollars ($100,000.00).
(c) In the event this Agreement is terminated pursuant to Section
9.1(b), 9.1(e) or 9.1(f) as a result of the willful and material breach of this
Agreement by Parent or Acquisition Corp., or pursuant to 9.1(d) or in the event
this Agreement is terminated due to the failure of Parent and Acquisition Corp.
to obtain the required consent of third parties in
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connection with the transactions contemplated by this Agreement, then Parent or
Acquisition Corp. shall immediately pay the Company a lump sum cash payment
equal to One Hundred Thousand Dollars ($100,000.00)
9.3 SPECIFIC PERFORMANCE. The Parties acknowledge that the rights of
each Party to consummate the transactions contemplated hereby are special,
unique, and of extraordinary character, and that, in the event any Party either
violates or fails or refuses to perform any covenant made by it herein, the
other Party or Parties will be without adequate remedy at law. Each Party
agrees, therefore, that in the event that it violates, fails or refuses to
perform any covenant or agreement made by it herein, the other Party or Parties,
so long as it or they are not in breach hereof, may, in addition to the remedies
at law, institute and prosecute an action in a court of competent jurisdiction
to enforce specific performance of such covenant or agreement or seek any other
equitable relief.
9.4 AMENDMENT. This Agreement may not be amended except by an instrument
in writing signed on behalf of all the Parties hereto.
9.5 EXTENSION; WAIVER. The Parties may, at any time prior to the Closing
Date, (a) extend the time for the performance of any of the obligations or other
acts of the other Parties; (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant thereto; or
(c) waive compliance with any of the agreements or conditions contained herein.
Any agreement on the part of any Party to any extension or waiver shall be valid
only if it is set forth in an instrument in writing signed on behalf of the
Party against which the waiver is sought to be enforced and shall apply only to
the specific condition, representation or warranty identified by the writing as
being waived, extended or modified.
ARTICLE 10
INDEMNIFICATION
10.1 INDEMNIFICATION BY THE COMPANY AND SHAREHOLDERS. Subject to the
terms of this Article 10, the Company and the Shareholders (but after the
consummation of the transactions contemplated by this Agreement, solely the
Shareholders, and not the Company) shall, jointly and severally, indemnify,
defend, save and hold harmless Parent, its subsidiaries and their respective
predecessors, successors, directors, officers, employees, agents,
representatives and assigns (collectively, the "PARENT INDEMNIFIED PARTIES"),
from and against any demands, claims (as defined in Section 101 of the U.S.
Bankruptcy Code), actions, losses, damages, deficiencies, liabilities, costs and
expenses (including, without limitation, reasonable attorneys' and accountants'
fees and expenses), together with interest and penalties, if any, awarded by
court order or otherwise agreed to (collectively, "INDEMNIFIABLE DAMAGES"),
suffered by Parent Indemnified Parties that arise out of or result from any of
the following (whether or not a third party initiates the proceeding or claim
giving rise to such Indemnifiable Damages):
(a) any breach of any of the representations, warranties,
covenants or agreements made by the Company or the Shareholders in this
Agreement and the other Purchase Agreements; or
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(b) any breach of any representation, warranty, covenant or
agreement in a document, certificate or affidavit delivered by the Company or
the Shareholders at the Closing.
10.2 INDEMNIFICATION BY PARENT. Subject to the terms of this Article 10,
Parent shall indemnify, defend, save and hold harmless the Company and the
Shareholders (but after consummation of the transactions contemplated by this
Agreement, solely the Shareholders, and not the Company) (collectively, the
"COMPANY INDEMNIFIED PARTIES"), from and against any Indemnifiable Damages
suffered by the Company Indemnified Parties that arise out of or result from any
of the following (whether or not a third party initiates the proceeding or claim
giving rise to such Indemnifiable Damages):
(a) any breach of any of the representations, warranties,
covenants and agreements made by Parent in this Agreement and the other Purchase
Agreements; or
(b) any breach of any representation, warranty, covenant or
agreement in a document, certificate or affidavit delivered by Parent or
Acquisition Corp. at the Closing.
10.3 CLAIMS FOR INDEMNIFICATION. The representations, warranties,
covenants and agreements in this Agreement shall survive the Closing subject to
the limitations set forth in Section 7.14 herein and shall not be affected by
any investigation made by the parties hereto prior to the date hereof or the
Closing Date. The Party seeking indemnification (the "INDEMNIFIED PARTY") shall
give the Party from whom indemnification is sought (the "INDEMNIFYING PARTY") a
written notice ("NOTICE OF CLAIM") within sixty (60) days of the discovery of
any loss, liability, claim or expense in respect of which the right to
indemnification contained in this Article 10 may be claimed; provided, however,
that the failure to give such notice within such sixty (60) day period shall not
result in the waiver or loss of any right to bring such claim hereunder after
such period unless, and only to the extent that, the other Party is actually
prejudiced by such failure. In the event a claim is pending or threatened or the
Indemnified Party has a reasonable belief as to the validity of the basis for
such claim, the Indemnified Party may give written notice (a "NOTICE OF POSSIBLE
CLAIM") of such claim to the Indemnifying Party, regardless of whether a loss
has arisen from such claim. A Party shall have no liability under this Article
10 for breach of a representation or warranty, unless a Notice of Claim or
Notice of Possible Claim therefor is delivered by the Indemnified Party prior to
the Determination Date (as defined in the Escrow Agreement); provided, however,
that the limitations set forth in this Section 10.3 shall not apply to liability
under this Article 10 for any intentional breach of a representation or warranty
in this Agreement. Any Notice of Claim or Notice of Possible Claim shall set
forth the representations, warranties, covenants and agreements with respect to
which the claim is made, the specific facts giving rise to an alleged basis for
the claim and the amount of liability asserted or anticipated to be asserted by
reason of the claim.
10.4 DEFENSE OF CLAIM BY THIRD PARTIES. If any claim is made by a third
party against a Party to this Agreement that, if sustained, would give rise to a
liability of another Party under this Agreement, the Party against whom the
claim is made shall promptly cause notice of the claim to be delivered to the
other Party and shall afford the other Party and its counsel, at the other
Party's sole expense, the opportunity to join in the defense and settlement of
the claim.
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The failure to provide such notice will not relieve the Indemnifying Party of
liability under this Agreement unless, and only to the extent that, the
Indemnifying Party is actually prejudiced by such failure.
10.5 THIRD PARTY CLAIM ASSISTANCE. From time to time after the Closing,
Parent, Acquisition Corp., the Company and the Shareholders shall provide or
cause their appropriate employees or representatives to provide the other
Parties with information or data in connection with the handling and defense of
any third party claim or litigation (including counterclaims filed by the
parties) in respect to which a Party may be required to indemnify another Party
under this Agreement. The Party receiving such information or data shall
reimburse the other Parties for all of their reasonable costs and expenses in
providing these services, including, without limitation, (i) all out of pocket,
travel and similar expenses incurred by their personnel in rendering these
services; and (ii) all fees and expenses for services performed by third parties
engaged by or at the request of such other Parties.
10.6 SETTLEMENT OF INDEMNIFICATION CLAIMS. If a recipient of a Notice of
Claim desires to dispute such claim, it shall, within thirty (30) days after
receipt of the Notice of Claim, give counternotice, setting forth the basis for
disputing such claim, to Parent, Acquisition Corp. or the Shareholders, as the
case may be. If no such counternotice is given within such thirty (30) day
period, or if Parent, Acquisition Corp. or the Shareholders, as the case may be,
acknowledges liability for indemnification, then the amount claimed shall be
promptly satisfied as provided in Section 10.7. If, within thirty (30) days
after the receipt of counternotice by Parent, Acquisition Corp. or the
Shareholders, as the case may be, the Shareholders, Acquisition Corp. and Parent
shall not have reached agreement as to the claim in question, then the Party
disputing the claim shall satisfy any undisputed amount as specified in Section
10.7 and the disputed amount of the claim of indemnification shall be submitted
to and settled by arbitration in accordance with the then prevailing commercial
arbitration rules of the American Arbitration Association. Such arbitration
shall be held in the Atlanta, Georgia area before a panel of three (3)
arbitrators, one selected by each of the Parties and the third selected by
mutual agreement of the first two, and all of whom shall be independent and
impartial under the rules of the American Arbitration Association. The decision
of the arbitrators shall be final and binding as to any matter submitted under
this Agreement. To the extent the decision of the arbitrators is that a Party
shall be indemnified hereunder, the amount shall be satisfied as provided in
Section 10.7. Judgment upon any award rendered by the arbitrators may be entered
in any court of competent jurisdiction.
10.7 MANNER OF INDEMNIFICATION BY THE COMPANY AND SHAREHOLDERS. Where
the Shareholders are obligated to indemnify the Parent Indemnified Parties under
Section 10.1 after the Closing Date, such indemnity obligation must be satisfied
pursuant to the Escrow Agreement by the Shareholders. Thereafter (or, if the
Closing Date fails to occur for any reason), such indemnity obligation must be
satisfied by the Shareholders (or the Company, if the Closing Date fails to
occur) by paying to that Parent Indemnified Party cash in an amount equal to the
applicable Indemnified Damages.
10.8 CERTAIN LIMITATIONS. The foregoing indemnification obligations are
subject to the limitation that no Indemnifying Party shall have any liability
for indemnification for breaches
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of representations and warranties pursuant to this Article 10 unless the total
Indemnifiable Damages for which the Indemnifying Party would be liable exceed
$100,000 in the aggregate; provided, however, that the foregoing limitation
shall not apply to any Indemnifiable Damages with respect to, as a result of or
involving any intentional breach of a representation or warranty in this
Agreement. In no event shall the liability of the Shareholders, Acquisition
Corp. and Parent under this Article 10 exceed the total Purchase Price paid by
Acquisition Corp. for the Company Common Stock.
10.9 OTHER INDEMNIFICATIONS. The Shareholders acknowledge and agree that
the Company shall have no obligation to indemnify the Shareholders pursuant to
the Company's Articles of Incorporation for any breaches of or other action or
failure to act in connection with this Agreement by the Company or the
Shareholders.
ARTICLE 11
MISCELLANEOUS
11.1 EXPENSES.
(a) Except as otherwise expressly stated herein, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby (including legal and accounting fees and expenses) shall be
borne by the Party incurring such costs and expenses and shall be paid by such
Party prior to or on the Closing Date.
(b) Notwithstanding any provision in this Agreement to the
contrary, if any of the Parties shall willfully default in its obligations
hereunder, the non-defaulting Party may pursue any remedy available at law or in
equity to enforce its rights and shall be paid by the willfully defaulting Party
for all damages, costs and expenses, including without limitation reasonable
legal and accounting expenses incurred or suffered by the non-defaulting Party
in connection herewith or in the enforcement of its rights hereunder.
11.2 NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or by reputable overnight or express courier, sent by registered or certified
mail, postage prepaid, or by telefax (with subsequent delivery via one of the
two previous methods) as follows:
(a) If to Parent or Acquisition Corp., to:
Towne Services, Inc.
3295 River Exchange Drive
Suite 350
Norcross, Georgia 30092
Attn: Drew W. Edwards
Telefax: (770) 582-8350
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Copy (which shall not constitute notice) to:
Nelson Mullins Riley & Scarborough, LLP
999 Peachtree Street, N.E.
Suite 1400
Atlanta, Georgia 30309
Attn: Susan L. Spencer, Esq.
Telefax: (404) 817-6050
(b) If to the Company (prior to Closing) or the
Shareholders, to:
Banking Solutions, Inc.
1600 Redbud Boulevard
Suite 101, LB32
McKinney, Texas 75069
Telefax: (972) 562-6528
Copy (which shall not constitute notice) to:
Moseley & Standerfer, P.C.
One Turtle Creek Village
3878 Oak Lawn Avenue, 4th Floor
Dallas, Texas 75219-4469
Attn: Bruce W. Bringardner, Esq.
Telefax: (214) 525-3939
(c) If to the Shareholders, to:
David R. Frank
P. O. Box 63
Prosper, Texas 75070
Donald G. Shafer
#2 Fox Hollow Lane
Melissa, Texas 75454
James R. Peirce
4313 Queen Circle
The Colony, Texas 77056
Copy (which shall not constitute notice) to:
Moseley & Standerfer, P.C.
One Turtle Creek Village
3878 Oak Lawn Avenue, 4th Floor
Dallas, Texas 75219-4469
Attn: Bruce W. Bringardner, Esq.
Telefax: (214) 525-3939
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or such other addresses and telefax numbers as shall be furnished
in writing by any Party, and any such notice or communications shall be deemed
to have been given as of three business days after the date actually sent via
overnight or express courier, eight days after mailed and upon telefax
confirmation of receipt to addressee by the sender.
11.3 PARTIES IN INTEREST. This Agreement shall be binding on and shall
inure to the benefit of the Parties hereto and their respective successors,
representatives and assigns. This Agreement (and the rights and interests
herein) may not be assigned by any Party without the written consent of the
other Parties; provided, however, each of Parent and Acquisition Corp. may
assign its interests herein to (a) an entity controlling, controlled by or under
common control with Parent or (b) a purchaser or transferee of all or
substantially all of the business or assets of Parent or Acquisition Corp.,
whether by sale of stock or assets, merger or otherwise. ANY ATTEMPTED
ASSIGNMENT IN CONTRAVENTION OF THE FOREGOING SHALL BE NULL AND VOID. Nothing in
this Agreement is intended to confer, expressly or by implication, upon any
other person or entity any rights or remedies under or by reason of this
Agreement.
11.4 ENTIRE AGREEMENT. This Agreement, which includes the Disclosure
Schedules, Exhibits and the other documents, agreements, certificates and
instruments executed and delivered pursuant to or in connection with this
Agreement (collectively, the "PURCHASE AGREEMENTS"), sets forth the agreement
among the Parties with respect to the purchase and sale of the Company Common
Stock.
11.5 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original, and each of which shall
constitute one and the same agreement. Any Party may deliver an executed copy of
this Agreement and any documents contemplated hereby by facsimile transmission
to another Party, and such delivery shall have the same force and effect as any
other delivery of a manually signed copy of this Agreement or of such other
documents.
11.6 GOVERNING LAW.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE UNITED STATES OF AMERICA AND THE STATE OF
GEORGIA, EXCLUDING CHOICE OF LAW PRINCIPLES.
(b) Parent, Acquisition Corp., the Company and the Shareholders
consent to the exclusive jurisdiction and venue of the courts of any county in
the State of Georgia and the United States Federal District Courts of Georgia,
in any judicial proceeding brought to enforce this Agreement. The Parties agree
that any forum other than the State of Georgia is an inconvenient forum and that
a lawsuit (or non-compulsory counterclaim) brought by one Party against another
Party, in a court of any jurisdiction other than the State of Georgia should be
forthwith dismissed or transferred to a court located in the State of Georgia.
41
<PAGE> 47
11.7 ARBITRATION.
(a) Any dispute, controversy or claim arising out of or relating
to this Agreement or any other related documents, agreements, certificates or
other writing, or the breach, termination, construction, validity or
enforceability hereof or thereof, shall be settled by binding arbitration in
accordance with the rules of the American Arbitration Association (except as
otherwise provided in this Section 11.7).
(b) Termination or limitation of Parent's rights in any of its
software, products, or any associated intellectual property rights or documents
may not be awarded under any circumstances. The right to demand arbitration and
to receive damages and obtain other available remedies as provided hereunder
shall be the exclusive remedy in the event an arbitration demand is made, except
that Parent shall be entitled to obtain equitable relief, such as injunctive
relief, from any court of competent jurisdiction to protect its rights in any of
its software products or any associated intellectual property rights or
documents while such proceeding is pending or in support of any award made
pursuant to such arbitration.
11.8 INVALIDITY OF ANY PART. If any provision or part of this Agreement
shall for any reason be held invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provisions of this Agreement and shall be construed as if such invalid, illegal
or unenforceable provision or part thereof had never been contained herein, but
only to the extent of its invalidity, illegality, or unenforceability. Upon any
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the Parties hereto will negotiate in good faith to
modify this Agreement so as to effect the original intent of the Parties as
closely as possible in an acceptable manner to the end that the transactions
contemplated by this Agreement are consummated to the extent possible.
11.9 TIME OF THE ESSENCE; COMPUTATION OF TIME. Time is of the essence of
each and every provision of this Agreement. Whenever the last day for the
exercise of any right or the discharge of any duty under this Agreement shall
fall upon Saturday, Sunday or a federal, public or legal holiday, the Party
having such right or duty shall have until 5:00 p.m., Atlanta, Georgia time on
the next succeeding regular business day to exercise such right or to discharge
such duty.
[Signatures begin on following page]
42
<PAGE> 48
IN WITNESS WHEREOF, Parent, Acquisition Corp., the Company and
the Shareholders have caused this Agreement to be executed by their duly
authorized officers as of the day and year first above written.
PARENT
Towne Services, Inc.
By: /s/ Drew W. Edwards
----------------------------------
Its: Chairman and CEO
ACQUISITION CORP.
BSI Acquisition Corp.
By: /s/ Drew W. Edwards
----------------------------------
Its: Chairman and CEO
THE COMPANY
Banking Solutions, Inc.
By: /s/ Donald G. Shafer
----------------------------------
Its: President
THE SHAREHOLDERS:
/s/ David R. Frank
-----------------------------------------
David R. Frank
/s/ Donald G. Shafer
-----------------------------------------
Donald G. Shafer
/s/ James R. Peirce
-----------------------------------------
James R. Peirce
43
<PAGE> 49
SCHEDULES
Schedule 5.1(a) - Governmental Authority
Schedule 5.1(b) - Articles of Incorporation and Bylaws of Company
Schedule 5.1(c) - Equity Interests
Schedule 5.2 - Shareholders and other Holders of Company Stock
Schedule 5.3(a) - Company Approvals
Schedule 5.4(a) - Company Financial Statements
Schedule 5.4(d) - Brokers, Finders, Etc.
Schedule 5.7 - Litigation of Company
Schedule 5.8 - Taxes and Tax Returns
Schedule 5.9 - Employee Benefit Plans
Schedule 5.9(g) - Accruals; Funding - Employee Benefit Plans
Schedule 5.10 - Compliance with Applicable Laws
Schedule 5.11(a)- Material Contracts
Schedule 5.11(b)- Amendments to Material Contracts
Schedule 5.11(c)- Employment/Severance Agreements
Schedule 5.11(d)- Limits on Competition
Schedule 5.11(e)- Defaults on Material Contract
Schedule 5.12(a)- Ownership of Company Assets and Properties
Schedule 5.12(b)- Insurance
Schedule 5.14 - Software Programs
Schedule 5.14(a)- Ownership of Patents, Trademarks, Service Marks,
Trade Names and Copyrights
Schedule 5.14(b)- Proprietary Legends and Copyright Notices
Schedule 5.14(c)- Trade Secret Protection
Schedule 5.14(d)- Ownership of Software
Schedule 5.14(e)- Absence of Claims in Software
Schedule 5.16 - Third Party Components in Software
Schedule 5.17 - Third Party Interests in Software
Schedule 5.18 - Parachute Payments
Schedule 5.19(a)- Absence of Certain Agreements
Schedule 5.20 - Major Vendors and Customers
Schedule 5.21 - Accounts Receivable
Schedule 5.22 - Bank Accounts
Schedule 5.25 - Labor and Employment Matters
Schedule 5.26 - Year 2000 Matters
Schedule 5.27 - Change in Control Provisions
Schedule 7.2 - Negative Covenants
Schedule 7.3 - No Solicitation
Schedule 8.2(j) - No Interest in Software
Schedule 8.2(k) - Termination or Assignment of Certain Agreements
Schedule 8.2(n) - Release of Obligations
EXHIBITS
Exhibit 3.2(a) - Form of Escrow Agreement
Exhibit 3.2(b) - Delivery Instructions for Wire Transfers and Certificates
Exhibit 7.5 - Confidentiality and Standstill Agreement dated November 6, 1998
Exhibit 8.1(c) - Form of Registration Rights Agreement
Exhibit 8.2(b) - Form of Opinion of Counsel to the Company and the Shareholders
Exhibit 8.2(c) - Form of Certificate of the Company
Exhibit 8.2(d) - Form of Noncompetition, Nonsolicitation and Confidentiality
Agreement
Exhibit 8.2(e) - Form of Spousal Consent
Exhibit 8.2(f) - Form of Work Product Agreement
44
<PAGE> 1
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
November 30, 1998
CONTACT: Bruce Lowthers
SVP/Chief Financial Officer
(770) 734-2680
or
Janice J. Kuntz
Fleishman-Hillard
(404) 659-4446
TOWNE SERVICES, INC. TO ACQUIRE MAJOR COMPETITOR - BANKING SOLUTIONS, INC.
EXPANDS MERCHANT SALES TEAM, ADDS MORE THAN 1,000 MERCHANTS,
200 BANK RELATIONSHIPS & 9 JOINT MARKETING AGREEMENTS
NORCROSS, Georgia - Towne Services, Inc. (Nasdaq: TWNE) today announced that it
will acquire one of its key competitors, Banking Solutions, Inc., a McKinney,
Texas, company that provides an accounts receivable financing product to banks
and their commercial customers under the name CashFlow(SM) Manager. The
transaction consideration will include a combination of cash and stock and a
performance based earn-out component.
"I'm excited about this transaction because it is expected to be accretive to
our earnings per share even before realizing the obvious synergies. These
synergies include the combination of our sales force that specializes in smaller
merchants and primarily retail receivables with Banking Solutions' sales force
that specializes in larger merchants and primarily commercial receivables. In
addition, we gain the ability to merge the best of both companies' products and
technologies, giving our financial institution clients a complete spectrum of
processing and financing alternatives available," commented Drew Edwards,
chairman and chief executive officer of Towne Services, Inc.
Edwards continued, "Each of the more than 200 Banking Solutions' bank customers
are already offering accounts receivable financing programs, and we are excited
about the opportunity to cross-
<PAGE> 2
sell our retail-based and collections products within this customer base. In
addition, we pick up nine new marketing agreements with banking associations and
a strong geographic presence in the southwest."
"For the last five years our consultants have excelled in helping financial
institutions finance receivables for commercial accounts. I believe that Towne
has emerged as the new leader in enabling banks to offer accounts receivable
financing via an electronic retail gateway. Both our clients and our consultants
who work with them believe they can expand their market penetration using
Towne's products," stated Don G. Shafer, chief executive officer of Banking
Solutions, Inc. "It's a win, win, win," Shafer continued.
Through this transaction, Towne will more than double its merchant customer
base, add more than 200 bank relationships, gain a sales team with an average of
five years experience in selling commercial financing products and increase
market presence into seven new states.
Towne Services is based in Norcross, Georgia, and its electronic processing
systems help community banks to compete with larger financial institutions,
attract and retain customers, increase market share, and generate a new source
of fee income. Advantages to the bank's customers include improved cash flow,
automated accounts receivable functions and relief from billing and collection
responsibilities. Towne Services' two primary products are TOWNE CREDIT(SM) and
TOWNE FINANCE(SM).
# # #
This release contains statements which constitute forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These statements
include all statements that are not statements of historical fact regarding the
intent, belief or current expectations of the Company, its directors or its
officers with respect to, among other things: (i) the Company's business plans;
(ii) trends affecting
<PAGE> 3
the Company's financial condition or results of operations; and (iii) the
Company's growth strategy and operating strategy. The words "may," "would,"
"could," "will," "expect," "anticipate," "believe," "intend," "plans," and
similar expressions and variations thereof are intended to identify
forward-looking statements. Investors are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, many of which are beyond the Company's ability to
control. Actual results may differ materially from those projected in the
forward-looking statements as a result of the Company's limited operating
history and prior losses; its dependence or increased sales and marketing
resources; its ability to grow and manage its growth; acquisition risks
(including the ability to integrate the operations of Banking Solutions and
realize synergies in the future) and various other factors discussed in detail
in the Company's filings with the Securities and Exchange Commission, including
the "Risk Factors" section of the Company's Registration Statement on Form S-1
(Registration Number 333-53341), as declared effective by the Securities and
Exchange Commission on July 30, 1998.
