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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 28, 1999
REGISTRATION NO. 333-76955
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 3 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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NFRONT, INC.
(Exact Name of Registrant as Specified in its Charter)
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<S> <C> <C>
GEORGIA 7375 58-2242756
(State or other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
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520 GUTHRIDGE COURT, NW, SUITE 100
NORCROSS, GA 30092
770-209-4460
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
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BRADY L. "TRIPP" RACKLEY III
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
NFRONT, INC.
520 GUTHRIDGE COURT, NW, SUITE 100
NORCROSS, GA 30092
(770) 209-4460
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
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COPIES TO:
<TABLE>
<S> <C>
WARD S. BONDURANT, ESQ. WILLIAM G. ROCHE, ESQ.
VIRGINIA A. JOHNSON, ESQ. WILLIAM R. SPALDING, ESQ.
MORRIS, MANNING & MARTIN, L.L.P. KING & SPALDING
1600 ATLANTA FINANCIAL CENTER 191 PEACHTREE STREET
3343 PEACHTREE ROAD, N.E. ATLANTA, GEORGIA 30303
ATLANTA, GEORGIA 30326 (404) 572-4600
(404) 233-7000
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement is declared effective.
If any of the securities being registered on this Form are offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), please check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JUNE 28, 1999
PROSPECTUS
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3,900,000 SHARES
(NFRONT LOGO)
COMMON STOCK
This is an initial public offering of common stock by nFront, Inc. Of the
3,900,000 shares of common stock being sold in this offering, 3,500,000 shares
are being sold by nFront and 400,000 shares are being sold by selling
shareholders. nFront will not receive any of the proceeds from the sale of
shares by the selling shareholders. The estimated initial public offering price
is between $9.00 and $11.00 per share.
-------------------------
We have applied to have the common stock approved for quotation on the
Nasdaq National Market under the symbol NFNT.
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<TABLE>
<CAPTION>
PER SHARE TOTAL
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<S> <C> <C>
Initial public offering price.............................. $ $
Underwriting discounts and commissions..................... $ $
Proceeds to nFront, before expenses........................ $ $
Proceeds to the selling shareholders....................... $ $
</TABLE>
The selling shareholders have granted the underwriters an option for a
period of 30 days to purchase up to 585,000 additional shares of common stock.
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INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
HAMBRECHT & QUIST
J.C. BRADFORD&CO.
RAYMOND JAMES & ASSOCIATES, INC.
SOUNDVIEW TECHNOLOGY GROUP
, 1999
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[ARTWORK DEPICTED IN PROSPECTUS]
1. Inside front page includes the following text:
"Defining the Future of Internet Banking"
"nFront is a leading provider of Internet banking solutions
to financial institutions."
"nFront's Internet banking services enable banks to provide consumers
and businesses with an "Internet branch" for banking from the
convenience of their own homes and offices, 24 hours a day, 7
days a week."
"nFront ... where banking meets the world."
[nFront logo]
2. Inside front page gate-fold portrays the following:
Title bar at the top of the page states: "Defining the Future..."
Followed by the nFront logo.
Upper left side of the page: Text stating "Defining the Moment" over a
box surrounding the following text: "According to Forrester Research,
the number of households banking on-line in the United States is
projected to grow from 2.4 million in 1997 to more than 18 million in
2002." Below the text is a vertical bar graph showing an increase in
U.S. households (in millions) from 1997 through 2002 attributed to
Forrester Research, Inc.
At the bottom left side of the page under the heading "Internet Banking
Powered by nFront" is the text "nFront serves as a single-source
solution for enabling Internet banking transactions."
Below this text is a graphic reflecting a box labeled "Consumer" from
which the following four items emanate: "Account Origination," "Online
Banking," "Bill Payment" and "Brokerage Research." Lines for the four
items move through the nFront logo to a graphic representing a
financial institution.
In the upper portion of the center of the page is the text "nFront
enables banks to offer an "Internet bank branch" to customers. Our
services include custom web site design and hosting, on-line bill pay
services, cash management for small businesses and account
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origination services." Below this text is a screen shot of a web site
developed by nFront for one of its client banks. Under the screen shot
is the following text: "Custom Web Site Design strengthens bank
branding, while on line banking offers improved services through an
innovative delivery channel."
To the right of the screen shot are three other screen shots
accompanied by the following text: "Electronic Bill Payment allows
customers to initiate one-time and recurring payments to user defined
payees, with the ability to generate reports based on payment
criteria." "Cash Management provides small business owners with
specialized services needed to manage their commercial accounts, from
disbursing funds to initiating electronic tax payments." "Account
Origination allows existing and prospective customers to apply for a
range of custom bank products, including deposit and savings accounts,
loans, and lines of credit."
In the bottom center portion of the page, the following text appears:
"nFront is building a nationwide network of banks that offer Internet
banking services - currently more than 120 banks coast to coast." Under
this text appears a graphic of a map of the United States with the
nFront logo superimposed over Atlanta, Georgia and colored lines
arching to various cities throughout the United States.
On the right side of the page at the top appears the text: "Defining
the Destination." Below this text is a graphic representing a circle
with the nFront logo superimposed in the middle and three circles
around the periphery identified as "Financial Institution," "Consumer"
and "Business." Below the graphic appears the following text: "The
Future of eCommerce." Under that text is the following:
"The nFront solution enables our client banks to serve as financial
destinations for their customers, positioning the banks, we believe, to
play a critical role and in rapidly developing world of electronic
commerce."
3. Inside back page portrays the following:
Graphics portray the back of a person seated in front of a computer
screen with graphics to the left and right of screen shots from web
sites developed by nFront for its client banks.
Title bar at the top of the page states: "Where Banking Meets the
World."
Below the title bar are the words: "BANKING.COM"
Centered at the bottom of the page is the nFront logo.
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TABLE OF CONTENTS
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Prospectus Summary.......................................... 3
Risk Factors................................................ 7
Forward-Looking Statements.................................. 22
Use of Proceeds............................................. 23
Dividend Policy............................................. 23
Capitalization.............................................. 24
Dilution.................................................... 25
Selected Financial Data..................................... 27
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 29
Business.................................................... 41
Management.................................................. 56
Certain Transactions........................................ 63
Principal and Selling Shareholders.......................... 64
Description of Capital Stock................................ 66
Shares Eligible for Future Sale............................. 69
Underwriting................................................ 71
Legal Matters............................................... 73
Experts..................................................... 73
Additional Information...................................... 73
Index to Financial Statements............................... F-1
</TABLE>
nFront, nHome and nBusiness are service marks of nFront. We have applied
for federal registration of "nFront," "nHome" and "nBusiness." This prospectus
also refers to other trademarks and trade names of nFront and other companies.
<PAGE> 6
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this
prospectus. This summary may not contain all of the information that you should
consider before investing in the common stock. You should read the entire
prospectus carefully, including "Risk Factors" and the financial statements,
before making an investment decision.
NFRONT
nFront provides a comprehensive, outsourced solution that enables small to
mid-sized banks to offer their retail and commercial customers banking and
financial services through the Internet. A comprehensive outsourced solution
means that we handle all aspects of our client banks' Internet banking
operations, including the design, implementation and management of their
"Internet branches." Our solution enables our client banks to establish Internet
branches designed to increase customer retention, acquire new customers,
decrease costs, increase fee income and expand the financial products and
services offered to their customers. By creating Internet branches for our
client banks, we enable banks to become the destination on the Web for bank
customers who are increasingly using the Web for their financial management
needs.
Our nHome product provides Internet banking and financial services to a
bank's retail customers, and our nBusiness product provides Internet banking and
financial services to a bank's commercial customers. Through our outsourcing
model, our client banks purchase our products as services, paying us on a
monthly basis depending on the level of usage by their customers. Our Internet
banking data center provides the necessary communications, transaction
processing and data storage services to operate the nFront system. Our
outsourced solution tends to have significantly lower up front costs, lower
overhead for the bank, shorter lead times on initial implementation and
upgrades, better access to qualified personnel and higher quality service and
support than the bank would experience on an in-house basis.
We market our solution to small to mid-sized banks in the United States,
typically with assets of less than $10 billion, through our direct sales force
and through our strategic marketing alliances with other providers of banking
services. We currently generate revenue by charging client banks an
implementation fee for designing their Internet branch web sites and integrating
our system with the banks' core computer systems. We also receive recurring
monthly fees based primarily on the number of bank customers using our products,
as well as other transaction-based fees. As of March 31, 1999, we had 122 client
banks, of which 83 had completed implementation and were operating an Internet
branch. We have more than tripled our base of client banks over the past nine
months, from 40 as of June 30, 1998 to 122 as of March 31, 1999.
nFront was incorporated in Georgia in 1996. Our principal executive office
is located at 520 Guthridge Court, NW, Suite 100, Norcross, Georgia 30092. Our
telephone number is (770) 209-4460. Our web sites are located at www.banking.com
and www.nfront.com. Information contained on our web sites does not constitute a
part of this prospectus.
3
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THE OFFERING
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Common stock offered by nFront..................... 3,500,000 shares
Common stock offered by selling shareholders....... 400,000 shares
Common stock to be outstanding after the
offering......................................... 14,196,152 shares
Use of proceeds.................................... Repayment of debt; expansion of our
business, including sales and
marketing expenditures, product
development and potential future
acquisitions; and for general
corporate purposes, including working
capital.
Proposed Nasdaq National Market
symbol........................................... NFNT
</TABLE>
Unless otherwise noted, all information in this prospectus, including share
and per share information, gives effect to a 50-for-1 common stock split in
January 1998, a 3-for-1 common stock split in September 1998, and a 2.65-for-1
common stock split in May 1999; assumes the conversion of all outstanding shares
of redeemable convertible preferred stock into 2,034,285 shares of common stock
immediately prior to completion of this offering; and assumes no exercise of the
underwriters' over-allotment option.
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SUMMARY FINANCIAL DATA
This table summarizes our financial data for the periods indicated. The
unaudited pro forma net loss per share reflects the conversion of our redeemable
convertible preferred stock into common stock. Our balance sheet data is
presented:
- on an actual basis;
- on an unaudited pro forma basis to reflect conversion of our redeemable
convertible preferred stock into common stock; and
- on an unaudited pro forma as adjusted basis to reflect conversion of our
redeemable convertible preferred stock into common stock and our receipt
of the estimated net proceeds from the sale of 3,500,000 shares of common
stock offered by nFront at an assumed initial public offering price of
$10.00.
<TABLE>
<CAPTION>
PERIOD NINE MONTHS
FROM JUNE 17, FISCAL ENDED MARCH 31,
1996 (INCEPTION) TO YEAR ENDED -------------------------
JUNE 30, 1997 JUNE 30, 1998 1998 1999
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<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Implementation fees............ $ 358,245 $ 722,859 $ 581,375 $ 1,728,179
Monthly service fees........... 34,263 185,283 102,929 892,816
Other.......................... 458,643 174,287 149,406 214,095
---------- ---------- ---------- -----------
Total revenues............ 851,151 1,082,429 833,710 2,835,090
Operating income (loss)........ 70,993 (573,529) 9,105 (1,853,508)
Net income (loss).............. 48,740 (522,996) 9,107 (1,808,147)
Accretion on redeemable
convertible preferred
stock....................... -- (35,733) -- (204,661)
---------- ---------- ---------- -----------
Net income (loss) attributable
to common stock............. $ 48,740 $ (558,729) $ 9,107 $(2,012,808)
========== ========== ========== ===========
Net income (loss) per common
share -- basic and
diluted..................... $ 0.01 $ (0.07) $ 0.00 $ (0.24)
Weighted average shares
outstanding -- basic and
diluted..................... 5,079,167 8,033,223 8,000,090 8,498,844
========== ========== ========== ===========
Unaudited pro forma net loss
per share -- basic and
diluted..................... $ (0.07) $ (0.19)
========== ===========
Unaudited pro forma weighted
average shares outstanding--
basic and diluted........... 8,300,746 10,533,129
========== ===========
OPERATING DATA (AT END OF PERIOD):
Total client banks under
contract....................... 6 40 24 122
Total client banks implemented... 2 20 14 83
Total customers at client banks
using our solution............. * 5,220 3,149 19,648
</TABLE>
* Information not available because prior to fiscal year ended June 30, 1998,
nFront did not bill client banks on the basis of the total customers at client
banks using the nFront solution.
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<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
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PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
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<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents......................... $ 1,530,458 $1,530,458 $32,416,510
Working capital................................... 561,185 561,185 31,749,030
Total assets...................................... 3,802,645 3,802,645 34,688,697
Long-term debt, net of current portion............ 427,540 427,540 --
Redeemable convertible preferred stock............ 2,580,222 -- --
Total stockholders' equity (deficit).............. (1,572,199) 1,008,023 32,623,408
</TABLE>
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RISK FACTORS
You should consider carefully the following risk factors and all other
information contained in this prospectus before purchasing our common stock.
Investing in our common stock involves a high degree of risk. Any of the
following risks could materially adversely affect our business, operating
results and financial condition and could result in a complete loss of your
investment.
WE HAVE A LIMITED OPERATING HISTORY AND WE CANNOT GUARANTEE WE WILL BECOME
PROFITABLE
We were incorporated in June 1996. Because we have a limited operating
history, an investor in our common stock must consider the risks and
difficulties frequently encountered by early stage companies in new and rapidly
evolving markets, including the Internet banking and electronic commerce
markets. These risks include our ability to:
- successfully expand our sales and marketing efforts;
- maintain our current, and develop new, strategic marketing relationships;
- promote acceptance of our Internet banking services by customers of our
client banks;
- respond effectively to competitive pressures;
- continue to develop and upgrade our technology; and
- attract, retain and motivate qualified personnel.
We cannot guarantee that we will succeed in achieving these goals, and
there can be no assurance we will ever achieve or sustain profitability. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for detailed information on our limited operating history.
WE HAVE A HISTORY OF LOSSES AND ANTICIPATE LOSSES IN THE FUTURE
We incurred net losses of approximately $532,000 for the quarter ended June
30, 1998; $394,000 for the quarter ended September 30, 1998; $249,000 for the
quarter ended December 31, 1998; and $1.2 million for the quarter ended March
31, 1999. At March 31, 1999, we had an accumulated deficit of approximately $2.3
million. We expect to incur significant operating losses on a quarterly basis in
the future.
We will need to generate significant revenues to achieve and maintain
profitability, and we cannot assure you that we will be able to do so. Even if
we do achieve profitability, we cannot assure you that we can sustain or
increase profitability on a quarterly or an annual basis in the future. If our
revenues grow more slowly than we anticipate or if our operating expenses exceed
our expectations, our financial performance will likely be adversely affected.
See "Selected Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
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OUR FINANCIAL RESULTS COULD FLUCTUATE AND MAY ADVERSELY AFFECT OUR STOCK PRICE
Our financial results have varied on a quarterly basis and could fluctuate
substantially in the future, adversely affecting our stock price. We believe
that quarter-to-quarter comparisons of our financial results are not necessarily
meaningful, and you should not rely on them as an indication of future
performance. These fluctuations may be caused by several factors, many of which
are beyond our control, including pricing competition and pricing pressures for
our products and services. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
IF OUR REVENUES DO NOT MEET OUR EXPECTATIONS, OUR FINANCIAL RESULTS WILL SUFFER
BECAUSE OUR EXPENSES WILL INCREASE FOR THE REMAINDER OF THE CALENDAR YEAR
We plan to significantly increase our sales and marketing, research and
development and general and administrative expenses throughout the remainder of
calendar year 1999. Our expenses are partially based on our expectations
regarding future revenues, and are largely fixed in nature, particularly in the
short term. As a result, if our revenues in a period do not meet our
expectations, our financial results will likely suffer.
OUR SUCCESS DEPENDS UPON THE DEMAND FOR OUR PRODUCTS AND SERVICES IN THE BANKING
INDUSTRY
We expect to derive substantially all of our revenues from products and
services provided to banks, the banks' customers and other participants in the
financial services industry. Accordingly, our future success depends
significantly upon the continued demand for our products and services within
this industry. We believe that important factors in our growth will be the
willingness of the banking industry to pursue technological innovation and
customer demand and acceptance of this innovation. If the rate of adoption by
banks of products like ours were too slow, we could experience reduced demand
for our products and services. In addition, changes in economic conditions and
unforeseen events, including recession, inflation or other adverse occurrences,
may result in a significant decline in the utilization of bank services or
demand for our products and services. Any event that results in decreased
consumer or corporate use of bank services, or increased pressures on banks
toward the in-house development of Internet banking systems, could have a
material adverse effect on our business, financial condition and results of
operations.
THE EXPANDED USE OF THE INTERNET FOR PROVIDING BANKING AND OTHER FINANCIAL
PRODUCTS AND SERVICES IS UNCERTAIN AND MAY AFFECT OUR CUSTOMER BASE AND REVENUE
GROWTH
The market for Internet-based financial services only recently has begun to
develop, and the market demand for our products and services is uncertain.
Critical issues concerning commercial use of the Internet for financial
services, including security, reliability, ease and cost of access and quality
of service, are evolving and may impact the growth of Internet use. We cannot
predict the size of the market for Internet-based financial services or the rate
at which that market will grow. If the market for Internet-based financial
services fails to grow, grows more slowly than anticipated, or becomes saturated
with competitors, our business, financial condition and results of operations
likely would be materially adversely affected. Furthermore,
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telephone and personal computer banking systems have been marketed in the past
and have not enjoyed widespread consumer adoption. Accordingly, there can be no
assurance that there will be widespread consumer acceptance of advanced Internet
banking systems, including ours.
We rely on the Internet to provide access to our banking services. Our
business would be adversely affected if Internet use does not continue to grow
or grows more slowly than expected. Internet usage may be inhibited for a number
of reasons, including inadequate network infrastructure, security concerns,
inconsistent quality of service, and unavailability of cost effective,
high-speed access to the Internet. The occurrence of any of these factors could
inhibit the acceptance and adoption of Internet banking.
DECLINE IN DEMAND FOR NHOME OR NBUSINESS COULD AFFECT OUR BUSINESS, FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
To date, more than 91% of our revenue has been attributable to fees
generated from our nHome product. Fees generated from the sale of nHome and
related services and from the sale of our nBusiness product, which became
generally available in March 1999, are expected to account for most of our total
revenue for the foreseeable future. As a result, a decline in demand for, or
failure to achieve broad market acceptance of, nHome or nBusiness would have a
material adverse effect on our business, financial condition and results of
operations. There can be no assurance that we will continue to be successful in
marketing nHome, nBusiness or any new or enhanced products and services.
WE MAY EXPERIENCE DELAYS IN DEVELOPING ENHANCEMENTS OF EXISTING PRODUCTS AND
DEVELOPING NEW PRODUCTS; THESE DELAYS MAY AFFECT OUR COMPETITIVENESS
Our future success will depend on our ability to develop, test, sell and
support enhancements of our nHome and nBusiness products and new products on a
timely basis in response to changing bank and bank customer needs, competition,
technological developments and emerging industry standards. The electronic
banking and financial services industry is characterized by rapidly changing
technology, evolving industry standards, emerging competition and frequent new
product and service introductions. These developments could limit the
marketability of our products and services and could render our products and
services obsolete. There can be no assurance that we can successfully identify
new product opportunities and develop and bring new products and services to
market in a timely manner given the rapid evolution of the electronic banking
industry. Our failure to successfully adapt our products and services to this
rapidly changing market could adversely affect our business.
OUR SALES CYCLE VARIES AND MAY CAUSE OUR QUARTERLY RESULTS TO FLUCTUATE
The purchase decision relating to our products is typically made by senior
management of our prospective client banks. Due in part to the nature of our
applications and the associated hardware, software and consulting expenditures,
potential client banks tend to be cautious in making purchase decisions. The
purchase of our products involves a commitment of resources and recurring
expense and the attendant delays frequently associated with approving capital
expenditures
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and reviewing new technologies that affect key operations. Our client banks'
decision-making processes require us to provide a significant level of education
to prospective customers regarding the use and benefits of our products. We may
expend substantial funds and management resources during the sales cycle and
fail to make the sale. Accordingly, our results of operations for a particular
period may be adversely affected if the sales forecasted for a particular period
are delayed or do not otherwise occur.
The time between the date of initial contact with a potential client bank
and the execution of a contract with the bank typically ranges from six weeks
for smaller agreements to three months or longer for larger agreements. The
sales cycle is subject to significant risks and delays over which we have little
or no control, including:
- the banks' budgetary constraints;
- the banks' internal acceptance reviews;
- the success and continued support through the sales efforts of companies
with which we have strategic alliances; and
- the possibility of cancellation or delay of projects by banks.
IMPLEMENTATION OF OUR SOLUTION AT NEW CLIENT BANKS MAY TAKE LONGER THAN WE
ANTICIPATE AND COULD ADVERSELY AFFECT OUR OPERATING RESULTS
During the course of an initial bank implementation, we must integrate our
Internet banking software with the bank's core banking software. This involves
installation of an interface to permit communication between our products and
the banks' core banking software. While we have managed integration with over 28
different core banking systems, we may, from time to time, experience some
delays in the integration process, particularly if we do not already have an
established interface for that core banking software. Our implementation period
typically ranges from 35 to 170 days and currently averages approximately three
months. With systems for which we do not have an available interface, we must
develop customized software programs that enable our Internet banking software
and the bank's core banking software to communicate. A longer integration period
will increase the cost of the implementation, delay the recognition of revenues
associated with the implementation and result in a loss of service-related
customer usage fees. Changes to existing core banking software systems and
custom implementations for larger client banks could also cause integration
delays in future implementations that could have a material adverse effect on
our operating results for subsequent periods.
WE RELY ON OUR STRATEGIC MARKETING ALLIANCES TO GENERATE CUSTOMERS AND REVENUE
We expect that revenues generated from the sale of our products and
services based on leads generated through our strategic marketing alliances will
continue to account for a significant portion of our revenues for the
foreseeable future. In particular, we expect that a limited number of our
strategic marketing relationships, such as those with BISYS and BancTec, which
are core bank processing service providers, will account for a substantial
portion of our client bank leads and, therefore, revenues over time. Client
banks sold and billed through the BISYS
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strategic marketing alliance represented 26% of our revenue for the nine months
ended March 31, 1999. Our agreement with BancTec is relatively new and has not
yet generated material revenues. Our strategic marketing agreements are
typically five year agreements pursuant to which the strategic alliance
companies have agreed to use commercially reasonable efforts to market the
nFront products and services and not to market any other Internet banking
product to their customers. We pay each company with which we have a strategic
marketing alliance a commission, typically between 10% and 40%, based on the
revenues generated by our client banks that are also clients of the companies
with which we have strategic marketing alliances.
Our strategic marketing alliances are in an early stage of development. If
we lose one or more of our major strategic marketing relationships, we may be
unable in a timely manner, or at all, to replace the strategic marketing
relationships with other relationships that have comparable customer bases and
user demographics.
OUR BUSINESS COULD SUFFER IF CLIENT BANKS TERMINATE THEIR CONTRACTS WITH US AS A
RESULT OF ACQUISITIONS OF THE BANKS OR FOR OTHER REASONS
Although we have included financial penalties in most of our contracts with
our client banks for early termination without cause, these financial penalties
would be insufficient to replace the monthly service fee revenues that we would
receive if the bank had continued as a customer. As a result of the mergers and
acquisitions occurring in the banking industry today, there is a potential risk
of some of our existing client banks terminating their agreements with us. An
existing client bank may be acquired by or merged with another bank that
utilizes a different Internet banking system or does not desire to continue the
relationship with us for some other reason, which could result in the new entity
terminating the relationship with us. Many of the larger money center banks that
are involved in consolidating the banking industry do not use nFront's
solutions. Our business, financial condition and results of operations could
suffer if client banks terminate their relationships with us.
A SIGNIFICANT PORTION OF OUR RECURRING REVENUE IS BASED ON A SMALL NUMBER OF
CLIENT BANKS, AND THE LOSS OF A NUMBER OF THESE CLIENT BANKS COULD ADVERSELY
AFFECT OUR BUSINESS
We have, to date, depended on a limited number of client banks for a
significant part of our recurring revenues. For the nine month period ended
March 31, 1999, BancorpSouth accounted for 27% of monthly service fee revenues,
and our five largest client banks accounted for 53% of our monthly service fee
revenues. The loss of a number of our client banks may adversely affect our
business, financial condition and results of operations.
We anticipate that our results of operations in the near future will
continue to depend to a significant extent upon revenues from a small number of
client banks. In addition, we anticipate that these client banks will continue
to vary over time so that the achievement of our long-term goals will require us
to obtain additional client banks on an ongoing basis. Our failure to enter into
a sufficient number of contracts during a particular period could have a
material adverse effect on our business, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
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WE ARE CURRENTLY EXPERIENCING A PERIOD OF SIGNIFICANT GROWTH THAT IS PLACING A
STRAIN ON OUR RESOURCES
We have experienced significant growth in our operations since the fiscal
year ended June 30, 1998 and anticipate that additional expansion may be
required in order to continue our growth. Any expansion of our business would
place additional demands on our management, operational capacity and financial
resources. Our failure to manage growth effectively could have a material
adverse effect on our business, financial condition and results of operations.
We anticipate that we will need to recruit qualified personnel in all areas of
our operations, including management, sales, marketing, implementation and
software development, to effectively manage and control additional growth. There
can be no assurance that we will be effective in attracting and retaining
additional qualified personnel, expanding our operational capacity or otherwise
managing growth.
We have increased our number of employees from 30 at June 30, 1998 to 71 at
March 31, 1999. This expansion has placed, and is expected to continue to place,
a significant strain on our management, operational and financial resources.
Since June 1998, we have added a number of key managerial, technical and
operations personnel, including our President and Chief Operating Officer, Chief
Financial Officer, Senior Vice President of Sales and Vice President of
Marketing, and we expect to add additional key personnel in the near future.
Since December 1, 1998, we have added 12 new sales representatives, bringing the
total to 14 at March 31, 1999.
To manage the expected growth of our operations and personnel, we must
continue improving or replacing existing operational, accounting and information
systems, procedures and controls. Further, we must manage effectively our
marketing relationships as well as our relationships with Internet content
providers, affiliates and other third parties necessary to our business.
OUR BUSINESS IS DEPENDENT ON OUR CHIEF EXECUTIVE OFFICER AND OTHER KEY EXECUTIVE
PERSONNEL
Our future success depends to a significant extent on the continued
services of our senior management and other key personnel, particularly Brady L.
"Tripp" Rackley III, our founder and Chief Executive Officer. The loss of the
services of Mr. Rackley or other key employees would likely have a significant
adverse effect on our business. We only have employment agreements with our
Chief Executive Officer and our President. We maintain "key person" life
insurance in the amount of $2,000,000 on our Chief Executive Officer, but this
amount likely would be inadequate to compensate us for the loss of his services.
WE HAVE EXPERIENCED DIFFICULTY IN HIRING AND RETAINING PERSONNEL
There is significant competition for qualified employees among Internet
companies today. As a result of our rapid growth and expansion, we have in the
past experienced, and we expect to continue to experience difficulty in hiring
and retaining highly skilled employees with appropriate qualifications. We have
been required to hire a significant number of new employees in a short period of
time. We may be unable to retain our skilled employees or attract, assimilate or
retain other highly qualified employees in the future. Our operating results may
be
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adversely affected if we experience increased expenses related to attracting and
retaining qualified employees. If we do not succeed in attracting new personnel
or retaining and motivating our current personnel, our business will be
adversely affected.
NETWORK SECURITY PROBLEMS COULD CAUSE US TO LOSE CUSTOMERS
Even though we have implemented security measures, our networks may be
vulnerable to unauthorized access, computer viruses and other disruptive
problems. Someone who is able to circumvent security measures could
misappropriate our proprietary information or cause interruptions in our
Internet operations. Internet and on-line service providers have in the past
experienced, and may in the future experience, interruptions in service as a
result of the accidental or intentional actions of Internet users, current and
former employees or others. Unknown security risks may result in liability to us
and also may deter banks from purchasing our products, and deter banks'
customers from using our products. We may need to expend significant capital or
other resources protecting against the threat of security breaches or
alleviating problems caused by breaches. Although we intend to continue to
implement state of the art security measures, persons may be able to circumvent
the measures that we implement in the future. Eliminating computer viruses and
alleviating other security problems may result in interruptions, delays or
cessation of service to users accessing web sites that deliver our services, any
of which could harm our business.
INTERNET SECURITY CONCERNS COULD HINDER THE GROWTH OF INTERNET BANKING AND OTHER
ELECTRONIC COMMERCE SERVICES
Users of Internet banking and other electronic commerce services are highly
concerned about the security of transmissions over public networks. Concerns
over security and the privacy of users may inhibit the growth of the Internet
and other on-line services generally, and the Web in particular, especially as a
means of conducting commercial transactions. Any well-publicized compromise of
security could deter people from using the Internet or using it to conduct
transactions that involve transmitting confidential information. We may incur
significant costs to protect against the threat of security breaches or to
alleviate problems caused by those breaches. We rely on standard Internet
security systems, all of which are licensed from third parties, to provide the
security and authentication necessary to effect secure transmission of data.
However, we cannot guarantee that advances in computer capabilities, new
discoveries in the field of cryptography or other events or developments will
not result in a compromise or breach of our security measures.
WE COULD BE LIABLE FOR MISAPPROPRIATION OF OUR USERS' PERSONAL INFORMATION
Unauthorized users could possibly circumvent the measures we take to
protect client bank data. To the extent that our activities involve the storage
and transmission of proprietary information, security breaches could damage our
reputation and expose us to a risk of loss or litigation and possible liability.
Any compromise of our security could harm our business. In addition, the Federal
Trade Commission and state agencies have been investigating various Internet
companies regarding their use of personal information. We could incur additional
expenses if
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new regulations regarding the use of personal information are introduced or if
our privacy practices are investigated.
WE ARE DEPENDENT ON OUR INTERNET BANKING DATA CENTER, AND IT COULD SUFFER
TECHNICAL PROBLEMS AND SERVICE INTERRUPTIONS
All of our communications and network equipment is located at our corporate
headquarters in Norcross, Georgia. Any system failure at this location could
lead to interruptions, delays or cessations in providing our Internet banking
services to our client banks, which could have a material adverse effect on our
business, financial condition and results of operations. Our operations are
dependent upon our ability to protect systems against damage from fires,
hurricanes, earthquakes, power losses, telecommunications failures, break-ins,
computer viruses, hacker attacks and other events beyond our control. We have
contracted to establish a redundant Internet banking data center, but that data
center is not scheduled to be on-line until July 31, 1999. We cannot assure that
this data center will operate as anticipated. In the event of a disaster that
impacts our Internet banking data center, and depending on the nature of the
disaster, it may take several days for an off-site computer system to become
operational for all of our client banks, and use of an alternative off-site
computer would result in substantial additional cost to us. In the event of an
extended outage, we could potentially lose many of our client banks, which may
have a material adverse effect on our business, financial condition and results
of operations. Although we maintain business interruption insurance, it may not
adequately compensate us for any losses that may occur due to any failures or
interruptions in our systems.
OUR SUCCESS DEPENDS UPON THE PROPER OPERATION OF INTERNALLY-DEVELOPED SOFTWARE
AND SYSTEMS AS WELL AS THIRD-PARTY PRODUCTS
We have developed custom software for our systems. This software may
contain undetected errors, defects or bugs. Although we have not suffered
significant harm from any errors or defects to date, we may discover significant
errors or defects in the future that we may or may not be able to correct. We
must expand and upgrade our technology, transaction-processing systems and
network infrastructure if the volume of traffic and transactions on our system
increases substantially. We could experience periodic temporary capacity
constraints, which may cause unanticipated system disruptions, slower response
times and lower levels of customer service. We may be unable to accurately
project the rate or timing of increases, if any, in the use of our services or
expand and upgrade our systems and infrastructure to accommodate these increases
in a timely manner. Any inability to do so could harm our business. Our
agreements with our client banks typically contain provisions designed to limit
our exposure to potential product liability claims. It is possible, however,
that the limitation of liability provisions contained in our agreements may not
be effective under the laws of all jurisdictions. Although we have not
experienced any product liability claims to date, the sale and support of our
products may entail the risk of these claims. A product liability claim brought
against us could have a material adverse effect on our business, financial
condition and results of operations.
Our products involve integration with the core processing systems of our
client banks as well as the systems of the company that provides bill payment
processing services to us. We have an agreement through which another company
provides to us processing services for the electronic bill payment features of
our nHome and nBusiness products. The agreement was originally with Moneyline
Express/Travelers
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Express. In January 1999, M&I Data Services assumed the agreement and is
performing these services. The agreement provides for fees to be paid to M&I
based on banks implementing bill payment services and the number of bill payment
and electronic funds transfer transactions per month, as well as the allocation
of credit risks between the parties on potential insufficient funds or returned
items. The agreement is a non-exclusive, three year agreement which began in
July 1997. The agreement will automatically renew for one-year renewal terms
unless terminated by either party prior to renewal. Under the agreement we
cooperate with M&I to develop interfaces between the nFront products and the M&I
bill payment processing systems. While we believe that there are alternative
sources available for these services, at this time M&I is the only bill payment
processor used by us. A loss of their services could disrupt, for an indefinite
period, the bill payment services we provide to our client banks. If the core
processing or bill payment processing systems with which we are integrated
should become unavailable for any reason, fail under operation with our products
or fail to be supported by their respective vendors, it would be necessary for
us to redesign our products and/or obtain alternative vendors. There can be no
assurance that these changes could be accomplished in a cost-effective or timely
manner. We also could experience difficulties integrating our products with
other hardware and software. Furthermore, should new releases of products and
systems occur before we develop products compatible with these new releases, any
resulting decline in demand for our products could have a material adverse
effect on our business, financial condition and results of operations.
WE RELY ON THE INTERNET REMAINING A VIABLE COMMERCIAL MEDIUM
Our success depends, in large part, on other companies maintaining the
Internet infrastructure. In particular, we rely on other companies to maintain a
reliable network that provides adequate speed, data capacity and security and to
develop products that enable reliable Internet access and services. If the
Internet continues to experience significant growth in the number of users,
frequency of use and amount of data transmitted, the Internet infrastructure may
be unable to support the demands placed on it, and the Internet's performance or
reliability may suffer as a result of this continued growth. In addition, the
Internet could lose its viability as a commercial medium due to delays in the
development or adoption of new standards and protocols to process increased
levels of Internet activity. Any degradation of Internet performance or
reliability could cause users to reduce their Internet usage. If other companies
do not develop the infrastructure or complementary products and services
necessary to establish and maintain the Internet as a viable commercial medium,
our business, financial condition and results of operations could be materially
adversely affected.
OUR BUSINESS IS HIGHLY COMPETITIVE
The market for Internet banking services and financial software
applications is highly competitive, and we expect that competition will
intensify in the future. In addition we could experience competition from our
client banks and potential client banks. From time to time, these potential
client banks develop, implement and maintain their own services and applications
for revenue enhancements, cost reductions and/or enhanced customer services,
rather than purchasing services and related products from third parties. There
can be no assurance that these client banks or other potential client banks will
perceive sufficient value in our products
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and services to justify investing in them. In addition, client banks or
potential client banks could enter into strategic relationships with one or more
of our competitors to develop, market and sell competing services or products.
We compete with a variety of third parties, including Digital Insight,
Edify, FundsXpress, Q-UP, First Data Direct Banking and Security First
Technologies, that employ many different approaches to providing Internet
banking services. We believe that nFront's ability to compete successfully
depends upon a number of factors, including:
- our market presence within our target market;
- the capacity, reliability and security of our network infrastructure;
- the comprehensiveness and ease of use of our products;
- our pricing policies and the pricing policies of our competitors and
suppliers;
- the timing of introductions of new products and services by us and our
competitors; and
- our ability to support evolving industry standards.
We expect competition in our markets to increase significantly as new
companies enter our market and current competitors expand their product lines
and services. These new competitors may include non-bank financial institutions,
such as brokerage firms and on-line service providers such as E*Trade, Intuit,
Charles Schwab, Quicken.com and Yahoo! Finance, all of which could be dominant
competitors given their current position in the online financial services
industry, broad name recognition and substantial online customer bases. Many of
our current and potential competitors are likely to enjoy substantial
competitive advantages, including:
- greater financial, technical and marketing resources can be devoted to
the development, promotion and sale of their services;
- longer operating histories;
- greater name recognition;
- client banks with larger customer bases; and
- larger base of client banks.
Any pricing pressures, reduced margins or loss of market share resulting
from our failure to compete effectively would materially adversely affect our
business, financial condition and operating results.
INFRINGEMENT OF OUR PROPRIETARY TECHNOLOGY COULD HARM OUR BUSINESS
We rely on a combination of copyright, trademark and trade secret laws and
contractual provisions to establish and protect our proprietary rights. We have
applied for the federal registration of service marks for "nFront," "nHome" and
"nBusiness." We have also registered the domain names "banking.com" and
"nFront.com."
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There can be no assurance that the steps we have taken to protect our
proprietary rights will be adequate, that we will be able to secure trademark or
service mark registrations for our marks in the United States or in foreign
countries or that third parties will not infringe upon or misappropriate our
copyrights, trademarks, service marks, domain names and similar proprietary
rights. In addition, effective copyright and trademark protection may be
unenforceable or limited in foreign countries, and the global nature of the
Internet makes it impossible to control the ultimate destination of our
services. It is possible that our competitors may independently develop
technologies that are substantially equivalent or superior to our technology.
Also, our competitors or others may adopt product or service names similar to
ours, thereby impeding our ability to build brand identity and possibly leading
to customer confusion. Moreover, because domain names derive value from the
individual's ability to remember these names, we cannot guarantee that our
domain names will not lose their value if, for example, users begin to rely on
mechanisms other than domain names to access on-line resources. Our inability to
protect our marks adequately could have a material adverse effect on the
acceptance of the nFront brand and on our business, financial condition and
operating results.
LITIGATION MAY BE REQUIRED TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS
In the future, litigation may be necessary to enforce and protect our trade
secrets, copyrights and other intellectual property rights. Litigation would
divert management resources, be expensive and may not effectively protect our
intellectual property.
WE MAY BE SUBJECT TO INTELLECTUAL PROPERTY LITIGATION
We may be subject to litigation for claims of infringement of the rights of
others or to determine the scope and validity of the intellectual property
rights of others. If other parties file applications for marks used or
registered by us, we may have to oppose those applications and participate in
administrative proceedings to determine priority of rights to the mark, which
could result in substantial costs to us due to the diversion of management's
attention and the expense of this litigation, even if the eventual outcome is
favorable to us.
Adverse determinations in litigation could result in the loss of
proprietary rights, subject us to significant liabilities, require us to seek
licenses from third parties or prevent us from selling our services. There can
be no assurance that we will be able to obtain these licenses on commercially
reasonable terms, if at all. Any of these results could have a material adverse
effect on the acceptance of the nFront brand and on our business, financial
condition and operating results.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES COULD ADD ADDITIONAL COSTS TO
DOING BUSINESS ON THE INTERNET
There are currently few laws or regulations that specifically regulate
communications or commerce on the Internet. However, laws and regulations may be
adopted in the future that address issues including user privacy, pricing, and
the characteristics and quality of products and services. For example, the
Telecommunications Act sought to prohibit transmitting various types of
information
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and content over the Internet. Several telecommunications companies have
petitioned the Federal Communications Commission to regulate Internet service
providers and on-line service providers in a manner similar to long distance
telephone carriers and to impose access fees on those companies. This could
increase the cost of transmitting data over the Internet. Moreover, it may take
years to determine the extent to which existing laws relating to issues such as
property ownership, libel and personal privacy issues apply to the Internet. Any
new laws or regulations relating to the Internet or the manner in which existing
laws are applied to the Internet could adversely affect our business.
WE MAY BECOME SUBJECT TO GOVERNMENT REGULATION RELATING TO BANKING AND OUR
CLIENT BANKS MAY BECOME SUBJECT TO MORE STRINGENT ELECTRONIC BANKING
REGULATIONS, WHICH COULD AFFECT OUR GROWTH-RATE
Our primary customers are banks. The banking industry, including electronic
banking, is regulated heavily, and we expect that this regulation will affect
the relative demand for our products and services. In addition, through their
ability to regulate our bank customers' system requirements, bank regulators can
effectively regulate the required security systems, communication technologies
and other features of our products and services.
There can be no assurance that federal, state or foreign governmental
authorities will not adopt new regulations addressing electronic banking or
banking operations generally that could require us to modify our current or
future products and services. The adoption of laws or regulations affecting our
business or our client banks' business could reduce our growth rate or could
otherwise have a material adverse effect on our business, financial condition
and operating results.
THE INTERNET PRODUCTS AND SERVICES THAT WE AND OUR CLIENT BANKS PROVIDE COULD BE
SUBJECT TO SALES OR OTHER TAXES WHICH COULD AFFECT DEMAND FOR OUR PRODUCTS
The tax treatment of the Internet and electronic commerce is currently
unsettled. A number of proposals at the federal, state and local level and
foreign governments would, if enacted, impose taxes on the sale of goods and
services and other Internet activities. A recently enacted law places a
temporary moratorium on some forms of taxation on Internet commerce. We cannot
predict the effect of current attempts to tax or regulate commerce over the
Internet. Any legislation that substantially impairs the growth of electronic
commerce could have a material adverse effect on our business, financial
condition and operating results.
TO EXECUTE OUR STRATEGY WE MAY REQUIRE ADDITIONAL FUNDING THAT MAY NOT BE
AVAILABLE ON FAVORABLE TERMS OR AT ALL
Although we believe that our existing capital resources and available
financing will be adequate to fund our operations for at least the next 18
months, these sources may be inadequate. We have not sustained positive earnings
or cash flow and we are required to incur significant expenses to be
competitive. Consequently, we may require additional funds during or after this
period to successfully execute our strategy. Additional financing may not be
available on favorable terms or at all. If we cannot raise adequate funds to
satisfy our capital requirements, we may have to limit
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our operations significantly. Our future capital requirements depend upon many
factors, including, but not limited to:
- the rate at which we expand our sales and marketing operations;
- the extent to which we expand our products and services;
- the extent to which we develop and upgrade our technology and data
network infrastructure;
- the occurrence, timing, size and success of acquisitions; and
- the response of competitors to our service offerings.
OUR STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE
We cannot predict the extent to which investor interest in nFront will lead
to the development of a trading market for our common stock or how liquid that
market might become. The initial public offering price for our common stock will
be determined by negotiations between us and the representatives of the
underwriters and may not be indicative of prices that will prevail in the
trading market. Our common stock price could be subject to wide fluctuations in
response to several factors which are discussed elsewhere in "Risk Factors."
In addition, the market for Internet and technology companies has
experienced extreme price and volume volatility that have often been unrelated
or disproportionate to the operating performance of those companies. These broad
market and industry factors may materially and adversely affect our stock price,
regardless of our operating performance. The trading prices of the stocks of
many Internet and technology companies are at or near historical highs and
reflect relative valuation levels substantially above historical levels. These
trading prices and relative valuation levels may not be sustained.
OUR MANAGEMENT AND AFFILIATES CONTROL MORE THAN 60% OF OUR STOCK; NO CORPORATE
ACTIONS REQUIRING SHAREHOLDER APPROVAL CAN BE TAKEN WITHOUT THE APPROVAL OF THIS
GROUP
Following this offering, our officers, directors and affiliated persons
will beneficially own approximately 69.9% of our common stock (65.8% if the
underwriters exercise their over-allotment option in full). Brady L. "Tripp"
Rackley III, our Chief Executive Officer, will beneficially own approximately
22.3% of our common stock (20.9% if the underwriters exercise their
over-allotment option in full) following this offering. As a result, our
officers, directors and affiliated persons will effectively be able to:
- elect, or defeat the election of, our directors;
- amend or prevent amendment of our Articles of Incorporation or Bylaws;
- effect or prevent a merger, sale of assets or other corporate
transaction; and
- control the outcome of any other matter submitted to the shareholders for
vote.
Our public shareholders, for so long as they hold less than 50% of our
common stock, will be unable to control the outcome of these transactions.
Management's stock ownership may discourage a potential acquirer from offering
to purchase or otherwise attempting to obtain control of nFront, which in turn
could reduce our
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stock price or prevent our shareholders from realizing a premium over our stock
price.
FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE
Sales of a substantial number of shares of our common stock in the public
market following this offering could adversely affect the market price of our
common stock. After this offering, 14,196,152 shares of our common stock will be
outstanding. All of the shares sold in this offering will be freely tradable
unless held by affiliates of nFront or by persons subject to other contractual
or legal restrictions on resale. The remaining shares of common stock
outstanding after this offering will be restricted as a result of securities
laws or lock-up agreements signed by the holder and will be available for sale
in the public market as follows:
- no restricted shares will be eligible for sale as of the date of this
prospectus;
- approximately 386,425 restricted shares will be eligible for sale 180
days after the date of this prospectus upon the expiration of lock-up
agreements with the underwriters; and
- approximately 9,909,727 restricted shares will become eligible for sale
thereafter at various times upon the expiration of their respective
holding periods and if otherwise in accordance with the provisions of
Rule 144.
Hambrecht & Quist LLC may, in its sole discretion and at any time without
prior notice, release all or any portion of the common stock subject to lock-up
agreements. See "Shares Eligible for Future Sale" for a more detailed
discussion.
YEAR 2000 COMPLIANCE ISSUES COULD ADVERSELY IMPACT OUR BUSINESS
We are in the process of assessing and remediating any Year 2000 issues
associated with our computer systems and software and other property and
equipment. Despite our testing and remediation efforts, our systems and those of
third parties, including client banks, core processors, other technology
companies, utilities, affiliates, and end users may contain errors or faults
with respect to the Year 2000. Our efforts to address this issue are described
in more detail in "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Impact of Year 2000 Computer Issues." We also face
risks relating to the potential Year 2000 noncompliance of our client banks and
other institutions that support the banks, such as the FedWire system governing
electronic fund transfers and the Federal Reserve system itself. Furthermore, if
a client bank is unable to achieve Year 2000 readiness, the regulators could
suspend that bank's operations, adversely affecting the volume of new bank
customers and transactions generated for us by that bank. Additionally, an
extended disruption in availability of electricity to our facilities resulting
from Year 2000 problems with utility service providers could adversely affect
our business, results of operations and financial condition. Known or unknown
errors or defects that affect the operation of our software and systems and
those of third parties, including content providers, advertisers, affiliates,
and end users could result in delay or loss of revenue, interruption of
services, cancellation of client bank contracts, diversion of development
resources, damage to our reputation, increased service and warranty costs, and
litigation costs, any of which could harm our business.
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WE COULD BE LIABLE FOR INFORMATION RETRIEVED FROM OUR WEB SITES
We may be subject to third party claims for defamation, negligence,
copyright or trademark infringement or other theories based on the nature and
content of information supplied on our web sites by us or third parties,
including our content providers or users. These types of claims have been
brought, sometimes successfully, against on-line services in the past. We could
be subject to liability with respect to content that may be accessible on web
sites maintained on our system. Even if these claims do not result in liability
to us, we could incur significant costs in investigating and defending against
these claims and in implementing measures to reduce our exposure to this
liability. Our insurance may not cover potential claims of this type or may not
be adequate to cover all costs incurred in defense of potential claims or to
indemnify us for all liability that we may incur.
OUR MANAGEMENT HAS BROAD DISCRETION AS TO USE OF PROCEEDS FROM THIS OFFERING
WHICH WE MAY NOT USE EFFECTIVELY
Our management will have broad discretion in how we use the net proceeds of
this offering. We currently expect to use the net proceeds from this offering
for repayment of debt; expansion of our business, including sales, marketing and
product development expenditures; potential future acquisitions; and general
corporate purposes, including working capital. Investors will be relying on the
judgment of our management regarding the application of the proceeds from this
offering.
POTENTIAL ACQUISITIONS INVOLVE RISKS
Though we have not yet entered into negotiations on any potential
acquisitions and do not have any short-term plans to do so, we intend to
continuously evaluate our position within our industry, and we may acquire
complementary technologies or businesses in the future. Due to consolidation
trends within the online services industry, failure to adopt and successfully
implement a long-term acquisition strategy could damage our competitive
position. Future acquisitions may involve large one-time write-offs and
amortization expenses related to goodwill and other intangible assets. Any of
these factors could adversely affect our results of operations or stock price.
Acquisitions involve numerous risks, including:
- difficulties in assimilating the operations, products, technology,
information systems and personnel of the acquired company with our
operations;
- diverting our management's attention from other business concerns;
- impairing relationships with our employees, affiliates, strategic
marketing alliances and content providers;
- being unable to maintain uniform standards, controls, procedures and
policies;
- entering markets in which we have no direct prior experience; and
- losing key employees of the acquired company.
Some or all of these risks could result in a material adverse effect on our
business, financial condition and results of operations. In addition, we cannot
assure you that we will be able to identify suitable acquisition candidates that
are available for sale at reasonable prices. We may elect to finance future
acquisitions using some or all of the proceeds of this offering. We may also
elect to finance future acquisitions with debt financing, which would increase
our debt service requirements, or through the issuance of additional common or
preferred stock, which could result in dilution to our shareholders. There can
be no assurance that
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we will be able to arrange adequate financing for any acquisitions on acceptable
terms.
INVESTORS IN THIS OFFERING WILL SUFFER IMMEDIATE DILUTION
The initial public offering price is expected to be substantially higher
than the pro forma net tangible book value per share of our outstanding common
stock immediately after the offering. Accordingly, purchasers of common stock in
this offering will experience immediate and substantial dilution of
approximately $7.70 in pro forma net tangible book value per share, or
approximately 77% of the assumed offering price of $10.00 per share. In
contrast, existing shareholders paid an average price of $0.31 per share.
Investors will incur additional dilution upon the exercise of outstanding stock
options and warrants.
OUR ARTICLES OF INCORPORATION AND BYLAWS, AS WELL AS GEORGIA LAW, MAY PREVENT OR
DELAY A FUTURE TAKEOVER
Our Second Amended and Restated Articles of Incorporation, as amended,
Bylaws, other agreements and Georgia law could make it more difficult for a
third party to acquire us, even if a change in control would be beneficial to
our shareholders. For example, our Second Amended and Restated Articles of
Incorporation and Bylaws provide, among other things, that:
- the Board of Directors, without shareholder approval, has the authority
to issue preferred stock with rights superior to the rights of the
holders of common stock;
- shareholders must comply with advance notice provisions contained in our
Bylaws to make proposals at shareholder meetings and nominate candidates
for election to our Board of Directors;
- the Board of Directors is classified and directors have staggered terms;
and
- the shareholders may call a special meeting only upon request of 35% of
votes entitled to be cast on an issue.
Georgia law also contains "business combination" and "fair price" provisions
that may have the effect of delaying, deterring or preventing a change in
control of nFront. See "Description of Capital Stock - Antitakeover Provisions
of Our Second Amended and Restated Articles of Incorporation, Amended and
Restated Bylaws and Georgia Law."
FORWARD-LOOKING STATEMENTS
There are statements under the captions "Prospectus Summary," "Risk
Factors," "Use of Proceeds," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business," and elsewhere in this
prospectus that are "forward-looking statements." These forward-looking
statements include, but are not limited to, statements about our plans,
objectives, expectations and intentions and other statements contained in the
prospectus that are not historical facts. When used in this prospectus, the
words "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates" and similar expressions are generally intended to identify
forward-looking statements. Because these forward-looking statements involve
risks and uncertainties, there are important factors that could cause actual
results to differ materially from those expressed or implied by these
forward-looking statements, including our plans, objectives, expectations and
intentions and other factors discussed under "Risk Factors."
22
<PAGE> 26
USE OF PROCEEDS
The net proceeds to nFront from the sale of the 3,500,000 shares of common
stock offered by us in this offering, after deducting estimated offering
expenses of approximately $935,000 and the underwriting discounts and
commissions, are estimated to be approximately $31.6 million. We will not
receive any of the proceeds from the sale of shares by the selling shareholders.
The principal purposes of this offering are to obtain additional capital, to
create a public market for our common stock, to facilitate future access by us
to public equity markets and to provide increased visibility and credibility in
a marketplace where many of our current and potential competitors are or will be
publicly-held companies. We expect to use the net proceeds from the offering to
repay the debt described below, to expand our sales and marketing expenditures,
to continue our product development, and for general corporate purposes. We
expect to use approximately $887,500 of the net proceeds to repay loans
outstanding to NationsBank, N.A. The term loan portion of the NationsBank loans
(approximately $575,000), which was used to repay our obligations to Silicon
Valley Bank, bears interest at the prime rate plus 1% and matures on August 15,
2001. The line of credit portion of the loans ($312,500) bears interest at Libor
plus 1.75% and is due upon completion of this offering. We used the proceeds
derived from both the NationsBank line of credit and from the original Silicon
Valley loan for general working capital. We may borrow additional amounts under
the line of credit prior to the consummation of the offering to fund our current
working capital needs. The proceeds of the offering would be used to repay any
additional debt we incur prior to completion of the offering to fund our current
working capital needs. As of the date of this prospectus, we cannot specify with
certainty all of the particular uses for the remaining net proceeds we will have
upon completion of the offering. Accordingly, our management will have broad
discretion in the application of the net proceeds.
We may, when the opportunity arises, use an unspecified portion of the net
proceeds to acquire or invest in complementary businesses, products and
technologies. From time to time, in the ordinary course of business, we expect
to evaluate potential acquisitions of businesses, products or technologies.
However, we have no present understandings, commitments or agreements with
respect to any material acquisition or investment.
Pending use of the net proceeds for the above purposes, we intend to invest
these funds in short-term, interest-bearing, investment-grade securities and use
these funds for general corporate purposes.
DIVIDEND POLICY
nFront has never declared or paid any cash dividends on its capital stock.
We currently intend to retain any future earnings and do not anticipate paying
any cash dividends in the foreseeable future.
23
<PAGE> 27
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 1999. Our
capitalization is presented:
- on an actual basis;
- on an unaudited pro forma basis to reflect conversion of our redeemable
convertible preferred stock into common stock; and
- on an unaudited pro forma as adjusted basis to reflect conversion of our
redeemable convertible preferred stock into common stock and our receipt
of the estimated net proceeds from the sale of 3,500,000 shares of common
stock offered by nFront at an assumed initial public offering price of
$10.00 per share.
<TABLE>
<CAPTION>
MARCH 31, 1999
---------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
----------- ----------- -----------
<S> <C> <C> <C>
Long term debt, net of current portion........ $ 427,540 $ 427,540 $ --
Redeemable convertible preferred stock, no par
value; 10,000,000 shares authorized; 255,885
shares issued and outstanding at March 31,
1999; no pro forma and pro forma as adjusted
shares issued or outstanding................ 2,580,222 -- --
Stockholders' equity (deficit):
Common stock, no par value; 70,000,000
shares authorized; 8,661,867 shares
issued and outstanding at March 31, 1999;
10,696,152 pro forma and 14,196,152 pro
forma as adjusted shares issued and
outstanding.............................. 710,981 3,291,203 34,906,588
Subscription receivable..................... (777) (777) (777)
Accumulated deficit......................... (2,282,403) (2,282,403) (2,282,403)
----------- ----------- -----------
Total stockholders' equity (deficit)........ (1,572,199) 1,008,023 32,623,408
----------- ----------- -----------
Total capitalization..................... $ 1,435,563 $ 1,435,563 $32,623,408
=========== =========== ===========
</TABLE>
Upon the closing of the offering, our authorized capital will consist of
70,000,000 shares of common stock and 10,000,000 shares of preferred stock. Upon
the closing of this offering, all of our outstanding preferred stock will
convert into shares of common stock and none of our preferred stock will be
issued or outstanding. We expect there to be 14,196,152 shares of common stock
outstanding after the offering, which includes the pro forma adjustments
described above. The outstanding shares as of March 31, 1999 exclude 959,782
shares of common stock issuable upon the exercise of outstanding stock options
at a weighted average exercise price of $1.26, 50,000 shares of common stock
issuable upon the exercise of outstanding warrants at an exercise price equal to
the initial public offering price, approximately 61,600 shares of common stock
issuable upon the exercise of options granted since March 31, 1999 or to be
granted upon completion of this offering under our stock incentive plan and
approximately 42,850 shares of common stock issuable upon the exercise of
options to be granted upon completion of this offering under our employee stock
purchase plan.
Read the capitalization table together with the sections of this prospectus
entitled "Selected Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements and
related notes included in this prospectus.
24
<PAGE> 28
DILUTION
As of March 31, 1999, nFront had a pro forma net tangible book value of
approximately $1.0 million, or $0.09 per share of common stock. Pro forma net
tangible book value per share represents the amount of total tangible assets of
nFront reduced by its total liabilities, divided by the number of shares of
common stock outstanding after giving effect to the conversion of all
outstanding shares of preferred stock into shares of common stock upon
completion of this offering. After giving effect to the receipt by nFront of the
estimated net proceeds from the sale of the 3,500,000 shares of common stock
offered by nFront hereby, the pro forma as adjusted net tangible book value of
nFront as of March 31, 1999 would have been approximately $32.6 million; or
$2.30 per share. This represents an immediate increase in pro forma net tangible
book value of $2.21 per share to existing shareholders and an immediate dilution
of $7.70 per share to new investors. The following table illustrates this per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $10.00
Pro forma net tangible book value per share as of March
31, 1999............................................... $0.09
Increase per share attributable to new investors.......... 2.21
-----
Pro forma as adjusted net tangible book value per share
after this offering....................................... 2.30
------
Dilution per share to new investors......................... $ 7.70
======
</TABLE>
The following table sets forth on a pro forma basis as of March 31, 1999,
the differences between existing shareholders and new investors with respect to
the number of shares of common stock purchased from nFront, the total
consideration paid and the average price per share paid:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing
shareholders......... 10,696,152 75.3% $ 3,290,426 8.5% $ 0.31
New investors.......... 3,500,000 24.7 35,000,000 91.5 10.00
---------- ----- ----------- -----
Total................ 14,196,152 100.0% $38,290,426 100.0%
========== ===== =========== =====
</TABLE>
Other than as noted above, the foregoing computations assume no exercise of
stock options or warrants after March 31, 1999. As of March 31, 1999, options to
purchase 959,782 shares of common stock were outstanding, with a weighted
average exercise price of $1.26 per share. In conjunction with an agreement
under which nFront has the right to issue up to $5.0 million in subordinated
debentures, nFront has agreed to issue to Noro-Moseley Partners IV, L.P.,
concurrent with the completion of this offering, a warrant to purchase a number
of shares equal to $500,000 divided by the initial public offering price per
share and exercisable at that price. Additionally, if CNL Financial Corporation,
one of our strategic marketing alliances, consummates sales to between 51 and 75
or more client banks prior to January 1, 2000, we will be obligated to issue
options to purchase up to 114,988 shares of common stock at an exercise price of
$1.63 per share. To the extent that the outstanding options or warrants to
purchase common stock, or any options or warrants issued in the future, are
exercised, there will be further dilution to new investors.
25
<PAGE> 29
Sales by the selling shareholders in this offering will reduce the number
of shares of common stock held by existing shareholders to 10,296,152, or
approximately 72.5% (approximately 68.4%, if the underwriters' over-allotment
option is exercised in full) of the total number of shares of common stock
outstanding upon the closing of this offering and will increase the number of
shares held by new public investors to 3,900,000, or approximately 27.5%
(4,485,000 shares, or approximately 31.6%, if the underwriters' over-allotment
option is exercised in full) of the total number of shares of common stock
outstanding after this offering. See "Principal and Selling Shareholders."
26
<PAGE> 30
SELECTED FINANCIAL DATA
The following table sets forth our selected financial data and other
operating information. We derived the selected financial data from our financial
statements and related notes included in another part of this prospectus. You
should read the selected financial data together with our financial statements
and related notes and the section of the prospectus entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations." Ernst
& Young LLP, independent auditors, audited our financial statements for the
period from June 17, 1996 (inception) to June 30, 1997, the fiscal year ended
June 30, 1998 and the nine months ended March 31, 1999. The statement of
operations and per share data for the nine months ended March 31, 1998 were
derived from unaudited financial statements which, in the opinion of management,
include all adjustments, consisting of normal recurring accruals, necessary for
a fair presentation of results of operations. You should not rely on interim
results as being indicative of results we expect for the full year.
Additionally, historical results are not necessarily indicative of results to be
expected in the future. See Notes 1 and 11 of Notes to Financial Statements for
an explanation of the determination of the shares used in computing basic and
diluted net income (loss) per common share and unaudited pro forma net loss per
share.
<TABLE>
<CAPTION>
PERIOD FROM FISCAL YEAR NINE MONTHS
JUNE 17, 1996 ENDED ENDED MARCH 31,
(INCEPTION) TO JUNE 30, -----------------------
JUNE 30, 1997 1998 1998 1999
-------------- ----------- --------- -----------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Implementation fees.............................. $ 358,245 $ 722,859 $ 581,375 $ 1,728,179
Monthly service fees............................. 34,263 185,283 102,929 892,816
Other............................................ 458,643 174,287 149,406 214,095
--------- ----------- --------- -----------
Total revenues................................. 851,151 1,082,429 833,710 2,835,090
Operating expenses:
Cost of implementation........................... 246,544 346,054 132,750 697,541
Cost of Internet banking data center............. 61,681 96,732 65,098 213,950
Selling and marketing............................ 194,450 568,928 189,265 1,462,943
Product development.............................. 106,429 170,419 109,164 785,790
General and administrative....................... 157,274 440,099 305,188 1,445,481
Depreciation..................................... 13,780 33,726 23,140 82,893
--------- ----------- --------- -----------
Total operating expenses....................... 780,158 1,655,958 824,605 4,688,598
Operating income (loss)............................ 70,993 (573,529) 9,105 (1,853,508)
Other (income) expense:
Interest income.................................. (3,672) (26,692) (3,916) (63,436)
Interest expense................................. -- 2,084 1,914 18,075
--------- ----------- --------- -----------
Income (loss) before income taxes.................. 74,665 (548,921) 11,107 (1,808,147)
Income tax expense (benefit)....................... 25,925 (25,925) 2,000 --
--------- ----------- --------- -----------
Net income (loss).................................. 48,740 (522,996) 9,107 (1,808,147)
Accretion on redeemable convertible preferred
stock............................................ -- (35,733) -- (204,661)
--------- ----------- --------- -----------
Net income (loss) attributable to common stock..... $ 48,740 $ (558,729) $ 9,107 $(2,012,808)
========= =========== ========= ===========
Net income (loss) per common share -- basic and
diluted.......................................... $ 0.01 $ (0.07) $ 0.00 $ (0.24)
========= =========== ========= ===========
Weighted average shares outstanding -- basic and
diluted.......................................... 5,079,167 8,033,223 8,000,090 8,498,844
========= =========== ========= ===========
Unaudited pro forma net loss per share -- basic and
diluted.......................................... $ (0.07) $ (0.19)
=========== ===========
Unaudited pro forma weighted average shares
outstanding -- basic and diluted................. 8,300,746 10,533,129
=========== ===========
</TABLE>
27
<PAGE> 31
<TABLE>
<CAPTION>
PERIOD FROM FISCAL YEAR NINE MONTHS
JUNE 17, 1996 ENDED ENDED MARCH 31,
(INCEPTION) TO JUNE 30, -----------------------
JUNE 30, 1997 1998 1998 1999
-------------- ----------- --------- -----------
<S> <C> <C> <C> <C>
OPERATING DATA (AT END OF PERIOD):
Total client banks under contract.................. 6 40 24 122
Total client banks implemented..................... 2 20 14 83
Total customers at client banks using our
solution......................................... * 5,220 3,149 19,648
</TABLE>
- ---------------
* Information not available because prior to fiscal year ended June 30, 1998,
nFront did not bill client banks on the basis of the total customers at client
banks using the nFront solution.
<TABLE>
<CAPTION>
AS OF JUNE 30,
---------------------- AS OF MARCH 31,
1997 1998 1999
--------- ---------- ---------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 243,525 $2,521,384 $ 1,530,458
Working capital (deficiency).............................. (71,787) 1,957,205 561,185
Total assets.............................................. 402,345 2,998,128 3,802,645
Long-term debt, net of current portion.................... -- -- 427,540
Redeemable convertible preferred stock.................... -- 2,375,561 2,580,222
Total stockholders' equity (deficit)...................... 49,240 (209,391) (1,572,199)
</TABLE>
28
<PAGE> 32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements and related notes included elsewhere in this prospectus. This
discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from the results
anticipated in these forward-looking statements as a result of factors
including, but not limited to, those under "Risk Factors" and elsewhere in this
prospectus.
OVERVIEW
nFront provides a comprehensive, outsourced solution that enables small to
mid-sized banks to offer their retail and commercial customers banking and
financial services through the Internet. nFront's products and services provide
bank-branded Internet applications to these banks, enabling the banks to offer
products, services and transactions over the Internet in a secure environment.
We were founded and incorporated in June 1996. From June 1996 through May 1997,
our principal activities consisted of developing our nHome product, recruiting
employees and raising capital. Our revenue during this period was generated
primarily through software licensing fees from our nHome product. In June 1997,
in response to the significant demand from small to mid-sized banks, we opened
our Internet banking data center and began focusing on providing our client
banks with a comprehensive outsourced Internet banking solution. In March 1999,
we released our nBusiness product, which is designed to meet the specific needs
of a bank's commercial customers. Our nHome product has been responsible for
generating most of our revenue to date.
We derive revenue from multi-year service contracts under which our client
banks pay us the following fees:
- an up-front implementation fee for developing each client bank's uniquely
branded web site;
- recurring fees based primarily on the number of customers of our client
banks that use our products;
- transaction-based fees; and
- fees for materials and services provided to client banks to support their
customer marketing efforts and to train their staff on how best to manage
customers on the Internet branch.
The implementation fee, which is billable to the client bank when the
contract is executed, is recognized as revenue over the implementation period,
which currently averages approximately three months. We record the unrecognized
portion of billable implementation fees as deferred revenue. Revenue from
monthly user fees and transaction fees are recognized monthly based on the
number of users with accounts on the bank's Internet branch at the end of the
month and the transactions occurring during the month. The service contracts
with the banks are typically five year exclusive agreements. The revenue from
marketing and training support materials and services is recognized at the time
the materials are delivered or the services are provided.
29
<PAGE> 33
We compensate both our sales representatives and companies with which we
have strategic marketing alliances with commissions. Sales representatives'
commissions are determined using a fixed commission schedule, which is based on
the total asset size of the applicable client bank sold. Commissions on sales
guaranteed from companies with which we have strategic marketing alliances are
paid in accordance with the contractually agreed upon commission schedules in
the respective contracts. These commissions, typically between 10% and 40%, vary
by relationship and are generally expressed as a percentage of the up-front
implementation fee and the monthly recurring fees.
Our strategic marketing agreements stipulate that either nFront or the
company with which we have a strategic marketing alliance is responsible for
billing a client bank. In the event that nFront is responsible for billing the
client bank, we recognize the gross amount of revenue and the sales commission
to the company with which we have a strategic marketing alliance as a selling
and marketing expense. In the event that the company with which we have a
strategic marketing alliance is responsible for billing the client bank, that
company remits an agreed upon amount to us. Accordingly, we recognize the
related revenue collected and no sales commission expense is incurred.
To date, the majority of our resources have been directed to creating our
nHome and nBusiness Internet banking products, building our Internet banking
data center, forming exclusive strategic marketing alliances, marketing our
products and building our sales and marketing team. As we have migrated from a
licensing fee structure to a structure based on recurring revenue generation, we
have incurred significant operating losses since September 30, 1997. Our
strategy is to rapidly expand our base of client banks, assist these banks in
promoting the use of the nFront system by their customers and increase the
retail and commercial banking communities' awareness and acceptance of the
nFront solution. We anticipate that our operating expenses will increase
substantially in future quarters as we increase our sales force, significantly
increase our marketing and branding efforts, continue to develop new
distribution channels, fund greater levels of product development and expand our
support staff and facilities to facilitate our anticipated growth. Accordingly,
we expect to incur additional losses in future quarters.
30
<PAGE> 34
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM NINE MONTHS
JUNE 17, 1996 FISCAL ENDED MARCH 31,
(INCEPTION) TO YEAR ENDED ----------------------
JUNE 30, 1997 JUNE 30, 1998 1998 1999
-------------- -------------- -------- -----------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Implementation fees.......... $358,245 $ 722,859 $581,375 $ 1,728,179
Monthly service fees......... 34,263 185,283 102,929 892,816
Other........................ 458,643 174,287 149,406 214,095
-------- ---------- -------- -----------
Total revenues............ 851,151 1,082,429 833,710 2,835,090
Operating expenses:
Cost of implementation....... 246,544 346,054 132,750 697,541
Cost of Internet banking data
center.................... 61,681 96,732 65,098 213,950
Selling and marketing........ 194,450 568,928 189,265 1,462,943
Product development.......... 106,429 170,419 109,164 785,790
General and administrative... 157,274 440,099 305,188 1,445,481
Depreciation................. 13,780 33,726 23,140 82,893
-------- ---------- -------- -----------
Total operating
expenses................ 780,158 1,655,958 824,605 4,688,598
Operating income (loss)........ 70,993 (573,529) 9,105 (1,853,508)
Other (income) expense:
Interest income.............. (3,672) (26,692) (3,916) (63,436)
Interest expense............. -- 2,084 1,914 18,075
-------- ---------- -------- -----------
Income (loss) before income
taxes........................ 74,665 (548,921) 11,107 (1,808,147)
Income tax expense (benefit)... 25,925 (25,925) 2,000 --
-------- ---------- -------- -----------
Net income (loss).............. $ 48,740 $ (522,996) $ 9,107 $(1,808,147)
======== ========== ======== ===========
</TABLE>
NINE MONTHS ENDED MARCH 31, 1999 COMPARED TO NINE MONTHS ENDED MARCH 31, 1998
Revenues
Implementation Fees. Implementation fees represent fees generated from
developing the client banks' uniquely branded web sites. Implementation fees
increased from $581,000 during the 1998 period to $1.7 million in the 1999
period. This increase was attributable to an increase in the number of new banks
purchasing the nFront solution, from 19 banks purchasing our solution during the
1998 period to 83 banks during the 1999 period. The increase in banks purchasing
our Internet banking solution reflects increased client bank acceptance of
Internet banking as well as continued development of our products and services
and an increase in our sales force from one individual at March 31, 1998 to a
team of 14 sales representatives at March 31, 1999. We added 12 new sales
representatives since December 1, 1998. Additionally, we introduced our
nBusiness product in March 1999.
Monthly Service Fees. Monthly service fees consist of the monthly fees
charged to our client banks based primarily on the number of bank customers with
accounts on the system and the volume of transactions such as bill payment, fund
transfers and check imaging. These fees increased from $103,000 in the 1998
period to
31
<PAGE> 35
$893,000 in the 1999 period. This increase is attributable to the increase in
customers at our client banks utilizing the nFront system from approximately
3,000 at March 31, 1998 to approximately 19,500 at March 31, 1999.
Other. Other revenue consists of the fees charged to our client banks for
materials and services to support marketing and training efforts as well as
other non-recurring fees, including fees for custom web site development. These
revenues increased from $149,000 in the 1998 period to $214,000 in the 1999
period primarily because of increased sales of our marketing materials.
Expenses
Cost of Implementation. Cost of implementation consists primarily of
salaries and wages and facilities costs directly attributable to the
implementation process. Cost of implementation increased from $133,000 in the
1998 period to $698,000 in the 1999 period. This increase reflects the
significant growth in personnel required to accommodate the increase in new
banks purchasing our solution.
Cost of Internet Banking Data Center. Cost of Internet banking data center
consists primarily of salaries and wages and communications costs required to
operate the Internet banking data center. These costs increased from $65,000 in
the 1998 period to $214,000 in the 1999 period to support the significant growth
in the number of client banks and those banks' customers utilizing the nFront
system.
Selling and Marketing. Selling and marketing expenses consist primarily of
salaries and wages, sales commissions, advertising, travel, public relations and
marketing materials and tradeshow costs. Sales and marketing expenses increased
from $189,000 in the 1998 period to $1.5 million in the 1999 period. The
increase reflects the expansion of our sales force and a substantial increase in
sales commissions paid to our sales representatives and companies with which we
have strategic marketing alliances due to our increased sales. We believe that
these expenses will increase significantly in the future as we continue to
expand our sales force and increase our marketing and advertising efforts.
Product Development. Product development expenses consist primarily of
salaries and wages costs. Product development expenses increased from $109,000
in the 1998 period to $786,000 in the 1999 period. This increase reflects the
increase in technical personnel to support the continued development of our
nHome product and the development of our new nBusiness product, which was
released in March 1999.
General and Administrative. General and administrative expenses consist
primarily of salaries and wages and other related costs for operations and
executive employees, professional fees and facilities-related expenses. General
and administrative expenses increased from $305,000 in the 1998 period to $1.4
million in the 1999 period. This increase is attributable to an increase in
personnel and facilities expenses necessary to support our expanded operations.
Depreciation. Depreciation expense increased from $23,000 in the 1998
period to $83,000 in the 1999 period primarily as a result of depreciation of
new computer equipment associated with the growth of the Internet banking data
center as well as depreciation of our enhanced administrative systems. During
the 1999 period, we added new sales automation, customer support and accounting
systems.
32
<PAGE> 36
Interest Income. Interest income increased from $4,000 in the 1998 period
to $63,000 in the 1999 period as a result of interest earned on cash balances
during the period. We raised approximately $2.8 million in proceeds from private
equity offerings from May 1998 to September 1998.
Interest Expense. Interest expense increased from $2,000 in the 1998
period to $18,000 in the 1999 period as a result of borrowings under our line of
credit facility with Silicon Valley Bank. This line of credit was executed in
August 1998. Outstanding borrowings under the facility totaled $729,000 as of
March 31, 1999.
Income Taxes. As of March 31, 1999, we had approximately $2.0 million of
federal net operating loss carryforwards, which begin expiring in 2013.
Utilization of these net operating loss carryforwards could become subject to
annual limitation due to "change of ownership" provisions of the Internal
Revenue Code and similar state provisions. For financial reporting purposes, a
valuation allowance has been recognized to reduce net deferred tax assets to
zero due to uncertainties with respect to nFront's ability to realize the
benefit of deferred income tax assets.
FISCAL YEAR ENDED JUNE 30, 1998 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1997
Revenues
Implementation Fees. Implementation fees increased from $358,000 in fiscal
1997 to $723,000 in fiscal 1998. This increase was attributable to the fact that
only six new client banks purchased the nFront solution during fiscal 1997 while
35 banks purchased the nFront solution during fiscal 1998. This increase was
partially offset during fiscal 1998 by the modification of our pricing structure
to lower the up-front charges to the client bank and establish recurring monthly
service fees as well as other transaction-based fees.
Monthly Service Fees. Monthly service fees increased from $34,000 in
fiscal 1997 to $185,000 in fiscal 1998 as a result of the increase in the number
of client bank customers using nFront's products.
Other. Other revenue decreased from $459,000 in fiscal 1997 to $174,000 in
fiscal 1998. This decrease is primarily attributable to one-time revenue
generated from a customized project performed for one client bank in fiscal
1997.
Expenses
Cost of Implementation. Cost of implementation increased from $247,000 in
fiscal 1997 to $346,000 in fiscal 1998. This increase is attributable to the
increase in client banks sold from six in fiscal 1997 to 34 in fiscal 1998.
Cost of Internet Banking Data Center. Cost of Internet banking data center
increased from $62,000 in fiscal 1997 to $97,000 in 1998. These costs increased
to support the significant growth in the number of client banks and these banks'
customers utilizing the nFront system.
Selling and Marketing. Selling and marketing expenses increased from
$194,000 in fiscal 1997 to $569,000 in fiscal 1998. This increase was due
primarily to a substantial increase in sales commissions due to our increased
sales.
33
<PAGE> 37
Product Development. Product development expenses increased from $106,000
in fiscal 1997 to $170,000 in fiscal 1998. This increase reflects the increase
in technical personnel to support the continued development of our nHome
product.
General and Administrative. General and administrative expenses increased
from $157,000 in fiscal 1997 to $440,000 in fiscal 1998. This increase is
attributable to an increase in personnel and facilities expenses necessary to
support our expanded operations.
Depreciation. Depreciation expense increased from $14,000 in fiscal 1997
to $34,000 in fiscal 1998 primarily as a result of depreciation of new computer
equipment associated with the growth of the Internet banking data center.
Interest Income. Interest income increased from $4,000 in fiscal 1997 to
$27,000 in fiscal 1998 as a result of interest earned on cash balances during
the period. This increase is due primarily to interest earned on the investment
pending use of the private equity offering proceeds received during fiscal 1998.
34
<PAGE> 38
QUARTERLY RESULTS OF OPERATIONS
The following table presents unaudited quarterly financial information for
each of the seven quarters during the fiscal year ended June 30, 1998 and the
nine months ended March 31, 1999. In the opinion of management, this information
has been prepared on the same basis as the audited financial statements and
includes all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the unaudited quarterly results included in this
prospectus. We expect to continue to experience fluctuations in our quarterly
operating results. Our quarterly results have in the past been subject to
fluctuations and, therefore, the operating results for any quarter or quarters
are not necessarily indicative of results for any future period. The quarterly
results should be read in conjunction with our financial statements and related
notes appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1997 1997 1998 1998 1998 1998 1999
------------- ------------ --------- --------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Implementation fees....... $ 217,313 $ 134,500 $ 229,562 $ 141,484 $ 481,677 $ 730,171 $ 516,331
Monthly service fees...... 28,517 28,603 45,809 82,354 132,706 363,243 396,867
Other..................... 39,982 98,325 11,099 24,881 12,014 105,559 96,522
--------- --------- --------- --------- ---------- ---------- -----------
Total revenues.......... 285,812 261,428 286,470 248,719 626,397 1,198,973 1,009,720
Operating expenses:
Cost of implementation.... 31,414 50,635 50,701 213,304 211,823 219,186 266,532
Cost of Internet banking
data center............. 29,587 14,256 21,255 31,634 47,085 94,826 72,039
Selling and marketing..... 29,481 52,191 107,593 379,663 260,471 428,366 774,106
Product development....... 32,786 41,267 35,111 61,255 146,881 226,610 412,299
General and
administrative.......... 82,350 92,242 130,596 134,911 363,640 464,646 617,195
Depreciation.............. 6,642 7,886 8,612 10,586 16,048 25,977 40,868
--------- --------- --------- --------- ---------- ---------- -----------
Total operating
expenses.............. 212,260 258,477 353,868 831,353 1,045,948 1,459,611 2,183,039
Operating income (loss).... 73,552 2,951 (67,398) (582,634) (419,551) (260,638) (1,173,319)
Other (income) expense:
Interest income........... (1,220) (985) (1,711) (22,776) (26,186) (20,126) (17,124)
Interest expense.......... -- 665 1,249 170 518 8,233 9,324
--------- --------- --------- --------- ---------- ---------- -----------
Income (loss) before
income taxes............ 74,772 3,271 (66,936) (560,028) (393,883) (248,745) (1,165,519)
Income tax expense
(benefit)............... 13,459 589 (12,048) (27,925) -- -- --
--------- --------- --------- --------- ---------- ---------- -----------
Net income (loss).......... $ 61,313 $ 2,682 $ (54,888) $(532,103) $ (393,883) $ (248,745) $(1,165,519)
========= ========= ========= ========= ========== ========== ===========
</TABLE>
The fluctuation in implementation fee revenue in the quarters ended
September 30, 1997, December 31, 1997 and March 31, 1998 reflects the
unpredictability of client bank sales in the early stages of our business. The
decrease in implementation fee revenue and the corresponding increase in other
fees during the quarter ended June 30, 1998 reflects our significant decrease in
the standard up-front implementation fee resulting from our migration from a
licensing fee structure to a structure based on recurring revenue generation.
The decrease in implementation fee revenue during the quarter ended March 31,
1999 reflects a decrease in the number of new banks purchasing nFront products
and services in December 1998 and January 1999 as compared to the previous
quarter and the resulting reduction in revenue recognized over the three month
implementation
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<PAGE> 39
periods. The relatively slower growth in monthly service fees during the same
quarter also reflects a decrease in the number of new banks purchasing nFront
products and services in December 1998 and January 1999. Our sales have
historically decreased in December. Additionally, our focus on building the
sales team contributed to slower sales in January 1999.
The increase in cost of implementation during the quarter ended June 30,
1998 reflects an increase in one-time set up costs to establish our bill payment
interfaces. The increase in selling and marketing expenses during this quarter
reflects a one-time contractually agreed upon fee paid to a client bank.
Our revenues and operating results are likely to vary significantly from
quarter to quarter in the future due to a number of factors, many of which are
outside of our control. These factors include: our ability to sell our products
and services to banks; our client banks' abilities to convert their customers to
Internet banking; services or products introduced by us or by our competitors;
the timing and uncertainty of sales cycles; seasonal declines in sales, which
typically occur in the fourth calendar quarter; the level of Internet usage; our
ability to attract, integrate and retain qualified personnel; our ability to
successfully integrate operations and technologies from acquisitions or other
business combinations; technical difficulties or system downtime affecting the
Internet generally or the operation of our client banks' web sites; and general
economic conditions, as well as economic conditions specific to the banking and
financial services industries.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have raised approximately $4.0 million of capital,
consisting of $2.3 million of redeemable convertible preferred stock, $950,000
of common stock and $750,000 of debt. Through March 31, 1999, we have invested
$900,000 in capital expenditures. Beyond our capital expenditures, the funds we
have raised have been applied to support our working capital needs. Our working
capital needs have expanded significantly as our client bank base has grown to
122 banks as of March 31, 1999.
On June 17, 1999, we entered into a loan agreement with NationsBank, N.A.,
whereby NationsBank agreed to loan us up to $5.0 million. The Loan includes a
$4.4 million revolving line of credit and a $575,000 term loan. We used
approximately $575,000 of the proceeds from the term loan toward repayment of
the debt outstanding with Silicon Valley Bank and borrowed an additional
$312,500 for working capital and to pay closing costs. The term loan is to be
repaid in equal monthly installments of principal, plus accrued interest,
through August 15, 2001. The line of credit terminates and must be repaid upon
the first to occur of (a) December 31, 1999, (b) the closing of this offering or
(iii) the 25th business day following demand by NationsBank if this offering has
not closed by September 15, 1999. We are repaying both the term loan and the
line of credit from the proceeds of this offering. At March 31, 1999, we had
cash of $1.5 million.
In April 1999, we entered into a debenture purchase agreement with Noro-
Moseley Partners IV, L.P. Under this agreement, Noro-Moseley agreed to purchase
up to $5.0 million of senior subordinated debentures upon request by us. No
debentures have been issued under this agreement. The obligation of Noro-Moseley
to purchase debentures under the agreement expires upon the completion of this
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<PAGE> 40
offering. In exchange for its commitment under the agreement, we will issue to
Noro-Moseley a three-year warrant to purchase a number of shares equal to
$500,000 divided by the initial public offering price of our common stock,
exercisable at the initial public offering price. One of our directors, Mr.
Charles D. Moseley, Jr., is a member of MKFJ-IV, LLC, the general partner of
Noro-Moseley.
We may borrow additional amounts under the line of credit prior to the
consummation of the offering to fund our current working capital needs. The
proceeds of the offering would be used to repay any additional debt we incur
prior to completion of the offering to fund our current working capital needs.
In the next twelve months we expect to invest approximately $4.5 million in
capital expenditures. We believe that our existing capital resources, together
with the estimated net proceeds from this offering, will be sufficient to fund
our operations for at least the next 18 months. If we expand more rapidly than
currently anticipated, if our working capital needs exceed our current
expectations or if we make acquisitions, we may need to raise additional capital
from equity or debt sources. We cannot be sure that we will be able to obtain
the additional financing necessary to satisfy these expanded cash requirements
or to implement an expanded growth strategy on acceptable terms or at all. If we
cannot obtain this financing on terms acceptable to us, we may be forced to
curtail some planned business expansion and may be unable to fund our ongoing
operations.
During the nine month period ended March 31, 1999, we used net cash of $1.7
million for operating activities, as compared to $236,000 for the nine month
period ended March 31, 1998. Operating activities for the nine month period
ended March 31, 1999 consisted primarily of a $1.8 million net loss. Cash used
in operating activities in fiscal 1998 included a net loss of $523,000 and an
increase in accounts receivable of $175,000 partially offset by an increase in
deferred revenue of $522,000. Cash provided by operating activities in fiscal
1997 included net income of $49,000 and an increase in accrued liabilities of
$214,000.
Cash used in investing activities was $716,000 for the nine month period
ended March 31, 1999, as compared to $66,000 for the same period ended March 31,
1998. Investing activities for the 1999 period consisted of capital expenditures
totaling $716,000. These capital expenditures were related primarily to the
expansion of the Internet banking data center as well as the additional
furniture and equipment needed to accommodate our growth. Cash used in investing
activities in fiscal 1998 consisted of capital expenditures of $120,000 related
primarily to equipment purchases for the Internet banking data center. Cash used
in investing activities in fiscal 1997 consisted of capital expenditures of
$47,000 related primarily to purchases of office equipment.
Cash provided by financing activities was $1.4 million for the nine months
ended March 31, 1999, as compared to $300,000 for the 1998 period. Financing
activities included net proceeds from our bank credit facility of $729,000 and
$650,000 from the sale of our common stock. Cash provided by financing
activities in fiscal 1998 included proceeds of $2.3 million from the sale of our
preferred stock and $300,000 from the sale of our common stock. Cash provided by
financing activities in fiscal 1997 consisted of $500 from the sale of our
common stock.
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RECENT ACCOUNTING PRONOUNCEMENTS
Effective July 1, 1998, we adopted Statement of Financial Accounting
Standard No. 130, Reporting for Comprehensive Income, or FAS 130. FAS 130
requires disclosures of components of non-stockholder changes in equity in
interim periods and additional disclosures of components of non-stockholder
changes in equity on an annual basis. Adoption of FAS 130 had no impact on our
results of operations or financial position.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 131, Disclosures about Segments of an
Enterprise and Related Information, or FAS 131. We adopted FAS 131 effective
July 1, 1998. The adoption of this standard did not have a material effect on
our financial statement disclosures.
In March 1998, the AICPA issued Statement of Position 98-1, Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use, or SOP
98-1. We will adopt SOP 98-1 effective July 1, 1999. We have not completed our
evaluation of the impact of adopting SOP 98-1 but do not expect its adoption to
have a material effect on our financial position or results of operations.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
nFront's interest income and expense is sensitive to changes in the general
level of U.S. interest rates. In this regard, changes in U.S. interest rates
affect the interest on nFront's cash equivalents earned as well as the interest
incurred on nFront's long-term debt, respectively. Based on our cash equivalents
balance and level of debt at March 31, 1999, nFront's exposure to interest rate
risk is not material.
IMPACT OF YEAR 2000 COMPUTER ISSUES
The year 2000 issue is the result of computer programs using two digits
rather than four to define the applicable year without specifying the century.
As a result, date-sensitive software may recognize a date of "00" as the year
1900 rather than the year 2000. This could result in system failures or
miscalculations causing disruptions of nFront's operations, including a
temporary inability to process transactions, send invoices or engage in other
business activities, and, as a result, the operations of the banks and end users
that we serve. Year 2000 issues impact nFront both on an external basis in
connection with the products and services we offer to banks and end users, as
well as on an internal basis as to our own operations and systems. We also face
risks relating to the potential year 2000 non-compliance with institutions that
provide services to us, merchants processing electronic transfer of funds, the
FedWire system governing electronic funds transfers and the Federal Reserve
system itself. We believe that based on our assessments to date, material year
2000 issues that we have identified that are within our control can be
corrected. The failure of nFront or third party hardware or software that is
used by nFront or in conjunction with our products to be year 2000 compliant
could have a material adverse effect on nFront's financial position and results
of operations.
Year 2000 Project Team. We have assembled a year 2000 project team,
composed of nFront employees from our senior management, product management,
development, Internet banking data center, support, implementation, accounting
and
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facilities management working groups. Our year 2000 project team has identified
software, equipment and systems that are material to our business, and we have
reviewed and tested our nFront products, as well as the software, equipment and
systems supplied to us by third party vendors, to determine their ability to
correctly process date changes from 1999 through 2000. The goals of the project
team are to minimize any year 2000-related impact to our bank customers and
their customers; maintain year 2000 readiness as a top business priority; and
work closely with our internal and external business associates to achieve year
2000 readiness. Management believes the costs related to year 2000 compliance
have not and will not have a material effect on nFront's financial condition,
results of operations and cash flows.
nFront Products. We designed our products to be year 2000 compliant. Year
2000 remediation efforts to nFront's products were minor due to nFront's
awareness of year 2000 issues when our products were updated in early 1998.
nFront products require users to enter a four-digit date code for each date, and
each product process stores and displays dates only in a four-digit year format.
We tested our products in test environments intended to emulate a year 2000
environment. Testing was performed on the century date change as well as other
critical date rollovers such as leap year using significant dates both before
and after January 1, 2000. No significant problems were detected as a result of
this testing.
Year 2000 External Efforts and Issues. We have substantially completed the
replacement, modification or retirement of hardware or software components for
nFront products and services that were identified by the year 2000 project team
to be vital to our core business processes and at risk for year 2000 failures.
In addition, we have requested that our customers, vendors, and other business
associates participate in our readiness efforts and update us on their year 2000
progress. Many of our computer systems and business operations are provided
and/or maintained by outside suppliers. nFront's key vendors and suppliers,
including core processors with which our systems interface, have been asked to
demonstrate sufficient year 2000 readiness. Where feasible, we have tested
vendor supplied products that are critical to our operations.
Year 2000 Internal Efforts and Issues. Our year 2000 project team has
completed corporate-wide inventory of nFront's internal application and system
software and of our computers and other equipment, such as our building security
systems, fire alarm systems and heating and air conditioning equipment, to
determine if this equipment uses embedded computer chips that may be date
sensitive. Based on this analysis, nFront has upgraded hardware and software
deemed vital to our on-going business by the year 2000 project team to versions
or releases identified by their vendors as year 2000 ready or compliant;
implemented computer code changes for non-critical issues not affecting year
2000 compliance; and substantially completed remediation of identified year 2000
issues in "mission critical" systems, or systems that are vital to the
successful continuance of core business activities.
Most Likely Worst Case Scenarios of Year 2000 Problems. nFront expects to
identify and resolve all year 2000 problems that could materially adversely
affect its business, financial condition or operating results. However, we
believe that it is not possible to determine with complete certainty that all
year 2000 problems affecting us have been identified or corrected. In addition,
we cannot accurately predict how many failures related to the year 2000 problem
will occur or the severity, duration or
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financial consequences of these failures. As a result, we expect that the
following worst case scenarios could occur:
- a significant number of operational inconveniences and inefficiencies for
nFront, our services and our clients that may divert our time and
attention and financial and human resources from our ordinary business
activities; and
- a number of serious system failures that may require significant efforts
by us to prevent or alleviate material business disruptions.
Contingency and Business Continuity Planning. Our year 2000 project team
has designed a corporate business continuity plan specific to year 2000 issues
to address potential disruptions to business identified by the year 2000 project
team that may impact our customers and other business associates. In addition,
we have developed consolidated readiness plans and schedules for business areas
to enable us to react to such identified potential events that could impact
normal business routines. Depending on the systems affected, these plans could
include (a) replacement of affected equipment; (b) use of backup equipment or
facilities; (c) increased work hours for our personnel to correct any year 2000
problems which arise; and (d) other similar approaches. If we are required to
implement any of these contingency plans or are unable to implement any of these
plans effectively, they could have a material adverse effect on our business,
financial condition or operating results.
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BUSINESS
The following Business section contains forward-looking statements relating
to future events or the future financial performance of nFront, which involve
risks and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of other factors,
including those set forth under "Risk Factors" and elsewhere in this prospectus.
OVERVIEW
nFront provides products and services designed to enable small to mid-sized
banks to provide Internet banking and other financial services to their retail
and commercial customers. Through our outsourcing model, our client banks
purchase our products as services, paying us on a monthly basis depending on the
level of usage by their customers. Our solution enables our client banks to
utilize the Internet to retain current customers, acquire new customers, offer
additional products and services, decrease costs and increase fee income. By
enabling banks to offer comprehensive Internet banking services, as well as
additional financial products and services, the nFront solution enables our
client banks to create a bank-branded web site that becomes a financial
destination for the client bank's customers.
Our solution consists of our Internet banking products, our Internet
banking data center which facilitates use of the products, implementation and
web site design services and marketing support services. Our nHome product
provides Internet banking services targeted at meeting the banking needs of a
bank's retail customers. Our nBusiness product provides banking services
specifically designed to meet the needs of the bank's commercial customers.
Through our Internet banking data center, we provide the necessary
communications, transaction processing and data storage services to operate the
system. We work closely with each of our client banks to design the appearance
of their Internet branches, implement and integrate our system with the banks'
existing computer systems and train the banks' employees to market our products.
As of March 31, 1999 we had 122 client banks.
INDUSTRY BACKGROUND
Growth of the Internet and Electronic Commerce
The Internet has emerged as a significant global communications medium
enabling millions of people to share information and conduct business
electronically. International Data Corporation estimates that the number of Web
users world-wide will grow from approximately 97 million in 1998 to
approximately 320 million by 2002. This growth is being driven by a number of
factors, including an expanding base of personal computers in the home and
workplace; improvements in network infrastructure; easier, faster and cheaper
access to the Internet and commercial on-line services; advances in network and
communication security; increased general awareness of the Internet among
consumer and business users; and the introduction of alternative
Internet-enabled devices, such as televisions and handheld devices.
As access to the Internet expands, businesses are increasingly using the
Web as an effective means of retaining customers, acquiring new customers,
selling additional products and services to their existing customer base and
reducing costs.
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The ease of use, functionality and accessibility of the Internet have made it an
increasingly attractive commercial medium by providing features that
historically had been unavailable through traditional channels of customer
contact. For example, the Internet provides users with convenient access to
large amounts of dynamic data to support their financial management, investment
management and purchasing decisions. Through the Internet, businesses are able
to communicate effectively with customers by providing access to information,
including frequent updates of new products and services, content, pricing and
visual presentations. Additionally, businesses can utilize customer-specific
data obtained through the customer's interaction with the business' web site to
market services and products targeted at the particular customer. International
Data Corporation estimates that goods and services purchased over the Internet
in the U.S. will increase from approximately $26 billion in 1998 to over $269
billion in 2002.
In addition to its use as a general commercial medium, the Internet has
rapidly emerged as a means of providing financial products and services. Many
companies increasingly are offering a variety of financial products and
services, including credit cards, brokerage services, insurance products and
commercial and retail banking services, via the Internet. For example, according
to International Data Corporation, the number of on-line brokerage accounts in
the United States is expected to grow from 3.5 million at the end of 1997 to 24
million at the end of 2002.
Emergence of Internet Banking
Banks have historically used technology to create alternative distribution
channels for their services in order to reduce their customers' dependence on
traditional physical branch locations. Examples include automated teller
machines or ATMs, telephone banking and electronic banking. The primary benefits
sought by banks in their attempts to reduce customers' reliance on traditional
branches were, among others, to reduce costs, increase the breadth and
availability of services and differentiate themselves from their competitors.
Although banks have been successful in directing customers to alternative
distribution channels, these alternatives have historically provided customers
with only limited access to the services available at a traditional branch
location. In seeking cost effective, convenient alternative distribution
channels that will provide customers a full array of services, banks have
recently focused on electronic banking alternatives, such as PC banking and
Internet banking.
Banks originally offered electronic banking by distributing their
proprietary PC-based software to their customers or by developing links between
the bank's computers and PC-based personal finance manager software packages
such as Intuit's Quicken(R) or Microsoft's Money. PC banking provides access to
the customer's accounts and the ability to execute banking transactions.
However, limitations of PC banking include:
- customers can only access their bank accounts and related information
from the particular PC on which the PC banking software has been
installed;
- it can be expensive for the bank to provide and support PC banking
because of the significant costs to develop, purchase and maintain the
software and hardware necessary to integrate with the bank's core
operating system and to support the locally-installed copies of software
on the customers' PCs; and
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- PC banking does not enhance the bank's ability to identify and exploit
opportunities to sell other products and services to the customer.
Consequently, only a relatively small number of banks have offered a PC
banking solution.
The proliferation of the Internet has enabled the development and
implementation of Internet banking systems that overcome many of the limitations
of PC banking. Unlike PC banking, Internet banking only requires that a customer
have a secure Web browser for access to the Internet and the bank. Internet
banking does not require the user to have any other specific software and does
not restrict the customer to a particular PC. Instead, customers may access
their bank information through the Internet using any Web-enabled device to
review account activity, transfer funds, pay bills or transact other business.
Account information is stored on a secure server at all times, protected by
technology designed specifically to safeguard this information. According to
Forrester Research, the number of households banking on-line in the United
States is projected to grow from 2.4 million in 1997 to more than 18 million by
2002.
According to the Office of the Comptroller of the Currency, as of June 30,
1998, there were 374 banks offering transactional Internet banking web sites in
the United States. With the rapid growth of the Internet banking market, many
banks are compelled to offer Internet banking as part of their overall services
in order to remain competitive and continue to retain and attract customers.
Challenges to Implementing Internet Banking Systems
Many banks choose between using in-house resources or licensed technology
to implement an Internet banking system. Common challenges for banks trying to
implement Internet banking systems using internally-developed or licensed
technology include:
- substantial initial investments in hardware, software and communications
equipment required to implement these systems and maintain security and
redundancy;
- difficulty in identifying, attracting and retaining qualified personnel
to implement and manage the system;
- limited access to technical resources to integrate an Internet banking
system into the bank's core computer systems, monitor the system for
security and regulatory compliance and train and support the bank's
customers on the use of the system; and
- competitive risks associated with possible delays in implementing,
supporting or upgrading an Internet banking solution in-house.
These challenges are particularly difficult for most small to mid-sized
banks due to their limited capital and internal technical resources. Many larger
national or "super-regional" banks offer some form of Internet banking currently
and bank customers are increasingly demanding these services. Small to mid-sized
banks are being pressured to provide competitive solutions.
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Many banks, particularly small to mid-sized banks, are seeking to outsource
their Internet banking services as a more cost-effective, efficient means of
providing these services to their customers. An outsourced Internet banking
solution can provide to the small to mid-sized bank the resources necessary to
create an Internet banking service competitive with the services offered by the
large banks.
nFront's Market Opportunity
We believe that a significant opportunity exists to provide small to
mid-sized banks with a comprehensive, outsourced solution that enables these
banks to offer Internet banking services to their customers. As of September 30,
1998, there were more than 10,000 banks, savings and loans and thrifts in the
United States and all but 81 of those had assets below $10 billion.
Approximately 175 million, or approximately 52%, of the deposit accounts with
balances less than $100,000 were held by banks in that small to mid-sized bank
segment. Many consumers and small businesses continue to be attracted by the
customer orientation and local community presence offered by small to mid-sized
banks and are beginning to demand the convenience of Internet banking.
Internet banking also permits banks to more easily expand the financial
products and services offered to their customers to include brokerage services,
credit cards, bill presentment, bill payment, insurance, tax return preparation,
full on-line account origination and retail Web-based purchasing.
NFRONT'S SOLUTION
We provide a comprehensive, outsourced solution that enables small to mid-
sized banks to offer their customers complete branch banking services through
the Internet. Our solution consists of our Internet banking products, our
Internet banking data center which facilitates the use of these products,
implementation and web site design services and marketing and support services.
Our nHome product provides Internet banking services targeted at meeting the
needs of a bank's retail customers. Our nBusiness product provides banking
services specifically designed to meet the needs of the bank's commercial
customers. The nFront Internet banking data center provides the web server
computers, communications, data storage, retrieval and security, as well as
support personnel necessary to operate an Internet branch for each bank, that is
integrated with the bank's existing computer systems. Our solution enables banks
to utilize the Internet to compete more effectively in their markets, retain
current customers, acquire new customers, offer additional products and
services, decrease costs and increase fee income.
By creating Internet branches for our client banks, we enable banks to
become the destination on the Web for bank customers who are increasingly using
the Web to research, evaluate and, if desired, purchase a broad array of
financial products and services. Because of the integral role of bank accounts
in all types of financial transactions and the importance of expanded access to
the information relating to those accounts, we believe that banks are
particularly well suited to provide this financial destination on the Web for
their customers. Our products and services enable our client banks' customers to
access their personal account information, perform a variety of financial
transactions and conduct investment research on the banks' web site. We plan to
expand our products and services to enable client banks
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to offer investment portfolio management, insurance and related sales to
strengthen their position as the financial destination on the Web for their
customers.
The key differentiators of our products and services are:
Outsourced Solution. Our outsourced solution has been designed to have
significantly lower up-front costs, lower overhead, shorter lead times on
initial implementation and upgrades and better access to qualified personnel
than the bank would experience on an in-house basis. Finally, by aggregating the
customer bases and assets of our client banks, our outsourced solution enables
us to take advantage of economies of scale and increased buying power in
negotiating agreements with third parties to offer additional products and
services to our client banks' customers, resulting in improved economic
arrangements than would otherwise be the case. By outsourcing the system design,
implementation, operation and support, the bank is free to focus on its core
competency, serving its banking customers, rather than managing the growing
complexities of Internet technology.
Fat Server Architecture. Our products are based on a system architecture
that is commonly referred to as a "fat server" design. A "server" is the
computer or collection of computers that store information and handle many of
the more complex data processing functions. A "fat server" refers to a server
that has been configured to handle significant volumes of data storage and
retrieval, as well as complex data processing functions. With "fat server"
architecture, the system utilizes a relational database located on the nFront
system server to receive and store customer data from a bank's core computer
system. This data storage architecture allows the nFront system to store and
organize the client bank customer's account data locally, without a continuous,
direct connection between the customer and the bank's core system. On the other
hand, a "thin server" refers to a server which acts more as a conduit for
information which is processed either by other servers or by the PCs accessing
this server. With the "thin server" model, which connects the customer directly
to the bank's core system, the information available to the customer is limited
to data currently accessible on the bank's core system.
Fat server architecture provides the following functional advantages over
thin server architecture:
- Access to historical financial information. Information stored on the
fat server allows a customer to generate consolidated reports on
financial transactions spanning an extended period of time. nFront's fat
server system currently stores up to two years of customer data, whereas
thin server systems typically provide access to 60 to 90 days of
financial data. We believe access to more historical account data
promotes increased customer loyalty for a bank.
- Analysis of customer information. A fat server solution enhances the
bank's ability to extract and analyze relevant customer account
information and more efficiently cross-sell products.
- Effective consolidation of financial services. The fat server can more
effectively consolidate the customer's financial data from disparate host
systems in one place. These host systems include banking, brokerage and
insurance financial data.
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Ease of Integration through Relationships with Core Processors. We have
interfaces with 28 different core processing systems used by banks, enabling us
to offer faster, more cost-effective integration of our Internet banking
products with a bank's existing core processing system. Core processors provide
the software and services required by banks to process their transactions.
Microsoft NT-Based. The nFront solution is designed to take advantage of
the Microsoft NT application environment. In 1997 we received the Microsoft
Corporation "Best Industry Solution for Internet Banking" award. The nFront
solution utilizes the Microsoft BackOffice suite, which provides an integrated,
scalable system foundation, allowing nFront to focus on product development
instead of third-party application selection and integration. The integrated
suite of NT server applications enables nFront to efficiently add new bank
clients and their customers without interrupting service to our existing
customers.
STRATEGY
Our objective is to be the leading provider of Internet banking products
and services to the small to mid-sized bank market and to create Web-based
financial destinations for the millions of banking customers in that market. To
achieve our objective, we intend to:
Capitalize on Exclusive, Strategic Marketing Alliances to Expand Base of
Client Banks. Primarily through our strategic marketing alliances with bank
core processors and other related service providers, we plan to increase the
number of banks offering the nFront products and services to their customers. We
have formed exclusive, five year relationships with many of the key core
processors and other providers of supporting technology to our target banking
market segment. We recently expanded our national sales force to pursue
additional sales opportunities through our strategic marketing relationships.
Assist Client Banks in Converting their Customers to the nFront System. A
portion of our service fees are based on the conversion of our client banks'
customers to our system, as well as the number of their customers using our
system each month. We offer to client banks our marketing program and other
support services to promote conversion of their customers to our system. We are
currently expanding our marketing team to achieve this objective.
Build Awareness of nFront's Brands. As our client banks develop their
positions as comprehensive financial destinations on the Web, we are positioning
the "nFront" brand to create broad market recognition of nFront as the leading
provider of solutions enabling banks to offer Internet banking, financial
services and financial destination sites. The nFront logo appears on our client
banks' Internet branches, further promoting the nFront name. In addition, we
plan to use our www.banking.com web site and increased advertising to promote
awareness of our products and services.
Generate Incremental Revenue by Offering Additional Financial Products and
Services through the nFront System. We intend to generate incremental revenue
for ourselves and our client banks by providing additional products and services
to the client banks' customers through the nFront system. These additional
services may include, among others, insurance, brokerage and bill presentment
services. In
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addition to providing incremental revenue, these products and services should
enhance the client banks' positions as financial destinations on the Web and
improve customer retention for the banks.
Continue to Enhance Our Products and Services. We believe our system
architecture serves as the foundation for our future position as a leader in the
Internet banking market for small to mid-sized banks. We have made and intend to
continue to make substantial investments to improve our core technologies to
enhance the functionality and performance of our products and services.
PRODUCTS AND SERVICES
nFront offers products and services designed to enable banks to offer
complete branch banking services over the Internet to retail and commercial
customers. Our nHome product provides Internet banking services to a bank's
retail customers. Our nBusiness product provides these services to a bank's
commercial customers. We work closely with each of our client banks to design
the appearance of their Internet branches to achieve each bank's particular
branding objectives. The nFront Internet banking data center provides the
computers that operate as the web servers for the system, the communications
equipment, the data storage, retrieval and security software and hardware, as
well as the support personnel, necessary to operate each client bank's Internet
branch and connect each Internet branch to the bank's existing computer systems.
Through our outsourcing model, our client banks purchase our products as
services, paying us on a monthly basis depending on the level of usage by their
customers. Pricing for our nHome and nBusiness products include an up-front
implementation fee payable upon execution of the contract, recurring monthly
fees, transaction fees and fees for additional marketing and support services.
Products
nHome. The nHome product provides a bank's retail customers a wide array
of branch banking services over the Internet. nHome was initially released in
November 1996. As of March 31, 1999, there were 122 agreements with banks to
provide the nHome product to their customers. With the nHome product, a bank's
retail customers can:
- open new accounts;
- access account summaries and histories;
- download account information to personal finance software, such as
Intuit's Quicken or Microsoft's Money;
- receive electronic images of cleared checks;
- transfer funds;
- pay bills;
- manage pending transactions;
- generate custom reports;
- define event notifications;
- receive on-line customer support; and
- view a fully functional Internet banking demonstration.
nHome also includes components used by the client bank to support the
Internet branch. These administrative components include the ability for the
client
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banks' customers and potential customers to submit account applications in a
secure environment. Also, the client bank can automatically generate email
responses to customer applications, update product interest rates and terms and
receive customer-specific marketing and data analysis.
nBusiness. The nBusiness product provides to a bank's small business
customers comprehensive commercial banking services over the Internet. nBusiness
was initially released in March 1999 and as of March 31, 1999, there were 37
agreements with banks to provide the nBusiness product to their customers. The
product has been designed to enable the bank to generate additional fee revenue
by offering its commercial customers a broader array of commercial cash
management services than they currently offer. The nBusiness product provides
the bank the same administrative and support functions available in the nHome
product. With the nBusiness product, a bank's commercial customer receives the
functionality of the nHome product, plus, the customer can:
- debit customer accounts;
- issue stop payment orders;
- pay employees;
- create multiple user security profiles;
- issue wire transfers;
- facilitate direct deposit; and
- initiate electronic tax payments.
Services
We provide the implementation services necessary to install our products,
"brand" the bank's Internet branch and integrate the nFront products into the
bank's core processing system. For a typical nHome installation, the
implementation period currently averages approximately three months.
Additionally, we provide the following marketing and support services to our
client banks:
Client Bank Marketing Program. Our client bank marketing program offers
banks marketing campaigns aimed at converting existing bank customers to the
nFront system and acquiring new customers. The program consists of several
separate pre-designed segments from which the bank can choose. Each segment is
complete with "camera ready" collateral marketing material as well as media
campaign strategies. We may print and produce the materials at an additional
cost or the bank may choose a local vendor to print and produce the materials.
Employee Education Program. The Employee Education Program is a training
program designed to help client banks train their employees on the benefits of
the nFront system and Internet banking. nFront typically conducts training at
the client bank. Training covers topics such as connecting to and navigating the
Web, Internet banking, Internet security, email and related topics. nFront can
employ a "train-the-trainer" approach or train the client's front line staff.
The program includes leaders' guides and participants' kits.
Marketing Consulting Services. We also offer customized consulting
services for those banks with specific marketing and training needs. These
services include competitive analyses, performance reporting, product
recommendations and service and support recommendations. Consulting projects are
priced on a time and materials basis.
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INTERNET BANKING DATA CENTER
All of our client bank Internet branches are hosted and processed in our
Internet banking data center. The data center contains the computers that
operate as the web servers for the system, the communications equipment, the
data storage, retrieval and security software and hardware, as well as the
support personnel, necessary to operate each client bank's Internet branch and
connect each Internet branch to the client bank's existing computer systems. The
data center communicates with a client bank by transferring the data directly
from the client bank's core system to our servers in the data center utilizing
direct data connections and a workstation running at the client bank.
Our data center provides a controlled access environment that includes a
high capacity battery backup system. The battery backup system provides
continuous power to all production systems including servers, monitors,
telecommunications equipment, and employee workstations. In addition, a diesel
power generator provides backup power to our entire facility in the event of an
extended power outage. We have recently entered into an agreement with Exodus
Communications that provides us with a redundant data center, which will allow
us to continue to provide service in the event of a catastrophic loss of our
primary data center. We expect this redundant data center to be operational by
the quarter ending September 30, 1999.
STRATEGIC MARKETING ALLIANCES
When evaluating Internet banking solutions, banks usually focus on the ease
of interface between their existing core banking software and the Internet
banking software. Core banking software is the central software within a bank
that processes information concerning banking transactions such as deposits and
withdrawals. The link between the core banking software and the Internet banking
software allows for the transfer of transactional data between both software
systems. We have formed strategic marketing alliances with vendors of core
banking software and outsourced data processing services who market our products
exclusively to their customer base. These relationships are typically for a five
year period, and we pay commissions to the companies with which we have
strategic marketing alliances. These commissions typically range from 10% to 40%
of the implementation fees and portions of the monthly service fees charged by
nFront, though one agreement provides for a commission of 50% on the
implementation fees. Generally we do not pay commissions on transactional fees
such as bill payment or funds transfers. In addition, we have developed
interfaces to the software systems of each of the companies with which we have
strategic marketing alliances. Our alliances with core processors include BISYS,
BancTec, Sparak and First Commerce Technologies.
BISYS. We have a five-year marketing agreement with BISYS which began in
April 1998, with automatic renewals for successive five-year terms unless
terminated by either party prior to renewal. BISYS, which provides transaction
processing and other administrative and computer processing services to banks
and financial institutions, offers our products to its customer base. Subject to
some restrictions, BISYS agrees to use its best efforts not to distribute other
Internet banking solutions. BISYS is entitled to retain a portion of the fees
collected on implementation and monthly service on the nFront System.
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BancTec USA, Inc. We have a five-year marketing agreement with BancTec,
with automatic renewals for successive five-year terms unless terminated by
either party prior to renewal. BancTec, which provides transaction processing
and other administrative and computer services to banks and financial
institutions, offers our products to its customers and to its potential bank
customers. Subject to some restrictions, BancTec has agreed that nFront will be
its premier provider of Internet banking solutions to its customers. We pay to
BancTec commissions on the implementation fees and monthly service fees we
receive from their customers.
Sparak. We have a five-year marketing agreement with Sparak, with
automatic renewals for successive five-year terms unless terminated by either
party prior to renewal. Sparak, which provides transaction processing and other
administrative and computer processing services to banks and financial
institutions, offers our nHome system to its customer base and to potential bank
customers. Sparak has exclusive rights to market nHome to its customer base and
nonexclusive rights with respect to potential bank customers. We pay to Sparak
commissions on the implementation fees and monthly service fees we receive from
their customers.
First Commerce Technologies. We have a five-year marketing agreement with
First Commerce Technologies which began in July 1997, with automatic renewals
for successive five-year terms unless terminated by either party prior to
renewal. First Commerce Technologies, which provides transaction processing and
other administrative and computer processing services to banks and financial
institutions, offers our products to its customers and its potential bank
customers. Subject to some restrictions, First Commerce Technologies agrees to
use its best efforts not to distribute other Internet banking solutions. We pay
to First Commerce Technologies commissions on the implementation fees and
monthly service fees we receive from their customers.
We also have exclusive marketing alliances with other banking technology
providers such as BISYS Document Solutions, a bank check imaging company, and
Southern Data Systems, a bank platform automation company.
SALES
nFront utilizes a direct sales force that works closely with the national
sales forces of each of the companies with which we have strategic marketing
alliances to capitalize on their existing relationships within the banking
community to promote nFront's products and services. Many of nFront's sales
representatives are teamed with and assigned a strategic marketing relationship
customer base on which to focus. The strategic marketing alliance sales
representatives identify banks that are interested in purchasing an Internet
banking solution, qualify the customer and then pass the qualified lead to the
nFront sales person. The nFront sales person manages the sales effort, provides
a demonstration of the products and negotiates and closes the sale. The nFront
sales representative continues to leverage the relationship throughout the sales
process and continues to work jointly with the strategic
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marketing alliance sales representative. We compensate both our sales
representatives and companies with which we have strategic marketing alliances
with commissions.
In addition to sales representatives focused on the strategic marketing
alliances, nFront also has sales representatives that focus exclusively on
specific geographic territories as well as a sales representative that contacts
nFront client banks to explore sales of additional and complementary nFront
products and services. Since December 1, 1998, we have added 12 new sales
representatives, to bring the total to 14 at March 31, 1999.
The typical sales cycle for nFront products is approximately 90 days. We
have recently implemented a sales force automation and customer relationship
management software system that will allow our sales force to view the complete
customer prospect listing, track progress in the sales cycle and report to
management sales progress, thereby facilitating a complete customer contact
program.
MARKETING
We have achieved our historical growth with minimal marketing expenditures.
We have utilized or intend to utilize the following programs and promotional
activities to enhance our sales efforts:
Advertising. We employ joint marketing efforts through our strategic
marketing alliances nationwide, and we advertise in financial publications,
trade magazines and financial industry directories. In addition, the nFront logo
appears on our client banks' Internet branches further promoting the nFront
name.
Public Relations. We proactively pursue public relations opportunities to
build brand awareness for nFront and its products. We target traditional print,
syndicated news services and industry events with our public relations programs.
We participate actively in industry trade shows, both on our own and jointly
with companies with which we have strategic marketing alliances. To date,
participation in industry trade shows has been our primary means of marketing.
Direct Mail. We use direct mail to deliver our message to the key decision
makers at all targeted banks in the United States. Direct mail campaigns will
often be co-branded with the companies with which we have strategic marketing
alliances.
Telemarketing. To support our direct mail campaigns and advertising, we
utilize telemarketing to target decision makers at community banks. We also use
telemarketing to pre-qualify Internet banking leads as well as to sell
additional products and services to existing nFront clients.
PRODUCT DEVELOPMENT
Our product development efforts focus on enhancing current product
functionality and adding new products to the nFront product line. We will
continue to develop real time interfaces, check imaging, bill payment and bill
presentment interfaces to the systems of companies with which we have strategic
marketing alliances. New functionality planned for nHome includes on-line
brokerage, deposit imaging, statement imaging, bill presentment and credit
scoring. New functionality
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planned for nBusiness includes Internet payroll, managerial graphing capability,
electronic data interchange functionality and other business applications.
Our product development strategy includes clear definition and separation
of responsibilities. We approach each development effort using the same
fundamental set of guidelines and standards. The development process also allows
for feedback from nFront's client banks and from internal resources as defined
milestones are reached. nFront uses the rapid application development, or RAD,
technique in order to manage product development cycles to attempt to keep pace
with rapid changes in technology.
CLIENT BANKS
Our target market is the approximately 10,000 small to mid-sized banks in
the United States. As of March 31, 1999, we had 122 client banks, of which 83
had completed implementation and were operating an Internet branch. The average
asset size of our client banks as of that date was $490 million.
For the nine months ended March 31, 1999, no individual client bank
accounted for 10% of our total revenues, although client banks sold and billed
through the BISYS strategic marketing alliance represented 26% of our revenue
for that period. One client bank, First Commerce Bank, accounted for 14% of our
total revenues in the fiscal year ended June 30, 1998 and for 57% of our total
revenues in the fiscal year ended June 30, 1997.
COMPETITION
The Internet technology, financial services and secure network
communication industries all represent dynamic and competitive markets. We
continue to expect competition to intensify in the future, especially with
respect to Internet financial service products. Because of the diverse and
changing competitive marketplace in the financial services industry and for
Internet related products and services, there can be no assurance that we have
identified or considered all possible present and future competitors or that the
discussion set forth below represents a complete coverage of competition.
We believe that we face two basic levels of competition in our market. The
first is competition from companies offering competitive Internet banking
solutions to banks. The second is competition which our client banks face in
providing Internet-based financial products and services to their customer base.
We believe that the principal competitive factors in our market are
industry trust, technical capabilities, operating effectiveness, cost and
scalability, customer service, security, speed to market, and capital. Many of
our competitors have the financial, technical and marketing resources, plus
established industry relationships, to better compete based on these factors.
Competitive pressures we face may have a material adverse effect on our
business, financial condition or operating results.
The market for on-line banking and financial software and services is
competitive, rapidly evolving and subject to technological change. With the
continued development of the Internet as an alternative means of delivering
financial services, we expect competition to intensify. Principal competitors
currently include software companies that provide comprehensive in-house
software and Internet
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integration tools for on-line banking and brokerage solutions and outsourcing
companies that provide similar product functionality to different target
markets.
With respect to solution providers in competition with us, while we believe
no other company delivers comprehensive, outsourced Internet products and
services to banks in our target market, there are a number of companies that
have similar products and services such as Digital Insight, Edify, FundsXpress,
Q-UP, First Data Direct Banking and Security First Technologies. However, many
of our current and potential competitors have longer operating histories,
greater name recognition, larger customer bases and significantly greater
financial, technical and marketing resources.
We also believe that the competitive forces facing us include the various
competitive alternative approaches for Internet banking solutions, such as thin
servers; fat clients (personal financial management software) and in-house
development. Each of these alternatives competes with our fat server, outsourced
solution.
In providing Internet banking solutions to their customers, our client
banks face competition not only from other banks, but also from non-bank
financial institutions, such as brokerage firms and on-line service providers
such as E*TRADE, Intuit's Quicken.com and Yahoo! Finance.
GOVERNMENT REGULATION
We are not licensed by the Office of the Comptroller of the Currency, the
Federal Reserve Board, the Federal Deposit Insurance Corporation, the Office of
Thrift Supervision, the National Credit Union Association or other Federal or
state agencies that regulate or monitor banks or other types of providers of
financial electronic commerce services. Federal, state or foreign agencies may
attempt to regulate our activities. Congress could enact legislation that would
require us to comply with data, record keeping, processing and other
requirements. We may be subject to additional regulation as the market for our
business continues to evolve. For example, Regulation E, which is promulgated by
the Federal Reserve Board, governs electronic fund transfers made by regulated
financial institutions and providers of access devices and electronic fund
transfer services, including many aspects of our services. Under Regulation E,
our client banks are required, among other things, to provide disclosure to
retail customers, to comply with notification periods regarding changes in the
terms of service provided and to follow specified procedures for dispute
resolutions. The Federal Reserve Board may adopt new rules and regulations for
electronic funds transfers that could lead to increased operating costs and
could also reduce the convenience and functionality of our services, possibly
resulting in reduced market acceptance. Because of the growth in the electronic
commerce market, Congress has held hearings on whether to regulate providers of
services and transactions in the electronic commerce market, and Federal or
state authorities could enact laws, rules or regulations affecting our business
operations. We also may be subject to Federal, state and foreign money
transmitter laws, encryption and security export laws and regulations and state
and foreign sales and use tax laws. If enacted or deemed applicable to us, these
laws, rules or regulations could be imposed on our activities or our business
thereby rendering our business or operations more costly, burdensome, less
efficient or
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impossible, any of which could have a material adverse effect on our business,
financial condition and operating results.
The market we currently target, the financial services industry, is subject
to extensive and complex Federal and state regulation. Our current and
prospective clients, which consist primarily of commercial banks and thrifts,
operate in markets that are subject to extensive and complex Federal and state
regulations and oversight. While we are not directly subject to these
regulations, our services and related products must be designed to work within
the extensive and evolving regulatory constraints in which our clients operate.
These constraints include Federal and state truth-in-lending disclosure rules,
state usury laws, the Equal Credit Opportunity Act, the Electronic Funds
Transfer Act, the Fair Credit Reporting Act, Bank Secrecy Act and the Community
Reinvestment Act. Because many of these regulations were promulgated before the
development of our solution, the application of these regulations to our
solution must be determined on a case by case basis. We do not make
representations to client banks regarding the applicable regulatory
requirements, but instead rely on each bank making its own assessment of the
applicable regulatory provisions in deciding whether to become a client bank.
Furthermore, some consumer groups have expressed concern regarding the privacy,
security and interchange pricing of financial electronic commerce services. It
is possible that one or more states or the federal government may adopt laws or
regulations applicable to the delivery of financial electronic commerce services
in order to address these or other privacy concerns. It is not possible to
predict the impact that any of these regulations could have on our business.
We currently offer services on the Internet. Due to the increasing
popularity of the Internet, it is possible that laws and regulations may be
enacted with respect to the Internet, covering issues such as user privacy,
pricing, content, characteristics and quality of services and products. The
adoption of any of these laws or regulations may limit the growth of the
Internet, which could affect our ability to utilize the Internet to deliver
banking and other financial electronic commerce services.
INTELLECTUAL PROPERTY
Our success will be heavily dependent upon proprietary technology. We rely
primarily on a combination of patent, copyright and trademark laws, trade
secrets, confidentiality procedures and contractual provisions to protect our
proprietary rights. These laws, procedures and contracts provide only limited
protection. We have applied for the federal registration of service marks for
"nFront," "nHome" and "nBusiness." We have also registered the domain names
"banking.com" and "nFront.com." Despite the precautions that we take, it may be
possible for unauthorized third parties to copy aspects of our current or future
products or to obtain and use information that we regard as proprietary. The
means we employ to protect our proprietary rights may not be adequate.
Additionally, our competitors may independently develop similar or superior
technology. Policing unauthorized use of software is difficult and some foreign
laws do not protect nFront's proprietary rights to the same extent as United
States laws. Litigation may be necessary in the future to enforce our
intellectual property rights, to protect our trade secrets or to determine the
validity and scope of the proprietary rights of others. Litigation could
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result in substantial costs and diversion of our resources and could materially
adversely affect our business, operating results, and financial condition.
EMPLOYEES
As of March 31, 1999, we had 71 employees. We have never had a work
stoppage and none of our employees are represented under collective bargaining
agreements. We consider our employee relations to be good.
FACILITIES
Our Internet banking data center and administrative, sales, marketing and
development facilities are located in approximately 13,800 square feet of office
space in Norcross, Georgia. This facility is leased to us through August 1,
2003. In addition, we lease approximately 1,000 square feet in a facility in
Bogart, Georgia, which serves as a location for many of our graphic designers.
We are in the process of expanding our Norcross offices to a total of
approximately 20,000 square feet.
LEGAL PROCEEDINGS
nFront is not a party to any material legal proceeding.
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MANAGEMENT
The following table sets forth information about the executive officers and
directors of nFront:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- ------------------------------------
<S> <C> <C>
Brady L. "Tripp" Rackley III........ 28 Chairman of the Board of Directors
and Chief Executive Officer
Robert L. Campbell.................. 48 President, Chief Operating Officer
and Director
Jeffrey W. Hodges................... 32 Chief Financial Officer and
Secretary
Brady L. Rackley.................... 55 Director
Thomas E. Greene III................ 51 Director
Charles D. Moseley, Jr.............. 56 Director (1)(2)
William H. Scott III................ 51 Director (1)
James A. Verbrugge.................. 58 Director (2)
Vincent R. Brennan.................. 36 Senior Vice President -- Sales
Steven S. Neel...................... 29 Senior Vice President -- Operations
W. Derek Porter..................... 27 Vice President -- Research and
Development
Adam M. Naide....................... 32 Vice President -- Marketing
Alan W. Powell...................... 29 Vice President -- Sales
</TABLE>
- -------------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Brady L. "Tripp" Rackley III, founder of nFront, has served as Chairman of
the Board and Chief Executive Officer of nFront since its inception in 1996.
Prior to forming nFront, Mr. Rackley served as Chief Operating Officer of
LeapFrog Technologies, Inc., a software development company, from October 1995
until February 1996, and as Vice President -- Development of Systeme Corp., a
software development company, from December 1992 until September 1995. Mr.
Rackley received an Industrial Engineering degree from the Georgia Institute of
Technology and has post-graduate studies in business and human computer
interface from the University of Central Florida. Mr. Rackley is also a member
of the board of the Alexander-Tharpe Foundation, Inc. Mr. Rackley is the son of
Brady L. Rackley.
Robert L. Campbell has served as President and Chief Operating Officer of
nFront since July 1998 and as a Director since September 1998. Prior to joining
nFront, Mr. Campbell worked as an independent consultant for Campbell and
Associates from January to July 1998. Mr. Campbell served as President of
Insight Management, a professional services business, from January 1997 until
November 1997. Mr. Campbell served as President and Chief Executive Officer of
Servantis Systems, Inc., a banking and electronic commerce software and services
firm from July 1993 until the company's acquisition by CheckFree Corp. in March
1996. Mr. Campbell received a Bachelor of Science Degree and a Masters of
Business Administration from the University of Tennessee.
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Jeffrey W. Hodges has served as Chief Financial Officer of nFront since
November 1998 and was elected Secretary in April 1999. Prior to joining nFront,
Mr. Hodges served as Vice President -- Controller of Powertel, Inc., a public
wireless telecommunications provider, from June 1995 until November 1998. From
December 1988 until June 1995, Mr. Hodges served as an auditor at Arthur
Andersen, LLP, an independent accounting firm, serving most recently as Audit
Manager from 1992 to 1995. Mr. Hodges is a graduate of Auburn University with a
degree in accounting and is a Certified Public Accountant.
Brady L. Rackley has served as a Director of nFront since its inception in
1996 and served as Secretary from inception to April 1999. From 1990 until 1995,
Mr. Rackley was the President and Chief Executive Officer of Systeme Corp., a
software development company. Mr. Rackley also has served as the Chairman of the
Board, President and Chief Executive Officer of LeapFrog Technologies, Inc., a
software development Company, since October 1995. Mr. Rackley is the father of
Brady L. "Tripp" Rackley III.
Thomas E. Greene III has served as a Director of nFront since May 1998. Mr.
Greene has served as Chairman of Liberty Street Capital Corporation, an
investment banking company, since May 1995. Prior to joining Liberty Street
Capital Corporation, Mr. Greene served as Vice President of Municipal Finance of
Goldman Sachs & Co. from May 1993 until May 1995.
Charles D. Moseley, Jr. has served as a Director of nFront since May 1998
and as a member of the Audit and Compensation Committees of the Board of
Directors of nFront since November 1998. Mr. Moseley is a member of MKFJ-IV,
LLC, which is the general partner of Noro-Moseley Partners IV, L.P., a venture
capital firm. Mr. Moseley founded Noro-Moseley Partners in 1983, and he is a
director of several private companies. Mr. Moseley received a Bachelor of
Industrial Engineering degree from the Georgia Institute of Technology and a
Masters of Business Administration from Harvard University.
William H. Scott III has served as a Director and a member of the
Compensation Committee of nFront since November 1998. Mr. Scott has served as
the President of ITC Holding Co., a telecommunications service provider, since
December 1991, and has been a director of ITC Holding Co. since May 1989. Mr.
Scott is also an officer and director of several ITC Holding Co. subsidiaries.
In addition, Mr. Scott serves on the Board of Directors of Mindspring
Enterprises, Inc., an Internet service provider; Innotrac Corporation, a
customized, technology-based marketing support services company; ITC Deltacom,
Inc., a full-service telecommunications provider; and Knology Holdings, Inc., a
broadband telecommunications service provider, formerly known as CyberNet
Holdings, Inc. Mr. Scott received a Bachelor of Arts degree from Presbyterian
College and a Masters degree in Business Administration from the University of
Georgia.
James A. Verbrugge has served as a Director and a member of the Audit
Committee of nFront since May 1998. Dr. Verbrugge has served as Professor of
Finance at the University of Georgia since 1968 and currently serves as Chairman
of the University's Department of Banking and Finance. Dr. Verbrugge is also a
member of the Board of Directors of Proactive Technologies Inc., an airport
hospitality services and real estate holding company. Dr. Verbrugge received a
Ph.D. in Economics from the University of Kentucky.
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Vincent R. Brennan has served as Senior Vice President -- Sales of nFront
since March 1998 and is responsible for growing and managing nFront's sales,
marketing and business development units. From September 1998 until March 1999,
Mr. Brennan served as Senior Vice President -- Sales and Marketing of nFront.
Prior to joining nFront, Mr. Brennan was employed by John H. Harland Co. from
June 1986 until September 1998, serving as Senior Vice President -- Sales,
managing the financial markets division from December 1995 until September 1998
and as Vice President from April 1993 until December 1995. Mr. Brennan received
a Bachelor's degree in Business Administration from the University of
Connecticut.
Steven S. Neel has served as Senior Vice President -- Operations of nFront
since July 1996 and is responsible for enhancing customer satisfaction by
implementing and supporting the nFront products and services. Prior to joining
nFront, Mr. Neel served as Vice President -- Implementations of LeapFrog
Technologies, Inc., a software development company, from October 1995 until July
1996. Prior to joining LeapFrog Technologies, Inc., Mr. Neel was a partner from
April 1993 until October 1995 in an Atlanta-based consulting firm where he
obtained experience in the financial services industry. Mr. Neel received a
Bachelor's degree in Management from the Georgia Institute of Technology.
W. Derek Porter has served as Vice President -- Research and Development of
nFront since its inception in 1996 and is responsible for product development
and data center operations. Prior to joining nFront, Mr. Porter worked for
LeapFrog Technologies, Inc., a software development company, as Internet Product
Manager and Director of Product Strategy. Prior to entering the banking software
industry, Mr. Porter worked with IBM Corporation in various technical roles
ranging from technical product support to LAN Applications Specialist. Mr.
Porter received a Bachelor's degree in Management from the Georgia Institute of
Technology.
Adam M. Naide has served as Vice President -- Marketing of nFront since
April 1999 and is responsible for all consumer marketing and product marketing
functions. Prior to joining nFront, Mr. Naide spent ten years in
marketing-management related positions including Director of Marketing with
Primestar Inc., a satellite communications company, from April 1998 until March
1999, Director of Marketing with Cox Communications, a media conglomerate, from
October 1994 until March 1998, and Account Executive with InterServ Services
Corp., a marketing services company, from December 1993 until June 1994. Mr.
Naide consulted independently from July 1994 until September 1994. Mr. Naide
received a Bachelor's degree in Business Administration from Emory University
and a Masters of Business Administration from the University of Georgia.
Alan W. Powell has served as Vice President -- Sales of nFront since August
1997 and is responsible for both partner and non-partner sales and managing and
training the sales department. From May 1997 until August 1997, Mr. Powell was
an Account Executive with nFront. From August 1995 until joining nFront, Mr.
Powell served as a Regional Sales Engineer with Renishaw, Inc., an aerospace
products manufacturer. Prior to joining Renishaw, Mr. Powell worked as an
account engineer with both Sorel Equipment Co. from February 1995 until August
1995 and James Industrial from February 1993 until February 1995. Mr. Powell
received a Bachelor's degree in Industrial Engineering from the Georgia
Institute of Technology.
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TERMS OF DIRECTORS AND EXECUTIVE OFFICERS
The Board of Directors is divided into three classes, each of whose members
serve for a staggered three-year term. The Board currently consists of three
Class I directors (Messrs. Brady L. "Tripp" Rackley III, Campbell and Greene),
two Class II directors (Messrs. Verbrugge and Brady L. Rackley) and two Class
III directors (Messrs. Moseley and Scott). At each annual meeting of
shareholders, a class of directors will be elected for a three-year term to
succeed the directors of the same class whose terms are then expiring. The terms
of the initial Class I directors, Class II directors and Class III directors
will expire upon the election and qualification of successor directors at the
1999, 2000 and 2001 annual meetings of shareholders, respectively. The executive
officers serve at the pleasure of the Board of Directors.
COMMITTEES OF THE BOARD OF DIRECTORS
The members of the Audit Committee are Charles D. Moseley, Jr. and James A.
Verbrugge. The Audit Committee reviews the scope and timing of our audit
services and any other services our independent auditors are asked to perform,
the auditor's report on our financial statements following completion of their
audit and their policies and procedures with respect to internal accounting and
financial control. In addition, the Audit Committee makes annual recommendations
to the Board of Directors for the appointment of independent auditors for the
following year.
The members of the Compensation Committee are Charles D. Moseley, Jr. and
William H. Scott III. The Compensation Committee reviews and evaluates the
compensation and benefits of all our officers, reviews general policy matters
relating to compensation and benefits of employees of nFront and makes
recommendations concerning these matters to the Board of Directors. The
Compensation Committee also administers our stock option plans.
COMPENSATION OF DIRECTORS
Neither employee nor non-employee directors receive cash compensation for
services performed in their capacity as directors. We reimburse each director
for reasonable out-of-pocket expenses incurred in attending meetings of the
Board of Directors and any of its committees. In addition, directors who are not
nFront employees are eligible to receive options under the nFront Director Stock
Option Plan. Under this plan, eligible directors may receive an option to
purchase 2,500 shares of nFront common stock upon becoming a director and 1,000
additional shares each subsequent year immediately following the annual meeting
of shareholders. At the first annual meeting of shareholders after the effective
date of this offering, nFront intends to grant options pursuant to the Director
Stock Option Plan to purchase 1,000 shares of nFront common stock to each of our
non-employee directors who are either re-elected at that meeting or whose terms
continue beyond the meeting.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are no Compensation Committee interlocks.
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<PAGE> 63
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth the total
compensation paid or accrued by us in 1998 for our Chief Executive Officer, our
only executive officer whose total annual salary and bonuses determined at June
30, 1998 exceeded $100,000.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------- OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- --------------------------- ---- -------- -------- ------------
<S> <C> <C> <C> <C>
Brady L. "Tripp" Rackley III............ 1998 $134,668 $ 0 $25,402(1)
Chairman of the Board and Chief
Executive Officer
</TABLE>
- -------------------------
(1) Includes $13,785 in personal automobile expenses and $10,000 in country club
dues.
STOCK OPTION AND OTHER COMPENSATION PLANS
nFront, Inc. Stock Incentive Plan. Our Stock Incentive Plan became
effective on September 9, 1998. The aggregate number of shares of nFront common
stock reserved for issuance under the Stock Incentive Plan is 2,188,900 shares.
The number of shares of common stock available for issuance under the Stock
Incentive Plan shall automatically increase on the last trading day of the last
month of each of nFront's fiscal years, beginning with the fiscal year ending
June 30, 2000 and continuing through the fiscal year ending June 30, 2004, by a
number of shares equal to one and one-quarter percent (1.25%) of the total
number of shares of common stock outstanding on the last trading day of the
month preceding the final month of each such fiscal year, but in no event shall
any such annual increase exceed 1,000,000 shares (as adjusted under the terms of
the plan). The purpose of the Stock Incentive Plan is to provide incentives for
key employees, officers, consultants and directors to promote the success of
nFront, thereby benefiting shareholders and aligning the economic interests of
the participants with those of the shareholders. Awards granted under the Stock
Incentive Plan may be either restricted stock or options intended to qualify as
"incentive stock options" or nonqualified stock options.
As of March 31, 1999, options to purchase 959,782 shares of common stock
were outstanding under the Stock Incentive Plan at a weighted average exercise
price of $1.26 per share. No shares of common stock had been issued upon
exercise of options granted under the Stock Incentive Plan.
Incentive Compensation Plan. We adopted a cash incentive compensation plan
for our 1999 fiscal year. The plan is administered by the Compensation Committee
of the Board of Directors, which determines eligible participants, performance
goals, measurement criteria, performance ratings and amount and timing of
payments. Awards under the plan are determined annually on the basis of our
performance over the year in relation to pre-determined financial and operating
goals. All awards are paid in full, in cash, following the year of performance.
Awards are granted under the plan at the sole discretion of the Compensation
Committee.
nFront, Inc. Employee Stock Purchase Plan. In June 1999, our shareholders
approved the nFront, Inc. Employee Stock Purchase Plan which is intended to
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<PAGE> 64
qualify under Section 423 of the Internal Revenue Code. The stock purchase plan
will be effective upon completion of this offering. The stock purchase plan
allows employees to purchase common stock through payroll deductions for 85% of
the fair market value of the common stock. Participation in the stock purchase
plan is voluntary. Employees may become participants in the stock purchase plan
by authorizing payroll deductions of one to ten percent of their base pay for
each payroll period. At the end of each six-month purchase period, each
participant in the stock purchase plan will receive an amount of our common
stock equal to the sum of that participant's payroll deductions during the
period multiplied by 85% of the lower of the fair market value of our common
stock at the beginning of the period, or the fair market value of our common
stock at the end of the period. No employee may participate in the stock
purchase plan if such employee owns or would own 5% or more of the voting power
of all classes of our stock. There are currently 100,000 shares of common stock
reserved for issuance under the stock purchase plan. The number of shares of
common stock available for issuance under the stock purchase plan shall
automatically increase on the last trading day of the last month of each of
nFront's fiscal years, beginning with the fiscal year ending June 30, 2000 and
continuing through the fiscal year ending June 30, 2004, by a number of shares
equal to one-quarter percent (0.25%) of the total number of shares of common
stock outstanding on the last trading day of the month preceding the final month
of each such fiscal year, but in no event shall any such annual increase exceed
1,000,000 shares (as adjusted under the terms of the plan). We are permitted
under the stock purchase plan to purchase shares of common stock on the open
market for the purpose of reselling the shares to participants in the stock
purchase plan. No shares will be sold by us to participants in the stock
purchase plan until after completion of this offering.
nFront Director Stock Option Plan. The nFront Director Stock Option Plan
became effective in April 1999. The aggregate number of shares of nFront common
stock reserved for issuance under the Director Stock Option Plan is 200,000
shares. At the first annual meeting of shareholders after the effective date of
this offering, nFront intends to grant options pursuant to the Director Stock
Option Plan to purchase shares of nFront common stock to each of our
non-employee directors who are either re-elected at such meeting or whose terms
continue beyond the meeting.
EMPLOYMENT AGREEMENTS
Brady L. "Tripp" Rackley III and Robert L. Campbell have entered into
employment agreements and non-disclosure, non-solicitation and non-competition
agreements with nFront. Under the employment agreements, Mr. Rackley is entitled
to receive an annual base salary of $175,000 and Mr. Campbell is entitled to an
annual base salary of $135,000. Both are entitled to bonuses as determined by
the Board of Directors. In addition, both are eligible to participate in
nFront's Stock Incentive Plan. Under the terms of the non-disclosure,
non-solicitation and non-competition agreements, Messrs. Rackley and Campbell
have assigned to nFront all of their copyrights, trade secrets and patent rights
that relate to the business of nFront. Additionally, they have agreed not to
compete with nFront during the term of their employment and for one year
afterward. They have also agreed not to solicit customers and employees of
nFront for a period of one year following termination of their employment with
nFront. If nFront terminates their employment when they had not violated any
specific provision of the agreement or they terminate their
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<PAGE> 65
employment for reasons that are deemed to be proper under the agreements, they
will be entitled to receive severance payments equal to the amount of their
then-current base salary and benefits for a twelve month period following
termination.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our Second Amended and Restated Articles of Incorporation provide that the
liability of our directors for monetary damages shall be eliminated to the
fullest extent permissible under Georgia law and that we may indemnify our
officers, employees and agents to the fullest extent permitted under Georgia
law.
Our Bylaws provide that we must indemnify our directors against all
liabilities to the fullest extent permitted under Georgia law and that we must
advance all reasonable expenses incurred in a proceeding where the director was
either a party or a witness because he or she was a director.
We have entered into agreements that require us to indemnify our directors
and our officers to the full extent permitted under Georgia law. In addition, we
have agreed to defend, hold harmless and indemnify our directors and our
officers against any obligation to pay a judgment, penalty, fine, expenses and
settlement amounts in connection with any action, suit or proceeding brought by
reason of the fact that he or she is a director or officer, as the case may be,
of nFront or is serving, at the request of nFront, as a director, officer,
employee, agent or consultant of another entity. No indemnification will be
provided for any misappropriation of any nFront business opportunity, any act or
omission involving intentional misconduct or a knowing violation of law, any
transaction from which an improper personal benefit was received and other types
of liability under Georgia law. Further, nFront will pay expenses incurred by
directors and officers in defending any covered action, suit or proceeding in
advance of the final disposition of such action, suit or proceeding. We believe
that these agreements, as well as the provisions contained in our articles and
bylaws described above, are necessary to attract and retain qualified persons as
directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors of nFront pursuant to the provisions of our
charter documents, Georgia law or the agreements described above, nFront has
been advised that in the opinion of the Securities and Exchange Commission, this
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
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CERTAIN TRANSACTIONS
RELATED PARTY TRANSACTIONS
In January 1997, LeapFrog Technologies, Inc., a Georgia corporation of
which Brady L. Rackley is Chairman of the Board, exchanged office furniture
having a fair market value of $83,986 for programming services furnished by
nFront having the same value. In October 1997, we loaned Mr. Rackley $20,000,
and he repaid $20,875 in February 1998, constituting payment in full. The loan
was unsecured and had an interest rate of 10.5% per year. In addition, nFront
has retained Mr. Rackley to provide marketing and sales consulting services to
nFront for $70,000 per year. Mr. Rackley is a Director and principal shareholder
of nFront.
During the period from October 1997 through January 1998, we borrowed a
total of $90,000 from Brady L. "Tripp" Rackley III, our Chief Executive Officer.
The loans were unsecured, had an interest rate of 10.5% per year and were repaid
in February 1998.
In May 1998, we issued to Noro-Moseley Partners IV, L.P. 255,885 shares of
redeemable convertible preferred stock at a per share price of $9.77. These
shares will be automatically converted into 2,034,285 shares of common stock
upon the completion of this offering. One of our directors, Mr. Charles D.
Moseley, Jr., is a member of MKFJ-IV, LLC, the general partner of Noro-Moseley.
In May 1998, we paid a $125,000 fee to Liberty Street Capital, an
investment banking company controlled by Mr. Thomas E. Greene III, one of our
directors. The fee was payment for services provided by Liberty Street Capital
to us in connection with the investment in nFront by Noro-Moseley.
In April 1999, we entered into a debenture purchase agreement with Noro-
Moseley Partners IV, L.P. Under this agreement, Noro-Moseley agreed to purchase
up to $5.0 million of senior subordinated debentures upon request by us. No
debentures have been issued under this agreement. The obligation of Noro-Moseley
to purchase debentures under the agreement expires upon the occurrence of this
offering. In exchange for its commitment under the agreement, we will issue to
Noro-Moseley a three-year warrant to purchase a number of shares of common stock
equal to $500,000 divided by the initial public offering price of our common
stock and exerciseable at that price.
Our Chief Executive Officer, Mr. Rackley, and our President, Mr. Campbell,
have employment agreements described in "Management -- Employment Agreements."
Our Board of Directors has adopted a resolution whereby all future
transactions with related parties, including any loans from us to our officers,
directors, principal shareholders or affiliates, must be approved by a majority
of the Board of Directors, including a majority of the independent and
disinterested members of the Board of Directors or a majority of the
disinterested shareholders and must be on terms no less favorable to us than
could be obtained from unaffiliated third parties.
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<PAGE> 67
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth information with respect to the beneficial
ownership of our common stock as of the date of this prospectus and as adjusted
to reflect the sale by nFront of the common stock being offered hereby with
respect to:
- each of our directors;
- each of the selling shareholders;
- each shareholder known by us to be the beneficial owner of more than 5%
of the outstanding shares of common stock; and
- all of our executive officer and directors as a group.
<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED
PRIOR TO OFFERING NUMBER OF AFTER THE OFFERING
-------------------------- SHARES BEING -------------------------
NAME OF BENEFICIAL OWNER(1) SHARES PERCENTAGE(2) OFFERED SHARES PERCENTAGE(2)
- --------------------------- ---------- ------------- ------------ --------- -------------
<S> <C> <C> <C> <C> <C>
Brady L. "Tripp" Rackley
III.................... 3,295,513 30.8% 133,624 3,161,889 22.3%
Brady L. Rackley(3)...... 3,173,449 29.7% 128,675 3,044,774 21.5%
Noro-Moseley Partners IV,
L.P.(4)................ 2,531,822 23.6% 100,631 2,431,191 17.1%
W. Derek Porter.......... 596,250 5.6% 24,176 572,074 4.0%
William H. Scott III..... 203,432 1.9% 203,432 1.4%
James A. Verbrugge....... 119,250 1.1% 119,250 *
Thomas E. Greene III..... 119,250 1.1% 4,835 114,415 *
Steven S. Neel........... 198,750 1.9% 8,059 190,691 1.3%
Robert L. Campbell....... 81,368 * 81,368 *
Charles D. Moseley,
Jr.(5)................. 2,531,822 23.6% (5) 2,431,191 17.1%
All directors and executive
officers as a group (13
persons)............... 10,359,727 96.4% 9,959,727 69.9%
</TABLE>
- ---------------
* Less than 1% of the outstanding common stock.
(1) Except as set forth herein, the business address of the named beneficial
owner is c/o nFront, Inc., 520 Guthridge Court, NW, Suite 100, Norcross,
Georgia 30092.
(2) For purposes of calculating the percentage beneficially owned, the number of
shares of common stock deemed outstanding prior to and after the offering
consists of: (i) 8,661,867 shares outstanding as of March 31, 1999, plus
(ii) 2,034,285 shares issued upon automatic conversion of the redeemable
convertible preferred stock as a result of this offering. No person in the
above table holds options that may be exercised within 60 days following the
date of this prospectus. The number of shares of common stock deemed
outstanding after this offering includes an additional 3,500,000 shares that
are being offered for sale by nFront in this offering. Beneficial ownership
is determined in accordance with the rules of the Securities and Exchange
Commission that deem shares to be beneficially owned by any person or group
who has or shares voting and investment power with respect to these shares.
(3) Includes 66,250 shares beneficially owned by Mr. Rackley's wife, Katharine
S. Rackley, 728,750 shares beneficially owned by The Katharine Rackley
Grantor
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Retained Annuity Trust and 728,750 shares beneficially owned by The Brady
Rackley Grantor Retained Annuity Trust. Mr. Rackley disclaims beneficial
ownership of shares held by Ms. Rackley.
(4) Includes 2,034,285 shares of common stock issued upon automatic conversion
of all shares of preferred stock and 50,000 shares of common stock issuable
upon exercise of a warrant which will be issued to Noro-Mosley Partners at
the closing of the offering pursuant to the Debenture Purchase Agreement
described in "Certain Transactions." The address of Noro-Moseley Partners
IV, L.P. is 9 North Parkway Square, 4200 Northside Parkway, Atlanta, Georgia
30327.
(5) Consists of the 2,531,821 shares beneficially owned by Noro-Moseley Partners
IV, L.P. Mr. Moseley is a member of MKFJ-IV, LLC, which is the general
partner of Noro-Moseley Partners IV, L.P. Mr. Moseley disclaims beneficial
ownership of the shares owned by Noro-Moseley Partners IV, L.P. Mr.
Moseley's address is 9 North Parkway Square, 4200 Northside Parkway,
Atlanta, Georgia 30327.
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<PAGE> 69
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of nFront consists of 70,000,000 shares of
common stock, no par value per share, and 10,000,000 shares of preferred stock,
no par value per share. The following summary is a description of the material
terms of our capital stock and is subject to, and qualified in its entirety by
reference to, the provisions of nFront's Second Amended and Restated Articles of
Incorporation, which is included as an exhibit to the Registration Statement of
which this prospectus is a part, and by the provisions of applicable law.
COMMON STOCK
As of March 31, 1999, there were 8,661,867 shares of nFront common stock
outstanding held of record by 13 shareholders. There will be 14,196,152 shares
of common stock outstanding (assuming no exercise of outstanding options or
warrants after March 31, 1999) after giving effect to the sale of common stock
offered to the public in this offering and conversion of the redeemable
convertible preferred stock. The holders of common stock are entitled to one
vote for each share held of record on all matters submitted to a vote of
shareholders. There are no cumulative voting rights. Subject to preferences that
may be applicable to any outstanding shares of preferred stock, the holders of
common stock are entitled to receive ratably such dividends, if any, as may be
declared by the Board of Directors out of funds legally available for the
payment of dividends. In the event of a liquidation, dissolution or winding up
of nFront, the holders of common stock are entitled to share ratably in all
assets remaining after payment of liabilities and liquidation preferences of any
outstanding shares of preferred stock. Holders of common stock have no
preemptive rights or rights to convert their common stock into any other
securities. There are no redemption or sinking fund provisions applicable to the
common stock. All outstanding shares of common stock are fully paid and
nonassessable, and the shares of common stock to be issued upon completion of
this offering will be fully paid and nonassessable.
PREFERRED STOCK
Upon completion of the offering, all outstanding shares of redeemable
convertible preferred stock will be converted into an aggregate of 2,034,285
shares of common stock. Pursuant to nFront's Second Amended and Restated
Articles of Incorporation, the Board of Directors has the authority, without
further action by the shareholders, to issue up to 10,000,000 shares of
preferred stock in one or more series and to fix the designations, powers,
preferences, privileges and relative, participating, optional or special rights
and the qualifications, limitations or restrictions thereof, including dividend
rights, conversion rights, voting rights, terms of redemption and liquidation
preferences, any or all of which may be greater than the rights of the common
stock.
The Board of Directors, without shareholder approval, can issue preferred
stock with voting, conversion or other rights that could adversely affect the
voting power and other rights of the holders of common stock. Preferred stock
could thus be issued quickly with terms calculated to delay or prevent a change
of control of
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<PAGE> 70
nFront or make removal of management more difficult. Additionally, the issuance
of preferred stock may have the effect of decreasing the market price of the
common stock and may adversely affect the voting and other rights of the holders
of common stock. The Company has no plans to issue any preferred stock.
WARRANTS
Concurrent with completion of this offering, nFront will issue to
Noro-Moseley Partners IV, LLC a warrant to purchase a number of shares of common
stock equal to $500,000 divided by the initial public offering price in this
offering. This warrant, which expires on the third anniversary of the date of
issuance, has an exercise price equal to the price per share of the shares sold
in this offering. The warrant is being issued in connection with the debenture
purchase agreement by Noro-Moseley described in "Certain Transactions" above.
ANTITAKEOVER PROVISIONS OF OUR SECOND AMENDED AND RESTATED ARTICLES OF
INCORPORATION, BYLAWS AND GEORGIA LAW
Preferred Stock. As noted above, nFront's Board of Directors, without
shareholder approval, has the authority under nFront's Second Amended and
Restated Articles of Incorporation to issue preferred stock with rights superior
to the rights of the holders of common stock. As a result, preferred stock could
be issued quickly and easily, could adversely affect the rights of holders of
common stock and could be issued with terms calculated to delay or prevent a
change of control of nFront or make removal of management more difficult.
Shareholder Meetings. Under nFront's Bylaws, the shareholders may call a
special meeting only upon the request of holders of at least 35% of votes
entitled to be cast on each issue proposed to be considered at the special
meeting. Additionally, the Board of Directors, the Chairman of the Board, the
Chief Executive Officer or the President of nFront may call special meetings of
shareholders.
Requirements for Advance Notification of Shareholder Proposals and Director
Nominations. nFront's Bylaws establish advance notice procedures with respect to
shareholder proposals and the nomination of candidates for election as
directors, other than nominations made by or at the direction of the Board of
Directors or a committee thereof.
Classified Board and Removal of Directors. nFront's Second Amended and
Restated Articles of Incorporation provide for a seven member board of directors
to be elected, initially, to staggered one, two and three year terms and,
thereafter, for successive three year terms. Also, the directors may only be
removed from office for cause by the majority vote of the shareholders at a
meeting for which notice of the removal action has been properly given.
Georgia Business Combination Statute. nFront has elected in its Bylaws to
be subject to provisions of Georgia law prohibiting various business
combinations involving shareholders that have an economic interest in the
transaction for a period of five years after the shareholder becomes an
interested shareholder of nFront. A "business combination" includes, among other
things, a merger or consolidation involving nFront and the interested
shareholder and the sale of 10% or more of nFront's assets. In general, the
Georgia Business Combination Statute defines an
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<PAGE> 71
"interested shareholder" as any entity or person beneficially owning 15% or more
of the outstanding voting stock of nFront and any entity or person affiliated
with or controlling or controlled by such entity or person.
Georgia Fair Price Statute. The Company has elected in its Bylaws to be
subject to the "Fair Price" provisions under Georgia law. These provisions
require that a "business combination" with an "interested shareholder" must be
approved by directors of nFront who will continue to be directors following the
business combination and shareholders other than the interested shareholders.
The Fair Price provisions do not restrict a business combination if the cash,
stock or other property received by nFront's shareholders meet various fair
value criteria described in the statute.
These charter provisions and provisions of Georgia law may have the effect
of delaying, deterring or preventing a change of control of nFront.
REGISTRATION RIGHTS
Pursuant to a Shareholder Agreement with nFront, dated as of May 13, 1998,
and the Stock Purchase Warrant between nFront and Noro-Moseley, investors
holding an aggregate of 10,746,152 shares of common stock (including 2,034,285
shares issued upon conversion of the Redeemable Convertible Preferred Stock and
50,000 shares issuable upon exercise of the Warrant to be issued to
Noro-Moseley) are entitled to specified rights with respect to the registration
of these shares under the Securities Act. At any time, following a public
offering of nFront's common stock, any such investor may request that nFront
file a registration statement that covers the sale of at least 40% of the shares
of common stock held by the investor. An investor may require that nFront
register its common stock for resale only one time, other than as described
below. In addition, if nFront proposes to register any of its securities under
the Securities Act, either for its own account or for the account of other
security holders, the investors are entitled to notice of the registration and
to include shares of common stock in the registration at nFront's expense. All
of these registration rights are subject to conditions and limitations, among
them the right of the underwriters of an offering to limit the number of shares
included in the registration.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is American Stock
Transfer & Trust Company.
NASDAQ NATIONAL MARKET LISTING
nFront has applied to have its common stock approved for listing on the
Nasdaq National Market under the symbol NFNT.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for nFront's common
stock, and there can be no assurance that a significant public market for the
common stock will be developed or be sustained after this offering. Sales of
substantial amounts of common stock in the public market after this offering, or
the possibility of these sales occurring, could adversely affect prevailing
market prices for the common stock or the future ability of nFront to raise
capital through an offering of equity securities.
After this offering, nFront will have outstanding an aggregate of
14,196,152 shares of common stock. Of these shares, the 3,900,000 shares offered
hereby will be freely tradeable in the public market without restriction under
the Securities Act, unless these shares are held by "affiliates" of nFront, as
that term is defined in Rule 144 under the Securities Act or by persons subject
to other contractual or legal restrictions on resale. The remaining 10,296,152
shares of common stock outstanding upon completion of this offering will be
"restricted securities," as that term is defined in Rule 144 under the
Securities Act. The restricted securities were issued and sold by nFront in
private transactions in reliance upon exemptions from registration under the
Securities Act. Restricted securities may be sold in the public market only if
they are registered or if they qualify for an exemption from registration, such
as Rules 144 or 701 under the Securities Act, which are summarized below.
All of the executive officers, directors, shareholders and employees of
nFront, who collectively hold an aggregate of 10,296,152 restricted shares of
nFront, have entered into "lock-up" agreements with Hambrecht & Quist LLC in
which they have agreed not to offer, sell, contract to sell, grant any option to
purchase or otherwise dispose of any of these shares for a period of 180 days
from the date of this prospectus. Hambrecht & Quist LLC may, in its sole
discretion and at any time without prior notice, release all or any portion of
the common stock subject to these lock-up agreements. Hambrecht & Quist LLC
currently has no plans to release any portion of the securities subject to these
lock-up agreements. When determining whether or not to release shares from the
lock-up agreements, Hambrecht & Quist LLC will consider, among other factors,
market conditions at the time, the number of shares proposed to be released or
for which the release is being requested and a shareholder's reasons for
requesting the release. We have also entered into an agreement with Hambrecht &
Quist LLC that nFront will not offer, sell or otherwise dispose of common stock
for a period of 180 days from the date of this prospectus.
Taking into account the lock-up agreements, the number of shares that will
be available for sale in the public market under the provisions of Rules 144,
144(k) and 701 will be as follows:
- no restricted shares will be eligible for sale as of the date of this
prospectus;
- approximately 386,425 restricted shares will be eligible for sale 180
days after the date of this prospectus upon the expiration of lock-up
agreements with the underwriters; and
- approximately 9,909,727 restricted shares will become eligible for sale
thereafter at various times upon the expiration of their respective
holding periods and otherwise if in accordance with the provisions of
Rule 144.
69
<PAGE> 73
Following the expiration of the lock-up periods and subject to applicable
vesting periods, shares issued upon exercise of options granted by nFront prior
to the date of this prospectus will also be available for sale in the public
market pursuant to Rule 701 under the Securities Act. Rule 701 permits resales
of these shares in reliance upon Rule 144 but without compliance with its
restrictions, including the holding period requirement, imposed under Rule 144.
In general, under Rule 144 as in effect at the closing of this offering,
beginning 90 days after the date of this prospectus, a person (or persons whose
shares of nFront are aggregated) who has beneficially owned restricted shares
for at least one year (including the holding period of any prior owner who is
not an affiliate of nFront) would be entitled to sell within any three-month
period a number of shares that does not exceed the greater of (i) one percent of
the then outstanding shares of common stock (approximately 141,962 shares
immediately after this offering) or (ii) the average weekly trading volume of
the common stock during the four calendar weeks preceding the filing of a Form
144 with respect to the sale. Sales under Rule 144 are also subject to manner of
sale and notice requirements and to the availability of current public
information about nFront. Under Rule 144(k), a person who is not deemed to have
been an affiliate of nFront at any time during the 90 days preceding a sale and
who has beneficially owned the shares proposed to be sold for at least two years
(including the holding period of any prior owner who is not an affiliate of
nFront) is entitled to sell the shares without complying with the manner of
sale, public information, volume limitation or notice provisions of Rule 144.
nFront intends to file after the effective date of this offering a
registration statement on Form S-8 to register approximately 2,488,900 shares of
common stock issuable upon the exercise of outstanding stock options or reserved
for issuance under the nFront Stock Incentive Plan, the nFront Director Stock
Option Plan and the nFront Employee Stock Purchase Plan. This registration
statement will become effective automatically upon filing. Shares issued under
the foregoing plans, after the filing of a registration statement on Form S-8,
may be sold in the open market, subject, in the case of option holders, to the
Rule 144 limitations applicable to affiliates, the above-referenced lock-up
agreements and vesting restrictions imposed by nFront.
Following this offering, the holders of an aggregate of 10,296,152 shares
of outstanding common stock and up to 50,000 shares of common stock issuable
upon exercise of warrants will have rights to require nFront to register their
shares for future sale pursuant to a Shareholder Agreement. See "Description of
Capital Stock -- Registration Rights."
70
<PAGE> 74
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, for whom Hambrecht & Quist LLC, J.C. Bradford & Co.,
Raymond James & Associates, Inc. and SoundView Technology Group, Inc. are acting
as representatives, have severally agreed to purchase from nFront and the
selling shareholders the following respective number of shares of common stock:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ----------- ---------
<S> <C>
Hambrecht & Quist LLC.......................................
J.C. Bradford & Co..........................................
Raymond James & Associates, Inc.............................
SoundView Technology Group, Inc.............................
---------
Total..................................................... 3,900,000
=========
</TABLE>
The underwriting agreement provides that the obligations of the
underwriters are subject to conditions precedent, including the absence of any
material adverse change in nFront's business and the receipt of certificates,
opinions and letters from nFront, its counsel and independent auditors. The
underwriters' have committed to purchase all shares of common stock offered
hereby if any of the shares are purchased.
The following table shows the per share and total underwriting discounts
and commissions to be paid to the underwriters by us and the selling
shareholders in connection with this offering. These amounts are shown assuming
both no exercise and full exercise of the underwriters' option to purchase
additional shares of common stock.
<TABLE>
<CAPTION>
PAID BY SELLING
PAID BY US SHAREHOLDERS
--------------------------- ---------------------------
NO EXERCISE FULL EXERCISE NO EXERCISE FULL EXERCISE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Per share......................
Total..........................
</TABLE>
We will pay the offering expenses, estimated to be $935,000.
The underwriters propose to offer the shares of common stock directly to
the public at the initial public offering price set forth on the cover page of
this prospectus and to dealers at that price less a concession not in excess of
$ per share. The underwriters may allow and these dealers may reallow a
concession not in excess of $ per share to other dealers. After the initial
public offering of the shares, the offering price and other selling terms may be
changed by the underwriters. The representatives have informed nFront that the
underwriters do not intend to confirm discretionary sales of the shares of
common stock offered by this prospectus.
71
<PAGE> 75
The selling shareholders have granted to the underwriters an option,
exercisable no later than 30 days after the date of this prospectus, to purchase
up to 585,000 additional shares of common stock at the initial public offering
price, less the underwriting discount, set forth on the cover page of this
prospectus. To the extent that the underwriters exercise this option, each of
the underwriters will have a firm commitment to purchase approximately the same
percentage thereof which the number of shares of common stock to be purchased by
it shown in the above table bears to the total number of shares of common stock
offered by us. The selling shareholders will be obligated, pursuant to the
option, to sell shares to the underwriters to the extent the option is
exercised. The underwriters may exercise this option only to cover
over-allotments made in connection with the sale of common stock.
The offering of the shares is made for delivery when, as and if accepted by
the underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.
nFront has agreed to indemnify the underwriters against various
liabilities, including liabilities under the Securities Act, and to contribute
to payments the underwriters may be required to make in respect of those
liabilities.
nFront, the selling shareholders, and other shareholders of nFront,
including executive officers and directors, who will own in the aggregate
10,296,152 shares of common stock after the offering, have agreed that they will
not, without the prior written consent of Hambrecht & Quist LLC, offer, sell or
otherwise dispose of any shares of common stock, options or warrants to acquire
shares of common stock or securities exchangeable for or convertible into shares
of common stock owned by them during the 180-day period following the date of
this prospectus. nFront has agreed that it will not, without the prior written
consent of Hambrecht & Quist LLC, offer, sell or otherwise dispose of any shares
of common stock, options or warrants to acquire shares of common stock or
securities exchangeable for or convertible into shares of common stock during
the 180 days following the date of this prospectus, except that nFront may issue
shares upon the exercise of options granted prior to the date hereof and may
grant additional options under its stock option plans, provided that, without
the prior written consent of Hambrecht & Quist LLC, these additional options
shall not be exercisable during this period. Sales of these shares in the future
could adversely affect the market price of the common stock.
There are persons participating in this offering that may over-allot or
effect transactions that stabilize, maintain or otherwise affect the market
price of the common stock at levels above those that might otherwise prevail in
the open market, including by entering stabilizing bids, effecting syndicate
covering transactions or imposing penalty bids. A stabilizing bid means the
placing of any bid or effecting of any purchase for the purpose of pegging,
fixing or maintaining the price of the common stock. A syndicate covering
transaction means the placing of any bid on behalf of the underwriting syndicate
or the effecting of any purchase to reduce a short position created in
connection with the offering. A penalty bid means an arrangement that permits
the underwriters to reclaim a selling concession from a syndicate member in
connection with this offering when shares of common stock sold by the syndicate
member are purchased in syndicate covering transactions.
72
<PAGE> 76
These transactions may be effected on the Nasdaq National Market, in the
over-the-counter market, or otherwise. This stabilizing, if commenced, may be
discontinued at any time.
Prior to the offering, there has been no public market for the common
stock. The initial public offering price for the common stock will be determined
by negotiations among nFront and the underwriters. Among the factors to be
considered in determining the initial public offering price will be prevailing
market and economic conditions, revenues and results of operations of nFront,
market valuations of other companies engaged in activities similar to nFront's
activities, estimates of the business potential and prospects of nFront, the
present state of nFront's business operations, nFront's management and other
factors deemed relevant. The estimated initial public offering price range shown
on the cover of this preliminary prospectus is subject to change as a result of
changes in these factors.
At the request of nFront, the underwriters have reserved for sale, at the
initial public offering price, not more than five percent of the shares of
common stock offered hereby (not including shares subject to the underwriters'
over-allotment option) for designated individuals, including officers and
directors of nFront, who may express an interest in purchasing shares in this
offering. Any such persons may, as a condition to purchasing these reserved
shares, be required to agree not to offer, sell or otherwise dispose of any such
reserved shares for a period of 180 days following the date of this prospectus
without the prior written consent of Hambrecht & Quist. The number of shares of
common stock available for sale to the general public will be reduced to the
extent that these persons purchase these reserved shares. Any reserved shares
that are not so purchased will be offered by the underwriters to the general
public on the same basis as other shares offered hereby.
LEGAL MATTERS
The validity of the shares offered hereby will be passed on for nFront by
Morris, Manning & Martin, L.L.P., Atlanta, Georgia. The validity of the shares
offered hereby by nFront will be passed upon for the underwriters by King &
Spalding, Atlanta, Georgia.
EXPERTS
The financial statements of nFront as of and for the period from June 17,
1996 (inception) to June 30, 1997, as of and for the fiscal year ended June 30,
1998, and as of and for the nine months ended March 31, 1999, appearing in this
prospectus and registration statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon this report given the authority of
that firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission, or SEC, a
registration statement on Form S-1 under the Securities Act with respect to the
73
<PAGE> 77
shares of common stock offered hereby. This prospectus is only a part of the
registration statement and does not contain all of the information included in
the registration statement. Further information with respect to nFront and the
common stock offered hereby can be found in the registration statement.
Statements made in this prospectus as to the contents of any contract, agreement
or other document are not necessarily complete. Documents filed as an exhibit to
the registration statement, and all descriptions in this prospectus are
qualified in all respects by reference to the registration statement. The
registration statement and the exhibits and schedules thereto may be inspected
without charge at the public reference room maintained by the Commission in Room
1024, 450 Fifth Street, N. W., Washington, D.C. 20549, and at the following
regional offices of the Commission: Seven World Trade Center, Room 1400, New
York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained
from the public reference section of the Commission at 450 Fifth Street, N. W.,
Washington, D.C. 20549, Room 1024, at prescribed rates. The public may obtain
information on the operation of the Commission's public reference room by
calling the Commission at 1-800-SEC-0330. In addition, nFront is required to
file electronic versions of these documents with the Commission through the
Commission's Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system.
The Commission maintains an Internet site at http://www.sec.gov, which contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. Information concerning
nFront is also available for inspection at the offices of the Nasdaq National
Market, Reports Section, 1735 K Street, N.W., Washington, D.C. 20006.
Upon completion of this offering, we will become subject to the information
and periodic reporting requirements of the Securities Exchange Act of 1934, as
amended, and, in accordance therewith, will file periodic reports, proxy
statements and other information with the Commission. Such periodic reports,
proxy statements and other information will be available for inspection and
copying at the Commission's public reference rooms and the Commission's web
site, which is described above.
74
<PAGE> 78
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FINANCIAL STATEMENTS:
Report of Independent Auditors.............................. F-2
Balance Sheets as of June 30, 1997 and 1998 and March 31,
1999 and Pro Forma March 31, 1999 (unaudited)............. F-3
Statements of Operations for the Period from June 17, 1996
(inception) through June 30, 1997, the Fiscal Year Ended
June 30, 1998, and the Nine Months Ended March 31, 1998
(unaudited) and 1999...................................... F-4
Statements of Redeemable Convertible Preferred Stock and
Stockholders' Equity (Deficit) for the Period from June
17, 1996 (inception) through June 30, 1997, Fiscal Year
Ended June 30, 1998, and Nine Months Ended March 31,
1999...................................................... F-5
Statements of Cash Flows for the Period from June 17, 1996
(inception) through June 30, 1997, the Fiscal Year Ended
June 30, 1998, and the Nine Months Ended March 31, 1998
(unaudited) and 1999...................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 79
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
nFront, Inc.
We have audited the accompanying balance sheets of nFront, Inc. (the
"Company") as of June 30, 1997 and 1998 and March 31, 1999 and the related
statements of operations, redeemable convertible preferred stock and
stockholders' equity (deficit) and cash flows for the period from June 17, 1996
(inception) through June 30, 1997, the fiscal year ended June 30, 1998 and the
nine months ended March 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of nFront, Inc. at June 30,
1997 and 1998 and March 31, 1999 and the results of its operations and its cash
flows, for the period from June 17, 1996 (inception) through June 30, 1997, the
fiscal year ended June 30, 1998, and the nine months ended March 31, 1999 in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Atlanta, Georgia
April 22, 1999, except for Note 12, as to
which the date is June 17, 1999
F-2
<PAGE> 80
NFRONT, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
JUNE 30, JUNE 30, MARCH 31, MARCH 31,
1997 1998 1999 1999
-------- ---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................... $243,525 $2,521,384 $1,530,458
Accounts receivable........................... 37,793 116,919 530,035
Unbilled accounts receivable.................. -- 96,199 781,501
Prepaid expenses and other assets............. -- 2,811 34,423
Refundable income taxes....................... -- 51,850 51,850
-------- ---------- ----------
Total current assets................... 281,318 2,789,163 2,928,267
Property and equipment:
Leasehold improvements........................ -- -- 31,742
Software...................................... -- -- 178,505
Furniture and fixtures........................ 106,352 197,541 216,006
Equipment..................................... 25,050 54,199 541,589
-------- ---------- ----------
131,402 251,740 967,842
Less accumulated depreciation................. (13,780) (47,506) (130,399)
-------- ---------- ----------
117,622 204,234 837,443
Other assets.................................... 3,405 4,731 36,935
-------- ---------- ----------
Total assets........................... $402,345 $2,998,128 $3,802,645
======== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt............. $ -- $ -- $ 301,793
Accounts payable.............................. 6,791 86,446 211,305
Accrued liabilities........................... 213,900 191,195 773,763
Deferred revenue.............................. 32,404 554,317 1,080,221
Account payable to related party.............. 74,085 -- --
Income taxes payable.......................... 25,925 -- --
-------- ---------- ----------
Total current liabilities.............. 353,105 831,958 2,367,082
Long-term debt, net of current portion.......... -- -- 427,540
Redeemable convertible preferred stock, no par
value; 10,000,000 shares authorized; issuable
in series:
Series A -- 255,885 shares authorized, issued
and outstanding at June 30, 1998 and March
31, 1999; liquidation preference of
$2,782,873 at March 31, 1999; no pro forma
shares issued or outstanding................ -- 2,375,561 2,580,222 $ --
Stockholders' equity (deficit):
Common stock, no par value; 70,000,000 shares
authorized; 7,950,000, 8,132,993 and
8,661,867 shares issued and outstanding at
June 30, 1997 and 1998 and March 31, 1999,
respectively; 10,696,152 pro forma shares
issued and outstanding...................... 1,375 265,642 710,981 3,291,203
Subscription receivable....................... (875) (777) (777) (777)
Retained earnings (deficit)................... 48,740 (474,256) (2,282,403) (2,282,403)
-------- ---------- ---------- -----------
Total stockholders' equity (deficit)... 49,240 (209,391) (1,572,199) 1,008,023
-------- ---------- ---------- -----------
Total liabilities and stockholders'
equity (deficit)..................... $402,345 $2,998,128 $3,802,645 $ 3,802,645
======== ========== ========== ===========
</TABLE>
See accompanying notes.
F-3
<PAGE> 81
NFRONT, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 17, 1996 FISCAL NINE MONTHS ENDED
(INCEPTION) YEAR ENDED MARCH 31,
THROUGH JUNE 30, -------------------------
JUNE 30, 1997 1998 1998 1999
------------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Implementation fees.......... $ 358,245 $ 722,859 $ 581,375 $ 1,728,179
Monthly service fees......... 34,263 185,283 102,929 892,816
Other........................ 458,643 174,287 149,406 214,095
---------- ----------- ---------- -----------
Total revenues............... 851,151 1,082,429 833,710 2,835,090
Operating expenses:
Cost of implementation....... 246,544 346,054 132,750 697,541
Cost of Internet banking data
center.................... 61,681 96,732 65,098 213,950
Selling and marketing........ 194,450 568,928 189,265 1,462,943
Product development.......... 106,429 170,419 109,164 785,790
General and administrative... 157,274 440,099 305,188 1,445,481
Depreciation................. 13,780 33,726 23,140 82,893
---------- ----------- ---------- -----------
Total operating expenses....... 780,158 1,655,958 824,605 4,688,598
---------- ----------- ---------- -----------
Operating income (loss)........ 70,993 (573,529) 9,105 (1,853,508)
Other (income) expense:
Interest income.............. (3,672) (26,692) (3,916) (63,436)
Interest expense............. -- 2,084 1,914 18,075
---------- ----------- ---------- -----------
(3,672) (24,608) (2,002) (45,361)
---------- ----------- ---------- -----------
Income (loss) before income
taxes........................ 74,665 (548,921) 11,107 (1,808,147)
Income tax expense (benefit)... 25,925 (25,925) 2,000 --
---------- ----------- ---------- -----------
Net income (loss).............. 48,740 (522,996) 9,107 (1,808,147)
Accretion on redeemable
convertible preferred
stock........................ -- (35,733) -- (204,661)
---------- ----------- ---------- -----------
Net income (loss) attributable
to common stock.............. $ 48,740 $ (558,729) $ 9,107 $(2,012,808)
========== =========== ========== ===========
Net income (loss) per common
share -- basic and diluted... $ 0.01 $ (0.07) $ 0.00 $ (0.24)
========== =========== ========== ===========
Weighted average shares
outstanding -- basic and
diluted...................... 5,079,167 8,033,223 8,000,090 8,498,844
========== =========== ========== ===========
Unaudited pro forma net loss
per share -- basic and
diluted...................... $ (0.07) $ (0.19)
=========== ===========
Unaudited pro forma weighted
average shares outstanding --
basic and diluted............ 8,300,746 10,533,129
=========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE> 82
NFRONT, INC.
STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
PERIOD FROM JUNE 17, 1996 (INCEPTION) THROUGH JUNE 30, 1997,
FISCAL YEAR ENDED JUNE 30, 1998 AND NINE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
REDEEMABLE CONVERTIBLE TOTAL
PREFERRED STOCK COMMON STOCK RETAINED STOCKHOLDERS'
---------------------- --------------------- SUBSCRIPTION EARNINGS EQUITY
SHARES AMOUNT SHARES AMOUNT RECEIVABLE (DEFICIT) (DEFICIT)
--------- ---------- --------- --------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 17,
1996 (inception)... -- $ -- -- $ -- $ -- $ -- $ --
Proceeds from
issuance of
common stock..... -- -- 7,950,000 1,375 (1,375) -- --
Payment of stock
subscription
receivable....... -- -- -- -- 500 -- 500
Net income........... -- -- -- -- -- 48,740 48,740
--------- ---------- --------- --------- ------- ----------- -----------
Balance at June 30,
1997............... -- -- 7,950,000 1,375 (875) 48,740 49,240
Proceeds from
issuance of
common stock..... -- -- 182,993 300,000 -- -- 300,000
Proceeds from the
issuance of
redeemable
convertible
preferred stock,
net of issuance
costs of
$160,172......... 255,885 2,339,828 -- -- -- -- --
Accretion on
redeemable
convertible
preferred
stock............ -- 35,733 -- (35,733) -- -- (35,733)
Payment of stock
subscription
receivable....... -- -- -- -- 98 -- 98
Net loss........... -- -- -- -- -- (522,996) (522,996)
--------- ---------- --------- --------- ------- ----------- -----------
Balance at June 30,
1998............... 255,885 2,375,561 8,132,993 265,642 (777) (474,256) (209,391)
Proceeds from
issuance of
common stock..... -- -- 528,874 650,000 -- -- 650,000
Accretion on
redeemable
convertible
preferred
stock............ -- 204,661 -- (204,661) -- -- (204,661)
Net loss............. -- -- -- -- -- (1,808,147) (1,808,147)
--------- ---------- --------- --------- ------- ----------- -----------
Balance at March 31,
1999............... 255,885 $2,580,222 8,661,867 $ 710,981 $ (777) $(2,282,403) $(1,572,199)
========= ========== ========= ========= ======= =========== ===========
</TABLE>
See accompanying notes.
F-5
<PAGE> 83
NFRONT, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 17, 1996 NINE MONTHS ENDED
(INCEPTION) FISCAL MARCH 31,
THROUGH YEAR ENDED -------------------------
JUNE 30, 1997 JUNE 30, 1998 1998 1999
------------- ------------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)..................... $ 48,740 $ (522,996) $ 9,107 $(1,808,147)
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Depreciation........................ 13,780 33,726 23,140 82,893
Changes in operating assets and
liabilities:
Accounts receivable............... (37,793) (175,325) (30,948) (1,098,418)
Prepaid expenses and other
assets.......................... (3,405) (4,137) (7,113) (63,816)
Income taxes...................... 25,925 (51,850) (11,591) --
Accounts payable.................. (3,110) (20,355) (21,065) 124,859
Accrued liabilities............... 213,900 (22,705) (204,162) 582,568
Deferred revenue.................. 32,404 521,913 6,929 525,904
-------- ---------- --------- -----------
Net cash provided by (used in)
operating activities................ 290,441 (241,729) (235,703) (1,654,157)
INVESTING ACTIVITIES
Purchase of property and equipment.... (47,416) (120,338) (66,074) (716,102)
-------- ---------- --------- -----------
Net cash used in investing
activities.......................... (47,416) (120,338) (66,074) (716,102)
FINANCING ACTIVITIES
Proceeds from stockholder loan........ -- 90,000 -- --
Repayment of stockholder loan......... -- (90,000) -- --
Proceeds from bank credit facility.... -- -- -- 750,000
Repayment of bank credit facility..... -- -- -- (20,667)
Proceeds from issuance of preferred
stock............................... -- 2,339,828 -- --
Proceeds from issuance of common
stock............................... 500 300,098 300,098 650,000
-------- ---------- --------- -----------
Net cash provided by financing
activities.......................... 500 2,639,926 300,098 1,379,333
-------- ---------- --------- -----------
Net increase (decrease) in cash and
cash equivalents.................... 243,525 2,277,859 (1,679) (990,926)
Cash and cash equivalents at the
beginning of the period............. -- 243,525 243,525 2,521,384
-------- ---------- --------- -----------
Cash and cash equivalents at the end
of the period....................... $243,525 $2,521,384 $ 241,846 $ 1,530,458
======== ========== ========= ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITY
Assets acquired in exchange for
programming services................ $ 83,986 $ -- $ -- $ --
======== ========== ========= ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest................ $ -- $ -- $ -- $ 19,164
======== ========== ========= ===========
Cash paid for income taxes............ $ -- $ 51,850 $ -- $ --
======== ========== ========= ===========
</TABLE>
See accompanying notes.
F-6
<PAGE> 84
NFRONT, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
nFront, Inc. (the "Company") was incorporated on June 17, 1996 (date of
inception). As the Company had minimal activity between the date of inception
and June 30, 1996, the statements of operations, stockholders' equity and cash
flows for the period ended June 30, 1997 include the period June 17, 1996 to
June 30, 1996. The Company's normal operating cycle is twelve months.
DESCRIPTION OF BUSINESS
The Company provides full-service Internet banking solutions to small to
mid-sized banks. The solutions provided by the Company include development and
implementation services, web site design, maintenance and hosting, customer
service training and support, and marketing consulting.
USE OF ESTIMATES
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles required management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates and such differences may be
material to the financial statements.
CASH AND CASH EQUIVALENTS
The Company considers unrestricted, highly liquid investments with initial
maturities of less than three months to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of assets ranging from
three to seven years. Repairs and maintenance are charged to expense as
incurred.
UNBILLED ACCOUNTS RECEIVABLE
The Company bills on the first of each month for the previous month's
activity. Unbilled accounts receivable is comprised of these amounts.
PRODUCT DEVELOPMENT COSTS
Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting
for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed,"
requires the capitalization of certain software development costs subsequent to
the
F-7
<PAGE> 85
NFRONT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
establishment of technological feasibility. Based upon the Company's product
development process, technological feasibility is established upon the
completion of a working model. Costs incurred by the Company between completion
of a working model and the point at which the product is ready for general
release have been insignificant.
REVENUE RECOGNITION
The Company earns revenue from implementation fees, monthly user and
transaction fees and marketing and training support materials and services.
The non-refundable implementation fee, which is billable to the client bank
when the contract is executed, is recognized as revenue ratably over the
implementation period, which currently averages approximately three months. The
Company's implementation costs are generally incurred ratably over the
implementation period. The Company records the unrecognized portion of billable
implementation fees as deferred revenue. Revenue from monthly user fees and
transaction fees are recognized monthly based on the number of users with
accounts on the bank's Internet branch at the end of the month and the
transactions occurring during the month. The service contracts with the banks
are typically five year exclusive agreements. The revenue from marketing and
training support materials and services is recognized at the time the materials
are delivered or the services are provided.
In October 1997, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 97-2, "Software Revenue Recognition." SOP
97-2 was effective July 1, 1998 and generally requires revenue earned on
software arrangements involving multiple elements such as software products,
upgrades, enhancements, post-contract customer support, installation and
training to be allocated to each element based on the relative fair values of
the elements. There was no material change to the Company's accounting for
revenue as a result of the adoption of SOP 97-2.
ADVERTISING
The Company expenses the cost of advertising as incurred. Advertising
expense was $5,116, $59,710 and $215,345 for the period from June 17, 1996
(inception) through June 30, 1997, the fiscal year ended June 30, 1998 and the
nine months ended March 31, 1999, respectively.
STOCK BASED COMPENSATION
SFAS No. 123, Accounting for Stock Based Compensation ("SFAS 123"), sets
forth accounting and reporting standards for stock based employee compensation
plans. As permitted by SFAS 123, the Company accounts for stock option grants in
accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees,
and related interpretations ("APB 25"). Under APB 25, no compensation expense is
recognized for stock options granted to employees at fair market value. To date,
all
F-8
<PAGE> 86
NFRONT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
of the Company's stock option grants have been made with an option exercise
price equal to or greater than the fair market value of the underlying common
stock and, accordingly, no compensation expense has been recognized.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments which potentially expose the Company to
concentrations of credit risk consist primarily of cash and cash equivalents and
accounts receivable. The carrying amounts reported in the balance sheet for cash
and cash equivalents and accounts receivable approximate their fair values.
CONCENTRATION OF CREDIT RISK
The Company's revenues are primarily derived from companies located in the
United States. The Company performs periodic credit evaluations of its
customers' financial condition and does not require collateral. The Company
provides for estimated credit losses at the time of sale.
The Company's largest customers comprised the following percentages of
total revenues:
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 17, 1996 FISCAL NINE MONTHS
(INCEPTION) THROUGH YEAR ENDED ENDED
JUNE 30, 1997 JUNE 30, 1998 MARCH 31, 1999
------------------- ------------- --------------
<S> <C> <C> <C>
Client bank....................... 57% 14% --
Strategic alliance partner........ -- -- 26%
</TABLE>
Accounts receivable as of June 30, 1997 was substantially from one client
bank. Accounts receivable from three other client banks totaled approximately
$110,000 as of June 30, 1998. Accounts receivable from a strategic alliance
partner totaled approximately $297,000 as of March 31, 1999.
RECLASSIFICATIONS
Certain amounts in the financial statements for the period from June 17,
1996 (inception) through June 30, 1997 and for the fiscal year ended June 30,
1998 have been reclassified to conform to the presentation for the nine months
ended March 31, 1999.
NEW ACCOUNTING PRONOUNCEMENTS
Effective July 1, 1998, the Company adopted SFAS No. 130, "Reporting for
Comprehensive Income," ("SFAS 130"). SFAS 130 requires disclosures of components
of non-stockholder changes in equity in interim periods and additional
disclosures of components of non-stockholder changes in equity on an annual
basis. Adoption of SFAS 130 had no impact on the Company's results of operations
or financial position.
F-9
<PAGE> 87
NFRONT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information," ("SFAS
131"). The Company adopted SFAS 131 effective July 1, 1998. The adoption of this
standard did not have a material effect on the Company's financial statement
disclosures.
In March 1998, the AICPA issued Statement of Position 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use," ("SOP
98-1.") The Company will adopt SOP 98-1 effective July 1, 1999. The Company has
not completed its evaluation of the impact of adopting SOP 98-1 but does not
expect the adoption to have a material effect on its financial position or
results of operations.
UNAUDITED FINANCIAL STATEMENTS
According to management, the accompanying unaudited financial statements
for the nine months ended March 31, 1998 have been prepared on substantially the
same basis as the audited financial statements and include all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation of the financial information set forth therein.
UNAUDITED PRO FORMA INFORMATION
If the offering contemplated by this prospectus is consummated, the Series
A Redeemable Convertible Preferred Stock outstanding as of the closing date will
be converted into shares of the Company's common stock. The pro forma
stockholders' equity as of March 31, 1999 reflects conversion of the outstanding
preferred stock into 2,034,285 shares of common stock. Pro forma net loss per
share is computed as if outstanding preferred stock had been converted into
common stock on the date of issuance.
F-10
<PAGE> 88
NFRONT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. LEASE COMMITMENTS
The Company leases office facilities and certain equipment under separate
operating lease agreements which expire at various dates through 2003. The
Company has the option to renew the office facilities lease for an additional
five years through 2008. Rental expense under these operating leases was
$25,097, $52,361 and $163,019 for the period from June 17, 1996 (inception)
through June 30, 1997, the fiscal year ended June 30, 1998 and the nine months
ended March 31, 1999, respectively. Future commitments under noncancelable
operating leases outstanding as of March 31, 1999 are as follows:
<TABLE>
<CAPTION>
OPERATING
LEASE
PAYMENTS
---------
<S> <C>
2000........................................................ $231,640
2001........................................................ 229,286
2002........................................................ 217,145
2003........................................................ 221,602
2004........................................................ 93,480
Thereafter.................................................. --
--------
$993,153
========
</TABLE>
3. LONG TERM DEBT
In August 1998, the Company entered into a loan agreement with a bank under
which it may borrow up to $750,000. Amounts borrowed under this agreement are
due in thirty monthly installments plus interest at the bank's prime rate plus
1% per annum (8.75% as of March 31, 1999), and are secured by substantially all
of the assets of the Company. As of March 31, 1999, the outstanding borrowings
under this facility were $729,333 which are due as follows:
<TABLE>
<S> <C>
2000........................................................ $301,793
2001........................................................ 301,793
2002........................................................ 125,747
--------
$729,333
========
</TABLE>
4. COMMON STOCK
On January 14, 1998, the Company declared a fifty-for-one stock split of
the Company's common stock. On September 16, 1998, the Company declared a three-
for-one stock split of the Company's common stock. All common stock information
has been retroactively restated to reflect this stock split.
As of March 31, 1999, the Company has reserved 3,163,185 shares of common
stock for future issuance upon the conversion of Series A Redeemable Convertible
Preferred Stock into common stock and upon the exercise of options to purchase
common stock.
F-11
<PAGE> 89
NFRONT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. REDEEMABLE CONVERTIBLE PREFERRED STOCK
In May, 1998, the Company entered into an agreement to sell 255,885 shares
of Series A Redeemable Convertible Preferred Stock (Series A) for $9.77 per
share. The holders of Series A have the right to convert all or part of the
shares of Series A into common stock initially on a one-for-one basis subject to
certain conversion ratio adjustments should the price of the common stock for
any transaction subsequent to the agreement be lower than $9.77 per share or
automatically if the Company completes an initial public offering at a specified
price per share of common stock which results in aggregate gross proceeds of not
less than $15.0 million. As a result of stock splits subsequent to the issuance
of the Series A, the Series A conversion price has been reduced to $1.23 per
share which results in a conversion ratio of 7.95-for-one. The holders of Series
A vote together with the holders of common stock as a single class on all
actions to be taken by the stockholders of the Company.
At any time after June 1, 2005, any holder of Series A can require the
Company to redeem the outstanding Series A at the redemption price. The
redemption price is equal to the original issuance price of the Series A plus a
10% compound annual rate of return. The carrying amount of Series A is being
increased by periodic accretions so that its carrying amount will equal the
redemption amount at the redemption date.
The agreement provides for preferences upon liquidation. In general, Series
A has a preference at liquidation equal to the greater of the purchase price
plus a 10% compound annual rate of return or the fair value of the Series A. The
remaining assets, if any, would be distributed ratably to the common
stockholders.
In connection with the sale of Series A, the Company paid a fee of $125,000
to an investment banking company controlled by one of the Company's directors.
This fee was recorded as an issuance cost.
6. STOCK INCENTIVE PLAN
In January 1998, the Company's Board of Directors approved a stock
incentive plan whereby 1,128,900 shares of the Company's common stock were
reserved for grants to various personnel of the Company as well as outside
directors. At March 31, 1999, there were 169,117 shares available for grant
under the stock incentive plan. Options granted under the plan generally vest
over a four year period and expire 10 years from the date of grant.
F-12
<PAGE> 90
NFRONT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the Company's stock options granted to employees, and related
information for the nine months ended March 31, 1999 follows:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE PRICE
OPTIONS PER SHARE
--------- --------------
<S> <C> <C>
Outstanding at June 30, 1998........................... -- $ --
Granted.............................................. 962,034 1.23-7.93
Canceled............................................. (2,252) 1.23
-------
Outstanding at March 31, 1999.......................... 959,782 $1.23-7.93
======= ===========
Exercisable at March 31, 1999.......................... -- $ --
======= ===========
</TABLE>
Options outstanding as of March 31, 1999 were comprised of 954,982 options
with an exercise price of $1.23 per share and 4,800 options with an exercise
price of $7.93 per share. The weighted average exercise price per share of
options outstanding as of March 31, 1999 is approximately $1.26. The weighted
average remaining contractual life is 9.5 years.
Pro forma information regarding net income (loss) per share is required by
SFAS 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method. The fair value of these
options was estimated at the date of grant using the Minimum Value option
pricing model with the following weighted-average assumptions for the nine
months ended March 31, 1999: risk-free interest rates of 5.38%; no dividend
yields; and a weighted-average expected life of an option of 5 years.
The Minimum Value option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions. Because the Company's employee stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can materially
affect the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of its
employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options and warrants granted to employees are amortized to expense over the
vesting period. The weighted average fair value per option granted in the nine
months ended March 31, 1999 was $0.29. The Company's pro forma information
follows:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
MARCH 31, 1999
--------------
<S> <C>
SFAS 123 pro forma net loss................................. $(2,049,322)
SFAS 123 pro forma loss per share........................... $ (0.24)
</TABLE>
F-13
<PAGE> 91
NFRONT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. WARRANTS
During January 1998, the Company entered into a transaction with a reseller
of the Company's services to purchase 182,993 shares of the Company's common
stock at $1.63 per share in cash. In connection with this transaction, the
Company agreed to issue warrants to purchase shares of common stock based on the
number of customer contracts the reseller is able to enter into prior to
September 30, 1998 and January 1, 2000. The reseller did not enter into the
required number of contracts at the September 30, 1998 target date. If the
reseller enters into a certain number of contracts prior to January 1, 2000,
then the reseller will receive up to 114,988 warrants to purchase common stock
at $1.63 per share. Any issued and unexercised warrants will expire on September
30, 2001. The value of the warrants will be determined when it is probable that
the reseller will enter into the target number of contracts.
8. INCOME TAXES
The income tax provision (benefit) consists of the following:
<TABLE>
<CAPTION>
PERIOD FROM NINE
JUNE 17, 1996 MONTHS
(INCEPTION) FISCAL YEAR ENDED
THROUGH ENDED MARCH 31,
JUNE 30, 1997 JUNE 30, 1998 1999
------------- ------------- -----------
<S> <C> <C> <C>
Current
Federal................................. $19,448 $(19,448) $--
State................................... 6,477 (6,477) --
------- -------- ---
$25,925 $(25,925) $--
======= ======== ===
</TABLE>
A reconciliation of the provision for income taxes (benefit) to the federal
statutory rate is as follows:
<TABLE>
<CAPTION>
PERIOD FROM NINE
JUNE 17, 1996 MONTHS
(INCEPTION) ENDED
THROUGH YEAR ENDED MARCH 31,
JUNE 30, 1997 JUNE 30, 1998 1999
------------- ------------- -----------
<S> <C> <C> <C>
Tax at statutory rate..................... $18,146 $(208,479) $(687,096)
Permanent differences..................... 7,779 5,089 5,470
Other..................................... -- 8,800 (14,189)
Valuation allowance....................... -- 168,665 695,815
------- --------- ---------
$25,925 $ (25,925) $ --
======= ========= =========
</TABLE>
F-14
<PAGE> 92
NFRONT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
JUNE 30,
--------------------- MARCH 31,
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss........................... $ -- $ 173,858 $ 780,515
Accrued compensation......................... -- -- 115,349
Other........................................ -- -- 955
--------- --------- ---------
Total deferred tax assets...................... -- 173,858 896,819
Deferred tax liabilities:
Depreciation................................. -- (5,193) (32,339)
--------- --------- ---------
Total deferred tax liabilities................. -- (5,193) (32,339)
--------- --------- ---------
Valuation allowance............................ -- (168,665) (864,480)
--------- --------- ---------
Net deferred taxes............................. $ -- $ -- $ --
========= ========= =========
</TABLE>
For federal income tax purposes at March 31, 1999, the Company has net
operating loss carryforwards of approximately $2.0 million which begin expiring
in 2013. Utilization of the Company's net operating loss carryforwards could
become subject to annual limitation due to the "change of ownership" provisions
of the Internal Revenue Code and similar state provisions. For financial
reporting purposes, a valuation allowance has been recognized to reduce net
deferred tax assets to zero due to uncertainties with respect to the Company's
ability to realize the benefit of deferred income tax assets.
9. 401(K) PLAN
In April, 1998, the Company adopted the nFront, Inc. Retirement Plan (the
"Plan"), which qualifies under Section 401(k) of the Internal Revenue Code.
Employees are eligible to participate in the plan after three months of service.
Participants may contribute a percentage of their base salaries up to the
maximum allowable under Section 401(k). Contributions made to the Plan by the
Company are discretionary. No employer contributions to the Plan have been made
through March 31, 1999.
10. RELATED PARTY TRANSACTIONS
In January 1997, the Company entered into an agreement with a company owned
by certain principal shareholders of the Company whereby the Company would
obtain certain furniture and equipment in exchange for programming services. The
parties valued these assets at $83,986 and the obligation was satisfied upon the
provision of $9,901 and $74,085 of programming services in the period from June
17, 1996 (inception) through June 30, 1997 and year ended June 30, 1998.
F-15
<PAGE> 93
NFRONT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In October 1997, the Company loaned a stockholder $20,000 which was repaid
in February 1998. The loan was unsecured and bore interest at 10.5% per annum.
During the period from October 1997 through January 1998, the Company
borrowed $90,000 from its Chief Executive Officer. The loans were unsecured and
bore interest at 10.5% per annum, and were repaid in February 1998.
One of the Company's shareholders is a reseller of the Company's services.
During the year ended June 30, 1998 this reseller accounted for $136,872 of the
Company's revenues. There were no revenues from this reseller during the nine
months ended March 31, 1999.
11. NET INCOME (LOSS) PER SHARE
Net income (loss) per share has been computed in accordance with SFAS 128
which requires disclosure of basic and diluted earnings per share. Basic
earnings per share excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share includes the impact of
potentially dilutive securities. The Company's potentially dilutive securities
were antidilutive and therefore were not included in the computation of weighted
average shares used in computing diluted loss per share. There were no
potentially dilutive securities outstanding during the period from June 17, 1996
(inception) through June 30, 1997 and for the nine months ended March 31, 1998.
The following table sets forth the reconciliation of the numerators of the
basic and diluted income (loss) per share:
<TABLE>
<CAPTION>
PERIOD FROM FISCAL NINE NINE
JUNE 17, 1996 YEAR MONTHS MONTHS
(INCEPTION) ENDED ENDED ENDED
THROUGH JUNE 30, MARCH 31, MARCH 31,
JUNE 30, 1997 1998 1998 1999
------------- ---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net income (loss).............. $ 48,740 $ (522,996) $ 9,107 $(1,808,147)
Accretion on redeemable
convertible preferred
stock........................ -- (35,733) -- (204,661)
---------- ---------- ---------- -----------
Net income (loss) attributable
to common stock.............. $ 48,740 $ (558,729) $ 9,107 $(2,012,808)
========== ========== ========== ===========
Net income (loss) per common
share -- basic and diluted... $ 0.01 $ (0.07) $ 0.00 $ (0.24)
========== ========== ========== ===========
Weighted average shares
outstanding -- basic and
diluted...................... 5,079,167 8,033,223 8,000,090 8,498,844
========== ========== ========== ===========
</TABLE>
Potentially dilutive options to purchase 959,782 shares of common stock
with a weighted average exercise price of $1.26 per share outstanding at March
31, 1999 and 2,034,285 common shares issuable upon conversion of the redeemable
convertible
F-16
<PAGE> 94
NFRONT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
preferred stock were not included in the computation of diluted loss per share
for the periods outstanding because the Company reported a loss and, therefore,
the effect would be anti-dilutive.
12. SUBSEQUENT EVENTS
On April 21, 1999, the Company's Board of Director's approved the nFront,
Inc. Director Stock Option Plan (the "Director Plan") and has reserved 200,000
shares of common stock for issuance under the Director Plan.
On April 21, 1999, the Company's Board of Directors increased the number of
authorized capital stock from 5,000,000 to 70,000,000 shares of common stock and
from 1,000,000 to 10,000,000 shares of preferred stock, pending stockholder
approval. This increase has been reflected in the financial statements as of
March 31, 1999.
On April 21, 1999, the Company's Board of Directors increased the number of
shares of the Company's common stock reserved for grants under the stock
incentive plan to 2,188,900 shares.
On April 22, 1999, the Company executed a senior subordinated debenture
agreement with a stockholder under which the Company may borrow up to $5.0
million through the earlier of April 22, 2000 or the closing of an underwritten
public offering of the Company's common stock. Unanimous approval of the
Company's Board of Directors is required to borrow in excess of $3 million under
the agreement. Interest on any borrowings under the senior subordinated
debenture accrues at the prime rate plus 3% per annum, payable at maturity. In
consideration of the stockholder's commitment to make the loan, the Company
agreed to issue warrants exercisable for three years for i) common shares equal
to $500,000 divided by the initial public offering price and at a purchase price
per share equal to the initial public offering price per share if the offering
is declared effective prior to September 1, 1999 or ii) 55,671 common shares at
a purchase price of $8.98 per share.
On May 25, 1999, the Company's Board of Directors approved the nFront, Inc.
Employee Stock Purchase Plan which, subject to certain terms and conditions,
will allow employees to purchase common stock through payroll deductions for 85%
of the fair market value of the common stock. Upon adoption, 100,000 shares of
common stock were reserved for issuance under the plan, and the number of shares
available for issuance under the plan shall automatically increase on the last
trading day of each fiscal year, beginning with the fiscal year ending June 30,
2000, by a number of shares equal to one-quarter percent (0.25%) of the total
number of shares of common stock outstanding.
On May 28, 1999, the Company's Board of Directors declared a 2.65-for-1 common
stock split. All common stock, option and warrant information, weighted average
shares and earnings per share information has been retroactively restated to
reflect the common stock split.
F-17
<PAGE> 95
NFRONT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
On June 17, 1999, the Company entered into a loan agreement which is
comprised of a $4,425,000 revolving line of credit (the "Line"), which bears
interest at Libor plus 1.75% per annum and a $575,000 term loan (the "Loan"),
which bears interest at the Prime Rate plus 1.0% per annum. The Line is due on
the earliest to occur of: (i) December 31, 1999; (ii) the consummation of a
public offering of the Company's common stock; or (iii) 25 days after request
for payment made by the lender. The Loan is due in 26 equal monthly installments
commencing on July 15, 1999. The Line and the Loan are secured by substantially
all of the assets of the Company and the Company used the proceeds of the Loan
to repay long-term debt.
F-18
<PAGE> 96
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3,900,000 SHARES
(NFRONT LOGO)
COMMON STOCK
-----------------------
PROSPECTUS
-----------------------
HAMBRECHT & QUIST
J.C. BRADFORD&CO.
RAYMOND JAMES & ASSOCIATES, INC.
SOUNDVIEW TECHNOLOGY GROUP
-----------------------
, 1999
-----------------------
You should rely only on information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock.
No action is being taken in any jurisdiction outside the United States to
permit a public offering of the common stock or possession or distribution of
this prospectus in any such jurisdiction. Persons who come into possession of
this prospectus in jurisdictions outside the United States are required to
inform themselves about and to observe any restrictions as to this offering and
the distribution of this prospectus applicable to that jurisdiction.
Until , 1999, all dealers that buy, sell or trade in
our common stock, whether or not participating in this offering, may be required
to deliver a prospectus. This requirement is in addition to the dealers'
obligation to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 97
PART II
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 13,715
National Association of Securities Dealers, Inc. fee........ 5,400
Nasdaq National Market listing fee.......................... 88,500
Accountants' fees and expenses.............................. 225,000
Legal fees and expenses..................................... 400,000
Blue Sky fees and expenses.................................. 2,000
Transfer Agent's fees and expenses.......................... 2,000
Printing and engraving expenses............................. 150,000
Miscellaneous............................................... 48,000
--------
Total Expenses.............................................. $934,615
========
</TABLE>
- -------------------------
All fees other than the SEC registration fee, the NASD fee and the Nasdaq
National Market listing fee are estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
nFront's Second Amended and Restated Articles of Incorporation provide that
the liability of the directors for monetary damages shall be eliminated to the
fullest extent permissible under the Georgia Business Corporation Code (the
"GBCC") and that we may indemnify our officers, employees and agents to the
fullest extent permitted under the GBCC.
nFront's Amended and Restated Bylaws provide that nFront must indemnify its
directors against all liabilities to the fullest extent permitted under the GBCC
and that nFront must advance all reasonable expenses incurred in a proceeding in
which the director was either a party or a witness because he or she was a
director. The Company has entered into indemnification agreements with its
directors and its officers that provide indemnification similar to that provided
in the Amended and Restated Bylaws.
The GBCC provides that, in general, a corporation may indemnify an
individual who is or was a party to any proceeding (other than action by, or in
the right of, such corporation) by reason of the fact that he or she is or was a
director of the corporation, against liability incurred in connection with such
proceeding, including any appeal thereof, provided specified standards are met,
including that such officer or director acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the best interests of
the corporation, and provided further that, with respect to any criminal action
or proceeding, the officer or director had no reasonable cause to believe his or
her conduct was unlawful. In the case of proceedings by or in the right of the
corporation, the GBCC provides that, in general, a company may indemnify an
individual who was or is a party to any such proceeding by reason of the fact
that he or she is or was a director of the corporation against reasonable
expenses incurred in connection with such proceeding, if it is determined that
the director has met the relevant standard of conduct. To the extent that any
directors are successful on the merits or otherwise in the defense of any of the
proceedings described above, the GBCC provides that a
II-1
<PAGE> 98
corporation is required to indemnify such officers or directors against
reasonable expenses incurred in connection therewith. The GBCC further provides,
in general, for the advancement of reasonable expenses incurred by a director
who is a party to a proceeding if the director furnishes the corporation (1) a
written affirmation of his good faith belief that he or she has met the standard
of conduct under the GBCC or that the proceeding involves conduct for which
liability has been eliminated under the corporation's articles of incorporation;
and (2) a written undertaking to repay any advances if it is ultimately
determined that he or she is not entitled to indemnification. In addition, the
GBCC provides for the indemnification of officers, employees and agents in
various circumstances.
The Underwriting Agreement filed as Exhibit 1.1 hereto also contains
provisions pursuant to which officers, directors and controlling persons of
nFront may be entitled to be indemnified by the underwriters named therein.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the past three years, nFront has issued the following securities
that were not registered under the Securities Act of 1933 (shares and per share
amounts are not adjusted for splits occurring subsequent to the date of
issuance):
(1) On June 17, 1996, in connection with its organization, nFront issued an
aggregate of 10,000 shares of its common stock to Brady L. "Tripp" Rackley III
and Brady L. Rackley for an aggregate cash consideration of $1,000.
(2) On March 15, 1997, nFront issued an aggregate of 8,500 shares of its
common stock to Brady L. "Tripp" Rackley III and Brady L. Rackley for an
aggregate cash consideration of $277.50.
(3) On March 15, 1997, nFront issued an aggregate of 2,600 shares of its
common stock to Thomas E. Greene III, James A. Verbrugge, Steven S. Neel and W.
Derek Porter for an aggregate cash consideration of $97.50.
(4) On January 15, 1998, nFront issued 23,018 shares of its common stock,
on a post January 21, 1998, 50-for-1 stock split basis, to CNL Financial
Corporation for an aggregate cash consideration of $300,001.
(5) On January 21, 1998, nFront reclassified and converted each share of
its common stock issued and outstanding into fifty (50) validly issued, fully
paid and nonassessable shares of common stock.
(6) On May 13, 1998, nFront issued 255,885 shares of redeemable convertible
preferred stock to Noro-Moseley Partners IV, L.P. for an aggregate cash
consideration of $2.5 million.
(7) On August 25, 1998, nFront issued 10,235 shares of its common stock to
Robert L. Campbell for an aggregate cash consideration of $100,000.
(8) On September 21, 1998, nFront issued an aggregate of 51,178 shares of
its common stock to William H. Scott III and Campbell B. Lanier III for an
aggregate combined cash consideration of $500,000.
II-2
<PAGE> 99
(9) On September 9, 1998, nFront declared a 3-for-1 stock split in the form
of a dividend of its common stock to each shareholder of record as of September
16, 1998.
(10) On September 16, 1998, nFront issued to certain employees of nFront
stock options to purchase an aggregate of 320,332 shares of common stock at a
weighted average exercise price of $3.26 per share. No shares of common stock
have been issued pursuant to the exercise of such options.
(11) On October 28, 1998, nFront issued 15,337 shares of its common stock
to Jeffrey W. Hodges for cash consideration of $50,000.
(12) On November 30, 1998, nFront issued to Jeffrey W. Hodges stock options
to purchase an aggregate of 42,600 shares of common stock at an exercise price
of $3.26 per share. No shares of common stock have been issued pursuant to the
exercise of such options.
(13) On April 22, 1999, nFront entered into a debenture purchase agreement
with Noro-Moseley Partners IV, L.P. Under the agreement, nFront agreed to issue
to Noro-Moseley, upon completion of this offering, a three-year warrant to
purchase a number of shares equal to $500,000 divided by the initial public
offering price of the common stock offered hereby, exercisable at the initial
public offering price.
(14) Effective April 24, 1999, nFront granted options to purchase an
aggregate of 6,300 shares of common stock to employees pursuant to nFront's
Stock Incentive Plan. The options are exercisable at $23.80 per share and vest
over a four year period.
(15) On May 24, 1999, nFront approved the grant of the following options to
purchase 13,469 shares of common stock to employees pursuant to nFront's Stock
Incentive Plan: (a) options to purchase 6,169 shares granted on May 24, 1999 and
exercisable at $23.80 per share and (b) options to purchase 7,300 shares to be
granted on the date of effectiveness of this Registration Statement exercisable
at a price per share equal to the offering price of this offering. All of these
options will vest over a four year period.
(16) On May 25, 1999, nFront declared a 2.65-for-1 stock split to each
shareholder of record as of May 28, 1999.
(17) Effective June 25, 1999, nFront approved the grant of options to
purchase 19,926 shares of common stock to employees pursuant to nFront's Stock
Incentive Plan to be granted on the date of effectiveness of this Registration
Statement. The options will be exercisable at a price per share equal to the
offering price on the later of the date of this offering or the commencement of
the employees employment. These options will vest over a four year period.
The issuance of the securities in the transactions described above were
deemed to be exempt from registration under the Securities Act in reliance on
Section 4(2) of the Securities Act and Rules 505 and 506 of Regulation D
promulgated thereunder as transactions by an issuer not involving any public
offering.
II-3
<PAGE> 100
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -----------
<C> <C> <S>
1.1* -- Form of Underwriting Agreement.
3.1* -- Second Amended and Restated Articles of Incorporation of the
Registrant.
3.2** -- Amended and Restated Bylaws of the Registrant.
4.1** -- See Exhibits 3.1 and 3.2 for provisions of the Second
Amended and Restated Articles of Incorporation and Amended
and Restated Bylaws of the Registrant defining rights of the
holders of common stock of the Registrant.
4.2** -- Specimen Stock Certificate.
4.3** -- Shareholder Agreement, dated as of May 13, 1998, as amended.
5.1* -- Opinion of Morris, Manning & Martin, L.L.P., counsel to the
Registrant, as to the legality of the shares being
registered.
10.1** -- Employment Agreement, dated July 14, 1998, between nFront,
Inc. and Robert L. Campbell.
10.2** -- Employment Agreement, dated April 21, 1999, between nFront,
Inc. and Brady L. "Tripp" Rackley III.
10.3*+ -- Marketing Agreement, dated January 19, 1999, between nFront,
Inc. and BancTec USA, Inc.
10.4*+ -- Marketing Agreement, dated March 1, 1999, between nFront,
Inc. and BancTec USA, Inc.
10.5*+ -- Marketing Agreement, dated July 22, 1997, between nFront,
Inc. and CNL Financial Corporation.
10.6** -- Stock Purchase and Stock Option Agreement, dated January 15,
1998, between nFront, Inc. and CNL Financial Corporation.
10.7*+ -- Marketing Agreement, dated April 10, 1998, between nFront,
Inc. and BISYS, Inc.
10.8*+ -- nBusiness Addendum to nFront Marketing Agreement, dated
January 5, 1999, between nFront, Inc. and BISYS, Inc.
10.9*+ -- Marketing Agreement, dated July 22, 1997, between nFront,
Inc. and Sparak Financial Systems, Inc.
10.10*+ -- nBusiness Addendum to nFront Marketing Agreement, dated
February 15, 1999, between nFront, Inc. and Sparak Financial
Systems, Inc. and Addendum, dated June 22, 1999.
10.11*+ -- Letter Agreement, dated May 2, 1997, between nFront, Inc.
and First Commerce Bank.
10.12*+ -- Home Banking Bill Payment Processing and Funds Transfer
Services Agreement, dated July 25, 1997 by and between
nFront, Inc. and Moneyline Express, Inc.; Assignment to M&I
Data Services, dated January 19, 1999; and Amendment, dated
February 4, 1999, by and between nFront, Inc. and M&I Data
Services.
</TABLE>
II-4
<PAGE> 101
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -----------
<C> <C> <S>
10.13** -- Lease, dated July 9, 1998, between Schneider Atlanta, L.P.,
a Georgia limited partnership, and nFront, Inc.
10.14** -- Form of Indemnification Agreement with directors of the
Registrant.
10.15** -- Form of Indemnification Agreement with certain officers of
the Registrant.
10.16** -- nFront, Inc. Stock Incentive Plan.
10.17** -- Amendment No. 1 to the nFront, Inc. Stock Incentive Plan.
10.18** -- nFront, Inc. Director Stock Option Plan.
10.19** -- Internet Data Center Services Agreement, dated March 31,
1999, by and between Exodus Communications, Inc. and nFront,
Inc.
10.20** -- Debenture Purchase Agreement, dated April 22, 1999, between
nFront, Inc. and Noro-Moseley Partners IV, L.P.
10.21** -- Form of Senior Subordinated Debenture, between nFront, Inc.
and Noro-Moseley Partners IV, L.P.
10.22** -- Form of Stock Purchase Warrant between nFront, Inc. and
Noro-Moseley Partners IV, L.P.
10.23** -- Form of nFront, Inc. Stock Incentive Plan Stock Option Grant
Certificate.
10.24** -- Consulting Agreement, dated May 25, 1999, by and between
nFront, Inc. and Brady L. Rackley.
10.26* -- Description of nFront, Inc. Cash Incentive Compensation
Plan.
10.27* -- Form of nFront Internet Banking Services Agreement
10.28* -- Amended and Restated Amendment No. 2 to nFront, Inc. Stock
Incentive Plan
10.29* -- nFront, Inc. Employee Stock Purchase Plan
10.30* -- Loan Agreement, dated June 17, 1999, by and between
NationsBank, N.A. and nFront, Inc.
10.31* -- Security Agreement, dated June 17, 1999 between NationsBank,
N.A. and nFront, Inc.
10.32* -- $4,425,000 Promissory Note, dated June 17, 1999 between
NationsBank, N.A. and nFront, Inc.
10.33* -- $575,000 Promissory Note, dated June 17, 1999 between
NationsBank, N.A. and nFront, Inc.
10.34* -- Sublease Agreement, dated June 1, 1999 between Gulliver
Ritchie Associates, Inc. and nFront, Inc.
10.35* -- Form of nFront, Inc. Director Stock Option Plan Stock Option
Grant Certificate.
10.36*+ -- Marketing Agreement, dated July 22, 1997, between nFront,
Inc. and First Commerce Technologies
23.1* -- Consent of Morris, Manning & Martin, L.L.P. (included in
Exhibit 5.1).
</TABLE>
II-5
<PAGE> 102
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -----------
<C> <C> <S>
23.2* -- Consent of Ernst & Young LLP.
24.1** -- Powers of Attorney (included on signature page).
27.1** -- Financial Data Schedule (for SEC use only).
</TABLE>
- -------------------------
* Filed herewith.
** Previously filed.
+ We have requested confidential treatment of specific portions of this
exhibit pursuant to Rule 406 of the Securities Act of 1933. The entire
agreement has been filed separately with the Securities and Exchange
Commission.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to provide to the
underwriters at the closing specified in the Underwriting Agreement certificates
in such denominations and registered in such names as required by the
underwriters to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(c) The Registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of the
Registration Statement as of the time it was declared effective.
(ii) For purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-6
<PAGE> 103
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Atlanta, State of Georgia
on the 28th day of June 1999.
nFront, Inc.
By: /s/ BRADY L. "TRIPP" RACKLEY III
----------------------------------------
Brady L. "Tripp" Rackley III,
Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ BRADY L. "TRIPP" RACKLEY III Chairman of the Board June 28, 1999
- --------------------------------------------------- and Chief Executive
Brady L. "Tripp" Rackley III Officer
* President, Chief June 28, 1999
- --------------------------------------------------- Operating Officer
Robert L. Campbell and Director
by Brady L. "Tripp" Rackley III
Attorney-in-Fact
* Chief Financial June 28, 1999
- --------------------------------------------------- Officer (Principal
Jeffrey W. Hodges Financial and
by Brady L. "Tripp" Rackley III Accounting Officer)
Attorney-in-Fact
* Director June 28, 1999
- ---------------------------------------------------
Brady L. Rackley
by Brady L. "Tripp" Rackley III
Attorney-in-Fact
* Director June 28, 1999
- ---------------------------------------------------
Thomas E. Greene III
by Brady L. "Tripp" Rackley III
Attorney-in-Fact
* Director June 28, 1999
- ---------------------------------------------------
Charles D. Moseley, Jr.
by Brady L. "Tripp" Rackley III
Attorney-in-Fact
</TABLE>
II-7
<PAGE> 104
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Director June 28, 1999
- ---------------------------------------------------
William H. Scott III
by Brady L. "Tripp" Rackley III
Attorney-in-Fact
* Director June 28, 1999
- ---------------------------------------------------
James A. Verbrugge
by Brady L. "Tripp" Rackley III
Attorney-in-Fact
*By: /s/ BRADY L. "TRIPP" RACKLEY III
----------------------------------------------
Brady L. "Tripp" Rackley III
Attorney-in-Fact
</TABLE>
II-8
<PAGE> 1
EXHIBIT 1.1
NFRONT, INC.
3,900,000 SHARES(1)
COMMON STOCK
UNDERWRITING AGREEMENT
_____ __, 1999
HAMBRECHT & QUIST LLC
J.C. Bradford & Co.
Raymond James & Associates, Inc.
SoundView Technology Group, Inc.
c/o Hambrecht & Quist LLC
One Bush Street
San Francisco, CA 94104
Ladies and Gentlemen:
nFront, Inc., a Georgia corporation (herein called the Company),
proposes to issue and sell 3,500,000 shares of its authorized but unissued
Common Stock, no par value (herein called the Common Stock), and the
shareholders of the Company named in Schedule II hereto (herein collectively
called the Selling Securityholders) propose to sell an aggregate of 400,000
shares of Common Stock of the Company (said 3,900,000 shares of Common Stock
being herein called the Underwritten Stock). The Selling Securityholders propose
to grant to the Underwriters (as hereinafter defined) an option to purchase up
to 585,000 additional shares of Common Stock (herein called the Option Stock and
with the Underwritten Stock herein collectively called the Stock). The Common
Stock is more fully described in the Registration Statement and the Prospectus
hereinafter mentioned.
The Company and the Selling Securityholders severally hereby confirm
the agreements made with respect to the purchase of the Stock by the several
underwriters, for whom you are acting, named in Schedule I hereto (herein
collectively called the Underwriters, which term shall also include any
underwriter purchasing Stock pursuant to Section 3(b) hereof). You represent and
warrant that you have been authorized by each of the other Underwriters to enter
into this Agreement on its behalf and to act for it in the manner herein
provided.
1. REGISTRATION STATEMENT. The Company has filed with the
Securities and Exchange Commission (herein called the Commission) a registration
statement on Form S-1 (No. 333-76955), including the related preliminary
prospectus, for the registration under the Securities Act of 1933, as amended
(herein called the Securities Act) of the Stock. Copies of such registration
statement and of each amendment thereto, if any, including the related
preliminary prospectus (meeting the requirements of Rule 430A of the rules and
regulations of the Commission) heretofore filed by the Company with the
Commission have been delivered to you.
The term Registration Statement as used in this agreement shall mean
such registration statement, including all exhibits and financial statements,
all information omitted therefrom in reliance upon Rule 430A and contained in
the Prospectus referred to below, in the form in which it became effective, and
any registration statement filed pursuant to Rule 462(b) of the rules and
regulations of the Commission with respect to the Stock (herein called a Rule
462(b) registration statement), and, in the event of any amendment thereto after
the effective date of such registration statement (herein called the Effective
Date), shall also mean (from and after the
------------------------
(1) Plus an option to purchase from the Selling Securityholders up to
585,000 additional shares to cover allotments.
<PAGE> 2
effectiveness of such amendment) such registration statement as so amended
(including any Rule 462(b) registration statement). The term Prospectus as used
in this Agreement shall mean the prospectus relating to the Stock first filed
with the Commission pursuant to Rule 424(b) and Rule 430A (or if no such filing
is required, as included in the Registration Statement) and, in the event of any
supplement or amendment to such prospectus after the Effective Date, shall also
mean (from and after the filing with the Commission of such supplement or the
effectiveness of such amendment) such prospectus as so supplemented or amended.
The term Preliminary Prospectus as used in this Agreement shall mean each
preliminary prospectus included in such registration statement prior to the time
it becomes effective.
The Registration Statement has been declared effective under the
Securities Act, and no post-effective amendment to the Registration Statement
has been filed as of the date of this Agreement. The Company has caused to be
delivered to you copies of each Preliminary Prospectus and has consented to the
use of such copies for the purposes permitted by the Securities Act.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
SECURITYHOLDERS.
(a) Each of the Company and the Selling Securityholders (other
than Noro-Moseley Partners IV, L.P. which represents and warrants only as to the
matters contained in subparagraph (iii)) hereby represents and warrants as
follows:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has full corporate power and
authority to own or lease its properties and conduct its business as
described in the Registration Statement and the Prospectus and as being
conducted, and is duly qualified as a foreign corporation and in good
standing in all jurisdictions in which the character of the property
owned or leased or the nature of the business transacted by it makes
qualification necessary (except where the failure to be so qualified
would not have a material adverse effect on the business, properties,
financial condition or results of operations of the Company).
(ii) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not
been any materially adverse change in the business, properties,
financial condition or results of operations of the Company, whether or
not arising from transactions in the ordinary course of business, other
than as set forth in the Registration Statement and the Prospectus, and
since such dates, except in the ordinary course of business, the
Company has not entered into any material transaction not referred to
in the Registration Statement and the Prospectus.
(iii) The Registration Statement and the Prospectus comply,
and on the Closing Date (as hereinafter defined) and any later date on
which Option Stock is to be purchased, the Prospectus will comply, in
all material respects, with the provisions of the Securities Act and
the rules and regulations of the Commission thereunder; on the
Effective Date, the Registration Statement did not contain any untrue
statement of a material fact and did not omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein not misleading; and, on the Effective Date the
Prospectus did not and, on the Closing Date and any later date on which
Option Stock is to be purchased, will not contain any untrue statement
of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that
none of the representations and warranties in this subparagraph (iii)
shall apply to statements in, or omissions from, the Registration
Statement or the Prospectus made in reliance upon and in conformity
with information herein or otherwise furnished in writing to the
Company by or on behalf of the Underwriters for use in the Registration
Statement or the Prospectus.
(iv) As of the date hereof, the authorized capital stock
of the Company consists of 10,000,000 shares of preferred stock, of
which there are outstanding 255,885 shares designated Series A
Redeemable Convertible Preferred Stock, and 70,000,000 shares of Common
Stock, of which there are outstanding 10,296,152 shares. At the Closing
Date, the authorized capital stock of the Company will consist of
10,00,000 shares of preferred stock, of which there will be outstanding
no shares, and 70,000,000 of Common Stock, of which there will be
outstanding ______ shares (including the
2
<PAGE> 3
Underwritten Stock plus the number of shares of Option Stock, if any,
issued on the date hereof). Proper corporate proceedings have been
taken validly to authorize such authorized capital stock. All of the
shares of such capital stock outstanding prior to the issuance of the
Stock have been duly and validly issued and are fully paid and
nonassessable. All outstanding shares of capital stock and options and
other rights to acquire capital stock have been issued in compliance
with the registration and qualification provisions of all applicable
securities laws and were not issued in violation of any preemptive
rights, rights of first refusal, or other similar rights. Except for
rights of the Series A Redeemable Convertible Preferred Stock, which
rights will be extinguished at the Closing, no preemptive rights of, or
rights of refusal in favor of, shareholders exist with respect to the
Stock, or the issue and sale thereof, pursuant to the Second Amended
and Restated Articles of Incorporation or Bylaws of the Company, and
there are no contractual or statutory preemptive rights that have not
been waived, rights of first refusal or rights of co-sale which exist
with respect to the issue and sale of the Stock. Except as described in
the Prospectus or Item 15 of the Registration Statement, there are no
outstanding options, warrants or other rights to purchase, agreements
to issue or other rights to convert any obligations into shares of
capital stock of the Company.
(v) The Stock is duly and validly authorized, is (or, in
the case of shares of the Stock to be sold by the Company, will be,
when issued and sold to the Underwriters as provided herein) duly and
validly issued, fully paid and nonassessable and conforms to the
description thereof in the Prospectus. No further approval or authority
of the shareholders or the Board of Directors of the Company will be
required for the transfer and sale of the Stock to be sold by the
Selling Securityholders or the issuance and sale of the Stock as
contemplated herein.
(vi) The Company and the Selling Securityholders have full
legal right, power and authority to enter into this Agreement and
perform the transactions contemplated hereby. This Agreement has been
duly authorized, executed and delivered by the Company and the Selling
Securityholders and is a valid and binding agreement on the part of the
Company and each Selling Securityholder, enforceable in accordance with
its terms, except as rights to indemnification or contribution
hereunder may be limited by applicable law and except as the
enforcement hereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally, or by general equitable principles.
(vii) The Company possesses all consents, approvals,
orders, certificates, authorizations and permits issued by, and has
made all declarations and filings with, all appropriate federal, state
or foreign governmental and self-regulatory authorities and all courts
and other tribunals and all required state agencies in connection with
applicable franchise laws, regulations and requirements necessary to
conduct its business and to own, lease, license and use its properties
in the manner described in the Prospectus, and the Company has not
received any notice of proceedings related to the revocation or
modification of any such consent, approval, order, certificate,
authorization or permit.
(viii) The Company does not own any real properties. The
Company has good and marketable title to all personal property that it
owns free and clear of all liens, encumbrances and defects except such
as are described in the Registration Statement or the Prospectus and do
not interfere with the use made and proposed to be made of such
property by the Company; and any real property and buildings held under
lease by the Company are held under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and
buildings by the Company.
(ix) The Company is in compliance, in all material
respects, with all presently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"); no
"reportable event" (as defined in ERISA) has occurred with respect to
any "pension plan" (as defined in ERISA) for which the Company would
have any liability; the Company has not incurred and does not expect to
incur liability under (i) Title IV or ERISA with respect to termination
of, or withdrawal from, any "pension plan" or (ii) Sections 412 or 4971
of the Internal Revenue Code of 1986, as amended, including the
regulations and published interpretations thereunder (the "Code"); and
each "pension plan" for which the Company would have any
3
<PAGE> 4
liability that is intended to be qualified under Section 401(a) of the
Code is so qualified and nothing has occurred, whether by action or
failure to act, that would cause the loss of such qualification.
(x) The Company is not and, after giving effect to the
offering and sale of the Stock and the application of the proceeds
thereof as described in the Prospectus, will not be an "investment
company" or an entity "controlled" by an "investment company" as such
terms are defined in the Investment Company Act of 1940, as amended.
(xi) There is no owner of any securities of the Company
who has any right, not effectively satisfied or waived, to require
registration of any shares of capital stock of the Company in
connection with the filing of the Registration Statement or the sale of
any shares thereunder. There are no contracts, agreements or
understandings between the Company and any person granting such person
the right to require the Company to file a registration statement under
the Securities Act with respect to any securities of the Company or to
require the Company to include such securities with the Stock
registered pursuant to the Registration Statement, except in each case
as described in the Prospectus.
(xii) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles of the United States and to maintain
asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(xiii) No material labor dispute with employees of the
Company exists or is imminent. The Company has complied with all
applicable state and federal equal employment opportunity laws and with
other laws related to employment. To the Company's knowledge, no
employee of the Company, nor any consultant or independent contractor
with whom the Company has contracted, is in violation of any term of
any employment contract, proprietary information agreement or any other
agreement relating to the right of any such individual to be employed
by, or to contract with, the Company because of the nature of the
business to be conducted by the Company; and the continued employment
by the Company of its present employees, and the performance of the
Company's contracts with its independent contractors, will not result
in any such violation. The Company has not received any notice alleging
that any such violation has occurred. Except as disclosed in the
Prospectus, no employee of the Company or any of its subsidiaries has
been granted the right to continued employment by the Company or to any
other material compensation following termination of employment with
the Company. The Company is not aware that any officer or key employee,
or that any group of key employees, intends to terminate their
employment with the Company, nor does the Company have a present
intention to terminate the employment of any of the foregoing.
(xiv) Each of the Company's products will produce no
material, logical or arithmetic inconsistencies when dealing with leap
years or dates beyond the year 1999. Without limiting the foregoing,
the Company's services and products will not impede the accurate
processing of data, or cause programming or processing errors resulting
from the rollover of a two-digit year values to "00" on January 1,
2000. The foregoing does not constitute a warranty or representation
that the Company's software will be capable of recording, storing,
processing, calculating and displaying correct calendar dates based on
software supplied by any party other than the Company, or that other
Company's software will properly interact with such third party
software.
(xv) The Company is insured by insurers of recognized
financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the business in which it is
engaged, and the Company does not have any reason to believe that it
will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that
would not materially and adversely affect the condition, financial or
otherwise, or the earnings, business or operations of the Company,
except as described in or contemplated by the Prospectus.
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<PAGE> 5
(xvi) The Company owns or possesses valid licenses or other
rights to use all patents, patent rights, inventions, trade secrets,
copyrights, trademarks, service marks, trade names, technology and
know-how (herein called Intellectual Property) currently employed or
proposed to be employed by them in connection with their business as
described in the Prospectus. Except as disclosed in the Prospectus,
neither the Company nor any of its subsidiaries has received any notice
of infringement or conflict with (and the Company knows of no
infringement or conflict with) asserted rights of others with respect
to any Intellectual Property that could have a material adverse effect
on the Company. The discoveries, inventions, products or processes of
the Company and its subsidiaries referred to in the Prospectus do not
infringe or conflict with any right or patent of any third party, or
any discovery, invention, product or process that is the subject of a
patent application filed by any third party that could have a material
adverse effect on the Company.
(xvii) No consent, approval, authorization or order of any
court or governmental agency or body is required for the consummation
of the transactions contemplated herein, except such as have been
obtained under the Securities Act and such as may be required under
state securities or blue sky laws in connection with the purchase and
distribution of the Stock by the Underwriters.
(xviii) The Company owns no capital stock or other equity or
ownership or proprietary interest in any corporation, partnership,
association, trust or other entity.
(xix) The Company is not in violation of any provision of
its Second Amended and Restated Articles of Incorporation or Bylaws or
other organizational documents, or is in breach of or default with
respect to any provision of any agreement, judgment, decree, order,
mortgage, deed of trust, lease, franchise, license, indenture, permit
or other instrument to which it is a party or by which it or any of its
properties are bound; and there does not exist any state of facts which
constitutes an event of default on the part of the Company as defined
in such documents or which, with notice or lapse of time or both, would
constitute such an event of default, in either case, which would have a
material adverse effect on the business, assets or prospects of the
Company.
(xx) There are no franchises, contracts, leases, documents
or legal proceedings, pending or threatened, which are of a character
required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement,
which are not described and filed as required; the franchises,
contracts, leases and documents so described in the Prospectus
(assuming due authorization, execution and delivery by the parties
thereto other than the Company) are in full force and effect on the
date hereof; and neither the Company nor, to the best of the Company's
knowledge, any other party is in breach of or default under any of such
franchises, contracts, leases and documents.
(xxi) The Company is conducting its business in compliance
with all applicable laws, rules and regulations of the jurisdictions in
which it is conducting business, including, without limitation, all
applicable local, state and federal environmental laws and regulations.
(xxii) The execution and delivery by the Company and the
Selling Securityholders of, and the performance by the Company and the
Selling Securityholders of their obligations pursuant to, the
Underwriting Agreement, and the issue and sale by the Company and the
Selling Securityholders of the Stock pursuant to the Underwriting
Agreement will not conflict with, or result in a violation of, the
Second Amended and Restated Articles of Incorporation or Bylaws of the
Company or result in any breach of, or constitute an event of default
under, any agreement or instrument to which the Company is a party or
violate any applicable law, regulation, order, writ, injunction or
decree of any jurisdiction, court or governmental instrumentality.
(xiii) Prior to the Closing Date, the Stock to be sold by
the Selling Securityholders and the Stock to be issued and sold by the
Company will be authorized for listing by the Nasdaq National Market
upon official notice of issuance.
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<PAGE> 6
(b) Each of the Selling Securityholders severally, and not
jointly, hereby represents and warrants as follows:
(i) Such Selling Securityholder has good and marketable
title to all the shares of Stock to be sold by such Selling
Securityholder hereunder, free and clear of all liens, encumbrances,
equities, security interests and claims whatsoever, with full right and
authority to deliver the same hereunder, subject, in the case of each
Selling Securityholder, to the rights of _______ , as Custodian (herein
called the Custodian), and that upon the delivery of and payment for
such shares of the Stock hereunder, the several Underwriters will
receive good and marketable title thereto, free and clear of all liens,
encumbrances, equities, security interests and claims whatsoever.
(ii) Certificates in negotiable form for the shares of the
Stock to be sold by such Selling Securityholder have been placed in
custody under a Custody Agreement for delivery under this Agreement
with the Custodian; such Selling Securityholder specifically agrees
that the shares of the Stock represented by the certificates so held in
custody for such Selling Securityholder are subject to the interests of
the several Underwriters and the Company, that the arrangements made by
such Selling Securityholder for such custody, including the Power of
Attorney provided for in such Custody Agreement, are to that extent
irrevocable, and that the obligations of such Selling Securityholder
shall not be terminated by any act of such Selling Securityholder or by
operation of law, whether by the death or incapacity of such Selling
Securityholder (or, in the case of a Selling Securityholder that is not
an individual, the dissolution or liquidation of such Selling
Securityholder) or the occurrence of any other event; if any such
death, incapacity, dissolution, liquidation or other such event should
occur before the delivery of such shares of the Stock hereunder,
certificates for such shares of the Stock shall be delivered by the
Custodian in accordance with the terms and conditions of this Agreement
as if such death, incapacity, dissolution, liquidation or other event
had not occurred, regardless of whether the Custodian shall have
received notice of such death, incapacity, dissolution, liquidation or
other event.
3. PURCHASE OF THE STOCK BY THE UNDERWRITERS.
(a) On the basis of the representations and warranties and subject
to the terms and conditions herein set forth, the Company agrees to issue and
sell 3,500,000 shares of the Underwritten Stock to the several Underwriters,
each Selling Securityholder agrees to sell to the several Underwriters the
number of shares of the Underwritten Stock set forth in Schedule II opposite the
name of such Selling Securityholder, and each of the Underwriters agrees to
purchase from the Company and the Selling Securityholders the respective
aggregate number of shares of Underwritten Stock set forth opposite its name in
Schedule I. The price at which such shares of Underwritten Stock shall be sold
by the Company and the Selling Securityholders and purchased by the several
Underwriters shall be $___ per share. The obligation of each Underwriter to the
Company and each of the Selling Securityholders shall be to purchase from the
Company and the Selling Securityholders that number of shares of the
Underwritten Stock which represents the same proportion of the total number of
shares of the Underwritten Stock to be sold by each of the Company and the
Selling Securityholders pursuant to this Agreement as the number of shares of
the Underwritten Stock set forth opposite the name of such Underwriter in
Schedule I hereto represents of the total number of shares of the Underwritten
Stock to be purchased by all Underwriters pursuant to this Agreement, as
adjusted by you in such manner as you deem advisable to avoid fractional shares.
In making this Agreement, each Underwriter is contracting severally and not
jointly; except as provided in paragraphs (b) and (c) of this Section 3, the
agreement of each Underwriter is to purchase only the respective number of
shares of the Underwritten Stock specified in Schedule I.
(b) If for any reason one or more of the Underwriters shall fail
or refuse (otherwise than for a reason sufficient to justify the termination of
this Agreement under the provisions of Section 8 or 9 hereof) to purchase and
pay for the number of shares of the Stock agreed to be purchased by such
Underwriter or Underwriters, the Company or the Selling Securityholders shall
immediately give notice thereof to you, and the non-defaulting Underwriters
shall have the right within 24 hours after the receipt by you of such notice to
purchase, or procure one or more other Underwriters to purchase, in such
proportions as may be agreed upon between you and such purchasing Underwriter or
Underwriters and upon the terms herein set forth, all or any part of the shares
of the Stock which such defaulting Underwriter or Underwriters agreed to
purchase. If the non-defaulting Underwriters fail so to make such arrangements
with respect to all such shares and portion, the number of shares of the Stock
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<PAGE> 7
which each non-defaulting Underwriter is otherwise obligated to purchase under
this Agreement shall be automatically increased on a pro rata basis to absorb
the remaining shares and portion which the defaulting Underwriter or
Underwriters agreed to purchase; provided, however, that the non-defaulting
Underwriters shall not be obligated to purchase the shares and portion which the
defaulting Underwriter or Underwriters agreed to purchase if the aggregate
number of such shares of the Stock exceeds 10% of the total number of shares of
the Stock which all Underwriters agreed to purchase hereunder. If the total
number of shares of the Stock which the defaulting Underwriter or Underwriters
agreed to purchase shall not be purchased or absorbed in accordance with the two
preceding sentences, the Company and the Selling Securityholders shall have the
right, within 24 hours next succeeding the 24-hour period above referred to, to
make arrangements with other underwriters or purchasers satisfactory to you for
purchase of such shares and portion on the terms herein set forth. In any such
case, either you or the Company and the Selling Securityholders shall have the
right to postpone the Closing Date determined as provided in Section 5 hereof
for not more than seven business days after the date originally fixed as the
Closing Date pursuant to said Section 5 in order that any necessary changes in
the Registration Statement, the Prospectus or any other documents or
arrangements may be made. If neither the non-defaulting Underwriters nor the
Company and the Selling Securityholders shall make arrangements within the
24-hour periods stated above for the purchase of all the shares of the Stock
which the defaulting Underwriter or Underwriters agreed to purchase hereunder,
this Agreement shall be terminated without further act or deed and without any
liability on the part of the Company or the Selling Securityholders to any
non-defaulting Underwriter and without any liability on the part of any
non-defaulting Underwriter to the Company or the Selling Securityholders.
Nothing in this paragraph (b), and no action taken hereunder, shall relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
(c) On the basis of the representations, warranties and covenants
herein contained, and subject to the terms and conditions herein set forth, the
Selling Securityholders grant an option to the several Underwriters to purchase,
severally and not jointly, up to 585,000 shares in the aggregate of the Option
Stock from the Selling Securityholders at the same price per share as the
Underwriters shall pay for the Underwritten Stock. Said option may be exercised
only to cover over-allotments in the sale of the Underwritten Stock by the
Underwriters and may be exercised in whole or in part at any time (but not more
than once) on or before the thirtieth day after the date of this Agreement upon
written or telegraphic notice by you to the Company setting forth the aggregate
number of shares of the Option Stock as to which the several Underwriters are
exercising the option. Delivery of certificates for the shares of Option Stock,
and payment therefor, shall be made as provided in Section 5 hereof. The number
of shares of the Option Stock to be purchased by each Underwriter shall be the
same percentage of the total number of shares of the Option Stock to be
purchased by the several Underwriters as such Underwriter is purchasing of the
Underwritten Stock, as adjusted by you in such manner as you deem advisable to
avoid fractional shares.
4. OFFERING BY UNDERWRITERS.
(a) The terms of the initial public offering by the Underwriters
of the Stock to be purchased by them shall be as set forth in the Prospectus.
The Underwriters may from time to time change the public offering price after
the closing of the initial public offering and increase or decrease the
concessions and discounts to dealers as they may determine.
(b) The information set forth under "Underwriting" in the
Registration Statement, any Preliminary Prospectus and the Prospectus relating
to the Stock filed by the Company (insofar as such information relates to the
Underwriters) constitutes the only information furnished by the Underwriters to
the Company for inclusion in the Registration Statement, any Preliminary
Prospectus, and the Prospectus, and you on behalf of the respective Underwriters
represent and warrant to the Company that the statements made therein are
correct.
5. DELIVERY OF AND PAYMENT FOR THE STOCK.
(a) Delivery of certificates for the shares of the Underwritten
Stock and the Option Stock (if the option granted by Section 3(c) hereof shall
have been exercised not later than 7:00 a.m., San Francisco time, on the date
two business days preceding the Closing Date), and payment therefor, shall be
made at the office of King & Spalding, 191 Peachtree Street, Atlanta, Georgia
30303, at 7:00 a.m., San Francisco time, on the fourth business day after the
date of this Agreement, or at such time on such other day, not later than seven
full business
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<PAGE> 8
days after such fourth business day, as shall be agreed upon in writing by the
Company, the Selling Securityholders and you. The date and hour of such delivery
and payment (which may be postponed as provided in Section 3(b) hereof) are
herein called the Closing Date.
(b) If the option granted by Section 3(c) hereof shall be
exercised after 7:00 a.m., San Francisco time, on the date two business days
preceding the Closing Date, delivery of certificates for the shares of Option
Stock, and payment therefor, shall be made at the office of King & Spalding, 191
Peachtree Street, Atlanta, Georgia 30303, at 7:00 a.m., San Francisco time, on
the third business day after the exercise of such option.
(c) Payment for the Stock purchased from the Company shall be made
to the Company or its order, and payment for the Stock purchased from the
Selling Securityholders shall be made to the Custodian, for the account of the
Selling Securityholders, in each case by one or more certified or official bank
check or checks in same day funds. Such payment shall be made upon delivery of
certificates for the Stock to you for the respective accounts of the several
Underwriters against receipt therefor signed by you. Certificates for the Stock
to be delivered to you shall be registered in such name or names and shall be in
such denominations as you may request at least one business day before the
Closing Date, in the case of Underwritten Stock, and at least one business day
prior to the purchase thereof, in the case of the Option Stock. Such
certificates will be made available to the Underwriters for inspection, checking
and packaging at the offices of Lewco Securities Corporation, 2 Broadway, New
York, New York 10004 on the business day prior to the Closing Date or, in the
case of the Option Stock, by 3:00 p.m., New York time, on the business day
preceding the date of purchase.
It is understood that you, individually and not on behalf of the
Underwriters, may (but shall not be obligated to) make payment to the Company
and the Selling Securityholders for shares to be purchased by any Underwriter
whose check shall not have been received by you on the Closing Date or any later
date on which Option Stock is purchased for the account of such Underwriter. Any
such payment by you shall not relieve such Underwriter from any of its
obligations hereunder.
6. FURTHER AGREEMENTS OF THE COMPANY AND THE SELLING
SECURITYHOLDERS. Each of the Company and the Selling Securityholders
respectively covenants and agrees as follows:
(a) The Company will (i) prepare and timely file with the
Commission under Rule 424(b) a Prospectus containing information
previously omitted at the time of effectiveness of the Registration
Statement in reliance on Rule 430A and (ii) not file any amendment to
the Registration Statement or supplement to the Prospectus of which you
shall not previously have been advised and furnished with a copy or to
which you shall have reasonably objected in writing or which is not in
compliance with the Securities Act or the rules and regulations of the
Commission.
(b) The Company will promptly notify each Underwriter in
the event of (i) the request by the Commission for amendment of the
Registration Statement or for supplement to the Prospectus or for any
additional information, (ii) the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement, (iii)
the institution or notice of intended institution of any action or
proceeding for that purpose, (iv) the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Stock for sale in any jurisdiction, or (v) the receipt by it of notice
of the initiation or threatening of any proceeding for such purpose.
The Company and the Selling Securityholders will make every reasonable
effort to prevent the issuance of such a stop order and, if such an
order shall at any time be issued, to obtain the withdrawal thereof at
the earliest possible moment.
(c) The Company will (i) on or before the Closing Date,
deliver to you a signed copy of the Registration Statement as
originally filed and of each amendment thereto filed prior to the time
the Registration Statement becomes effective and, promptly upon the
filing thereof, a signed copy of each post-effective amendment, if any,
to the Registration Statement (together with, in each case, all
exhibits thereto unless previously furnished to you) and will also
deliver to you, for distribution to the Underwriters, a sufficient
number of additional conformed copies of each of the foregoing (but
without exhibits) so that one copy of each may be distributed to each
Underwriter, (ii) as promptly as possible deliver to you and send to
the several Underwriters, at such office or offices as you may
designate, as many copies of the Prospectus as you may reasonably
request, and (iii) thereafter from time to time
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<PAGE> 9
during the period in which a prospectus is required by law to be
delivered by an Underwriter or dealer, likewise send to the
Underwriters as many additional copies of the Prospectus and as many
copies of any supplement to the Prospectus and of any amended
prospectus, filed by the Company with the Commission, as you may
reasonably request for the purposes contemplated by the Securities Act.
(d) If at any time during the period in which a
prospectus is required by law to be delivered by an Underwriter or
dealer any event relating to or affecting the Company, or of which the
Company shall be advised in writing by you, shall occur as a result of
which it is necessary, in the opinion of counsel for the Company or of
counsel for the Underwriters, to supplement or amend the Prospectus in
order to make the Prospectus not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser of
the Stock, the Company will forthwith prepare and file with the
Commission a supplement to the Prospectus or an amended prospectus so
that the Prospectus as so supplemented or amended will not contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances existing at the time such Prospectus is delivered to such
purchaser, not misleading. If, after the initial public offering of the
Stock by the Underwriters and during such period, the Underwriters
shall propose to vary the terms of offering thereof by reason of
changes in general market conditions or otherwise, you will advise the
Company in writing of the proposed variation, and, if in the opinion
either of counsel for the Company or of counsel for the Underwriters
such proposed variation requires that the Prospectus be supplemented or
amended, the Company will forthwith prepare and file with the
Commission a supplement to the Prospectus or an amended prospectus
setting forth such variation. The Company authorizes the Underwriters
and all dealers to whom any of the Stock may be sold by the several
Underwriters to use the Prospectus, as from time to time amended or
supplemented, in connection with the sale of the Stock in accordance
with the applicable provisions of the Securities Act and the applicable
rules and regulations thereunder for such period.
(e) Prior to the filing thereof with the Commission, the
Company will submit to you, for your information, a copy of any
post-effective amendment to the Registration Statement and any
supplement to the Prospectus or any amended prospectus proposed to be
filed.
(f) The Company will cooperate, when and as requested by
you, in the qualification of the Stock for offer and sale under the
securities or blue sky laws of such jurisdictions as you may designate
and, during the period in which a prospectus is required by law to be
delivered by an Underwriter or dealer, in keeping such qualifications
in good standing under said securities or blue sky laws; provided,
however, that the Company shall not be obligated to file any general
consent to service of process or to qualify as a foreign corporation in
any jurisdiction in which it is not so qualified. The Company will,
from time to time, prepare and file such statements, reports, and other
documents as are or may be required to continue such qualifications in
effect for so long a period as you may reasonably request for
distribution of the Stock.
(g) During a period of five years commencing with the
date hereof, the Company will furnish to you, and to each Underwriter
who may so request in writing, copies of all periodic and special
reports furnished to shareholders of the Company and of all
information, documents and reports filed with the Commission.
(h) Not later than the 45th day following the end of the
fiscal quarter first occurring after the first anniversary of the
Effective Date, the Company will make generally available to its
security holders an earnings statement in accordance with Section 11(a)
of the Securities Act and Rule 158 thereunder.
(i) The Company and the Selling Securityholders jointly
and severally agree to pay all costs and expenses incident to the
performance of their obligations under this Agreement, including all
costs and expenses incident to (i) the preparation, printing and filing
with the Commission and the National Association of Securities Dealers,
Inc. ("NASD") of the Registration Statement, any Preliminary Prospectus
and the Prospectus, (ii) the furnishing to the Underwriters of copies
of any Preliminary Prospectus and of the several documents required by
paragraph (c) of this Section 6 to be so furnished,
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<PAGE> 10
(iii) the printing of this Agreement and related documents delivered to
the Underwriters, (iv) the preparation, printing and filing of all
supplements and amendments to the Prospectus referred to in paragraph
(d) of this Section 6, (v) the furnishing to you and the Underwriters
of the reports and information referred to in paragraph (g) of this
Section 6 and (vi) the printing and issuance of stock certificates,
including the transfer agent's fees. The Selling Securityholders will
pay any transfer taxes incident to the transfer to the Underwriters of
the shares the Stock being sold by the Selling Securityholders.
(j) The Company and the Selling Securityholders jointly
and severally agree to reimburse you, for the account of the several
Underwriters, for blue sky fees and related disbursements (including
counsel fees and disbursements and cost of printing memoranda for the
Underwriters) paid by or for the account of the Underwriters or their
counsel in qualifying the Stock under state securities or blue sky laws
and in the review of the offering by the NASD.
(k) The provisions of paragraphs (i) and (j) of this
Section are intended to relieve the Underwriters from the payment of
the expenses and costs which the Company and the Selling
Securityholders hereby agree to pay and shall not affect any agreement
which the Company and the Selling Securityholders may make, or may have
made, for the sharing of any such expenses and costs.
(l) The Company and each of the Selling Securityholders
hereby agrees that, without the prior written consent of Hambrecht &
Quist LLC on behalf of the Underwriters, the Company or such Selling
Securityholder, as the case may be, will not, for a period of 180 days
following the commencement of the public offering of the Stock by the
Underwriters, directly or indirectly, (i) sell, offer, contract to
sell, make any short sale, pledge, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of any
shares of Common Stock or any securities convertible into or
exchangeable or exercisable for or any rights to purchase or acquire
Common Stock or (ii) enter into any swap or other agreement that
transfers, in whole or in part, any of the economic consequences or
ownership of Common Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock
or such other securities, in cash or otherwise. The foregoing sentence
shall not apply to (A) the Stock to be sold to the Underwriters
pursuant to this Agreement, (B) shares of Common Stock issued by the
Company upon the exercise of options granted under the stock option
plans and employee stock purchase plan of the Company (the "Plans") or
upon the exercise of warrants outstanding as of the date hereof, all as
described in the first paragraph following the table under the caption
"Capitalization" in the Prospectus, (C) options to purchase Common
Stock granted under the Plans, and (D) with respect to Selling
Securityholders, (i) bona fide gift(s) or (ii) distributions to
partners or stockholders of the Selling Securityholders, provided that,
in either case, the transferees agree in writing prior to such transfer
to be bound by the restrictions of the foregoing sentence. The Company
agrees that, without the prior consent of Hambrecht & Quist LLC on
behalf of the Underwriters, the Company will not, for a period of 180
days following the date of the Prospectus, directly or indirectly, take
any action which will result in the acceleration of the vesting and
exercisability of any option, warrant, right or other security
convertible into Common Stock.
(m) If at any time during the 25-day period after the
Registration Statement becomes effective any rumor, publication or
event relating to or affecting the Company shall occur as a result of
which in your opinion the market price for the Stock has been or is
likely to be materially affected (regardless of whether such rumor,
publication or event necessitates a supplement to or amendment of the
Prospectus), the Company will, after written notice from you advising
the Company to the effect set forth above, forthwith prepare, consult
with you concerning the substance of, and disseminate a press release
or other public statement, reasonably satisfactory to you, responding
to or commenting on such rumor, publication or event.
(n) The Company is familiar with the Investment Company
Act of 1940, as amended, and has in the past conducted its affairs, and
will in the future conduct its affairs, in such a manner to ensure that
the Company was not and will not be an "investment company" or a
company "controlled" by an
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<PAGE> 11
"investment company" within the meaning of the Investment Company Act
of 1940, as amended, and the rules and regulations thereunder.
(o) The Company agrees: (i) to enforce the terms of each
Lock-up Agreement (as herein defined) and (ii) issue stop-transfer
instructions to the transfer agent for the Common Stock with respect to
any transaction or contemplated transaction that would constitute a
breach of or default under the applicable Lock-up Agreement.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) Subject to the provisions of paragraph (f) of this Section 7,
the Company and the Selling Securityholders jointly and severally agree to
indemnify and hold harmless each Underwriter and each person (including each
partner or officer thereof) who controls any Underwriter within the meaning of
Section 15 of the Securities Act from and against any and all losses, claims,
damages or liabilities, joint or several, to which such indemnified parties or
any of them may become subject under the Securities Act, the Securities Exchange
Act of 1934, as amended (herein called the Exchange Act), or the common law or
otherwise, and the Company and the Selling Securityholders jointly and severally
agree to reimburse each such Underwriter and controlling person for any legal or
other expenses (including, except as otherwise hereinafter provided, reasonable
fees and disbursements of counsel) incurred by the respective indemnified
parties in connection with defending against any such losses, claims, damages or
liabilities or in connection with any investigation or inquiry of, or other
proceeding which may be brought against, the respective indemnified parties, in
each case arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(including the Prospectus as part thereof and any Rule 462(b) registration
statement) or any post-effective amendment thereto (including any Rule 462(b)
registration statement), or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or (ii) any untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Prospectus or the Prospectus (as
amended or as supplemented if the Company shall have filed with the Commission
any amendment thereof or supplement thereto), or the omission or alleged
omission to state therein a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that (1) the indemnity agreements of
the Company and the Selling Securityholders contained in this paragraph (a)
shall not apply to any such losses, claims, damages, liabilities or expenses if
such statement or omission was made in reliance upon and in conformity with
information furnished as herein stated or otherwise furnished in writing to the
Company by or on behalf of any Underwriter for use in any Preliminary Prospectus
or the Registration Statement or the Prospectus or any such amendment thereof or
supplement thereto, and (2) the indemnity agreement contained in this paragraph
(a) with respect to any Preliminary Prospectus shall not inure to the benefit of
any Underwriter from whom the person asserting any such losses, claims, damages,
liabilities or expenses purchased the Stock which is the subject thereof (or to
the benefit of any person controlling such Underwriter) if at or prior to the
written confirmation of the sale of such Stock a copy of the Prospectus (or the
Prospectus as amended or supplemented) was not sent or delivered to such person
and the untrue statement or omission of a material fact contained in such
Preliminary Prospectus was corrected in the Prospectus (or the Prospectus as
amended or supplemented) unless the failure is the result of noncompliance by
the Company with paragraph (c) of Section 6 hereof. The indemnity agreements of
the Company and the Selling Securityholders contained in this paragraph (a) and
the representations and warranties of the Company and the Selling
Securityholders contained in Section 2 hereof shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
indemnified party and shall survive the delivery of and payment for the Stock.
(b) Each Underwriter severally agrees to indemnify and hold
harmless the Company, each of its officers who signs the Registration Statement
on his own behalf or pursuant to a power of attorney, each of its directors,
each other Underwriter and each person (including each partner or officer
thereof) who controls the Company or any such other Underwriter within the
meaning of Section 15 of the Securities Act, and the Selling Securityholders
from and against any and all losses, claims, damages or liabilities, joint or
several, to which such indemnified parties or any of them may become subject
under the Securities Act, the Exchange Act, or the common law or otherwise and
to reimburse each of them for any legal or other expenses (including, except as
otherwise hereinafter provided, reasonable fees and disbursements of counsel)
incurred by the respective indemnified parties in connection with defending
against any such losses, claims, damages or liabilities or in
11
<PAGE> 12
connection with any investigation or inquiry of, or other proceeding which may
be brought against, the respective indemnified parties, in each case arising out
of or based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (including the Prospectus
as part thereof and any Rule 462(b) registration statement) or any
post-effective amendment thereto (including any Rule 462(b) registration
statement) or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading or (ii) any untrue statement or alleged untrue statement of a
material fact contained in the Prospectus (as amended or as supplemented if the
Company shall have filed with the Commission any amendment thereof or supplement
thereto) or the omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, if such statement or
omission was made in reliance upon and in conformity with information furnished
as herein stated or otherwise furnished in writing to the Company by or on
behalf of such indemnifying Underwriter for use in the Registration Statement or
the Prospectus or any such amendment thereof or supplement thereto. The
indemnity agreement of each Underwriter contained in this paragraph (b) shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any indemnified party and shall survive the delivery of
and payment for the Stock.
(c) Each party indemnified under the provision of paragraphs (a)
and (b) of this Section 7 agrees that, upon the service of a summons or other
initial legal process upon it in any action or suit instituted against it or
upon its receipt of written notification of the commencement of any
investigation or inquiry of, or proceeding against, it in respect of which
indemnity may be sought on account of any indemnity agreement contained in such
paragraphs, it will promptly give written notice (herein called the Notice) of
such service or notification to the party or parties from whom indemnification
may be sought hereunder. No indemnification provided for in such paragraphs
shall be available to any party who shall fail so to give the Notice if the
party to whom such Notice was not given was unaware of the action, suit,
investigation, inquiry or proceeding to which the Notice would have related and
was prejudiced by the failure to give the Notice, but the omission so to notify
such indemnifying party or parties of any such service or notification shall not
relieve such indemnifying party or parties from any liability which it or they
may have to the indemnified party for contribution or otherwise than on account
of such indemnity agreement. Any indemnifying party shall be entitled at its own
expense to participate in the defense of any action, suit or proceeding against,
or investigation or inquiry of, an indemnified party. Any indemnifying party
shall be entitled, if it so elects within a reasonable time after receipt of the
Notice by giving written notice (herein called the Notice of Defense) to the
indemnified party, to assume (alone or in conjunction with any other
indemnifying party or parties) the entire defense of such action, suit,
investigation, inquiry or proceeding, in which event such defense shall be
conducted, at the expense of the indemnifying party or parties, by counsel
chosen by such indemnifying party or parties and reasonably satisfactory to the
indemnified party or parties; provided, however, that (i) if the indemnified
party or parties reasonably determine that there may be a conflict between the
positions of the indemnifying party or parties and of the indemnified party or
parties in conducting the defense of such action, suit, investigation, inquiry
or proceeding or that there may be legal defenses available to such indemnified
party or parties different from or in addition to those available to the
indemnifying party or parties, then counsel for the indemnified party or parties
shall be entitled to conduct the defense to the extent reasonably determined by
such counsel to be necessary to protect the interests of the indemnified party
or parties and (ii) in any event, the indemnified party or parties shall be
entitled to have counsel chosen by such indemnified party or parties participate
in, but not conduct, the defense. If, within a reasonable time after receipt of
the Notice, an indemnifying party gives a Notice of Defense and the counsel
chosen by the indemnifying party or parties is reasonably satisfactory to the
indemnified party or parties, the indemnifying party or parties will not be
liable under paragraphs (a) through (c) of this Section 7 for any legal or other
expenses subsequently incurred by the indemnified party or parties in connection
with the defense of the action, suit, investigation, inquiry or proceeding,
except that (A) the indemnifying party or parties shall bear the legal and other
expenses incurred in connection with the conduct of the defense as referred to
in clause (i) of the proviso to the preceding sentence and (B) the indemnifying
party or parties shall bear such other expenses as it or they have authorized to
be incurred by the indemnified party or parties. If, within a reasonable time
after receipt of the Notice, no Notice of Defense has been given, the
indemnifying party or parties shall be responsible for any legal or other
expenses incurred by the indemnified party or parties in connection with the
defense of the action, suit, investigation, inquiry or proceeding.
(d) If the indemnification provided for in this Section 7 is
unavailable or insufficient to hold harmless an indemnified party under
paragraph (a) or (b) of this Section 7, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party
12
<PAGE> 13
as a result of the losses, claims, damages or liabilities referred to in
paragraph (a) or (b) of this Section 7 (i) in such proportion as is appropriate
to reflect the relative benefits received by each indemnifying party from the
offering of the Stock or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of each indemnifying party in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, or
actions in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Securityholders on the one hand and the Underwriters on the other shall be
deemed to be in the same respective proportions as the total net proceeds from
the offering of the Stock received by the Company and the Selling
Securityholders and the total underwriting discount received by the
Underwriters, as set forth in the table on the cover page of the Prospectus,
bear to the aggregate public offering price of the Stock. Relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by each indemnifying party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission.
The parties agree that it would not be just and equitable if
contributions pursuant to this paragraph (d) were to be determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to in the first sentence of this paragraph
(d). The amount paid by an indemnified party as a result of the losses, claims,
damages or liabilities, or actions in respect thereof, referred to in the first
sentence of this paragraph (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigation, preparing to defend or defending against any action or claim
which is the subject of this paragraph (d). Notwithstanding the provisions of
this paragraph (d), no Underwriter shall be required to contribute any amount in
excess of the underwriting discount applicable to the Stock purchased by such
Underwriter. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this paragraph (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may be sought, it will promptly give written
notice of such service to the party or parties from whom contribution may be
sought, but the omission so to notify such party or parties of any such service
shall not relieve the party from whom contribution may be sought from any
obligation it may have hereunder or otherwise (except as specifically provided
in paragraph (c) of this Section 7).
(e) Neither the Company nor the Selling Securityholders will,
without the prior written consent of each Underwriter, settle or compromise or
consent to the entry of any judgment in any pending or threatened claim, action,
suit or proceeding in respect of which indemnification may be sought hereunder
(whether or not such Underwriter or any person who controls such Underwriter
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act is a party to such claim, action, suit or proceeding) unless such
settlement, compromise or consent includes an unconditional release of such
Underwriter and each such controlling person from all liability arising out of
such claim, action, suit or proceeding.
(f) The liability of each Selling Securityholder under such
Selling Securityholder's representations and warranties contained in paragraph
(a) of Section 2 hereof and under the indemnity and reimbursement agreements
contained in the provisions of this Section 7 and Section 11 hereof shall be
limited to an amount equal to the initial public offering price of the stock
sold by such Selling Securityholder to the Underwriters. The Company and the
Selling Securityholders may agree, as among themselves and without limiting the
rights of the Underwriters under this Agreement, as to the respective amounts of
such liability for which they each shall be responsible.
8. TERMINATION. This Agreement may be terminated by you at any
time prior to the Closing Date by giving written notice to the Company and the
Selling Securityholders if after the date of this Agreement trading in the
Common Stock shall have been suspended, or if there shall have occurred (i) the
engagement in hostilities or an escalation of major hostilities by the United
States or the declaration of war or a national emergency by the
13
<PAGE> 14
United States on or after the date hereof, (ii) any outbreak of hostilities or
other national or international calamity or crisis or change in economic or
political conditions if the effect of such outbreak, calamity, crisis or change
in economic or political conditions in the financial markets of the United
States would, in the Underwriters' reasonable judgment, make the offering or
delivery of the Stock impracticable, (iii) suspension of trading in securities
generally or a material adverse decline in value of securities generally on the
New York Stock Exchange, the American Stock Exchange, or The Nasdaq Stock
Market, or limitations on prices (other than limitations on hours or numbers of
days of trading) for securities on either such exchange or system, (iv) the
enactment, publication, decree or other promulgation of any federal or state
statute, regulation, rule or order of, or commencement of any proceeding or
investigation by, any court, legislative body, agency or other governmental
authority which in the Underwriters' reasonable opinion materially and adversely
affects or will materially or adversely affect the business or operations of the
Company, (v) declaration of a banking moratorium by either federal or New York
State authorities or (vi) the taking of any action by any federal, state or
local government or agency in respect of its monetary or fiscal affairs which in
the Underwriters' reasonable opinion has a material adverse effect on the
securities markets in the United States. If this Agreement shall be terminated
pursuant to this Section 8, there shall be no liability of the Company or the
Selling Securityholders to the Underwriters and no liability of the Underwriters
to the Company or the Selling Securityholders; provided, however, that in the
event of any such termination the Company and the Selling Securityholders agree
to indemnify and hold harmless the Underwriters from all costs or expenses
incident to the performance of the obligations of the Company and the Selling
Securityholders under this Agreement, including all costs and expenses referred
to in paragraphs (i) and (j) of Section 6 hereof.
9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of
the several Underwriters to purchase and pay for the Stock shall be subject to
the performance by the Company and by the Selling Securityholders of all their
respective obligations to be performed hereunder at or prior to the Closing Date
or any later date on which Option Stock is to be purchased, as the case may be,
and to the following further conditions:
(a) The Registration Statement shall have become
effective; and no stop order suspending the effectiveness thereof shall
have been issued and no proceedings therefor shall be pending or
threatened by the Commission.
(b) The legality and sufficiency of the sale of the Stock
hereunder and the validity and form of the certificates representing
the Stock, all corporate proceedings and other legal matters incident
to the foregoing, and the form of the Registration Statement and of the
Prospectus (except as to the financial statements contained therein),
shall have been approved at or prior to the Closing Date by King &
Spalding, counsel for the Underwriters.
(c) You shall have received from Morris, Manning &
Martin, L.L.P., counsel for the Company and the Selling
Securityholders, an opinion, addressed to the Underwriters and dated
the Closing Date, covering the matters set forth in Annex A and if
Option Stock is purchased at any date after the Closing Date,
additional opinion from such counsel, addressed to the Underwriters and
dated such later date, confirming that the statements expressed as of
the Closing Date in such opinion remains valid as of such later date.
(d) You shall be satisfied that (i) as of the Effective
Date, the statements made in the Registration Statement and the
Prospectus were true and correct and neither the Registration Statement
nor the Prospectus omitted to state any material fact required to be
stated therein or necessary in order to make the statements therein,
respectively, not misleading, (ii) since the Effective Date, no event
has occurred which should have been set forth in a supplement or
amendment to the Prospectus which has not been set forth in such a
supplement or amendment, (iii) since the respective dates as of which
information is given in the Registration Statement in the form in which
it originally became effective and the Prospectus contained therein,
there has not been any material adverse change or any development
involving a prospective material adverse change in or affecting the
business, properties, financial condition or results of operations of
the Company, whether or not arising from transactions in the ordinary
course of business, and, since such dates, except in the ordinary
course of business, the Company has not entered into any material
transaction not referred to in the Registration Statement in the form
in which it originally became effective and the Prospectus contained
therein, (iv) the Company does
14
<PAGE> 15
not have any material contingent obligations which are not disclosed in
the Registration Statement and the Prospectus, (v) there are not any
pending or known threatened legal proceedings to which the Company is a
party or of which property of the Company is the subject which are
material and which are not disclosed in the Registration Statement and
the Prospectus, (vi) there are not any franchises, contracts, leases or
other documents which are required to be filed as exhibits to the
Registration Statement which have not been filed as required, (vii) the
representations and warranties of the Company herein are true and
correct in all material respects as of the Closing Date or any later
date on which Option Stock is to be purchased, as the case may be, and
(viii) there has not been any material change in the market for
securities in general or in political, financial or economic conditions
from those reasonably foreseeable as to render it impracticable in your
reasonable judgment to make a public offering of the Stock, or a
material adverse change in market levels for securities in general (or
those of companies in particular) or financial or economic conditions
which render it inadvisable to proceed.
(e) You shall have received on the Closing Date and on
any later date on which Option Stock is purchased a certificate, dated
the Closing Date or such later date, as the case may be, and signed by
the Chief Executive Officer and the Chief Financial Officer of the
Company, stating that the respective signers of said certificate have
carefully examined the Registration Statement in the form in which it
originally became effective and the Prospectus contained therein and
any supplements or amendments thereto, and that the statements included
in clauses (i) through (vii) of paragraph (d) of this Section 9 are
true and correct.
(f) You shall have received from Ernst & Young LLP a
letter or letters, addressed to the Underwriters and dated the Closing
Date and any later date on which Option Stock is purchased, confirming
that they are independent public accountants with respect to the
Company within the meaning of the Securities Act and the applicable
published rules and regulations thereunder and based upon the
procedures described in their letter delivered to you concurrently with
the execution of this Agreement (herein called the Original Letter),
but carried out to a date not more than three business days prior to
the Closing Date or such later date on which Option Stock is purchased
(i) confirming, to the extent true, that the statements and conclusions
set forth in the Original Letter are accurate as of the Closing Date or
such later date, as the case may be, and (ii) setting forth any
revisions and additions to the statements and conclusions set forth in
the Original Letter which are necessary to reflect any changes in the
facts described in the Original Letter since the date of the Original
Letter or to reflect the availability of more recent financial
statements, data or information. The letters shall not disclose any
change, or any development involving a prospective change, in or
affecting the business or properties of the Company which, in your sole
judgment, makes it impractical or inadvisable to proceed with the
public offering of the Stock or the purchase of the Option Stock as
contemplated by the Prospectus.
(g) You shall have received from Ernst & Young LLP a
letter stating that their review of the Company's system of internal
accounting controls, to the extent they deemed necessary in
establishing the scope of their examination of the Company's financial
statements as of March 31, 1999, did not disclose any weakness in
internal controls that they considered to be material weaknesses.
(h) You shall have been furnished evidence in usual
written or telegraphic form from the appropriate authorities of the
several jurisdictions, or other evidence satisfactory to you, of the
qualification referred to in paragraph (f) of Section 6 hereof.
(i) Prior to the Closing Date, the Stock to be sold by
the Selling Securityholders and issued and sold by the Company shall
have been duly authorized for listing by the Nasdaq National Market
upon official notice of issuance.
(j) On or prior to the Closing Date, you shall have
received from all shareholders, agreements (herein called Lock-up
Agreements), in form reasonably satisfactory to Hambrecht & Quist LLC,
stating that without the prior written consent of Hambrecht & Quist LLC
on behalf of the Underwriters, such person or entity will not, for a
period of 180 days following the commencement of the public offering of
the Stock by the Underwriters, directly or indirectly, (i) sell, offer,
contract to sell, make any short sale, pledge, sell any option or
contract to purchase, purchase any option or contract to
15
<PAGE> 16
sell, grant any option, right or warrant to purchase or otherwise
transfer or dispose of any shares of Common Stock or any securities
convertible into or exchangeable or exercisable for or any rights to
purchase or acquire Common Stock or (ii) enter into any swap or other
agreement that transfers, in whole or in part, any of the economic
consequences or ownership of Common Stock, whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of
Common Stock or such other securities, in cash or otherwise.
All the agreements, opinions, certificates and letters mentioned above
or elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if King & Spalding, counsel for the Underwriters, shall
be satisfied that they comply in form and scope.
In case any of the conditions specified in this Section 9 shall not be
fulfilled, this Agreement may be terminated by you by giving notice to the
Company and to the Selling Securityholders. Any such termination shall be
without liability of the Company or the Selling Securityholders to the
Underwriters and without liability of the Underwriters to the Company or the
Selling Securityholders; provided, however, that (i) in the event of such
termination, the Company and the Selling Securityholders agree to indemnify and
hold harmless the Underwriters from all costs or expenses incident to the
performance of the obligations of the Company and the Selling Securityholders
under this Agreement, including all costs and expenses referred to in paragraphs
(i) and (j) of Section 6 hereof, and (ii) if this Agreement is terminated by you
because of any refusal, inability or failure on the part of the Company or the
Selling Securityholders to perform any agreement herein, to fulfill any of the
conditions herein, or to comply with any provision hereof other than by reason
of a default by any of the Underwriters, the Company will reimburse the
Underwriters severally upon demand for all out-of-pocket expenses (including
reasonable fees and disbursements of counsel) that shall have been incurred by
them in connection with the transactions contemplated hereby.
10. CONDITIONS OF THE OBLIGATION OF THE COMPANY AND THE SELLING
SECURITYHOLDERS. The obligation of the Company and the Selling Securityholders
to deliver the Stock shall be subject to the conditions that (a) the
Registration Statement shall have become effective and (b) no stop order
suspending the effectiveness thereof shall be in effect and no proceedings
therefor shall be pending or threatened by the Commission.
In case either of the conditions specified in this Section 10 shall not
be fulfilled, this Agreement may be terminated by the Company and the Selling
Securityholders by giving notice to you. Any such termination shall be without
liability of the Company and the Selling Securityholders to the Underwriters and
without liability of the Underwriters to the Company or the Selling
Securityholders; provided, however, that in the event of any such termination
the Company and the Selling Securityholders jointly and severally agree to
indemnify and hold harmless the Underwriters from all costs or expenses incident
to the performance of the obligations of the Company and the Selling
Securityholders under this Agreement, including all costs and expenses referred
to in paragraphs (i) and (j) of Section 6 hereof.
11. REIMBURSEMENT OF CERTAIN EXPENSES. In addition to their other
obligations under Section 7 of this Agreement (and subject, in the case of a
Selling Securityholder, to the provisions of paragraph (f) of Section 7), the
Company and the Selling Securityholders hereby jointly and severally agree to
reimburse on a quarterly basis the Underwriters for all reasonable legal and
other expenses incurred in connection with investigating or defending any claim,
action, investigation, inquiry or other proceeding arising out of or based upon
any statement or omission, or any alleged statement or omission, described in
paragraph (a) of Section 7 of this Agreement, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the obligations
under this Section 11 and the possibility that such payments might later be held
to be improper; provided, however, that (i) to the extent any such payment is
ultimately held to be improper, the persons receiving such payments shall
promptly refund them and (ii) such persons shall provide to the Company, upon
request, reasonable assurances of their ability to effect any refund, when and
if due.
12. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of the Company, the Selling Securityholders and the several
Underwriters and, with respect to the provisions of Section 7 hereof, the
several parties (in addition to the Company, the Selling Securityholders and the
several Underwriters) indemnified under the provisions of said Section 7, and
their respective personal representatives, successors and assigns. Nothing in
this Agreement is intended or shall be construed to give to any other person,
16
<PAGE> 17
firm or corporation any legal or equitable remedy or claim under or in respect
of this Agreement or any provision herein contained. The term "successors and
assigns" as herein used shall not include any purchaser, as such purchaser, of
any of the Stock from any of the several Underwriters.
13. NOTICES. Except as otherwise provided herein, all
communications hereunder shall be in writing or by telegraph and, if to the
Underwriters, shall be mailed, telegraphed or delivered to Hambrecht & Quist
LLC, One Bush Street, San Francisco, California 94104; and if to the Company,
shall be mailed, telegraphed or delivered to it at its office, 520 Guthridge
Court, NW, Suite 100, Norcross, Georgia 30092, Attention: Brady L. "Tripp"
Rackley III; and if to the Selling Securityholders, shall be mailed, telegraphed
or delivered to the Selling Securityholders in care of Jeffrey W. Hodges at 520
Guthridge Court, NW, Suite 100, Norcross, Georgia 30092. All notices given by
telegraph shall be promptly confirmed by letter.
14. MISCELLANEOUS. The reimbursement, indemnification and
contribution agreements contained in this Agreement and the representations,
warranties and covenants in this Agreement shall remain in full force and effect
regardless of (a) any termination of this Agreement, (b) any investigation made
by or on behalf of any Underwriter or controlling person thereof, or by or on
behalf of the Company or the Selling Securityholders or their respective
directors or officers, and (c) delivery and payment for the Stock under this
Agreement; provided, however, that if this Agreement is terminated prior to the
Closing Date, the provisions of paragraphs (l), (m) and (o) of Section 6 hereof
shall be of no further force or effect.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of California without giving effect to conflicts of laws.
17
<PAGE> 18
Please sign and return to the Company and to the Selling
Securityholders in care of the Company the enclosed duplicates of this letter,
whereupon this letter will become a binding agreement among the Company, the
Selling Securityholders and the several Underwriters in accordance with its
terms.
Very truly yours,
nFront, Inc.
By
------------------------------
Name:
------------------------
Title:
------------------------
18
<PAGE> 19
SELLING SECURITYHOLDERS:
Brady L. Rackley III
Brady L. Rackley
Noro-Moseley Partners IV, L.P.
W. Derek Porter
Thomas E. Greene III
Steven S. Neel
By
---------------------------
Attorney-in-Fact
The foregoing Agreement is hereby confirmed
and accepted as of the date first above written.
HAMBRECHT & QUIST LLC
J.C. Bradford & Co.
Raymond James & Associates, Inc.
SoundView Technology Group, Inc.
By Hambrecht & Quist LLC
By
----------------------------
Managing Director
Acting on behalf of the several Underwriters,
including themselves, named in Schedule I hereto.
19
<PAGE> 20
SCHEDULE I
UNDERWRITERS
<TABLE>
<CAPTION>
NUMBER OF
SHARES
TO BE
UNDERWRITERS PURCHASED
- ------------ ---------
<S> <C>
Hambrecht & Quist LLC . . . . . . . . . . . . .
J.C. Bradford & Co. . . . . . . . . . . . . . .
Raymond James & Associates, Inc. . . . . . . . .
SoundView Technology Group, Inc. . . . . . . . .
---------
Total. . . . . . . . . . . . . . . . . 3,900,000
=========
</TABLE>
20
<PAGE> 21
SCHEDULE II
SELLING SECURITYHOLDERS
<TABLE>
<CAPTION>
NUMBER OF
NAME AND ADDRESS SHARES
OF SELLING SECURITYHOLDERS TO BE SOLD
- -------------------------- ----------
<S> <C>
Brady L. Rackley III 133,624
Brady L. Rackley 128,675
Noro-Moseley Partners IV, L.P. 100,631
W. Derek Porter 24,176
Thomas E. Greene III 4,835
Steven S. Neel 8,059
-------
Total. . . . . . . . . . . . . . . . . 400,000
=======
</TABLE>
21
<PAGE> 22
ANNEX A
MATTERS TO BE COVERED IN THE OPINION OF MORRIS, MANNING & MARTIN, L.L.P.
COUNSEL FOR THE COMPANY
AND THE SELLING SECURITYHOLDERS
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, is duly qualified as a foreign
corporation and in good standing in each state of the United States of
America in which its ownership or leasing of property or the nature of
the business transacted by it requires such qualification (except where
the failure to be so qualified would not have a material adverse effect
on the business, properties, financial condition or results of
operations of the Company), and has full corporate power and authority
to own or lease its properties and conduct its business as described in
the Registration Statement;
(ii) the authorized capital stock of the Company consists of
10,000,000 shares of Preferred Stock, of which there are outstanding no
shares, and 70,000,000 shares of Common Stock, no par value, of which
there are outstanding ________ shares (including the Underwritten Stock
plus the number of shares of Option Stock issued on the date hereof)
and such additional number of shares, if any, as may have been issued
after ___________ and prior to the Closing Date, pursuant to _________;
proper corporate proceedings have been taken validly to authorize such
authorized capital stock; all of the outstanding shares of such capital
stock (including the Underwritten Stock and the shares of Option Stock
issued, if any) have been duly and validly issued and are fully paid
and nonassessable; any Option Stock purchased after the Closing Date,
when issued and delivered to and paid for by the Underwriters as
provided in the Underwriting Agreement, will have been duly and validly
issued and be fully paid and nonassessable; and no preemptive rights
of, or rights of refusal in favor of, shareholders exist with respect
to the Stock, or the issue and sale thereof, pursuant to the Second
Amended and Restated Articles of Incorporation or Bylaws of the Company
and, to the knowledge of such counsel, there are no contractual
preemptive rights that have not been waived, rights of first refusal or
rights of co-sale which exist with respect to the Stock being sold by
the Selling Securityholders or the issue and sale of the Stock;
(iii) the Registration Statement has become effective under
the Securities Act and, to the best of such counsel's knowledge, no
stop order suspending the effectiveness of the Registration Statement
or suspending or preventing the use of the Prospectus is in effect and
no proceedings for that purpose have been instituted or are pending or
contemplated by the Commission;
(iv) the Registration Statement and the Prospectus (except as
to the financial statements, notes and schedules and other financial
data contained therein, as to which such counsel need express no
opinion) comply as to form in all material respects with the
requirements of the Securities Act and with the rules and regulations
of the Commission thereunder;
(v) such counsel have no reason to believe that the
Registration Statement (except as to the financial statements and
schedules and other financial and statistical data contained as to
which such counsel need not express any opinion or belief) at the
Effective Date contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or that the
Prospectus (except as to the financial statements and schedules and
other financial and statistical data contained as to which such counsel
need not express any opinion or belief) as of its date or at the
Closing Date (or any later date on which Option Stock is purchased),
contained or contains any untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make
the statements therein, in light of the circumstances under which they
were made, not misleading;
(vi) the information required to be set forth in the
Registration Statement in answer to Items 9, 10 (insofar as it relates
to such counsel) and 11(c) of Form S-1 is to the best of such counsel's
knowledge accurately and adequately set forth therein in all material
respects or no response is required with respect
22
<PAGE> 23
to such Items, and, to the best of such counsel's knowledge, the
description of the Company's stock option plans and the options granted
and which may be granted thereunder and the options granted otherwise
than under such plans set forth in the Prospectus accurately and fairly
presents the information required to be shown with respect to said
plans and options to the extent required by the Securities Act and the
rules and regulations of the Commission thereunder;
(vii) such counsel do not know of any franchises, contracts,
leases, documents or legal proceedings, pending or threatened, which in
the opinion of such counsel are of a character required to be described
in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement, which are not described and
filed as required;
(viii) the Underwriting Agreement has been duly authorized,
executed and delivered by the Company;
(ix) the Underwriting Agreement has been duly executed and
delivered by or on behalf of the Selling Securityholders and the
Custody Agreement between the Selling Securityholders and ___________,
as Custodian, and the Power of Attorney referred to in such Custody
Agreement have been duly executed and delivered by the several Selling
Securityholders;
(x) the issue and sale by the Company of the shares of Stock
sold by the Company as contemplated by the Underwriting Agreement will
not conflict with, or result in a breach of, the Second Amended and
Restated Articles of Incorporation or Bylaws of the Company or any
agreement or instrument listed as an exhibit to the Registration
Statement to which the Company is a party or any applicable law or
regulation, or so far as is known to such counsel, any order, writ,
injunction or decree, of any jurisdiction, court or governmental
instrumentality;
(xi) all holders of securities of the Company having rights to
the registration of shares of Common Stock, or other securities,
because of the filing of the Registration Statement by the Company have
waived such rights or such rights have expired by reason of lapse of
time following notification of the Company's intent to file the
Registration Statement;
(xii) all rights of the Selling Securityholders to the shares
of Stock sold by the Selling Securityholders under the Underwriting
Agreement, free and clear of all liens, encumbrances, equities,
security interests and claims, has been transferred to the Underwriters
who have severally purchased such shares of Stock under the
Underwriting Agreement, assuming for the purpose of this opinion that
the Underwriters purchased the same in good faith without notice of any
adverse claims and take delivery of the shares as a certificated
security in registered form in their respective names;
(xiii) no consent, approval, authorization or order of any
court or governmental agency or body is required for the consummation
of the transactions contemplated in the Underwriting Agreement, except
such as have been obtained under the Securities Act and such as may be
required under state securities or blue sky laws in connection with the
purchase and distribution of the Stock by the Underwriters; and
(xiv) the Stock sold by the Selling Securityholders and the
Stock issued and sold by the Company has been duly authorized for
listing by the Nasdaq National Market upon official notice of issuance.
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<PAGE> 1
EXHIBIT 3.1
SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
NFRONT, INC.
Pursuant to the Georgia Business Corporation Code, nFront, Inc., a
Georgia corporation (the "Corporation"), submits these Second Amended and
Restated Articles of Incorporation and shows as follows:
1.
The Corporation hereby certifies that these Second Amended and Restated
Articles of Incorporation of the Corporation, as set forth in Paragraph 2 below,
were duly adopted by the Board of Directors of the Corporation by unanimous
written consent dated ________, 1999, contain amendments to the Articles of
Incorporation which require approval of the Shareholders of the Corporation and
were duly approved by the Shareholders of the Corporation by unanimous written
consent dated _______, 1999 in accordance with Section 14-2-1003 of the Georgia
Business Corporation Code.
2.
The Articles of Incorporation of the Corporation shall be amended and
restated as follows:
I.
The name of the Corporation is: nFront, Inc.
II.
Common Stock. The Corporation shall have authority to issue not more
than Seventy million (70,000,000) shares of common stock, no par value per
share.
Preferred Stock. The aggregate number of preferred shares (referred to
in these Articles of Incorporation as "Preferred Stock") which the Corporation
shall have authority to issue is Ten million (10,000,000), no par value per
share. The Preferred Stock may be issued from time to time by the Board of
Directors as shares of one or more series. The description of shares of each
series of Preferred Stock, including any designations, preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption shall be as set forth in
resolutions adopted by the Board of Directors, and Articles of Amendment shall
be filed with the Georgia Secretary of State as required by law to be filed with
respect to issuance of such Preferred Stock, prior to the issuance of any shares
of such series.
<PAGE> 2
The Board of Directors is expressly authorized, at any time, by
adopting resolutions providing for the issuance of, or providing for a change in
the number of, shares of any particular series of Preferred Stock and, if and to
the extent from time to time required by law, by filing Articles of Amendment
which are effective without shareholder action, to increase or decrease the
number of shares included in each series of Preferred Stock, but not below the
number of shares then issued, and to set in any one or more respects the
designations, preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms and
conditions of redemption relating to the shares of each such series. The
authority of the Board of Directors with respect to each series of Preferred
Stock shall include, but not be limited to, setting or changing the following:
(i) the dividend rate, if any, on shares of such series, the
times of payment and the date from which dividends shall be
accumulated, if dividends are to be cumulative;
(ii) whether the shares of such series shall be redeemable
and, if so, the redemption price and the terms and conditions
of such redemption;
(iii) the obligation, if any, of the Corporation to redeem
shares of such series pursuant to a sinking fund;
(iv) whether shares of such series shall be convertible into,
or exchangeable for, shares of stock of any other class or
classes and, if so, the terms and conditions of such
conversion or exchange, including the price or prices or the
rate or rates of conversion or exchange and the terms of
adjustment, if any;
(v) whether the shares of such series shall have voting
rights, in addition to the voting rights provided by law, and,
if so, the extent of such voting rights;
(vi) the rights of the shares of such series in the event of
voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation; and
(vii) any other relative rights, powers, preferences,
qualifications, limitations or restrictions thereof relating
to such series.
III.
The Corporation is organized for the purpose of engaging in any and all
lawful businesses not specifically prohibited to corporations for profit under
the laws of the State of Georgia, and the Corporation shall have all powers
necessary to conduct any such businesses and all other powers enumerated in the
Georgia Business Corporation Code or under any act amendatory thereof,
supplemental thereto or substituted therefor.
-2-
<PAGE> 3
IV.
No director of the Corporation shall have personal liability to the
Corporation or to its shareholders for monetary damages for breach of fiduciary
duty of care or other duty as a director, except that this Article IV shall not
eliminate or limit the liability of a director: (i) for any appropriation, in
violation of his duties, of any business opportunity of the Corporation; (ii)
for acts or omissions which involve intentional misconduct or a knowing
violation of law; (iii) for the types of liability set forth in Section 14-2-832
of the Georgia Business Corporation Code; or (iv) for any transaction from which
the director received an improper personal benefit. Neither the amendment nor
repeal of this Article IV, nor the adoption of any provision of the Articles of
Incorporation of the Corporation inconsistent with this Article IV, shall
eliminate or reduce the effect of this Article IV in respect of any act or
failure to act, or any cause of action, suit or claim that, but for this Article
IV, would accrue or arise prior to any amendment, repeal or adoption of such an
inconsistent provision. If the Georgia Business Corporation Code is subsequently
amended to provide for further limitations on the personal liability of
directors of corporations for breach of duty of care or other duty as a
director, then the personal liability of the directors of the Corporation shall
be so further limited to the greatest extent permitted by the Georgia Business
Corporation Code.
V.
The Board of Directors shall be divided into three classes to be known
as Class I, Class II and Class III. Except in case of death, resignation,
disqualification or removal, each Director shall serve for a term ending on the
date of the third annual meeting of shareholders following the annual meeting at
which the Director was elected; provided, however, that each initial Director in
Class I shall hold office until the 1999 annual meeting of shareholders; each
initial Director in Class II shall hold office until the 2000 annual meeting of
shareholders; and each initial Director in Class III shall hold office until the
2001 annual meeting of shareholders. In the event of any increase or decrease in
the authorized number of Directors, the newly created or eliminated
directorships resulting from such an increase or decrease shall be apportioned
among the three classes of Directors.
IN WITNESS WHEREOF, the undersigned has executed these Second Amended
and Restated Articles of Incorporation.
NFRONT, INC.
By:
---------------------------------------------
Brady L. Rackley III, Chief Executive Officer
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<PAGE> 1
EXHIBIT 5.1
[MORRIS, MANNING & MARTIN LETTERHEAD]
A LIMITED LIABILITY PARTNERSHIP
ATTORNEYS AT LAW
1600 ATLANTA FINANCIAL CENTER
3343 PEACHTREE ROAD, N.E.
ATLANTA, GEORGIA 30326-1044
TELEPHONE 404 233-7000
FACSIMILE 404 365-9532
MEMBER,
COMMERCIAL LAW AFFILIATES
WITH INDEPENDENT FIRMS
IN PRINCIPAL CITIES WORLDWIDE
June 25, 1999
nFront, Inc.
Suite 100
520 Guthridge Court, NW
Norcross, Georgia 30092
Re: Registration Statement on Form S-1
Gentlemen:
We have acted as counsel for nFront, Inc., a Georgia corporation (the
"Company"), in connection with the registration under the Securities Act of
1933, as amended, pursuant to a Registration Statement on Form S-1 (the
"Registration Statement"), of a proposed offering of an aggregate of 3,900,000
shares of the Company's common stock, no par value per share (the "Common
Stock"), consisting of 3,500,000 shares of the Common Stock being offered by
the Company (the "Company Shares") and 400,000 shares of Common Stock being
offered by certain selling shareholders (the "Selling Shareholder Shares"). In
addition, the selling shareholders have granted to the underwriters an option
to purchase 585,000 shares of Common Stock to cover over-allotments, if any
(the "Over-Allotment Shares").
We have examined such documents, corporate records, and other
instruments as we have considered necessary and advisable for purposes of
rendering this opinion.
In making the foregoing examinations, we have assumed the genuineness
of all signatures and the authenticity of all documents submitted to us as
originals, and the conformity to original documents of all documents submitted
to us as certified or photostatic copies. As to various questions of fact
material to this opinion, we have relied, to the extent we deem reasonably
appropriate, upon representations or certificates of officers or directors of
the Company and upon documents, records and instruments furnished to us by the
Company, without independent check or verification of their accuracy.
Based upon and subject to the foregoing, we are of the opinion that the
Company Shares, the Selling Shareholder Shares and any Over-Allotment Shares
being sold, when issued, sold and delivered as contemplated in the Registration
Statement, will be duly authorized and validly issued and fully paid and
nonassessable.
We hereby consent to the filing of this Opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption
"Legal Matters" in the Prospectus contained in the Registration Statement.
Very truly yours,
MORRIS, MANNING & MARTIN
a Limited Liability Partnership
By: /s/ Ward S. Bondurant
---------------------------
Ward S. Bondurant, Partner
<PAGE> 1
CONFIDENTIAL TREATMENT* EXHIBIT 10.3
* CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO THE
RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION.
BRACKETS AND "+" HAVE BEEN USED TO IDENTIFY INFORMATION WHICH IS THE
SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.
MARKETING AGREEMENT
This Marketing Agreement (the "Agreement") is made by and between
NFRONT, INC. ("nFront"), a Georgia corporation having its principal offices at
520 Guthridge Court, Suite 100, Norcross, Georgia 30092 and "BANCTEC, USA, INC."
("BancTec"), a Delaware corporation having its principal offices at 4851 LBJ
Freeway, Dallas, Texas 75244, the Agreement to be effective the 19th day of
January, 1999 (the "Effective Date").
W I T N E S S E T H:
WHEREAS, nFront is in the business of providing home banking and bill
payment services through the Internet to customers of banks and other financial
institutions;
WHEREAS, BancTec is in the business of providing transaction processing
and other administrative and computer processing services to banks and financial
institutions; and
WHEREAS, BancTec desires to offer to its Customer Base (as hereinafter
defined) and potential customers Internet home banking capabilities; and
WHEREAS, nFront desires BancTec to offer nFront's proprietary Internet
home banking system as more fully described in Exhibit A attached hereto (the
"System") to BancTec's Customer Base and to potential Bank customers of BancTec;
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, agreements and conditions set forth herein, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
Definitions
1.1 As used in this Agreement, each of the following terms has the meaning
set forth thereafter, such meaning to be equally applicable both to the singular
and plural forms of the terms herein defined:
(a) "Agreement" means this Marketing Agreement, together with all
exhibits and schedules hereto now or hereafter signed by BancTec and nFront (all
of which are herein incorporated by reference), as the same may be modified,
amended or supplemented from time to time.
(b) "Bank" means a financial institution that offers banking services
to the general public.
(c) "Customer Base" means those customers listed on Exhibit B attached
hereto and any other Banks who become customers of BancTec during the Term of
this Agreement.
(d) "Documentation" means that portion of the System that provides
installation and operating instructions for use of the System.
(e) "End-User" means the ultimate user of the System.
<PAGE> 2
(f) "Generic Hardware" means computer equipment (and configurations
thereof) that meets the specifications provided by nFront for use with the
System.
(g) "System" means nFront's proprietary Internet home and/or business
banking system described on Exhibit A of this Agreement, including all future
improvements, enhancements and modifications thereof, and all releases and
upgrades related thereto.
(h) "Sale" and "Resale" and any grammatical variant thereof shall mean
and include, without limitation, sales, contracts for sale, conditional sales,
installment sales, rentals, leases or licenses of software to Banks, and any
other arrangement whereby the System is placed at the disposal of the Banks.
(j) "Software" means that portion of the System that is comprised of
computer applications programs intended to be processed in nFront's Internet
Banking Center.
(k) "Term" shall have the meaning set forth in Section 8.1 of this
Agreement.
ARTICLE II
BancTec Appointment
2.1 Appointment. During the Term of this Agreement, nFront hereby grants to
BancTec the non-exclusive right to market and promote the System to its Customer
Base and potential Bank customers of BancTec, and BancTec hereby accepts such
appointment. BancTec may market and promote the System anywhere in the
continental United States but shall have no right to market or promote the
system outside the United States. BancTec understands, acknowledges and agrees
that this appointment is non-exclusive as to both the System and the geographic
area and that nFront may appoint itself or through other resellers or agents,
resell or market the System in any geographic area. nFront expressly reserves
the right to sell and deliver the System to any other entity, including Banks.
BancTec shall market or promote the System only to Banks, and shall not market
and promote the System to other parties providing core processing services to
Banks, or to Bank service bureaus, software providers, other marketers of
automated bank services or to any other buyer who intends, directly or
indirectly, to resell or license the System. BancTec has no authority to appoint
any associate marketers or subdealers of the System without nFront's consent.
BancTec, in its sole discretion, will determine the manner in which BancTec
markets and promotes the System to its Customer Base and the potential Bank
customers of BancTec. Any Banks that desire to purchase the System will enter
into and sign an agreement directly with nFront. nFront will be solely
responsible for invoicing the purchasers, collecting payment, and providing all
installation, maintenance and support services to the purchasers.
2.2 Relationship between nFront and BancTec. BancTec shall perform its
obligations under this Agreement to market and promote the System as a principal
for its own account and at its own expense and risk. This Agreement does not in
any way create the relationship of principal and agent, or any similar
relationship between nFront and BancTec, including, but not limited to that of
joint ventures, partners or associates. BancTec is granted no right or authority
hereunder to assume or create any obligation or responsibility for or on behalf
of nFront or otherwise to bind or to use nFront's name other than as may be
expressly authorized by nFront.
ARTICLE III
Promotion of Sales, Service and Training and Related Obligations
3.1 Marketing and Promotion. BancTec shall use its commercially reasonable
efforts to market and promote the sale of the System by nFront, which
commercially reasonable efforts shall include, but not be limited to, promotion
of the System to the Customer Base and prompt performance of all of its
obligations under this Agreement.
3.2 Staffing and Training. BancTec shall appoint its technically suitable
employees to market and promote the System, and provide Bank and End User Sales
support. BancTec shall, at its sole cost and expense, send the
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<PAGE> 3
appropriate sales personnel to such training programs and other refresher and
upgrade training as nFront may, at reasonable intervals, require. At BancTec's
request, nFront shall provide periodic routine consultation and advice to
BancTec in connection with BancTec's sales and service hereunder and shall
provide at BancTec's cost: (a) technical, specification and sales advice, (b)
assistance and advice concerning promotional and training programs, and (c)
suggestions for new applications for the System at BancTec's cost. nFront shall
furnish BancTec with a supply of price lists, sales literature, catalogues,
specifications for Generic Hardware, Documentation and advisory assistance with
respect to the System. All proprietary demonstration equipment, manuals,
instruction books, contract forms, sales and promotional materials,
Documentation and similar material furnished to BancTec by nFront, whether
furnished free of charge or not, shall remain the property of nFront and upon
request shall be returned to nFront by BancTec.
3.3 nFront to Maintain the System. BancTec acknowledges, understands and
agrees that the System that it shall market and promote to Banks shall remain on
nFront's servers, and that such Banks shall, through BancTec, gain access to the
System only upon execution of a contract with nFront. nFront shall be
responsible for systems maintenance of the System resident on its servers.
3.4 BancTec Promotional Activity. nFront shall not share in the expense of
any advertising or promotional activities by BancTec or other sales promotion
projects except by express agreement in writing. All materials prepared by
BancTec that market and promote the System, including, but not limited to, any
materials that include any trademark or trade name (or any mark or name closely
resembling the same) now or hereafter owned or licensed by nFront or any of its
affiliates shall be approved in writing by nFront prior to use.
3.5 nFront Recordkeeping. nFront shall keep records of its business
relating to the System as may be reasonably required by BancTec. BancTec or its
authorized representative may, from time to time during regular business hours,
examine such records and nFront's accounts relating to the sale and servicing of
the System.
ARTICLE IV
Conditions of Sale
4.1 Fees. The fees for accessing the System by a Bank and/or an End User
and the processing fees for services thereunder shall be as set forth in Exhibit
D ("Fees") attached hereto.
4.2 Invoicing. nFront shall invoice the Banks and/or the End Users for all
Fees associated with the System.
4.3 Marketing Commissions. As compensation for the performance of BancTec's
obligations under this Agreement, BancTec shall be entitled to receive the
percentage of fees actually received by nFront ("Marketing Commissions") as set
forth in Exhibit D attached hereto. nFront shall pay to BancTec the Marketing
Commissions within ten (10) days of the end of the month that nFront receives
receipt of payment by a Bank and/or an End User. BancTec shall receive Marketing
Commissions for each Bank that is (i) registered by BancTec as an active nFront
lead, and (ii) a member of BancTec's Customer Base (either as of the Effective
Date or during the Term of this Agreement) when that Bank buys the System from
nFront; provided, however, that BancTec shall not receive Marketing Commissions
for any Bank that has purchased the System from nFront before that Bank becomes
a member of BancTec's Customer Base.
4.4 Force Majeure. Neither party shall be liable for loss or damage due to
interruption of service or access to the System resulting from any cause beyond
its reasonable control, including, but not limited to, Internet systems or
network failure, capacity limitations, compliance with regulations, orders or
instructions of any federal, state or municipal government or any department or
agent thereof, acts of God, acts or omissions of the other party, acts of civil
or military authority, fires, strikes, facilities shutdowns or alterations,
embargoes, war, riot, delays in transportation, or inability to obtain necessary
labor, facilities or materials from usual sources. IN NO EVENT SHALL EITHER
PARTY BE LIABLE FOR CONSEQUENTIAL OR SPECIAL DAMAGES DUE TO ANY SUCH CAUSE.
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<PAGE> 4
4.5 Fee and System Changes. nFront shall have the right to change the
System without notice to BancTec, and shall have the right at any time to
discontinue the sale of any version of the System, to make changes in method of
access or delivery, including interface procedures, and to add improvements, all
without incurring any liability whatever. nFront may change its fees to End
Users for the System upon thirty (30) days' written notice to End Users.
4.6 Taxes and Other Fees. nFront shall pay all license fees, sales, use,
service use, occupation, personal property and excise taxes and any other fees,
assessments or taxes which may be assessed or levied by any federal, state or
local government and any departments and subdivisions thereof, against any of
the Systems ordered by an End User or under BancTec's direct or indirect
control.
ARTICLE V
Warranties
5.1 nFront's Warranty. nFront represents and warrants that the Software is
Year 2000 Compliant. For the purposes of this Agreement, "Year 2000 Compliant"
shall mean that the Software will: (i) report and display all dates, including
dates occurring before and after the year 2000, with a four-digit date; and (ii)
handle all leap years, including but not limited to the Year 2000 leap year,
correctly; provided, however, that nFront shall not be responsible or liable for
any date errors caused or contributed to by any third party software, any
operating systems, or any hardware. EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION
5.1 THE SYSTEM IS PROVIDED "AS-IS", "WHERE-IS". NFRONT SPECIFICALLY DISCLAIMS
ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AS TO THE
NHOME SYSTEM PROVIDED UNDER THIS AGREEMENT.
ARTICLE VI
Special Agreements Regarding Software and Other Intellectual Property
6.1 Limited License. In the performance of BancTec's obligations hereunder,
it shall be necessary for BancTec to demonstrate the System. Accordingly,
subject to the terms and conditions contained herein, nFront hereby grants to
BancTec, and BancTec hereby accepts from nFront, a non-exclusive license (the
"License") of the Software solely for the purpose of demonstrating the System in
operation to potential Bank customers of BancTec.
6.2 Software Covenants. BancTec agrees to comply with each of the following
requirements:
(a) BancTec shall not copy, alter, modify, translate, decompile,
disassemble, reverse engineer or otherwise attempt to derive source code, or
create derivative works of the Software, or any part thereof, or knowingly allow
others to do so, during or after the Term.
(b) Except as otherwise specifically provided in this Agreement,
BancTec shall not loan, rent, lease, give, sub-license, or otherwise transfer,
nor communicate or otherwise disclose, the Software, including any part or any
copy thereof, in whole or in part, to any person.
(c) The Software, including all parts thereof, and any copies, in whole
or in part, and any and all copyrights thereto, are and remain the property of
nFront, irrespective of the ownership of the media on which such Software and
any parts or copies thereof are contained.
(d) Each copy of the Software sold to Banks by nFront shall include a
license agreement, the form of which shall be as set forth in the Exhibit E.
(e) BancTec acknowledges that the laws and regulations of the United
States restrict the export and re-export of commodities and technical data of
United States origin, including the System. BancTec agrees that it shall not
export or re-export such Software in any form without nFront's consent, which
consent shall, among other things be conditioned upon BancTec receiving the
appropriate United States and foreign government licenses and approvals.
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<PAGE> 5
(f) BancTec shall not, by any act or omission, impair or prejudice the
copyright or any other right of whatever nature of nFront in and to the System
or any part thereof, and shall not deal with the same in any manner which may
allow any third party to obtain any rights in the same which are inconsistent or
which conflict with the rights of nFront.
6.3 Notices; Markings; Trademarks; Tradenames. BancTec agrees to comply
with the following:
(a) BancTec shall not delete any trademarks, tradename or copyright
notice present in, on or displayed by the System, or any part thereof.
(b) BancTec shall not add to any notice present in, on or displayed by
the System its own copyright, trademark or other proprietary notices unless such
notices have been previously approved in writing by nFront.
(c) Except as already present in, on or displayed by the System
software and/or accompanying packaging or Documentation provided by nFront,
BancTec shall not use any trademarks and/or tradenames of nFront without prior
written approval of nFront.
6.4 Documentation. Each System sold by nFront to a Bank shall include one
(1) set of accompanying Documentation. nFront shall only distribute complete and
separate copies of the Documentation to Banks and shall not reproduce, in whole
or in part, or transfer in any manner to a third party other than a Bank, such
Documentation. Any and all copyrights to such Documentation are and shall remain
the property of nFront.
ARTICLE VII
Confidentiality and Non-Disclosure
7.1 BancTec Obligations.
(a) BancTec recognizes, acknowledges and agrees that during the Term of
this Agreement, nFront may furnish to BancTec certain technical and commercial
information that is proprietary and of value to nFront and that is generally not
known to nFront's competitors or the general public, which information includes,
but is not limited to, designs, procedures, formulas, discoveries, inventions,
improvements, innovations, concepts and ideas, lists of customers, computer
programs, business methods, and plans for future developments ("nFront's
Confidential Information"). BancTec recognizes, acknowledges and agrees that
nFront's Confidential Information is to be maintained in secrecy and confidence
by BancTec and BancTec's employees, agents or representatives to whom BancTec
discloses any of nFront's Confidential Information. BancTec agrees for itself
and for each of its employees, agents or representatives to whom BancTec
discloses any of nFront's Confidential Information that such information shall
be used only in accordance with the terms, covenants, conditions and limitations
of this Agreement, and not for the benefit of or for, directly or indirectly,
BancTec or any of its employees, agents or representatives. Information made
available to the general public by nFront and information obtained from third
parties not associated with nFront shall not be considered to be nFront's
Confidential Information, except for information received from third parties
that BancTec knows or should have known was obtained illegally or in violation
of this Agreement. Information disclosed to BancTec by nFront that was
previously known to BancTec (and that can be proven to have been previously
known to BancTec) shall not be considered to be nFront's Confidential
Information. In the event BancTec or a representative of BancTec is requested by
law, order of court or any agency to disclose any of nFront's Confidential
Information, BancTec shall give nFront prompt notice of such request so that
nFront may seek an appropriate protective order. If, in the absence of a
protective order, BancTec or a representative of BancTec is nonetheless
compelled by law to disclose any of nFront's Confidential Information, BancTec
or a representative of BancTec, as the case may be, may disclose such
information in such proceeding without liability hereunder; provided, however,
that BancTec gives nFront written notice of the information to be disclosed
within five (5) business days after receipt of such order by BancTec and, upon
nFront's request and at its expense, BancTec shall use its best efforts to
obtain assurances that confidential treatment shall be accorded to such
information.
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<PAGE> 6
(b) In the event this Agreement is terminated for any reason, upon
receipt of nFront's written request, BancTec agrees to return promptly nFront's
Confidential Information, including all copies thereof, to nFront, or to deliver
all such information promptly to such party as may be designated by nFront.
BancTec further agrees thereafter not to use or disclose nFront's Confidential
Information in any manner whatsoever without the prior written approval of
nFront unless and until such information shall lawfully become generally known
in the public domain through no fault of the BancTec or breach by the BancTec of
the covenants contained herein.
(c) BancTec shall disclose nFront's Confidential Information to Banks
without nFront's written permission.
7.2 nFront's Obligations.
(a) nFront recognizes, acknowledges and agrees that during the Term of
this Agreement, BancTec may furnish to nFront certain technical and commercial
information that is proprietary and of value to BancTec and that is not
generally known to BancTec's competitors or the general public, which
information includes, but is not limited to designs, procedures, formulas,
discoveries, inventions, improvements, innovations, concepts and ideas, lists of
customers, computer programs, business methods, and plans for future
developments ("BancTec's Confidential Information"). nFront recognizes and
agrees that, except as otherwise provided herein, BancTec's Confidential
Information is to be maintained in secrecy and confidence, except as provided
herein, and used only in accordance with the terms, covenants, conditions and
limitations of this Agreement. Information made available to the general public
and information obtained from third parties not associated with BancTec shall
not be considered to be BancTec's Confidential Information, except for
information received from third parties that nFront knows or has reason to know
was obtained illegally or in violation of this Agreement. Information disclosed
to nFront by BancTec that was previously known to nFront (and that can be proven
to have been previously known to nFront) shall not be considered to be BancTec's
Confidential Information. In the event nFront or a representative of nFront is
requested by law, order of court or any agency to disclose any of BancTec's
Confidential Information, nFront shall give BancTec prompt notice of such
request so that BancTec may seek an appropriate protective order. If, in the
absence of a protective order, nFront or a representative of nFront is
nonetheless compelled by law to disclose any of BancTec's Confidential
Information, nFront or a representative of nFront, as the case may be, may
disclose such information in such proceeding without liability hereunder;
provided, however, that nFront gives BancTec written notice of the information
to be disclosed within five (5) business days after receipt of such order by
nFront and, upon BancTec's request and at its expense, nFront shall use its best
efforts to obtain assurances that confidential treatment shall be accorded to
such information.
(b) In the event this Agreement is terminated for any reason, upon
receipt of BancTec's written request, nFront agrees to return promptly BancTec's
Confidential Information, including all copies thereof, to BancTec or to deliver
all such information promptly to such party as may be designated by BancTec.
nFront further agrees thereafter not to use or disclose BancTec's Confidential
Information in any manner whatsoever without the prior written approval of
BancTec unless and until such information shall lawfully become generally known
in the public domain through no fault of nFront or breach by nFront of the
covenants contained herein.
ARTICLE VIII
Term and Termination
8.1 Term. This Agreement shall commence as of the Effective Date hereof and
shall remain in effect (unless sooner terminated pursuant to Section 8.2 hereof)
for five (5) years (the "Term"). It shall be renewed automatically without
interruption for successive five-year terms, unless, not less than sixty (60)
days before the end of any Term, either nFront or BancTec notifies the other
party in writing of its election (at its sole option, for any reason or for no
reason) not to renew. Any such renewal periods shall be considered an extension
of and part of the Term of this Agreement.
8.2 Right to Terminate. Notwithstanding any other provision hereof, this
Agreement may be terminated either (i) by mutual agreement of the parties
hereto; (ii) by either party at any time if the other party has materially
breached any of the provisions hereof and, has failed to cure such alleged
breach within thirty (30) days after written notice thereof in
6
<PAGE> 7
the case of failure to pay when due amounts owing to such party, and within
sixty (60) days in case of all other alleged curable breaches; or (iii) by
either party immediately and without the giving of notice, in the event that
either party shall become insolvent, or shall ask its creditors for a
moratorium, or shall file a voluntary petition in bankruptcy, or shall be
adjudicated as a bankrupt pursuant to an involuntary petition, or shall suffer
appointment of a temporary or permanent receiver, trustee, or custodian for all
or a substantial part of its assets which shall not be discharged within sixty
(60) days. Notwithstanding the foregoing, any violation of Articles VI or VII
hereof, this Agreement shall be immediately terminable by the non-breaching
party.
8.3 Effect of Termination.
(a) Any termination of this Agreement shall not release either party
from paying any amount which may then be owing to the other party. Either party
may offset and deduct from any or all amounts owed to the other party, if any,
any or all amounts owed by the other party, rendering to the other party the
excess, if any.
(b) In the event of termination of this Agreement by either party or
automatically as provided herein, it is understood that nFront shall not have
any obligation to provide further access to BancTec's Customer Base beyond
nFront's obligations contained in nFront's agreements with Banks that were
entered into prior to termination of this Agreement, however if nFront continues
to provide access to all or any part of BancTec's Customer Base after
termination of this Agreement, such continuation shall not be construed as a
renewal of this Agreement for any further term nor as a waiver of such
termination.
(c) Upon termination of this Agreement, upon receipt of nFront's
written request, BancTec shall return to nFront, promptly and without charge to
nFront, all Documentation, price lists, maintenance and policy manuals, sales
aids and other publications of nFront relating to the System that BancTec has on
hand. BancTec shall thereupon promptly cease using any trademarks, tradenames,
service marks or other identifying marks owned or controlled by nFront on any of
its materials.
(d) BancTec shall be solely responsible for all commitments incurred or
assumed by BancTec during the Term of this Agreement or thereafter to BancTec's
Customer Base, and nFront shall not be held responsible in any manner therefor,
irrespective of any suggestion or recommendation with respect thereto by nFront
or any of its employees or representatives unless nFront has expressly agreed in
writing to assume the responsibility.
ARTICLE IX
Exclusivity Provision
9.1 Exclusivity Provision. If during the Term of the Agreement, BancTec
directly or indirectly, individually, on behalf of any other person or legal
entity, or for or on behalf of any person, corporation, partnership, company,
trade association, agent, agency or other entity, engages in the business of
selling or distributing any Internet Banking solution for BancTec's data center
business other than the System, then nFront shall have the right to terminate
this Agreement by giving BancTec ninety (90) days prior written notice. BancTec
is not precluded from providing interfaces to other Internet banking solutions
upon Customer's request, however, nFront retains such termination rights if
BancTec receives revenue from any outside Internet banking vendor other than
nFront for such interface or processing. Notwithstanding the above, should
BancTec acquire (or be acquired by) a transaction processing business who has a
substantially similar agreement with an alternate Internet banking provider,
this Agreement will not limit BancTec's rights to generate revenue from the
acquired (or acquiring) base.
7
<PAGE> 8
ARTICLE X
Indemnification; Other Relief
10.1 Indemnification by BancTec. Subject to the limitations set forth in
Section 10.5 of this Agreement, BancTec shall indemnify, defend and hold
harmless nFront, its officers, directors, shareholders, employees, agents and
affiliates from and against any claims, losses, damages, liabilities or expenses
(including, without limitation, reasonable attorneys' fees and expenses)
(collectively, "Claims") resulting from or arising out of BancTec's gross
negligence and willful misconduct with respect to the System or any part thereof
or any misrepresentations with respect to the System, provided, however, that in
respect of any Claims hereunder against BancTec that arise out of or result from
any alleged gross negligence and/or willful misconduct of BancTec or any alleged
misrepresentation made by BancTec with respect to the System, BancTec shall be
notified promptly of such Claim in writing and shall be given authority, control
and full and proper information and assistance in the defense and settlement of
such Claim. Notwithstanding the foregoing, BancTec shall not have the authority
to settle or compromise any Claim in a manner that indicates that nFront
contributed to or was responsible for the cause of any such Claim unless nFront
consents in writing to such settlement.
10.2 Indemnification by nFront.
(a) Subject to the limitations set forth in Section 10.5 of this
Agreement, nFront shall indemnify, defend and hold harmless BancTec, its
officers, directors, shareholders, employees, agents and affiliates from and
against claims, losses, damages, liabilities or expenses (including, without
limitation, reasonable attorneys' fees and expenses) resulting from or arising
out of nFront's gross negligence and/or willful misconduct with respect to the
System or any part thereof or any misrepresentations made by nFront with respect
to the System, provided, however, that in respect of any claim, suit or
proceeding hereunder against nFront that arise out of or result from any alleged
gross negligence and/or willful misconduct of nFront or any alleged
misrepresentation made by nFront with respect to the System, nFront shall be
notified promptly of such claim, suit or proceeding in writing and is given
authority, control and full and proper information and assistance in the defense
and settlement of such claim, suit or proceeding. Notwithstanding the foregoing,
nFront shall not have the authority to settle or compromise any Claim in a
manner that indicates that BancTec contributed to or was responsible for the
cause of any such Claim unless BancTec consents in writing to such settlement.
(b) Subject to the limitations set forth in Section 10.5 hereof, nFront
shall indemnify, defend and hold harmless BancTec, its officers, directors,
shareholders, employees, agents and affiliates from and against any claim, suit
or proceeding based upon an allegation that the System (or any portion thereof)
infringes upon or misappropriate any copyright, patent, trademark or trade
secret of any third party, provided that nFront is notified promptly of such
claim, suit or proceeding in writing and is given authority, control and full
and proper information and assistance in the defense and settlement of such
claim, suit or proceeding. If the System is finally determined by a court of
competent jurisdiction to constitute an infringement of any patent, copyright,
trademark or other trade secret of a third party and its use is enjoined, nFront
shall either:
(i) procure the right for End Users to continue to use
the System; or
(ii) replace or modify the System with an equivalent
version of the System that is not so infringing.
10.3 Arbitration. The parties to this Agreement agree that any controversies
or claims arising out of or relating to this Agreement (including, without
limitation, any alleged breach thereof or the termination or non-renewal
thereof) shall be settled by arbitration pursuant to the Federal Arbitration
Act, 9 U.S.C. ss. 1 et. seq., in accordance with the Commercial Arbitration
Rules of the American Arbitration Association. The parties hereto further agree
that the arbitrators in any such arbitration shall not be authorized to award
any punitive damages in connection with any controversy or a claim settled by
arbitration hereunder. The decision of the arbitrator in any such arbitration
shall be final and binding upon the parties and judgment upon the award may be
entered in any court having jurisdiction thereof. Any arbitration shall take
place in Atlanta, Georgia if the arbitration is initiated by BancTec and in
Dallas, Texas if the arbitration is initiated by nFront, and the expenses of the
arbitrators shall be allocated by such arbitrators.
8
<PAGE> 9
The arbitration shall be conducted before a panel of three (3) arbitrators, one
selected by BancTec, one selected by nFront, and one selected by mutual
agreement of the arbitrators selected by BancTec and nFront.
10.4 Injunctive Relief. Notwithstanding the provisions of Section 10.3
hereof, the parties acknowledge and agree that any breach of the provisions of
Articles VI or VII of this Agreement shall result in irreparable harm to a party
for which no adequate remedy at law exists. Accordingly, upon any such breach, a
party shall be entitled to seek injunctive or other appropriate extraordinary
relief, such relief being in addition to, and not in lieu of, any other rights
and remedies, including the award of damages, available at law or in equity. Any
violation of the restraints set forth herein shall automatically extend the
period of such restraints for the amount of time such violation continues,
provided that a party seeks enforcement promptly after discovery of such
violation. nFront shall not be required to prove money damages to seek
injunctive relief under this Agreement.
10.5 LIMITATION OF LIABILITY. (a) IN NO EVENT SHALL NFRONT BE LIABLE FOR ANY
LOSS OF PROFIT OR ANY OTHER INDIRECT COMMERCIAL DAMAGE, INCLUDING BUT NOT
LIMITED TO SPECIAL, INCIDENTAL, CONSEQUENTIAL OR OTHER INDIRECT DAMAGES UNDER
ANY CAUSE OF ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, INCLUDING,
WITHOUT LIMITATION, CLAIMS ARISING FROM MALFUNCTION OR DEFECTS IN THE NHOME
SYSTEM OR NON-DELIVERY OF NHOME SYSTEM EVEN IF NFRONT HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. EXCEPT FOR NFRONT'S OBLIGATION TO INDEMNIFY BANCTEC
UNDER SECTION 10.2 ABOVE, IN NO EVENT SHALL NFRONT'S LIABILITY TO BANCTEC FOR
ANY CLAIM ARISING OUT OF THIS AGREEMENT EXCEED THE GREATER OF (i) THE AMOUNT OF
MARKETING COMMISSIONS DUE AND OWING TO BANCTEC, OR (ii) $25,000.
(b) IN NO EVENT SHALL BANCTEC BE LIABLE FOR ANY LOSS OF PROFIT OR ANY
OTHER INDIRECT COMMERCIAL DAMAGE, INCLUDING BUT NOT LIMITED TO SPECIAL,
INCIDENTAL, CONSEQUENTIAL OR OTHER INDIRECT DAMAGES UNDER ANY CAUSE OF ACTION
ARISING OUT OF OR RELATING TO THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION,
CLAIMS ARISING FROM MALFUNCTION OR DEFECTS IN THE SYSTEM OR NON-DELIVERY EVEN IF
BANCTEC HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. EXCEPT FOR
BANCTEC'S OBLIGATION TO INDEMNIFY NFRONT UNDER SECTION 10.1 ABOVE, IN NO EVENT
SHALL BANCTEC'S LIABILITY TO NFRONT FOR ANY CLAIM ARISING OUT OF THIS AGREEMENT
EXCEED THE GREATER OF (i) THE AMOUNT OF MARKETING COMMISSIONS PAID TO BANCTEC
WITHIN THE THREE (3) MONTH PERIOD PRIOR TO THE ACCRUAL OF THE CLAIM, OR (ii)
$25,000.
ARTICLE XI
Miscellaneous Provisions
11.1 Waiver. Any failure of a party to comply with any obligation, covenant,
agreement or condition herein may be expressly waived in writing by the other
party, but such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
11.2 Entire Agreement. This Agreement, the exhibits and schedules hereto
constitutes the entire understanding of the parties with respect to the subject
matter of this Agreement and are intended to supersede all prior understandings,
whether written or oral, between the parties with respect thereto.
11.3 No Third Party Beneficiary Rights. No provision of this Agreement is
intended or shall be construed to provide or create any third party beneficiary
right or any other right of any kind in any Bank or any client, customer,
affiliate, insurer, lender, shareholder, partner, officer, director, employee or
agent of any party hereto, or in any other person.
11.4 Amendment; Binding Effect; Assignment. No amendment, modification or
alteration of the terms of this Agreement shall be binding unless in writing and
executed by the parties hereto. This Agreement shall be binding upon
9
<PAGE> 10
and inure to the benefit of and be enforceable by the parties hereto and their
respective successors, assigns, heirs, executors and administrators. Neither
party may assign this Agreement, in whole or in part, or any of its rights or
obligations hereunder without the prior written consent of nFront, and any such
attempted assignment shall be void. Notwithstanding the foregoing, nFront may
freely and without the consent of BancTec assign this agreement in connection
with the sale of all or substantially all of its assets or a merger or similar
amalgamation.
11.5 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Georgia, without giving
effect to the conflict of laws principles thereof.
11.6 Severability. If any provision of this Agreement is held to be illegal,
invalid or unenforceable under present or future laws effective during the Term
of this Agreement, such provision shall be fully severable. This Agreement shall
be construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part of this Agreement, and the remaining provisions of
this Agreement shall remain in full force and effect and shall not be affected
by the illegal, invalid or unenforceable provision or by its severance from this
Agreement.
11.7 Counterparts. This Agreement may be executed simultaneously or in two
or more counterparts, each of which together shall constitute one and the same
instrument and shall be deemed an original hereof.
11.8 Notices. All notices required or permitted under this Agreement shall
be made in writing and shall be deemed to have been duly given if delivered
personally or sent by registered or certified mail (return receipt requested),
U.S. mail or facsimile. All notices shall be addressed to the parties at the
respective addresses indicated above.
11.9 Survival. The provisions of Articles VI, VII, VIII, X and XI shall
survive any termination or expiration of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the Effective Date.
NFRONT, INC.
By: /s/ Tripp Rackley
--------------------------
Its: Chairman/CEO
Date: 1/19/99
BANCTEC USA, INC.
By: /s/ KM Lopez
--------------------------
Its: VP
Date: 1/20/99
10
<PAGE> 11
EXHIBIT D - FEES
<TABLE>
<CAPTION>
nHome nBusiness nHome and BancTec
*thru 5/31/99 nBusiness Commission
--------- ------------- --------- ----------
<S> <C> <C> <C> <C> <C>
IMPLEMENTATION FEE - NEW CUSTOMERS
Assets $0 - $50 M $ [++++] $ [++++] $ [++++] 40% footnote
Assets $50M - $100M $ [++++] $ [++++] $ [++++] 40% footnote
Assets $100M - $300M $ [++++] $ [++++] $ [++++] 40%
Assets $300M - $500M $ [++++] $ [++++] $ [++++] 40%
Assets $500M - $1B $ [++++] $ [++++] $ [++++] 40%
Assets $1B - $2B $ [++++] $ [++++] $ [++++] 40% footnote
Assets $2B & Up $ [++++] $ [++++] $ [++++] 40%
MONTHLY MAINTENANCE FEE
From 11/1/98 to 1/31/99 $ [++++] $ [++++] $ [++++] 20%
From 2/1/99 to 4/30/99 $ [++++] $ [++++] $ [++++] 20%
After 5/1/99 $ [++++] $ [++++] $ [++++] 20%
PER CUSTOMER FEES
Customer Monthly Fee $ [++++] $ [++++] 20%
New Customer Setup - One Time $ [++++] $ [++++] 20%
TRANSACTION FEES
nBranch Product and Service Fees $ [++++] $ [++++] n/a
ACH Draft $ [++++] n/a
ACH Disbursement $ [++++] n/a
Direct Deposit $ [++++] n/a
Book Transfer $ [++++] n/a
Wire Transfer $ [++++] n/a
Stop Pay $ [++++] n/a
EFTPS - same day request $ [++++] n/a
EFTPS - pass through ACH $ [++++] n/a
Controlled Disbursement (per day) $ [++++] n/a
Cash Concentration $ [++++] n/a
BILL PAYMENT
Monthly Fee/Account $ [++++] Included n/a
Per Payment (Internet or Phone) $ [++++] $ [++++] n/a
Customer Setup $ [++++] included n/a
Canceled Check Copy $ [++++] $ [++++] n/a
NSF Fee $ [++++] $ [++++] n/a
Stop Pay Fee $ [++++] $ [++++] n/a
Additional User Kits $ [++++] $ [++++] n/a
Telephone Bill Payment Setup Fee (One Time) $ [++++] $ [++++] $ [++++] n/a
Telephone Bill Payment Monthly Maint. Fee $ [++++] $ [++++] $ [++++] n/a
Telephone Bill Payment Communications Quote Quote
CHECK IMAGING
DSI Setup Fee Quote Quote n/a
Greenway Setup Fee Quote Quote n/a
Per Check Image Fee Quote Quote n/a
Check Imaging Communications Charges Quote Quote n/a
OPTIONS
nReach Data Mining Reports (Per Report) $ [++++] $ [++++] n/a
nForm Multimedia Presentation (10 Frames) $ [++++] $ [++++] 40%
Site Map Construction $ [++++] $ [++++] $ [++++] 40%
Management Reporting (Per Month) $ [++++] $ [++++] 20%
Internet TV Site Quote n/a
Employee Training Program $ [++++] n/a
Jump Start Marketing And Promotion Program $ [++++] n/a
</TABLE>
Footnote: commissions on Implementation Fees are paid net of 3rd party expenses
to Bill Payment provider
PRICES EFFECTIVE 1/19/99 CONFIDENTIAL - DO NOT REPRODUCE
<PAGE> 1
CONFIDENTIAL TREATMENT* EXHIBIT 10.4
* CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO THE RULES
AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS AND "+" HAVE
BEEN USED TO IDENTIFY INFORMATION WHICH IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST.
MARKETING AGREEMENT
This Marketing Agreement (the "Agreement") is made by and between
NFRONT, INC. ("nFront"), a Georgia corporation having its principal offices at
520 Guthridge Court, Suite 100, Norcross, Georgia 30092 and "BANCTEC, USA, INC."
("BancTec"), a Delaware corporation having its principal offices at 4851 LBJ
Freeway, Dallas, Texas 75244, the Agreement to be effective the 1st day of
March, 1999 (the "Effective Date"). This Agreement is separate and distinct from
and is in addition to the Marketing Agreement entered into by and among the
parties dated the nineteenth (19th) of January, 1999.
W I T N E S S E T H:
WHEREAS, nFront is in the business of providing home banking and bill
payment services through the Internet to customers of banks and other financial
institutions; and
WHEREAS, BancTec is in the business of providing transaction processing
and other administrative and computer processing services to banks and financial
institutions; and
WHEREAS, BancTec desires to offer to its Customer Base (as hereinafter
defined) and potential customers Internet home banking capabilities; and
WHEREAS, nFront desires BancTec to offer nFront's proprietary Internet
home banking system as more fully described in Exhibit A attached hereto (the
"System") to BancTec's Customer Base and to potential Bank customers of BancTec;
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, agreements and conditions set forth herein, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
Definitions
1.1 As used in this Agreement, each of the following terms has the meaning
set forth thereafter, such meaning to be equally applicable both to the singular
and plural forms of the terms herein defined:
(a) "Agreement" means this Marketing Agreement, together with all
exhibits and schedules hereto now or hereafter signed by BancTec and nFront (all
of which are herein incorporated by reference), as the same may be modified,
amended or supplemented from time to time.
(b) "Bank" means a financial institution that offers banking services
to the general public.
(c) "Customer Base" means those customers listed on Exhibit B attached
hereto and any other Banks who become customers of BancTec during the Term of
this Agreement.
(d) "Documentation" means that portion of the System that provides
installation and operating instructions for use of the System.
<PAGE> 2
(e) "End-User" means the ultimate user of the System.
(f) "Generic Hardware" means computer equipment (and configurations
thereof) that meets the specifications provided by nFront for use with the
System.
(g) "System" means nFront's proprietary Internet home and/or business
banking system described on Exhibit A of this Agreement, including all future
improvements, enhancements and modifications thereof, and all releases and
upgrades related thereto.
(h) "Sale" and "Resale" and any grammatical variant thereof shall mean
and include, without limitation, sales, contracts for sale, conditional sales,
installment sales, rentals, leases or licenses of software to Banks, and any
other arrangement whereby the System is placed at the disposal of the Banks.
(i) "Software" means that portion of the System that is comprised of
computer applications programs intended to be processed in nFront's Internet
Banking Center.
(j) "Term" shall have the meaning set forth in Section 8.1 of this
Agreement.
ARTICLE II
BancTec Appointment
2.1 Appointment. During the Term of this Agreement, nFront hereby grants
to BancTec the non-exclusive right to market and promote the System to its
Customer Base and potential Bank customers of BancTec, and BancTec hereby
accepts such appointment. BancTec may market and promote the System anywhere in
the continental United States but shall have no right to market or promote the
System outside the United States without prior written consent from nFront.
BancTec understands, acknowledges and agrees that this appointment is
non-exclusive as to both the System and the geographic area and that nFront may
appoint itself or through other resellers or agents, resell or market the System
in any geographic area. nFront expressly reserves the right to sell and deliver
the System to any other entity, including Banks. BancTec shall market or promote
the System only to Banks, and shall not market and promote the System to other
parties providing core processing services to Banks, or to Bank service bureaus,
software providers, other marketers of automated bank services or to any other
buyer who intends, directly or indirectly, to resell or license the System
except that BancTec may market and promote the System to entities that BancTec
has licensed to use BancTec's Core Processing solution if BancTec has previously
obtained nFront's written consent to do so. nFront agrees that its consent will
not be unreasonably withheld. BancTec has no authority to appoint any associate
marketers or subdealers of the System without nFront's consent. BancTec, in its
sole discretion, will determine the manner in which BancTec markets and promotes
the System to its Customer Base and the potential Bank Customers of BancTec. Any
Banks that desire to purchase the System will enter into and sign an agreement
directly with nFront. nFront will be solely responsible for invoicing the
purchasers, collecting payment, and providing all installation, maintenance and
support services to the purchasers.
BancTec, in its sole discretion, will determine the manner in which
BancTec markets and promotes the System to its Customer Base and the potential
Bank customers of BancTec. Any Banks that desire to purchase the System will
enter into and sign an agreement directly with nFront. nFront will be solely
responsible for invoicing the purchasers, collecting payment, and providing all
installation, maintenance and support services to the purchasers.
2.2 Relationship between nFront and BancTec. BancTec shall perform its
obligations under this Agreement to market and promote the System as a principal
for its own account and at its own expense and risk. This Agreement does not in
any way create the relationship of principal and agent, or any similar
relationship between nFront and BancTec, including, but not limited to that of
joint ventures, partners or associates. BancTec is granted no right or authority
hereunder to assume or create any obligation or responsibility for or on behalf
of nFront or otherwise to bind or to use nFront's name other than as may be
expressly authorized by nFront.
<PAGE> 3
ARTICLE III
Promotion of Sales, Service and Training and Related Obligations
3.1 Marketing and Promotion. BancTec shall use its commercially reasonable
efforts to market and promote the sale of the System by nFront, which
commercially reasonable efforts shall include, but not be limited to, promotion
of the System to the Customer Base and prompt performance of all of its
obligations under this Agreement.
3.2 Staffing and Training. BancTec shall appoint its technically suitable
employees to market and promote the System, and provide Bank and End User Sales
support. BancTec shall, at its sole cost and expense, send the appropriate sales
personnel to such training programs and other refresher and upgrade training as
nFront may, at reasonable intervals, require. At BancTec's request, nFront shall
provide periodic routine consultation and advice to BancTec in connection with
BancTec's sales and service hereunder and shall provide at BancTec's cost: (a)
technical, specification and sales advice, (b) assistance and advice concerning
promotional and training programs, and (c) suggestions for new applications for
the System at BancTec's cost. nFront shall furnish BancTec with a supply of
price lists, sales literature, catalogues, specifications for Generic Hardware,
Documentation and advisory assistance with respect to the System. All
proprietary demonstration equipment, manuals, instruction books, contract forms,
sales and promotional materials, Documentation and similar material furnished to
BancTec by nFront, whether furnished free of charge or not, shall remain the
property of nFront and upon request shall be returned to nFront by BancTec.
3.3 nFront to Maintain the System. BancTec acknowledges, understands and
agrees that the System that it shall market and promote to Banks shall remain on
nFront's servers, and that such Banks shall, through BancTec, gain access to the
System only upon execution of a contract with nFront. nFront shall be
responsible for systems maintenance of the System resident on its servers.
3.4 BancTec Promotional Activity. nFront shall not share in the expense of
any advertising or promotional activities by BancTec or other sales promotion
projects except by express agreement in writing. All materials prepared by
BancTec that market and promote the System, including, but not limited to, any
materials that include any trademark or trade name (or any mark or name closely
resembling the same) now or hereafter owned or licensed by nFront or any of its
affiliates shall be approved in writing by nFront prior to use.
3.5 nFront Recordkeeping. nFront shall keep records of its business
relating to the System as may be reasonably required by BancTec. BancTec or its
authorized representative may, from time to time during regular business hours,
examine such records and nFront's accounts relating to the sale and servicing of
the System.
ARTICLE IV
Conditions of Sale
4.1 Fees. The fees for accessing the System by a Bank and/or an End User
and the processing fees for services thereunder shall be as set forth in Exhibit
D ("Fees") attached hereto.
4.2 Invoicing. nFront shall invoice the Banks and/or the End Users for
all Fees associated with the System.
4.3 Marketing Commissions. As compensation for the performance of BancTec's
obligations under this Agreement, BancTec shall be entitled to receive the
percentage of fees actually received by nFront ("Marketing Commissions") as set
forth in Exhibit D attached hereto. nFront shall pay to BancTec the Marketing
Commissions within ten (10) days of the end of the month that nFront receives
receipt of payment by a Bank and/or an End User. BancTec shall receive Marketing
Commissions for each Bank that is (i) registered by BancTec as an active nFront
lead, and (ii) a member of BancTec's Customer Base (either as of the Effective
Date or during the Term of this Agreement) when that Bank buys the System from
nFront; provided, however, that BancTec shall not receive
<PAGE> 4
Marketing Commissions for any Bank that has purchased the System from nFront
before that Bank becomes a member of BancTec's Customer Base.
4.4 Force Majeure. Neither party shall be liable for loss or damage due to
interruption of service or access to the System resulting from any cause beyond
its reasonable control, including, but not limited to, Internet systems or
network failure, capacity limitations, compliance with regulations, orders or
instructions of any federal, state or municipal government or any department or
agent thereof, acts of God, acts or omissions of the other party, acts of civil
or military authority, fires, strikes, facilities shutdowns or alterations,
embargoes, war, riot, delays in transportation, or inability to obtain necessary
labor, facilities or materials from usual sources. IN NO EVENT SHALL EITHER
PARTY BE LIABLE FOR CONSEQUENTIAL OR SPECIAL DAMAGES DUE TO ANY SUCH CAUSE.
4.5 Fee and System Changes. nFront shall have the right to change the
System without notice to BancTec, and shall have the right at any time to
discontinue the sale of any version of the System, to make changes in method of
access or delivery, including interface procedures, and to add improvements, all
without incurring any liability whatever. nFront may change its fees to End
Users for the System upon thirty (30) days' written notice to End Users.
4.6 Taxes and Other Fees. nFront shall pay all license fees, sales, use,
service use, occupation, personal property and excise taxes and any other fees,
assessments or taxes which may be assessed or levied by any federal, state or
local government and any departments and subdivisions thereof, against any of
the Systems ordered by an End User or under BancTec's direct or indirect
control.
ARTICLE V
Warranties
5.1 nFront's Warranty. nFront represents and warrants that the Software is
Year 2000 Compliant. For the purposes of this Agreement, "Year 2000 Compliant"
shall mean that the Software will: (i) report and display all dates, including
dates occurring before and after the year 2000, with a four-digit date; and (ii)
handle all leap years, including but not limited to the Year 2000 leap year,
correctly; provided, however, that nFront shall not be responsible or liable for
any date errors caused or contributed to by any third party software, any
operating systems, or any hardware. EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION
5.1 THE SYSTEM IS PROVIDED "AS-IS", "WHERE-IS". NFRONT SPECIFICALLY DISCLAIMS
ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AS TO THE
NHOME SYSTEM PROVIDED UNDER THIS AGREEMENT.
ARTICLE VI
Special Agreements Regarding Software and Other Intellectual Property
6.1 Limited License. In the performance of BancTec's obligations hereunder,
it shall be necessary for BancTec to demonstrate the System. Accordingly,
subject to the terms and conditions contained herein, nFront hereby grants to
BancTec, and BancTec hereby accepts from nFront, a non-exclusive license (the
"License") of the Software solely for the purpose of demonstrating the System in
operation to potential Bank customers of BancTec.
6.2 Software Covenants. BancTec agrees to comply with each of the
following requirements:
(a) BancTec shall not copy, alter, modify, translate, decompile,
disassemble, reverse engineer or otherwise attempt to derive source code, or
create derivative works of the Software, or any part thereof, or knowingly allow
others to do so, during or after the Term.
<PAGE> 5
(b) Except as otherwise specifically provided in this Agreement,
BancTec shall not loan, rent, lease, give, sub-license, or otherwise transfer,
nor communicate or otherwise disclose, the Software, including any part or any
copy thereof, in whole or in part, to any person.
(c) The Software, including all parts thereof, and any copies, in whole
or in part, and any and all copyrights thereto, are and remain the property of
nFront, irrespective of the ownership of the media on which such Software and
any parts or copies thereof are contained.
(d) Each copy of the Software sold to Banks by nFront shall include a
license agreement, the form of which shall be as set forth in the Exhibit E.
(e) BancTec acknowledges that the laws and regulations of the United
States restrict the export and re-export of commodities and technical data of
United States origin, including the System. BancTec agrees that it shall not
export or re-export such Software in any form without nFront's consent, which
consent shall, among other things be conditioned upon BancTec receiving the
appropriate United States and foreign government licenses and approvals.
(f) BancTec shall not, by any act or omission, impair or prejudice the
copyright or any other right of whatever nature of nFront in and to the System
or any part thereof, and shall not deal with the same in any manner which may
allow any third party to obtain any rights in the same which are inconsistent or
which conflict with the rights of nFront.
6.3 Notices; Markings; Trademarks; Tradenames. BancTec agrees to comply
with the following:
(a) BancTec shall not delete any trademarks, tradename or copyright
notice present in, on or displayed by the System, or any part thereof.
(b) BancTec shall not add to any notice present in, on or displayed by
the System its own copyright, trademark or other proprietary notices unless such
notices have been previously approved in writing by nFront.
(c) Except as already present in, on or displayed by the System
software and/or accompanying packaging or Documentation provided by nFront,
BancTec shall not use any trademarks and/or tradenames of nFront without prior
written approval of nFront.
6.4 Documentation. Each System sold by nFront to a Bank shall include one
(1) set of accompanying Documentation. nFront shall only distribute complete and
separate copies of the Documentation to Banks and shall not reproduce, in whole
or in part, or transfer in any manner to a third party other than a Bank, such
Documentation. Any and all copyrights to such Documentation are and shall remain
the property of nFront.
ARTICLE VII
Confidentiality and Non-Disclosure
7.1 BancTec Obligations.
(a) BancTec recognizes, acknowledges and agrees that during the Term of
this Agreement, nFront may furnish to BancTec certain technical and commercial
information that is proprietary and of value to nFront and that is generally not
known to nFront's competitors or the general public, which information includes,
but is not limited to, designs, procedures, formulas, discoveries, inventions,
improvements, innovations, concepts and ideas, lists of customers, computer
programs, business methods, and plans for future developments ("nFront's
Confidential Information"). BancTec recognizes, acknowledges and agrees that
nFront's Confidential Information is to be maintained in secrecy and confidence
by BancTec and BancTec's employees, agents or representatives to whom BancTec
discloses any of nFront's Confidential Information. BancTec agrees for itself
and for each of its
<PAGE> 6
employees, agents or representatives to whom BancTec discloses any of nFront's
Confidential Information that such information shall be used only in accordance
with the terms, covenants, conditions and limitations of this Agreement, and not
for the benefit of or for, directly or indirectly, BancTec or any of its
employees, agents or representatives. Information made available to the general
public by nFront and information obtained from third parties not associated with
nFront shall not be considered to be nFront's Confidential Information, except
for information received from third parties that BancTec knows or should have
known was obtained illegally or in violation of this Agreement. Information
disclosed to BancTec by nFront that was previously known to BancTec (and that
can be proven to have been previously known to BancTec) shall not be considered
to be nFront's Confidential Information. In the event BancTec or a
representative of BancTec is requested by law, order of court or any agency to
disclose any of nFront's Confidential Information, BancTec shall give nFront
prompt notice of such request so that nFront may seek an appropriate protective
order. If, in the absence of a protective order, BancTec or a representative of
BancTec is nonetheless compelled by law to disclose any of nFront's Confidential
Information, BancTec or a representative of BancTec, as the case may be, may
disclose such information in such proceeding without liability hereunder;
provided, however, that BancTec gives nFront written notice of the information
to be disclosed within five (5) business days after receipt of such order by
BancTec and, upon nFront's request and at its expense, BancTec shall use its
best efforts to obtain assurances that confidential treatment shall be accorded
to such information.
(b) In the event this Agreement is terminated for any reason, upon
receipt of nFront's written request, BancTec agrees to return promptly nFront's
Confidential Information, including all copies thereof, to nFront, or to deliver
all such information promptly to such party as may be designated by nFront.
BancTec further agrees thereafter not to use or disclose nFront's Confidential
Information in any manner whatsoever without the prior written approval of
nFront unless and until such information shall lawfully become generally known
in the public domain through no fault of the BancTec or breach by the BancTec of
the covenants contained herein.
(c) BancTec shall disclose nFront's Confidential Information to Banks
without nFront's written permission.
7.2 nFront's Obligations.
(a) nFront recognizes, acknowledges and agrees that during the Term of
this Agreement, BancTec may furnish to nFront certain technical and commercial
information that is proprietary and of value to BancTec and that is not
generally known to BancTec's competitors or the general public, which
information includes, but is not limited to designs, procedures, formulas,
discoveries, inventions, improvements, innovations, concepts and ideas, lists of
customers, computer programs, business methods, and plans for future
developments ("BancTec's Confidential Information"). nFront recognizes and
agrees that, except as otherwise provided herein, BancTec's Confidential
Information is to be maintained in secrecy and confidence, except as provided
herein, and used only in accordance with the terms, covenants, conditions and
limitations of this Agreement. Information made available to the general public
and information obtained from third parties not associated with BancTec shall
not be considered to be BancTec's Confidential Information, except for
information received from third parties that nFront knows or has reason to know
was obtained illegally or in violation of this Agreement. Information disclosed
to nFront by BancTec that was previously known to nFront (and that can be proven
to have been previously known to nFront) shall not be considered to be BancTec's
Confidential Information. In the event nFront or a representative of nFront is
requested by law, order of court or any agency to disclose any of BancTec's
Confidential Information, nFront shall give BancTec prompt notice of such
request so that BancTec may seek an appropriate protective order. If, in the
absence of a protective order, nFront or a representative of nFront is
nonetheless compelled by law to disclose any of BancTec's Confidential
Information, nFront or a representative of nFront, as the case may be, may
disclose such information in such proceeding without liability hereunder;
provided, however, that nFront gives BancTec written notice of the information
to be disclosed within five (5) business days after receipt of such order by
nFront and, upon BancTec's request and at its expense, nFront shall use its best
efforts to obtain assurances that confidential treatment shall be accorded to
such information.
(b) In the event this Agreement is terminated for any reason, upon
receipt of BancTec's written request, nFront agrees to return promptly BancTec's
Confidential Information, including all copies thereof, to BancTec or
<PAGE> 7
to deliver all such information promptly to such party as may be designated by
BancTec. nFront further agrees thereafter not to use or disclose BancTec's
Confidential Information in any manner whatsoever without the prior written
approval of BancTec unless and until such information shall lawfully become
generally known in the public domain through no fault of nFront or breach by
nFront of the covenants contained herein.
ARTICLE VIII
Term and Termination
8.1 Term. This Agreement shall commence as of the Effective Date hereof
and shall remain in effect (unless sooner terminated pursuant to Section 8.2
hereof) for five (5) years (the "Term"). It shall be renewed automatically
without interruption for successive five-year terms, unless, not less than sixty
(60) days before the end of any Term, either nFront or BancTec notifies the
other party in writing of its election (at its sole option, for any reason or
for no reason) not to renew. Any such renewal periods shall be considered an
extension of and part of the Term of this Agreement.
8.2 Right to Terminate. Notwithstanding any other provision hereof, this
Agreement may be terminated either (i) by mutual agreement of the parties
hereto; (ii) by either party at any time if the other party has materially
breached any of the provisions hereof and, has failed to cure such alleged
breach within thirty (30) days after written notice thereof in the case of
failure to pay when due amounts owing to such party, and within sixty (60) days
in case of all other alleged curable breaches; or (iii) by either party
immediately and without the giving of notice, in the event that either party
shall become insolvent, or shall ask its creditors for a moratorium, or shall
file a voluntary petition in bankruptcy, or shall be adjudicated as a bankrupt
pursuant to an involuntary petition, or shall suffer appointment of a temporary
or permanent receiver, trustee, or custodian for all or a substantial part of
its assets which shall not be discharged within sixty (60) days. Notwithstanding
the foregoing, in the event either party materially breaches any of the
provisions of Articles VI or VII hereof, this Agreement shall be immediately
terminable by the non-breaching party.
8.3 Effect of Termination.
(a) Any termination of this Agreement shall not release either party
from paying any amount which may then be owing to the other party. Either party
may offset and deduct from any or all amounts owed to the other party, if any,
any or all amounts owed by the other party, rendering to the other party the
excess, if any.
(b) In the event of termination of this Agreement by either party or
automatically as provided herein, it is understood that nFront shall not have
any obligation to provide further access to BancTec's Customer Base beyond
nFront's obligations contained in nFront's agreements with Banks that were
entered into prior to termination of this Agreement, however if nFront continues
to provide access to all or any part of BancTec's Customer Base after
termination of this Agreement, such continuation shall not be construed as a
renewal of this Agreement for any further term nor as a waiver of such
termination.
(c) Upon termination of this Agreement, upon receipt of nFront's
written request, BancTec shall return to nFront, promptly and without charge to
nFront, all Documentation, price lists, maintenance and policy manuals, sales
aids and other publications of nFront relating to the System that BancTec has on
hand. BancTec shall thereupon promptly cease using any trademarks, tradenames,
service marks or other identifying marks owned or controlled by nFront on any of
its materials.
(d) BancTec shall be solely responsible for all commitments incurred or
assumed by BancTec during the Term of this Agreement or thereafter to BancTec's
Customer Base, and nFront shall not be held responsible in any manner therefor,
irrespective of any suggestion or recommendation with respect thereto by nFront
or any of its employees or representatives unless nFront has expressly agreed in
writing to assume the responsibility.
<PAGE> 8
ARTICLE IX
Premier Partnership Status Provision
9.1 Premier Partnership Status Provision. During the Term of the Agreement,
BancTec will promote and present nFront as BancTec's sole Premier Partner.
"Premier Partner" status means that nFront's System shall be BancTec's highest
recommended Internet banking solution and BancTec will lead all Internet banking
sales with the nFront System. BancTec is not precluded from providing interfaces
to other Internet banking solutions upon Customer's request, however, BancTec
will charge those Customers the necessary interface fees to certify the
non-nFront Internet banking system.
ARTICLE X
Indemnification; Other Relief
10.1 Indemnification by BancTec. Subject to the limitations set forth in
Section 10.5 of this Agreement, BancTec shall indemnify, defend and hold
harmless nFront, its officers, directors, shareholders, employees, agents and
affiliates from and against any claims, losses, damages, liabilities or expenses
(including, without limitation, reasonable attorneys' fees and expenses)
(collectively, "Claims") resulting from or arising out of BancTec's gross
negligence and willful misconduct with respect to the System or any part thereof
or any misrepresentations made by BancTec with respect to the System, provided,
however, that in respect of any Claims hereunder against BancTec that arise out
of or result from any alleged gross negligence and/or willful misconduct of
BancTec or any alleged misrepresentation made by BancTec with respect to the
System, BancTec shall be notified promptly of such Claim in writing and shall be
given authority, control and full and proper information and assistance in the
defense and settlement of such Claim. Notwithstanding the foregoing, BancTec
shall not have the authority to settle or compromise any Claim in a manner that
indicates that nFront contributed to or was responsible for the cause of any
such Claim unless nFront consents in writing to such settlement.
10.2 Indemnification by nFront.
(a) Subject to the limitations set forth in Section 10.5 of this
Agreement, nFront shall indemnify, defend and hold harmless BancTec, its
officers, directors, shareholders, employees, agents and affiliates from and
against claims, losses, damages, liabilities or expenses (including, without
limitation, reasonable attorneys' fees and expenses) resulting from or arising
out of nFront's gross negligence and/or willful misconduct with respect to the
System or any part thereof or any misrepresentations made by nFront with respect
to the System, provided, however, that in respect of any claim, suit or
proceeding hereunder against nFront that arise out of or result from any alleged
gross negligence and/or willful misconduct of nFront or any alleged
misrepresentation made by nFront with respect to the System, nFront shall be
notified promptly of such claim, suit or proceeding in writing and is given
authority, control and full and proper information and assistance in the defense
and settlement of such claim, suit or proceeding. Notwithstanding the foregoing,
nFront shall not have the authority to settle or compromise any Claim in a
manner that indicates that BancTec contributed to or was responsible for the
cause of any such Claim unless BancTec consents in writing to such settlement.
(b) Subject to the limitations set forth in Section 10.5 hereof, nFront
shall indemnify, defend and hold harmless BancTec, its officers, directors,
shareholders, employees, agents and affiliates from and against any claim, suit
or proceeding based upon an allegation that the System (or any portion thereof)
infringes upon or misappropriate any copyright, patent, trademark or trade
secret of any third party, provided that nFront is notified promptly of such
claim, suit or proceeding in writing and is given authority, control and full
and proper information and assistance in the defense and settlement of such
claim, suit or proceeding. If the System is finally determined by a court of
competent jurisdiction to constitute an infringement of any patent, copyright,
trademark or other trade secret of a third party and its use is enjoined, nFront
shall either:
(i) procure the right for End Users to continue to use
the System; or
<PAGE> 9
(ii) replace or modify the System with an equivalent
version of the System that is not so infringing.
10.3 Arbitration. The parties to this Agreement agree that any controversies
or claims arising out of or relating to this Agreement (including, without
limitation, any alleged breach thereof or the termination or non-renewal
thereof) shall be settled by arbitration pursuant to the Federal Arbitration
Act, 9 U.S.C. ss. 1 et. seq., in accordance with the Commercial Arbitration
Rules of the American Arbitration Association. The parties hereto further agree
that the arbitrators in any such arbitration shall not be authorized to award
any punitive damages in connection with any controversy or a claim settled by
arbitration hereunder. The decision of the arbitrator in any such arbitration
shall be final and binding upon the parties and judgment upon the award may be
entered in any court having jurisdiction thereof. Any arbitration shall take
place in Atlanta, Georgia if the arbitration is initiated by BancTec and in
Dallas, Texas if the arbitration is initiated by nFront, and the expenses of the
arbitrators shall be allocated by such arbitrators. The arbitration shall be
conducted before a panel of three (3) arbitrators, one selected by BancTec, one
selected by nFront, and one selected by mutual agreement of the arbitrators
selected by BancTec and nFront.
10.4 Injunctive Relief. Notwithstanding the provisions of Section 10.3
hereof, the parties acknowledge and agree that any breach of the provisions of
Articles VI or VII of this Agreement shall result in irreparable harm to a party
for which no adequate remedy at law exists. Accordingly, upon any such breach, a
party shall be entitled to seek injunctive or other appropriate extraordinary
relief, such relief being in addition to, and not in lieu of, any other rights
and remedies, including the award of damages, available at law or in equity. Any
violation of the restraints set forth herein shall automatically extend the
period of such restraints for the amount of time such violation continues,
provided that a party seeks enforcement promptly after discovery of such
violation. nFront shall not be required to prove money damages to seek
injunctive relief under this Agreement.
10.5 LIMITATION OF LIABILITY. (a) IN NO EVENT SHALL NFRONT BE LIABLE FOR ANY
LOSS OF PROFIT OR ANY OTHER INDIRECT COMMERCIAL DAMAGE, INCLUDING BUT NOT
LIMITED TO SPECIAL, INCIDENTAL, CONSEQUENTIAL OR OTHER INDIRECT DAMAGES UNDER
ANY CAUSE OF ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, INCLUDING,
WITHOUT LIMITATION, CLAIMS ARISING FROM MALFUNCTION OR DEFECTS IN THE NHOME
SYSTEM OR NON-DELIVERY OF NHOME SYSTEM EVEN IF NFRONT HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. EXCEPT FOR NFRONT'S OBLIGATION TO INDEMNIFY BANCTEC
UNDER SECTION 10.2 ABOVE, IN NO EVENT SHALL NFRONT'S LIABILITY TO BANCTEC FOR
ANY CLAIM ARISING OUT OF THIS AGREEMENT EXCEED THE GREATER OF (i) THE AMOUNT OF
MARKETING COMMISSIONS DUE AND OWING TO BANCTEC, OR (ii) $25,000.
(b) IN NO EVENT SHALL BANCTEC BE LIABLE FOR ANY LOSS OF PROFIT OR ANY
OTHER INDIRECT COMMERCIAL DAMAGE, INCLUDING BUT NOT LIMITED TO SPECIAL,
INCIDENTAL, CONSEQUENTIAL OR OTHER INDIRECT DAMAGES UNDER ANY CAUSE OF ACTION
ARISING OUT OF OR RELATING TO THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION,
CLAIMS ARISING FROM MALFUNCTION OR DEFECTS IN THE NHOME SYSTEM OR NON-DELIVERY
OF NHOME SYSTEM EVEN IF BANCTEC HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES. EXCEPT FOR BANCTEC'S OBLIGATION TO INDEMNIFY NFRONT UNDER SECTION 10.1
ABOVE, IN NO EVENT SHALL BANCTEC'S LIABILITY TO NFRONT FOR ANY CLAIM ARISING OUT
OF THIS AGREEMENT EXCEED THE GREATER OF (i) THE AMOUNT OF MARKETING COMMISSIONS
PAID TO BANCTEC WITHIN THE THREE (3) MONTH PERIOD PRIOR TO THE ACCRUAL OF THE
CLAIM, OR (ii) $25,000.
<PAGE> 10
ARTICLE XI
Miscellaneous Provisions
11.1 Waiver. Any failure of a party to comply with any obligation, covenant,
agreement or condition herein may be expressly waived in writing by the other
party, but such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
11.2 Entire Agreement. This Agreement, the exhibits and schedules hereto
constitutes the entire understanding of the parties with respect to the subject
matter of this Agreement and are intended to supersede all prior understandings,
whether written or oral, between the parties with respect thereto.
11.3 No Third Party Beneficiary Rights. No provision of this Agreement is
intended or shall be construed to provide or create any third party beneficiary
right or any other right of any kind in any Bank or any client, customer,
affiliate, insurer, lender, shareholder, partner, officer, director, employee or
agent of any party hereto, or in any other person.
11.4 Amendment; Binding Effect; Assignment. No amendment, modification or
alteration of the terms of this Agreement shall be binding unless in writing and
executed by the parties hereto. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the parties hereto and their respective
successors, assigns, heirs, executors and administrators. Neither party may
assign this Agreement, in whole or in part, or any of its rights or obligations
hereunder without the prior written consent of nFront, and any such attempted
assignment shall be void. Notwithstanding the foregoing, nFront may freely and
without the consent of BancTec assign this agreement in connection with the sale
of all or substantially all of its assets or a merger or similar amalgamation.
11.5 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Georgia, without giving
effect to the conflict of laws principles thereof.
11.6 Severability. If any provision of this Agreement is held to be illegal,
invalid or unenforceable under present or future laws effective during the Term
of this Agreement, such provision shall be fully severable. This Agreement shall
be construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part of this Agreement, and the remaining provisions of
this Agreement shall remain in full force and effect and shall not be affected
by the illegal, invalid or unenforceable provision or by its severance from this
Agreement.
11.7 Counterparts. This Agreement may be executed simultaneously or in two
or more counterparts, each of which together shall constitute one and the same
instrument and shall be deemed an original hereof.
11.8 Notices. All notices required or permitted under this Agreement shall
be made in writing and shall be deemed to have been duly given if delivered
personally or sent by registered or certified mail (return receipt requested),
U.S. mail or facsimile. All notices shall be addressed to the parties at the
respective addresses indicated above.
11.9 Survival. The provisions of Articles VI, VII, VIII, X and XI shall
survive any termination or expiration of this Agreement.
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the Effective Date.
NFRONT, INC.
By: /s/ Tripp Rackley
------------------------
Its: Chairman/CEO
Date: 3/8/99
BANCTEC USA, INC.
By: /s/ KM Lopez
------------------------
Its: VP
Date: 3/1/99
<PAGE> 12
EXHIBIT A
NHOME - ONLINE INTERNET BANKING SERVICE
<TABLE>
<CAPTION>
CURRENT FUNCTION
----------------
<S> <C>
1. View Account Balances and Current Statement Transactions
- DDA/Savings X
- CD/IRA X
- Loans X
- Line of Credit X
2. Internal Transfer of Funds between DDA, Savings, Loan and Line of Credit
accounts, using ACH formatted file
- Immediate and Future Transfers X
- One Time and Recurring Transfers X
3. Pending Web Transfer and Bill Pay Transactions
- View, edit, delete future Web Transactions X
4. Bill Payment
- One Time, Future and Recurring Payments X
- Payment Reporting X
5. Custom Reports for Historical Transactions
- View customer account information for up to two years X
6. Password Manager
- Secure log in X
- Create and change customer password information X
7. Personal Information
- View customer information file X
8. PFM Downloads
- Microsoft Money(TM) X
- Quicken(TM) X
11. Online Help X
12. Online Banking Demo X
13. Bank Administration Site - nHome Functions
- Detailed Internet Branch Billing X
- Billing System for nHome On-Line Banking and Bill Payment X
customers, using ACH formatted file
- nReach - Data Mining and Marketing module
- Database Query Capability X
- Promotional E-mails to selected customers X
</TABLE>
<PAGE> 13
NBUSINESS ONLINE BANKING SERVICE
<TABLE>
<CAPTION>
CURRENT FUTURE
FUNCTION FUNCTION
-------- --------
<S> <C> <C>
1. View Account Balances and Histories
- DDA/Savings X
- CD/IRA X
- Loans and Line of Credit X
2. ACH formatted Transfers - Book Transfers, Drafts, Disbursements, Direct
Deposits between DDA, Savings, Loan, LOC accounts
- Immediate and Future Transfers
- One Time, Recurring Transfers and Pending Transfers X
- View Historical Transfers X
X
3. Bill Payment
- Immediate and Future Bill Payments X
- One Time and Recurring Payments X
- Pending Bill Payments X
- Historical Bill Payments X
4. User Resources
- Online Payee Database X
- Business Calculators X
- Text Messaging X
- Categories & Journal Entries X
5. Balance Reporting
- View customer account information for up to two years X
6. Multi-User permissions
- SuperUser sets up and controls subordinate members' functional access X
- Secure log-in X
- Create and change customer password information X
- Control Account access and disbursement levels X
7. Business application integration
- Microsoft Money, Quicken X
- Peachtree, Quick Books, Comma Delimited X
8. Online Help X
9. Virtual Status Requests - EFTPS (Electronic Federal Tax Payments), Stop
Payments, Wire Transfers
- Immediate and Future transactions (where applicable) X
- Recurring Transactions X
- Pending Transactions X
- View Historical Transfers X
10. Additional Functions
- Cash Concentration X
- Controlled Disbursements X
- Cash Flow Manager/Daily Transaction Journal X
- ACH version of EFTPS X
</TABLE>
<PAGE> 14
<TABLE>
<CAPTION>
CURRENT FUTURE
FUNCTION FUNCTION
-------- --------
<S> <C> <C>
11. Bank Administration Site - nBusiness Functions
- Set/Reset challenge code/Password for SuperUser X
- Flag accounts as Cash Management X
- Audit Management
- Receive/respond to time-sensitive Virtual Status
Requests (VSRs): Stop Pay, Wire Transfers, EFTPS X
- Detailed Internet Branch Billing X
- Billing System for nBusiness(SM) Customers using ACH formatted file
- nReach(SM) - Data Mining and Marketing module X
- Database Query Capability X
- Promotional e-mails to selected nBusiness(SM) customers X
- Internet Branch Reporting X
X
</TABLE>
<PAGE> 15
EXHIBIT B
Marketing Agreement dated March 1, 1999
BANCTEC CUSTOMER BASE
For purposes of the Marketing Agreement dated March 1, 1999 BancTec USA
Inc.'s Customer Base shall be and include any and all Customers of BancTec USA,
Inc.'s Community Banking Group whose work is not being processed by a BancTec
Data Center.
<PAGE> 16
EXHIBIT C
<PAGE> 17
EXHIBIT D
[See Attached]
<PAGE> 18
EXHIBIT D - FEES
<TABLE>
<CAPTION>
nHome and Banctec
nHome nBusiness nBusiness Commission
----- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
IMPLEMENTATION FEE - NEW CUSTOMERS
From 11/1/98 to 12/31/98 $[++++++] $ [++++++] $ [++++++] 40% footnote
From 1/1/99 to 4/30/99 $[++++++] $ [++++++] $ [++++++] 40% footnote
After 5/1/99 $[++++++] $ [++++++] $ [++++++] 40% footnote
MONTHLY MAINTENANCE FEE
From 11/1/98 to 1/31/99 $ [++++] $ [++++] $ [++++] 20%
From 2/1/99 to 4/30/99 $ [++++] $ [++++] $ [++++] 20%
After 5/1/99 $ [++++] $ [++++] $ [++++] 20%
PER CUSTOMER FEES
Customer Monthly Fee $ [++++] $ [++++] 20%
New Customer Setup - One Time $ [++++] $ [++++] 20%
TRANSACTION FEES
nBranch Product and Service Fees $ [++++] $ [++++] n/a
ACH Draft $ [++++] n/a
ACH Disbursement $ [++++] n/a
Direct Deposit $ [++++] n/a
Book Transfer $ [++++] n/a
Wire Transfer $ [++++] n/a
Stop Pay $ [++++] n/a
EFTPS - same day request $ [++++] n/a
EFTPS - pass through ACH $ [++++] n/a
Controlled Disbursement (per day) $ [++++] n/a
Cash Concentration $ [++++] n/a
BILL PAYMENT
Monthly Fee/Account $ [++++] included n/a
Per Payment (Internet or Phone) $ [++++] $ [++++] n/a
Customer Setup $ [++++] included n/a
Canceled Check Copy $ [++++] $ [++++] n/a
NSF Fee $ [++++] $ [++++] n/a
Stop Pay Fee $ [++++] $ [++++] n/a
Additional User Kits $ [++++] $ [++++] n/a
Telephone Bill Payment Setup Fee (One Time) $ [++++] $ [++++] $ [++++] n/a
Telephone Bill Payment Monthly Maint. Fee $ [++++] $ [++++] $ [++++] n/a
Telephone Bill Payment Communications Quote Quote
CHECK IMAGING
DSI Setup Fee Quote Quote n/a
Greenway Setup Fee Quote Quote n/a
Per Check Image Fee Quote Quote n/a
Check Imaging Communications Charges Quote Quote n/a
OPTIONS
nReach Data Mining Reports (Per Report) $ [++++] $ [++++] n/a
nForm Multimedia Presentation (10 Frames) $ [++++] $ [++++] 40%
Site Map Construction $ [++++] $ [++++] $ [++++] 40%
Management Reporting (Per Month) $ [++++] $ [++++] 20%
Internet TV Site Quote n/a
Employee Training Program $ [++++] n/a
Jump Start Marketing And Promotion Program $ [++++] n/a
</TABLE>
<PAGE> 19
Footnote: Commissions on Implementation Fees are paid net of 3rd party expenses
to Bill Payment provider.
Prices Effective 11/1/98
<PAGE> 20
EXHIBIT E
NFRONT INTERNET BANKING SERVICES AGREEMENT
THIS NFRONT INTERNET BANKING SERVICES AGREEMENT ("Agreement") is made
effective this ____ day of ____, 1998 ("Effective Date") by and between NFRONT,
INC. ("nFront"), a Georgia corporation having its primary offices at 520
Guthridge Court N.W., Suite 100, Norcross, Georgia 30092-3503, facsimile number
(770) 209-9093 and __________________ ("Bank"), a __________ corporation having
its primary offices at ____________________________, facsimile number
___________________.
BACKGROUND
WHEREAS, nFront is in the business of providing Internet-based banking
services to banks and other financial institutions;
WHEREAS, Bank desires to offer to its Customer Base (defined below) and
potential customers Internet-based banking capabilities;
NOW, THEREFORE, in consideration of the mutual agreements set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION ONE
DEFINITIONS
1. In addition to all other terms defined herein, the following terms
shall have the following meanings:
(a) "Agreement" means this agreement, together with all schedules and
Exhibits attached hereto or hereafter attached by mutual consent of the parties
(all of which are herein incorporated by reference).
(b) "Customer Base" means those customers of Bank as of the Effective
Date and those who become customers of Bank during the Term.
(c) "Documentation" means that portion of the System that provides
installation and operating instructions for use of the System by Bank.
(d) "End-User" means a Bank customer who uses the System.
(e) "Fees" means all fees payable by Bank to nFront under this
Agreement including, but not limited to, all the fees listed in Exhibit B,
Termination Fees and Bill Payment Fees.
(f) "File Transmission Computer" means Bank's computer equipment,
software, secure communications software and secure communications lines that
meet the specifications for use with the System.
(g) "nFront's Secure Server" means the server-grade computer owned and
maintained by nFront on which the System and Bank's Internet Branch resides.
(h) "Services" mean all services provided to Bank by nFront under this
Agreement.
(i) "Software" means that portion of the System that is comprised of
nFront's computer programs installed on nFront's Secure Server.
(j) "System" shall mean nFront's Software and nFront's proprietary
Internet banking system as more fully described in EXHIBIT C attached hereto,
together with all System Modifications made available to Bank under
<PAGE> 21
this Agreement.
(k) "Term" means the Initial Term and all Renewal Terms.
(l) "Bank Data Center" shall mean the Bank's internal data processing
department, the Bank's core processor or the Bank's service bureau that provides
nFront with the electronic customer files that nFront will process.
SECTION TWO
SCOPE OF SERVICES
2.1 Authorized Services. During the Term, Bank is authorized to use the
capabilities of the nFront System as specified in EXHIBIT A ("Authorized
Services").
2.1.1 nFront's Obligations. During the Term and for the Authorized
Services, nFront shall provide Bank with the following:
(a) design and installation of nBranch - an Internet branch of
Bank on the World Wide Web of the Internet ("Internet Branch")
in accordance with the specifications set forth in EXHIBIT D;
(b) host and maintain the Internet Branch on nFront's Secure
Server;
(c) provide interactive banking service capabilities to Bank
through the use of the System;
(d) provide specifications for File Transmission Computer as set
forth in EXHIBIT E or as modified by nFront from time to time
("Technical Specifications");
(e) train Bank's personnel in the daily operation and update
procedures for the System as set forth in EXHIBIT F; and
(f) through a third party processing agent, provide the bill
payment services listed in EXHIBIT G and on the terms set
forth therein ("Bill Payment Services").
2.1.2 Software Access License. During the Term of this Agreement and
for the Authorized Services and subject to the limitations set forth herein,
nFront grants to Bank a limited, non-exclusive, and non-assignable license to
access the Software located on nFront's Secure Server for the purpose of
receiving the Services and using the System. nFront reserves all rights not
expressly granted herein. Without limiting the foregoing, Bank has no right to
possess the Software or any copies thereof in any form.
2.1.3 nFront Mark License. During the Term of this Agreement and
subject to the limitations set forth herein, nFront grants to Bank a limited,
non-exclusive, and non-assignable license to use the "NFRONT MARK" solely for
the purpose of describing the Services and the System to the Customer Base and
for no other purpose.
2.1.4 Consulting Services. Bank may request that nFront perform
consulting services in addition to the Services set forth herein ("Consulting
Services"). Consulting Services, if any, are described on EXHIBIT H. When the
parties have agreed to the scope of Consulting Services as set forth in EXHIBIT
H, such Consulting Services shall be considered part of the "Services" provided
under this Agreement. All Consulting Services shall be performed pursuant to the
terms of this Agreement and EXHIBIT H.
2.2 Bank's Obligations. As promptly as practicable following the execution
of this Agreement, and at its sole cost and expense, Bank shall obtain or
otherwise make available to nFront the File Transmission Computer and other
recommended equipment meeting the Technical Specifications. During the Term,
Bank at its sole cost and expense, shall:
(a) employ technically suitable employees to support the System
and provide End User support;
(b) make available the appropriate Bank personnel to attend such
training programs and other refresher and upgrade training as
nFront may, at reasonable intervals, recommend or require (at
either the executive offices of Bank or nFront, as designated
by nFront);
(c) adhere, and cause its employees and agents to adhere, to the
security procedures established by nFront from time to time;
<PAGE> 22
(d) perform periodic file updates as provided in EXHIBIT F
attached hereto;
(e) not offer, directly or indirectly, any Internet banking
service except pursuant to this Agreement; and
(f) set up and maintain test accounts throughout the Term of the
Agreement. Test accounts should consist of a DDA and savings
account tied to the same social security number or tax
identification number with balances of at least $10.
2.3 Relationship Between nFront and Bank. This Agreement does not in any
way create the relationship of principal and agent, or any similar relationship
between nFront and Bank, including, but not limited to that of joint ventures,
partners, employees or associates. Bank is granted no right or authority
hereunder to assume or create any obligation or responsibility for or on behalf
of nFront or otherwise to bind or to use nFront's name other than as may be
expressly authorized by nFront.
SECTION THREE
FEES AND PAYMENT TERMS
3.1 Fees and Payment Terms. Bank agrees to pay the Fees for the Services
set forth herein and in the EXHIBITS. Bank also agrees to pay or reimburse
nFront for any travel-related and other out-of-pocket expenses reasonably
incurred by nFront in the performance of Services. nFront will invoice Bank for
the Implementation Fees set forth in EXHIBIT B on the Effective Date and payment
is due within ten (10) days from receipt of the invoice. All monthly Fees,
Consulting Fees and all other Fees and expenses are due and payable within ten
(10) days of receipt of the invoice. nFront will assess a late payment Fee equal
to the lesser of one and one-half percent (1-1/2%) of the unpaid amount or the
highest interest rate allowed by applicable law for each succeeding thirty (30)
day period or portion thereof in which Fees or expenses remain unpaid.
3.2 System Changes and Fee Changes.
(a) nFront shall have the right to modify the System including, without
limitation, to: (i) make changes in method of access to or delivery of the
System including, without limitation, interface procedures ("File Interface
Changes"), or (ii) add improvements to the System which are provided to Bank at
no additional cost ("System Enhancements"), or (iii) provide additional
functionality that is offered to Bank for such Fees as nFront may deem
appropriate ("System Options") (collectively "System Modifications").
(b) nFront will provide Bank thirty (30) days prior written notice of
any File Interface Changes.
(c) nFront may, at its option, elect to pay such additional Fees for
System Options and thereafter have access to such System Options.
(d) nFront reserves the right to increase Fees and will provide thirty
(30) days written notice to Bank prior to any increase in the Fees. Within ten
(10) days of receipt of notice from nFront of a Fee change, Bank may, at its
option, terminate this Agreement as set forth in Section 6 below.
3.3 Taxes and Other Fees. Bank shall pay all sales, use, service,
occupation, personal property, value-added and excise taxes and any other fees,
assessments or taxes which may be assessed or levied by any taxing authority
against Bank's use of the System or receipt of the Services.
SECTION FOUR
WARRANTIES
4.1 System Warranty. nFront represents and warrants that the nFront
Software is Year 2000 Compliant (as defined below). "Year 2000 Compliant" means
that the nFront Software will: (i) report and display all dates, including dates
occurring before and after the year 2000, with a four-digit date; and (ii)
handle all leap years, including but not limited to the Year 2000 leap year,
correctly; provided, however, that nFront shall not be responsible or liable for
any date errors caused or contributed to by any third party software, any
operating system, or any hardware. EXCEPT AS SPECIFICALLY SET FORTH IN THIS
SECTION 4.1, THE SYSTEM AND ALL
<PAGE> 23
SERVICES ARE PROVIDED BY NFRONT "AS-IS", "WHERE-IS". NFRONT SPECIFICALLY
DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED
TO, IMPLIED WARRANTIES OF MERCHANTABILITY, ACCURACY AND FITNESS FOR A PARTICULAR
PURPOSE AS TO THE SYSTEM OR SERVICES PROVIDED UNDER THIS AGREEMENT. WITHOUT
LIMITING THE FOREGOING, NFRONT DOES NOT WARRANT THAT THE USE OF THE SYSTEM, THE
NFRONT SOFTWARE OR NFRONT'S COMPUTER SERVERS WILL BE UNINTERRUPTED OR ERROR
FREE.
4.2 Security. nFront has made available to Bank a description of its
methods and procedures to safeguard the System, and, as part of nFront's
Services, will provide Bank with procedures which Bank is obligated to employ to
help secure the integrity of the System and Bank's data. nFront agrees to notify
Bank of any security breach of any End User's account on the System within a
commercially reasonable time. BANK UNDERSTANDS AND ACKNOWLEDGES THAT CERTAIN
RISKS ARE INHERENT IN THE TRANSMISSION OF INFORMATION OVER THE INTERNET. BANK
CHOOSES TO USE THE SECURITY MEASURES PROVIDED BY NFRONT EVEN THOUGH OTHER
SECURITY PROCEDURES ARE AVAILABLE. NFRONT MAKES NO REPRESENTATION, WARRANTY,
COVENANT OR AGREEMENT THAT ITS SECURITY MEASURES WILL BE EFFECTIVE AND NEITHER
NFRONT NOR ITS SUCCESSORS OR ASSIGNS SHALL HAVE ANY LIABILITY FOR THE BREACH OF
ITS SECURITY MEASURES, THIS SECTION OR THE INTEGRITY OF THE SYSTEM OR NFRONT'S
COMPUTER SERVERS.
SECTION FIVE
CONFIDENTIALITY AND NON-DISCLOSURE
5.1 In the performance of this Agreement, either party may disclose to the
other certain Proprietary Information. Proprietary Information includes, without
limitation, the Software, Documentation, business plans, financial information,
customer lists, procedures, formulas, discoveries, inventions, improvements,
innovations, concepts and ideas and information regarding Bank's customers and
their accounts. The receiving party agrees to hold the Proprietary Information
disclosed by the other party in strictest confidence and not to, directly or
indirectly, copy, use, reproduce, distribute, manufacture, duplicate, reveal,
report, publish, disclose, cause to be disclosed, or otherwise transfer the
Proprietary Information for any purpose whatsoever other than as expressly
provided by this Agreement.
5.2 For the purposes of this Agreement, (i) "Proprietary Information"
means Trade Secrets and Confidential Information; (ii) "Trade Secrets" means
trade secrets as defined under Georgia law; and (iii) "Confidential Information"
means information that is of value to its owner and is treated as confidential
other than Trade Secrets. Both parties acknowledge and agree that the
Proprietary Information shall remain the sole and exclusive property of the
disclosing party or a third party providing such information to the disclosing
party. The disclosure of the Proprietary Information does not confer upon the
receiving party any license, interest, or rights of any kind in or to the
Proprietary Information, except as expressly provided under this Agreement.
Subject to the terms set forth herein, the receiving party shall protect the
Proprietary Information of the disclosing party with the same degree of
protection and care the receiving party uses to protect its own Proprietary
Information, but in no event less than reasonable care. With regard to Trade
Secrets, the obligations in this Section shall continue for so long as such
information constitutes a Trade Secret. With regard to Confidential Information,
the obligations in this Section shall continue for the term of this Agreement
and for a period of five (5) years thereafter.
5.3 Nothing in this Section 5 shall prohibit or limit the receiving party's
use of information if (i) at the time of disclosure hereunder such information
is generally available to the public; (ii) after disclosure hereunder such
information becomes generally available to the public, except through breach of
this Agreement by the receiving party; (iii) the receiving party can demonstrate
such information was in its possession prior to the time of disclosure by the
disclosing party; (iv) the information becomes available to the receiving party
from a third party which is not legally prohibited from disclosing such
information; (v) the receiving party can demonstrate the information was
developed by or for it independently without the use of such information; or
(vi) if disclosure is required under applicable law or regulation.
<PAGE> 24
5.4 Upon termination or expiration of this Agreement for any reason, the
party receiving Proprietary Information shall immediately return all such
Proprietary Information, including all copies thereof, to the disclosing party.
5.5 Bank shall not disclose the terms of this Agreement except as required
by applicable law or regulation.
SECTION SIX
TERM AND TERMINATION
6.1 Term. This Agreement shall commence as of the Effective Date and shall
remain in effect (unless sooner terminated pursuant to Section 6.2) for five (5)
years thereafter (the "Initial Term"). The Agreement shall thereafter
automatically renew without interruption for successive two-year periods (each a
"Renewal Term"), unless either party (at its sole option, for any reason or for
no reason) gives written notice of intent not to renew the Agreement at least
sixty (60) days before the beginning of any Renewal Term.
6.2 Right to Terminate. Notwithstanding any other provision hereof, this
Agreement may be terminated as follows:
(a) by mutual agreement of the parties;
(b) by either party at any time if the other party has materially
breached the Agreement and, if the breach is curable, the breaching party has
failed to cure such breach (i) within fifteen (15) days after written notice
thereof in the case of failure to pay amounts due and owing, or (ii) within
thirty (30) days in case of all other curable breaches;
(c) immediately by nFront in the event that the Bank becomes insolvent,
files or is forced to file any petition in bankruptcy, or makes an assignment
for the benefit of its creditors;
(d) by Bank during the Initial Term upon ninety (90) days written
notice to nFront; provided, however, that Bank shall pay to nFront the
applicable Termination Fees as set forth in Section 6.3 below ("Bank Termination
Notice"). Monthly Fees do not include any telecommunication and/or Internet Fees
that may be imposed on Bank by nFront, bill payment Fees or per transaction
Fees; or
(e) in the event either party materially breaches any of the provisions
hereof, and such breach is not curable, this Agreement shall be immediately
terminable by the non-breaching party upon written notice to other party.
Without limiting the foregoing, any violation of Section 5 hereof or any use of
the System, including without limitation the Software, in a manner inconsistent
with the terms of this Agreement, shall constitute a non-curable breach.
6.3 Termination Fees. Termination Fees are an amount equal to:
(i) the greater of: (A) the average monthly Fees paid by Bank during
the four full calendar months immediately preceding nFront's receipt of the Bank
Termination Notice, or (B) the average monthly Fees paid by Bank during the
twelve month period immediately preceding the actual date of termination
multiplied by
(ii) the number of whole and/or partial months remaining in the Initial
Term following the actual date of termination.
6.4 Effect of Termination.
(a) Any termination of this Agreement shall not release Bank from
paying any Fees or expenses owed to nFront. In the event of any termination of
this Agreement, all obligations owed by Bank to nFront shall become immediately
due and payable upon termination whether otherwise then due or not (without
presentation, demand, protest or notice of any kind, all of which are hereby
waived by Bank); and nFront may offset and deduct from any or all amounts owed
to Bank, if any, any or all amounts owed by Bank to nFront, rendering to Bank
the excess, if
<PAGE> 25
any.
(b) Without limiting Bank's obligation to return all Proprietary
Information to nFront (as set forth in Section 5), upon termination of this
Agreement, Bank shall promptly and without charge return to nFront all copies of
all Documentation, maintenance and policy manuals and other publications of
nFront relating to the System (collectively "Copies"). Bank shall destroy all
Copies contained on any hard drive or other fixed medium of storage. Bank's
license to access the Software and license to use the nFront Marks as provided
in this Agreement shall immediately terminate. Within sixty (60) days from the
date of termination or expiration of this Agreement, an officer of Bank shall
certify in writing to nFront that Bank has complied with all requirements of
this Section.
(c) Upon termination of this Agreement, nFront shall (i) assign Bank's
domain name to another Internet service provider designated in writing by Bank;
and (ii) provide a notice at Bank's former Internet Branch location for a thirty
(30) day period of the new location of Bank's home page on the Internet.
SECTION SEVEN
INDEMNIFICATION; OTHER RELIEF
7.1 Indemnification by Bank. Bank shall indemnify, defend and hold
harmless nFront, its officers, directors, shareholders, employees, agents and
affiliates from and against any claims, losses, damages, liabilities or expenses
(including, without limitation, reasonable attorneys' fees and expenses)
(collectively, "Claims") resulting from or arising out of (a) misuse of the
System or any part thereof by Bank or any End-User in its Customer Base,
including, without limitation, any misrepresentations made by Bank with respect
to the System, or (b) nFront's compliance or alleged noncompliance with the
provisions of Regulation E, 12 CFR Section 205 et seq., or (c) an allegation
that any trademark, tradename, service mark, logo or other information (or any
portion thereof) provided by Bank to nFront in connection with the design of the
Bank's Internet Branch infringe upon or misappropriate any copyright, patent,
trademark or trade secret of any third party, or (d) a breach of any of the
provisions of this Agreement by Bank, provided that nFront shall promptly notify
Bank in writing and in reasonable detail of any Claim, and if such Claim is a
third party Claim, Bank shall have the right to assume the defense thereof using
counsel reasonably acceptable to nFront. nFront shall have the right to
participate, at its own expense, with respect to any such third party Claim. In
connection with such third party Claim, the parties shall cooperate with each
other and provide each other with access to relevant books and records in their
possession. No such third party Claim shall be settled or compromised by Bank
without the prior written consent of nFront if such settlement or compromise in
any manner indicates that nFront contributed to or was responsible for the cause
of any such Claim.
7.2 Indemnification by nFront. nFront shall indemnify, defend and hold
harmless Bank, its officers, directors, shareholders, employees, agents and
affiliates from and against any claim, suit or proceeding based upon an
allegation that the System (or any portion thereof) infringe upon or
misappropriate any copyright, patent, trademark or trade secret of any third
party, provided that nFront is notified promptly of such claim, suit or
proceeding in writing and is given authority, control and full and proper
information and assistance in the defense and settlement of such claim, suit or
proceeding. If the System is finally determined by a court of competent
jurisdiction to constitute an infringement of any patent, copyright, trademark
or other trade secret of a third party and its use is enjoined, nFront shall
have sole discretion to settle or not to settle the Claim and shall either:
(a) procure the right for Bank to continue to use the System under
this Agreement;
(b) replace or modify the System with a version of the System that
is not so infringing; or
(c) in nFront's sole discretion, remove the System, and terminate
the Agreement.
This Section sets forth the sole and exclusive remedy of Bank and the complete
liability of nFront with respect to any claim hereunder. nFront shall have no
liability for any claim based upon the unauthorized modification, combination,
operation or use of any portion of the System with equipment, data, software, or
programming not supplied by nFront.
7.3 Arbitration. Except as provided below, all disputes or claims relating
in any manner to this Agreement (including, without limitation, any alleged
breach thereof or the termination or non-renewal thereof) shall be settled by
binding arbitration in accordance with the Commercial Arbitration Rules of the
American
<PAGE> 26
Arbitration Association. The parties agree that the arbitrators in any such
arbitration shall not be authorized to award any punitive damages in connection
with any controversy or a claim settled by arbitration hereunder. The decision
of the arbitrators shall be final and binding upon the parties and judgment upon
the award may be entered in any court having jurisdiction thereof. Any
arbitration shall take place in Atlanta, Georgia, and the expenses of the
arbitrators shall be allocated by such arbitrators. The arbitration shall be
conducted before a panel of three (3) arbitrators, one selected by Bank, one
selected by nFront, and one selected by mutual agreement of the arbitrators
selected by Bank and nFront. If a party fails to select an arbitrator as
required herein within thirty (30) days from the written request by the other
party ("Selecting Party"), the Selecting Party shall then be entitled to select
the second arbitrator, with the two selected arbitrators selecting the final
arbitrator by mutual agreement.
7.4 Injunctive Relief. Notwithstanding the provisions of Section 7.3, the
parties may apply to a court of competent jurisdiction for any appropriate
equitable or injunctive relief, including, without limitation, preliminary and
permanent injunctions and temporary restraining orders. The parties also
acknowledge that (i) any use or threatened use of the Software, System, nFront
Marks or Bank Marks in a manner inconsistent with this Agreement, or (ii) any
other misuse of the Proprietary Information of either party will cause immediate
irreparable harm to the non-breaching party for which there is no adequate
remedy at law. Accordingly, the parties agree that the non-breaching party shall
be entitled to immediate and permanent injunctive relief from a court of
competent jurisdiction in the event of any such breach or threatened breach. The
parties hereby waive the defense that the non-breaching party has or will have
an adequate remedy at law for any such breach or threatened breach. The parties
agree and stipulate that the non-breaching party shall be entitled to such
injunctive relief without posting a bond or other security; provided however
that if the posting of a bond is a prerequisite to obtaining injunctive relief,
then a bond in the amount of $1000 shall be sufficient. Nothing contained herein
shall limit either party's right to any remedies at law, including the recovery
of damages from the other party for breach of this Agreement. The prevailing
party in any action pursuant to this Section 7.4 shall be entitled to collect
from the losing party its attorneys' fees and full costs of such action.
7.5 LIMITATION OF LIABILITY. IN NO EVENT SHALL NFRONT BE LIABLE FOR ANY
LOSS OF PROFIT OR ANY OTHER COMMERCIAL DAMAGE, INCLUDING BUT NOT LIMITED TO
SPECIAL, INCIDENTAL, CONSEQUENTIAL OR OTHER INDIRECT DAMAGES UNDER ANY CAUSE OF
ACTION ARISING OUT OF OR RELATING IN ANY MANNER TO THIS AGREEMENT, INCLUDING,
WITHOUT LIMITATION, CLAIMS ARISING FROM MALFUNCTION OR DEFECTS IN THE SYSTEM OR
NON-DELIVERY OF SYSTEM EVEN IF NFRONT HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES. SUBJECT TO THE MAXIMUM LIABILITY SET FORTH IN THIS SECTION. IN NO
EVENT SHALL NFRONT'S LIABILITY FOR ANY CLAIM ARISING OUT OF THIS AGREEMENT
(INCLUDING ANY CLAIM ARISING UNDER SECTION 7.2 HEREOF) REGARDLESS OF THE TYPE OR
NATURE OF THE CLAIM(S), EXCEED THE AMOUNT PAID TO NFRONT BY BANK UNDER THIS
AGREEMENT WITHIN THE TWELVE (12) MONTH PERIOD IMMEDIATELY PRECEDING THE
OCCURRENCE OF SUCH CLAIM. IN NO EVENT SHALL NFRONT'S MAXIMUM, CUMULATIVE
LIABILITY FOR ALL CLAIMS UNDER THIS AGREEMENT, REGARDLESS OF THE TYPE OR NATURE
OF THE CLAIM(S), EXCEED THE LESSER OF $50,000 OR ALL AMOUNTS PAID BY BANK TO
NFRONT HEREUNDER. NO CLAIM MAY BE BROUGHT BY BANK UNDER THIS AGREEMENT MORE THAN
TWO (2) YEARS AFTER SUCH CLAIM FIRST ACCRUES.
7.5.1 Use of the System by Third Parties. Without limiting the terms of
Section 7.5, the parties acknowledge that Bank is solely responsible for the use
of the System (and any resulting damages) by End Users and other third parties
including, without limitation, any improper or unauthorized transfers of funds
from accounts via the System. nFront shall have no liability for any such
actions or resulting damages.
SECTION EIGHT
MISCELLANEOUS PROVISIONS
8.1 Waiver. Any failure of a party to comply with any obligation, covenant,
agreement or condition herein may be expressly waived in writing by the other
party, but such waiver or failure to insist upon strict
<PAGE> 27
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
8.2 Entire Agreement. This Agreement, the Exhibits and schedules hereto
constitute the entire understanding of the parties with respect to the subject
matter of this Agreement and supersede all prior understandings, whether written
or oral, between the parties with respect thereto.
8.3 No Third Party Beneficiary Rights. No provision of this Agreement is
intended or shall be construed to provide or create any third party beneficiary
right or any other right of any kind in any End User or any client, customer,
affiliate, insurer, lender, shareholder, partner, officer, director, employee or
agent of any party hereto, or in any other person.
8.4 Third Party Processor. If Bank utilizes a third party to process Bank's
file information, the use of such third party shall not diminish or relieve Bank
of its obligations under this Agreement.
8.5 Amendment; Binding Effect; Assignment. No amendment, modification or
alteration of the terms of this Agreement shall be binding unless in writing and
executed by the parties hereto. This Agreement shall be binding upon, inure to
the benefit of, and be enforceable by, the parties and their respective
successors (including without limitation successors merger) and permitted
assigns. nFront may freely assign this Agreement in conjunction with (i) a sale
of all or substantially all of its assets, or (ii) a merger or similar
transaction. Bank may not assign this Agreement in whole or in part, or any of
its rights or obligations hereunder without the prior written consent of nFront.
Notwithstanding the foregoing, Bank may assign this Agreement in conjunction
with a sale of all or substantially all of its assets or in conjunction with a
merger if the successor entity agrees in writing (i) to be bound by the terms of
this Agreement (including without limitation the exclusivity requirements of
Section 2.2) and (ii) that the Bank (or the successor entity) will continue to
process Bank's customers on the System for the remainder of the Term. nFront
shall not unreasonably withhold or delay its consent to such an assignment. Any
attempted assignment in violation of this Section shall be void and of no
effect.
8.6 Force Majeure. nFront shall not be liable for loss or damage resulting
from any cause beyond its reasonable control, including, but not limited to,
Internet systems or network failure, capacity limitations, compliance with
regulations, orders or instructions of any federal, state or municipal
government or any department or agent thereof, acts of God, acts or omissions of
Bank, acts of civil or military authority, fires, strikes, facilities shutdowns
or alterations, embargoes, war, riot, delays in transportation, or inability to
obtain necessary labor, facilities or materials from usual sources.
8.7 Governing Law; Venue. This Agreement shall be governed, construed and
enforced in accordance with the laws of the State of Georgia and the U.S.
without giving effect to the conflict-of-laws principles thereof. The parties
hereby agree that the sole venue for all matters related in any manner to this
Agreement shall be solely in arbitration or a court of competent jurisdiction,
as the case may be, located in Fulton County, Georgia. The parties hereby
consent to the personal jurisdiction of those courts and irrevocably waive any
and all objections to jurisdiction and venue which are inconsistent herewith.
8.8 Severability. If any provision of this Agreement is held to be illegal,
invalid or unenforceable under present or future laws effective during the Term,
such provision shall be fully severable. This Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part of this Agreement, and the remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance from this
Agreement.
8.9 Counterparts. This Agreement may be executed simultaneously or in two
or more counterparts, each of which together shall constitute one and the same
instrument and shall be deemed an original hereof.
8.10 Notices. All notices required or permitted under this Agreement shall
be made in writing and shall be deemed to have been duly given if delivered
personally or sent by registered or certified mail (return receipt requested),
U.S. mail or facsimile. All notices shall be addressed to the parties at the
respective addresses or
<PAGE> 28
facsimile numbers indicated above.
8.11 Survival. The provisions of Sections 3, 4, 5, 6, 7, and 8 shall
survive any termination or expiration of this Agreement for any reason.
8.12 Headings; Interpretation. Headings of particular Sections are inserted
only for convenience and are not to be considered a part of this Agreement or be
used to define, limit or construe the scope of any term or provision of this
Agreement. Should any provision of this Agreement require judicial
interpretation, the parties agree that the court interpreting or construing the
same shall not apply a presumption that the terms of this Agreement shall be
more strictly construed against one party than against another.
8.13 This Agreement Controls. Notwithstanding the content of any purchase
order, sale order, sale confirmation or any other document relating to the
subject matter of this Agreement, this Agreement shall take precedence over any
such document, and any conflicting, inconsistent, or additional terms contained
therein shall be null and void.
8.14 Exhibits. Exhibits attached hereto are incorporated into this Agreement
for all purposes consistent herewith.
<TABLE>
<S> <C>
EXHIBIT A Authorized Services
EXHIBIT B Fees
EXHIBIT C The System
EXHIBIT D nBranch - Internet Branch Specifications
EXHIBIT E Technical Specifications
EXHIBIT F Installation, Training and Daily Processing Requirements
EXHIBIT G Bill Payment Services
EXHIBIT H Consulting Services
</TABLE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of Effective
Date.
NFRONT, INC. BANK
By: By:
----------------------------------- ---------------------------------
Name: Name:
--------------------------------- -------------------------------
Print Name Print Name
Title: Title:
-------------------------------- ------------------------------
Date: Date:
--------------------------------- -------------------------------
<PAGE> 29
EXHIBIT A - AUTHORIZED SERVICES
Bank is authorized to use the services indicated below for the Fees listed in
EXHIBIT B.
[ ] The nBranch Service (described in EXHIBIT C)
------------------ --------------- ------------ --------------
nFront Date Bank Date
[ ] The nHome Service (described in EXHIBIT C)
------------------ --------------- ------------ --------------
nFront Date Bank Date
[ ] The nBusiness Service (described in EXHIBIT C)
------------------ --------------- ------------ --------------
nFront Date Bank Date
Options:
[ ] nForm (10 frames)
[ ] nBranch Site Map Construction
[ ] Management Statistics Reporting
[ ] Bill Payment
[ ] Telephone Bill Payment
[ ] Check Imaging - DSI
[ ] Check Imaging - Greenway
[ ] Employee Training Program
[ ] Jump Start Marketing and Promotion Program
[ ] Internet TV Site
[ ] Other Special Services (Describe)
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
------------------ --------------- ------------ --------------
nFront Date Bank Date
<PAGE> 30
EXHIBIT B - FEES
<PAGE> 31
EXHIBIT C - THE SYSTEM
NBRANCH - INTERNET BRANCH SERVICE
<TABLE>
<CAPTION>
CURRENT
FUNCTION
--------
<S> <C>
1. Bank Branding of Internet Site X
2. 7 Secure Product Services
- Checking X
- Savings X
- Certificate of Deposit X
- IRA X
- Consumer/Commercial Loans X
- Mortgage Loans X
- Line of Credit X
3. Additional Secure Product Service
- Guestbook X
4. Financial Calculators
- Loan X
- Maximum Loan X
- College Planning X
- Mortgage X
- Retirement X
5. Administration Site
- Guestbook Secure Database Management X
- Products & Services Applications with Secure Database Management X
- Products & Services Application Email Notifications X
- Products & Services - Update Rates and Terms X
- Password Maintenance Interface X
- Audit Management X
- Bank can view pending or processed applications and who
approved/denied application X
- Bank can view changes to products and services rates and
terms which are automatically logged into the secure database X
6. Email - The bank will be assigned one @banking.com email address. This X
"general" mailbox will forward all incoming mail to any/all bank specified
email addresses
</TABLE>
<PAGE> 32
EXHIBIT C - THE SYSTEM
NHOME - ONLINE INTERNET BANKING SERVICE
<TABLE>
<CAPTION>
CURRENT
FUNCTION
--------
<S> <C>
9. View Account Balances and Current Statement Transactions
- DDA/Savings X
- CD/IRA X
- Loans X
- Line of Credit X
10. Internal Transfer of Funds between DDA, Savings, Loan and Line of Credit
accounts, using ACH formatted file
- Immediate and Future Transfers X
- One Time and Recurring Transfers X
11. Pending Web Transfer and Bill Pay Transactions
- View, edit, delete future Web Transactions X
12. Bill Payment
- One Time, Future and Recurring Payments X
- Payment Reporting X
13. Custom Reports for Historical Transactions
- View customer account information for up to two years X
14. Password Manager
- Secure log-in X
- Create and change customer password information X
15. Personal Information
- View customer information file X
16. PFM Downloads
- Microsoft Money(TM) X
- Quicken(TM) X
14. Online Help X
15. Online Banking Demo X
16. Bank Administration Site - nHome Functions
- Detailed Internet Branch Billing X
- Billing System for nHome On Line Banking and Bill X
Payment customers, using ACH formatted file
- nReach - Data Mining and Marketing module
- Database Query Capability X
- Promotional E-mails to selected customers X
</TABLE>
<PAGE> 33
EXHIBIT C - THE SYSTEM
NBUSINESS ONLINE BANKING SERVICE
<TABLE>
<CAPTION>
CURRENT FUTURE
FUNCTION FUNCTION
-------- --------
<S> <C> <C>
11. View Account Balances and Histories
- DDA/Savings X
- CD/IRA X
- Loans and Line of Credit X
12. ACH formatted Transfers - Book Transfers, Drafts, Disbursements, Direct
Deposits between DDA, Savings, Loan, LOC accounts X
- Immediate and Future Transfers X
- One Time, Recurring Transfers and Pending Transfers X
- View Historical Transfers X
13. Bill Payment
- Immediate and Future Bill Payments X
- One Time and Recurring Payments X
- Pending Bill Payments X
- Historical Bill Payments X
14. User resources
- Online Payee Database X
- Business Calculations X
- Text Messaging X
- Categories & Journal Entries X
15. Balance Reporting
- View customer account information for up to two years X
16. Multi-User permissions
- SuperUser sets up and controls subordinate members' functional X
access
- Secure log-in X
- Create and change customer password information X
- Control account access and disbursement levels X
17. Business application integration
- Microsoft Money, Quicken X
- Peachtree, Quick Books, Comma Delimited X
18. Online Help X
19. Virtual Status Requests - EFTPS (Electronic Federal Tax Payments), Stop
Payments, Wire Transfers
- Immediate and Future transactions (where applicable) X
- Recurring transactions X
- Pending Transactions X
- View Historical Transactions X
20. Additional Functions
- Cash Concentration X
- Controlled Disbursements X
- Cash Flow Manager / Daily Transaction Journal X
- ACH Version of EFTPS X
</TABLE>
<PAGE> 34
EXHIBIT C - THE SYSTEM
NBUSINESS ONLINE BANKING SERVICE (CONT'D)
<TABLE>
<CAPTION>
CURRENT FUTURE
FUNCTION FUNCTION
-------- --------
<S> <C> <C>
11. Bank Administration Site - nBusiness Functions
- Set/Reset challenge code/Password for SuperUser X
- Flag accounts as Cash Management X
- Audit Management
- Receive/respond to time-sensitive Virtual Status X
Requests (VSRs): Stop Pay, Wire Transfer, EFTPS
- Detailed Internet Branch Billing X
- Billing System for nBusinessSM Customers using ACH
formatted file
- nReach(SM) - Data Mining and Marketing module X
- Database Query Capability X
- Promotional e-mails to selected nBusinessSM X
customers X
- Internet Branch Reporting
X
</TABLE>
<PAGE> 35
EXHIBIT D -INTERNET BRANCH SPECIFICATIONS
1. Home Page
- Bank branding (logo)
- Custom navigational controls
- 3 scanned images or custom graphics
2. Product and Services (28 sub-page maximum)
- Bank branding (logo)
- Custom navigational controls
3. Bank Information and Contact Us (25 sub-page maximum)
- Bank branding (logo)
- Custom navigational controls
- Up to 10 scanned images or 5 graphics
4. Feature Product, Guestbook, Frequently Asked Questions (FAQ) and Search
Engine
- Bank branding (logo)
- Custom navigational controls
Note: All Web site content must be submitted to nFront in an IBM Microsoft Word
(.doc) or PC Text (.txt) Format. Also, a page can contain up to a maximum of 500
words of text.
<PAGE> 36
EXHIBIT E - TECHNICAL SPECIFICATIONS
FILE TRANSMISSION COMPUTER
1. Pentium 75 Processor or greater PC
2. 16 MB RAM or greater
3. 28.8 BPS Asynch modem or greater
4. CD ROM drive
5. Monitor
6. Keyboard
7. Mouse
8. Dedicated analog telephone line for dialup connectivity
9. PC must be housed in a secure area of the bank and be available to
receive daily ACH files and transmit nightly balance files.
REQUIRED SOFTWARE
1. Microsoft Windows 95 Version 4.00.950 B or greater on CD ROM
2. Microsoft Plus!
<PAGE> 37
EXHIBIT F - INSTALLATION, TRAINING AND
DAILY PROCESSING REQUIREMENTS
IMPLEMENTATION AND TRAINING SCHEDULE
1. Upon execution of this Agreement nFront will forward to Bank a copy of
nFront's implementation manual.
2. At a mutually agreeable time following contract execution nFront will
conduct a kick off meeting with bank personnel. The kick off meeting
will be in the form of a conference call and will last approximately 2
hours. Bank must have Internet access at their location during the
session. During this meeting the following topics will be discussed:
- nBranch
- Description of Web site content needed to begin work
(See Implementation Manual)
- Proposed graphic design for the Web site
- Setup Parameters for nHome
- Setup Parameters for nBusiness
- Proposed timelines for project completion with agreed-upon due
dates ("Project Timeline")
3. By the due dates in the Project Timeline, Bank will provide nFront the
nBranch Web site content, setup parameters for nHome, and setup
parameters for nBusiness which are detailed in the Implementation
Manual. Upon receipt of the Web site content and setup parameters,
nFront will begin site construction based on the Project Timeline. If
the bank fails to deliver the necessary Web site content and setup
parameters by the due dates in the Project Timeline, nFront reserves
the right to adjust the Project timeline based on the then-current
nFront implementation schedule.
4. Bank will need to make available to nFront a primary and secondary
"Internet Branch Manager." These individuals will be responsible for
receiving and processing Web site product services, guest book entries
and emails, updating product rates and terms and general administrative
functions. nFront will conduct a training session prior to the bank
completing the testing phase. This session will be in the form of a
conference call and will last 2-3 hours. The bank must have Internet
access at their location during the session. The session will include
instruction on Web site administrative functions.
5. Upon completion of the nBranch Web site, Bank will be asked to sign
nFront's Web Site Acceptance Agreement which stipulates the completion
of the Web Site.
6. Bank will need to make available to nFront a primary and secondary test
subject. These individuals will be responsible for testing the nHome
and nBusiness products. nFront will conduct a training session prior to
the testing phase. The session will be in the form of a conference call
and will last 2-3 hours. The bank must have Internet access at their
location during the session. The session will include instruction on
application functions.
7. Upon completion of the testing phase, Bank will be asked to sign
nFront's nHome and/or nBusiness Project Completion Acceptance Agreement
stipulating the completion of the implementation.
<PAGE> 38
EXHIBIT F - INSTALLATION, TRAINING AND
DAILY PROCESSING REQUIREMENTS
NBRANCH WEB SITE CHANGES
nFront will provide 3 hours of nBranch Web site changes monthly at no cost. All
changes exceeding 3 hours monthly will be billed at nFront's standard hourly
rate listed below. All requested changes must be submitted to nFront in writing.
nFront will provide a good faith, non-binding estimate of hours needed to
complete, cost if applicable and a delivery date.
<TABLE>
<CAPTION>
Hourly Blocks Cost per Hour
------------- -------------
<S> <C>
0 - 100 $ [++++]
101 - 200 $ [++++]
200 + $ [++++]
</TABLE>
DAILY PROCESSING
1. Bank's Data Center is responsible for verifying that account balance
files for nHome and nBusiness have been sent to nFront from the Bank
Data Center on a daily basis.
2. Bank's Data Center on a daily basis is responsible for retrieving and
processing the ACH formatted file created by nFront for the Bank.
3. Bank is responsible for obtaining all proper authorizations for
electronic funds transfers, including, but not limited to ACH drafts,
ACH disbursements, direct deposits, stop pays, wire transfers, and
EFTPS.
4. Bank is responsible for obtaining proper authorization from Bank's
customer in order to process ACH drafts when billing the Bank's
customer using nFront's end-user billing feature.
5. For nBusiness:
a. Bank or Bank's Data Center must be the ACH originator; and
b. Bank must maintain an Electronic Services Agreement with their
customers regarding the acknowledgment and use of the Internet
as a delivery channel for banking transactions. The agreement
shall also document bank's procedure and requirements for each
type of transaction; and
c. Bank is responsible for verifying that the morning transaction
"in-clearing" file(s) have been sent to nFront from the Bank
or Bank's data center on a daily basis.
<PAGE> 39
EXHIBIT G - BILL PAYMENT SERVICES
1. Bill Payment Services. Subject to the terms of the Agreement and this
Exhibit, nFront will provide the Bill Payment Services listed herein
through a third party processing agent ("Processing Agent"). nFront
makes no representation, warranty or guaranty with respect to the
performance of Services provided by the Processing Agent.
2. Terms of Bill Payment Services. nFront will provide Bill Payment
Services to End Users upon the following conditions:
(a) Eligibility. Only the following End Users shall be eligible to
receive Bill Payment Services: (i) consumer demand deposit
account holders ("Consumer Account Holders") or (ii) business
demand deposit account holders ("Business Account Holders").
(b) Transaction Cap. nFront shall not be obligated to forward for
processing any transaction in excess of $9,999.00 (the
"Transaction Cap"). nFront reserves the right to increase or
decrease the Transaction Cap in its sole discretion and shall
give Bank reasonable notice of any such increase or decrease.
(c) Risk Reduction Measures. nFront or the Processing Agent may,
from time to time, institute certain operating procedures to
reduce credit risk and exposure ("Procedures"). Such measures
may include, but are not limited to, pre-authorized drafts for
Business Account Holders, verification of funds through ATM
networks, separating debits from credit so that payments are
not sent until good funds confirmations are received, and the
like. Bank and all eligible End Users are subject to and shall
conform to all such Procedures. nFront shall use commercially
reasonable efforts to inform Customer in advance of the
implementation of such risk-reduction procedures.
3. Fees and Expenses. Bank shall pay the bill payment fees listed on
EXHIBIT B ("Bill Payment Fees"). nFront shall bill Bank all Bill
Payment Fees incurred in the previous month. Payment by Bank is due
within ten (10) days of receipt of the invoice.
4. Limitation of Damages. In addition to all other terms in the Agreement
and is Exhibit, nFront's total exposure during the term of the
Agreement for Business Account Holders is limited to a maximum loss of
(i) $1,000.00 per business account that has been open with the Bank for
less than one year and (ii) $2,500.00 per business account that has
been open with the Bank for one year or longer. In no event shall
nFront's total liability to Bank ever exceed the amount set forth in
the Section of the Agreement entitled "Limitation of Liability."
5. Bill Payment Services - Back-End Processing.
(a) Accurate payment data, including End User account number and
payment information, provided by End Users in files supplied
to the Processing Agent will be taken through a batch
interface from nFront each business day during the late
evening hours (Day 0). The payment transactions will be
processed the following day (Day 1) after the transaction was
initiated by the End User. On Day 1, Processing Agent will
initiate ACH debits and credits. Credits may be sent via
check, electronic transmissions, or ACH to vendor payees. All
debits and credits are sent on Day 1.
(b) Processing Agent will handle Funds Transfer in accordance with
End User payment instructions activated in accordance with
paragraph 5(a). Processing Agent will supply and transmit to
the sponsoring Bank payment information for debit against End
User account. The initiation of this transfer occurs on Day 1.
The End User account is debited on Day 2.
(c) Processing Agent will handle End User inquiries regarding
payments made on behalf of End User to Vendor payees. Customer
Service is available from 7 a.m. to 7 p.m. Monday through
Friday and Saturday from 8 a.m. to 5 p.m. Central Standard
Time or as otherwise designated by Processing Agent.
<PAGE> 40
(d) From time to time Processing Agent may make changes to the
system. nFront will notify Bank or Bank's Data Center in
advance of any data changes.
<PAGE> 41
EXHIBIT H - CONSULTING SERVICES
1. CONSULTING AND FEES. Pursuant to the terms and conditions of the
Agreement and this Exhibit, (i) nFront will provide to Bank the
consulting services described in the attached Schedule - Consulting
Services Statement of Work ("Consulting Services"), and (ii) Bank will
pay to nFront the Fees for the Consulting Services as set forth in the
attached Schedule.
2. PROMOTIONAL MATERIALS. Except as otherwise provided herein, nFront
reserves all rights, including but not limited to all copyrights, in
and to all promotional materials and other works of authorship provided
hereunder ("Materials"). Except as otherwise provided herein, Bank may
not reproduce or copy the Materials.
3. LIMITED WARRANTY. For a period of sixty (60) days from the date of
delivery to Bank, nFront warrants that: (i) the Consulting Services are
performed in accordance with normal industry standards, and (ii) the
media in which the Materials are embodied is free from material
defects. OTHER THAN AS EXPRESSLY SET FORTH IN THIS SECTION 4, NFRONT
DOES NOT MAKE ANY EXPRESS OR IMPLIED WARRANTIES, CONDITIONS OR
REPRESENTATIONS TO BANK WITH RESPECT TO THE CONSULTING SERVICES OR
MATERIALS OR OTHERWISE REGARDING THIS ADDENDUM, WHETHER ORAL, WRITTEN,
EXPRESS, IMPLIED OR STATUTORY. UNLESS SET FORTH IN THIS ADDENDUM, NO
REPRESENTATION OR OTHER AFFIRMATION OF FACTS SHALL BE BINDING ON NFRONT
(INCLUDING BUT NOT LIMITED TO ANY STATEMENT REGARDING PERFORMANCE OF
THE CONSULTING SERVICES OR STATEMENT REGARDING THE QUALITY OF THE
MATERIALS). WITHOUT LIMITING THE FOREGOING, NFRONT EXPRESSLY DISCLAIMS
ANY IMPLIED WARRANTY OR CONDITION OF MERCHANTABILITY, ACCURACY, OR
FITNESS FOR A PARTICULAR PURPOSE REGARDING THE CONSULTING SERVICES OR
MATERIALS OR OTHERWISE.
<PAGE> 42
SCHEDULE A - CONSULTING SERVICES STATEMENT OF WORK
NONE
<PAGE> 1
CONFIDENTIAL TREATMENT* EXHIBIT 10.5
* CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO THE RULES
AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS AND "+" HAVE
BEEN USED TO IDENTIFY INFORMATION WHICH IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST.
MARKETING AGREEMENT
THIS MARKETING AGREEMENT (the "Agreement") is made this 22nd day of
July, 1997 by and between NFRONT, INC. ("nFront"), a Georgia corporation having
its principal offices at 1551 Jennings Mill Road, Suite 800A, Bogart, Georgia
30622 and CNL FINANCIAL CORPORATION AND/OR SUBSIDIARIES ("Reseller"), a Georgia
corporation having its principal offices at 2960 Riverside Drive, Macon, Georgia
31204.
W I T N E S S E T H:
WHEREAS, nFront is in the business of providing home banking and bill
payment services through the Internet to customers of banks and other financial
institutions;
WHEREAS, Reseller is in the business of providing technology services
to banks and financial institutions;
WHEREAS, Reseller desires to offer to its Customer Base (as hereinafter
defined) and potential customers Internet home banking capabilities;
WHEREAS, nFront desires Reseller to offer nFront's proprietary Internet
home banking system as more fully described in Exhibit A attached hereto (the
"nHome System") to Reseller's Customer Base and to potential Bank customers of
Reseller.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, agreements and conditions set forth herein, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
Definitions
As used in this Agreement, each of the following terms has the meaning
set forth thereafter, such meaning to be equally applicable both to the singular
and plural forms of the terms herein defined:
(a) "Agreement" means this agreement, together with all exhibits and
schedules hereto now or hereafter signed by Reseller and nFront (all of which
are herein incorporated by reference), as the same may be modified, amended or
supplemented from time to time.
(b) "Bank" means banks and other financial institutions that offer
retail banking services to the general public.
(c) "Customer Base" means those customers listed on Exhibit B attached
hereto and any other Banks who become customers of Reseller during the Term.
(d) "Documentation" means that portion of the nHome System that
provides installation and operating instructions for use of the nHome System.
<PAGE> 2
(e) "End-User" means the ultimate user of the nHome System.
(f) "Generic Hardware" means computer equipment and configurations
thereof that meets the specifications provided by nFront for use with the nHome
System.
(g) "nHome System" shall have the meaning set forth in the fourth
recital hereof and shall also include all future improvements, enhancements and
modifications thereof, and all releases and upgrades related thereto.
(h) The terms "sale" and "resale" and any grammatical variant thereof
shall include, without limitation, sales, contracts for sale, conditional sales,
installment sales, rentals, leases or licenses of software to Banks, and any
other arrangement whereby the nHome System is placed at the disposal of the
Banks.
(j) "Software" means that portion of the nHome System that is comprised
of computer applications programs intended to be installed on the central
processing unit of Generic Hardware.
(k) "Term" shall have the meaning set forth in Section 8.1 hereof.
ARTICLE II
Reseller Appointment
2.1 Appointment. During the Term, nFront hereby grants to Reseller the
non-exclusive right to market the nHome System to its Customer Base and
potential Bank customers of Reseller, and Reseller hereby accepts such
appointment. There are no geographic restrictions on where Reseller may market
the nHome System. Reseller understands, acknowledges and agrees that this
appointment is non-exclusive as to both the nHome System and geographic area and
that nFront may appoint more than one reseller in any given geographic area to
sell and market the same nHome System as any other reseller. nFront expressly
reserves the right to sell and deliver the nHome System to any other entity,
including Banks. Unless otherwise set forth on Exhibit C attached hereto or
hereafter as consented to in writing by nFront, Reseller shall sell the nHome
System only to Banks, and shall not sell the nHome System to other parties
providing core processing services to Banks, or to Bank service bureaus,
software providers, other resellers of automated bank services or to any other
buyer who intends, directly or indirectly, to resell the nHome System. Reseller
has no authority to appoint any associate resellers or subdealers of the nHome
System.
2.2 Relationship between nFront and Reseller. Reseller shall conduct its
business in the purchase and resale of nHome System as a principal for its own
account and at its own expense and risk. This Agreement does not in any way
create the relationship of principal and agent, or any similar relationship
between nFront and Reseller, including, but not limited to that of joint
ventures, partners or associates. Reseller is granted no right or authority
hereunder to assume or create any obligation or responsibility for or on behalf
of nFront or otherwise to bind or to use nFront's name other than as may be
expressly authorized by nFront.
ARTICLE III
Sales, Service, and Training and Related Obligations
3.1 Selling and Promotion. Reseller shall use its best efforts to sell and
promote the sale of the nHome System within the Territory, which best efforts
shall include, but not be limited to, promotion of the nHome System to the
Customer Base and prompt performance of all of its obligations under this
Agreement.
3.2 Staffing and Training. Reseller shall appoint its suitable employees to sell
the nHome System. Reseller shall, at its sole cost and expense, send the
appropriate sales personnel to such training programs and other refresher and
upgrade training as nFront may, at reasonable intervals, require. nFront shall
provide periodic routine consultation and advice to Reseller in connection with
Reseller's sales and service hereunder and shall provide (a) technical,
specification and sales advice, (b) assistance and advice concerning promotional
and training programs, and (c) suggestions for new applications for the nHome
System at Reseller's cost. nFront shall furnish Reseller with a reasonable
supply of price
2
<PAGE> 3
lists, sales literature, catalogues, specifications for Generic Hardware,
Documentation and advisory assistance with respect to installing the nHome
System. All proprietary demonstration equipment, manuals, instruction books,
contract forms, sales and promotional materials, Documentation and similar
material furnished to Reseller by nFront, whether furnished free of charge or
not, shall remain the property of nFront and upon request shall be returned to
nFront by Reseller.
3.3 Installation. Reseller acknowledges, understands and agrees that the nHome
System that it shall provide to Banks shall remain resident on nFront's servers,
and that such Banks shall, through Reseller, gain access to the nHome System
upon execution of a contract with nFront. nFront shall be responsible for
systems maintenance of the nHome System resident on its servers.
3.4 Reseller Promotional Activity. nFront shall not share in the expense of any
advertising or promotional activities by Reseller or other sales promotion
projects except by express agreement in writing. All materials prepared by
Reseller that promote the nHome System, including, but not limited to, any
materials that include any trademark or trade name (or any mark or name closely
resembling the same) now or hereafter owned or licensed by nFront or any of its
affiliates shall be approved in writing by nFront prior to use.
3.5 Reseller Recordkeeping. Reseller shall keep records of its business relating
to the nHome System as may be reasonably required by nFront. nFront or its
authorized representative may, from time to time during regular business hours,
examine such records and Resellers accounts relating to the sale and servicing
of the nHome System. Within a reasonable period after the close of each of
Reseller's fiscal years, Reseller shall submit to nFront a copy of its financial
statements for such fiscal year.
ARTICLE IV
Conditions of Sale
4.1 Pricing and Payment. The price for access to the nHome System to the Banks
and the processing fees for transactions thereunder shall be as set forth in
Exhibit D attached hereto. As compensation for its sales and marketing provided
hereunder, Reseller shall be entitled to retain the percentage of such fees as
set forth in Exhibit D attached hereto.
4.2 Force Majeure. nFront shall not be liable for loss or damage due to
interruption of service or access to the nHome System resulting from any cause
beyond its reasonable control, including, but not limited to, Internet systems
or network failure, capacity limitations, compliance with regulations, orders or
instructions of any federal, state or municipal government or any department or
agent thereof, acts of God, acts or omissions of Reseller, acts of civil or
military authority, fires, strikes, facilities shutdowns or alterations,
embargoes, war, riot, delays in transportation, or inability to obtain necessary
labor, facilities or materials from usual sources. IN NO EVENT SHALL NFRONT BE
LIABLE FOR CONSEQUENTIAL OR SPECIAL DAMAGES DUE TO ANY SUCH CAUSE.
4.3 Price and System Changes. nFront shall have the right to change the nHome
System without notice to Reseller, and shall have the right at any time to
discontinue the sale of any version of the nHome System, to make changes in
method of access or delivery, including interface procedures, and to add
improvements, all without incurring any liability whatever, including any
obligation to install or modify the same on the nHome System previously accessed
by the Customer Base. nFront may change its prices to Reseller for the nHome
System upon thirty (30) days' written notice to Reseller. Any contract between
Reseller and a Bank which includes the nHome System executed prior to the date
of any such notice with a scheduled delivery date after the effective date of
such price increase shall be sold to Reseller at the revised price for the nHome
System. Any nHome System scheduled for delivery to a Bank prior to the effective
date of any such price increase but delayed due to the fault of nFront or for
reasons beyond nFront's control shall be sold to Reseller at the price as in
effect on the date Reseller ordered the nHome System. The price protection
provisions contained in this Section 4.3 shall apply only to the initial access
fees listed on Exhibit D attached hereto, and shall not apply to any increase in
processing fees, which increase shall be effective as of the thirtieth day
following written notice of such increase to Reseller.
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ARTICLE V
Warranties
5.1 nFront's Warranty. THE NHOME SYSTEM IS PROVIDED "AS-IS", "WHERE-IS". NFRONT
SPECIFICALLY DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT
LIMITED TO, IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE AS TO THE NHOME SYSTEM PROVIDED UNDER THIS AGREEMENT.
ARTICLE VI
Special Agreements Regarding Software and Other Intellectual Property
6.1 Limited License. In the performance of Reseller's obligations hereunder, it
shall be necessary for Reseller to demonstrate the nHome System. Accordingly,
subject to the terms and conditions contained herein, nFront hereby grants to
Reseller, and Reseller hereby accepts from nFront, a non-exclusive license (the
"License") of the Software solely for the purpose of demonstrating the nHome
System in operation to potential Bank customers of Reseller.
6.2 Software Covenants. Reseller agrees to comply with each of the
following requirements:
(a) Reseller shall not copy, alter, modify, translate, decompile,
disassemble, reverse engineer or otherwise attempt to derive source code, or
create derivative works of the Software, or any part thereof, or knowingly allow
others to do so, during or after the Term.
(b) Except as otherwise specifically provided in this Agreement,
Reseller shall not loan, rent, lease, give, sub-license, or otherwise transfer,
nor communicate or otherwise disclose, the Software, including any part or any
copy thereof, in whole or in part, to any person. Reseller agrees that except
for copies of the Software provided to Reseller pursuant to Section 6.1 hereof,
all such software provided to Reseller hereunder shall remain in its sealed
package, as provided by nFront to Reseller, until delivered to a Bank customer
of Reseller.
(c) Except with respect to providing access to the nHome System to Bank
customers as authorized and specifically provided in this Agreement, Reseller
shall not electronically transfer the Software, or any part thereof, from one
computer to another over a network, irrespective of how linked.
(d) The Software, including all parts thereof, and any copies, in whole
or in part, and any and all copyrights thereto, are and remain the property of
nFront, irrespective of the ownership of the media on which such Software and
any parts or copies thereof are contained.
(e) Each copy of the Software sold to Banks shall include a license
agreement, the form of which shall be as set forth in the Exhibit E.
(f) Reseller acknowledges that the laws and regulations of the United
States restrict the export and re-export of commodities and technical data of
United States origin, including the nHome System. Reseller agrees that it shall
not export or re-export such Software in any form without nFront's consent,
which consent shall, among other things be conditioned upon Reseller receiving
the appropriate United States and foreign government licenses and approvals.
(g) Reseller shall not, by any act or omission, impair or prejudice the
copyright or any other right of whatever nature of nFront in and to the nHome
System or any part thereof, and shall not deal with the same in any manner which
may allow any third party to obtain any rights in the same which are
inconsistent or which conflict with the rights of nFront.
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6.3 Notices; Markings; Trademarks; Tradenames. Reseller agrees to comply
with the following:
(a) Reseller shall not delete any trademarks, tradename or copyright
notice present in, on or displayed by the nHome System, or any part thereof.
(b) Reseller shall not add to any notice present in, on or displayed by
the nHome System its own copyright, trademark or other proprietary notices
unless such notices have been previously approved in writing by nFront.
(c) Except as already present in, on or displayed by the nHome System
software and/or accompanying packaging or Documentation provided by nFront,
Reseller shall not use any trademarks and/or tradenames of nFront without prior
written approval of nFront.
6.4 Documentation. Each nHome System sold by Reseller to a Bank shall include
one (1) set of accompanying Documentation.
ARTICLE VII
Confidentiality and Non-Disclosure
7.1 Reseller Obligations.
(a) Reseller recognizes, acknowledges and agrees that during the Term,
nFront may furnish to Reseller certain technical and commercial information,
including but not limited to, designs, procedures, formulas, discoveries,
inventions, improvements, innovations, concepts and ideas, lists of customers,
computer programs, business methods, and plans for future developments
("nFront's Confidential Information") which is the confidential, proprietary
property of nFront. Reseller recognizes, acknowledges and agrees that nFront's
Confidential Information was not previously known to the Reseller and is to be
maintained in secrecy and confidence by Reseller and Reseller's employees,
agents or representatives to whom Reseller discloses any of nFront's
Confidential Information. Reseller agrees for itself and for each of its
employees, agents or representatives to whom Reseller discloses any of nFront's
Confidential Information that such information shall be used only in accordance
with the terms, covenants, conditions and limitations of this Agreement, and not
for the benefit of or for, directly or indirectly, Reseller or any of its
employees, agents or representatives. Information made available to the general
public by nFront and information obtained from third parties not associated with
nFront shall not be considered to be nFront's Confidential Information, except
for information received from third parties that Reseller knows or should have
known was obtained illegally or in violation of this Agreement. In the event
Reseller or a representative of Reseller is requested by law, order of court or
any agency to disclose any of nFront's Confidential Information, Reseller shall
give nFront prompt notice of such request so that nFront may seek an appropriate
protective order. If, in the absence of a protective order, Reseller or a
representative of Reseller is nonetheless compelled by law to disclose any of
nFront's Confidential Information, Reseller or a representative of Reseller, as
the case may be, may disclose such information in such proceeding without
liability hereunder; provided, however, that Reseller gives nFront written
notice of the information to be disclosed within twenty-four (24) hours after
receipt of such order by Reseller and, upon nFront's request and at its expense,
Reseller shall use its best efforts to obtain assurances that confidential
treatment shall be accorded to such information.
(b) In the event this Agreement is terminated for any reason, the
Reseller agrees to return promptly nFront's Confidential Information, including
all copies thereof, to nFront, or to deliver all such information promptly to
such party as may be designated by nFront. Reseller further agrees thereafter
not to use or disclose nFront's Confidential Information in any manner
whatsoever without the prior written approval of nFront unless and until such
information shall lawfully become generally known in the public domain through
no fault of the Reseller or breach by the Reseller of the covenants contained
herein.
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(c) Reseller shall disclose nFront's Confidential Information to Banks
only to the extent necessary to enable such customers to use the nHome System,
and only after any such Bank executes an agreement in form and substance
acceptable to nFront, acknowledging the confidential nature of such information
and setting forth the appropriate treatment of such information.
7.2 nFront's Obligations.
(a) nFront recognizes and agrees that, except as otherwise provided
herein, certain business information provided by the Reseller to nFront, not
related to nFront's ongoing business ("Reseller's Confidential Information"), is
the proprietary property of Reseller, is not previously known to nFront and is
to be maintained in secrecy and confidence, except as provided herein, and used
only in accordance with the terms, covenants, conditions and limitations of this
Agreement. Information made available to the general public and information
obtained from third parties not associated with Reseller shall not be considered
to be Reseller's Confidential Information, except for information received from
third parties that nFront knows or has reason to know was obtained illegally or
in violation of this Agreement. In the event nFront or a representative of
nFront is requested by law, order of court or any agency to disclose any of
Reseller's Confidential Information, nFront shall give Reseller prompt notice of
such request so that Reseller may seek an appropriate protective order. If, in
the absence of a protective order, nFront or a representative of nFront is
nonetheless compelled by law to disclose any of Reseller's Confidential
Information, nFront or a representative of nFront, as the case may be, may
disclose such information in such proceeding without liability hereunder;
provided, however, that nFront gives Reseller written notice of the information
to be disclosed within twenty-four (24) hours after receipt of such order by
nFront and, upon Reseller's request and at its expense, nFront shall use its
best efforts to obtain assurances that confidential treatment shall be accorded
to such information.
(b) In the event this Agreement is terminated for any reason, nFront
agrees to return promptly Reseller's Confidential Information, including all
copies thereof, to Reseller or to deliver all such information promptly to such
party as may be designated by Reseller. nFront further agrees thereafter not to
use or disclose Reseller's Confidential Information in any manner whatsoever
without the prior written approval of Reseller unless and until such information
shall lawfully become generally known in the public domain through no fault of
nFront or breach by nFront of the covenants contained herein.
ARTICLE VIII
Term and Termination
8.1 Term. This Agreement shall commence as of the date hereof and shall remain
in effect (unless sooner terminated pursuant to Section 8.2 hereof) for ten (10)
years (the "Term"). It shall be renewed automatically without interruption for
successive five-year terms, unless, not less than sixty (60) days before the end
of any Term, either nFront or Reseller notifies the other party in writing of
its election (at its sole option, for any reason or for no reason) not to renew.
Any such renewal periods shall be considered an extension of and part of the
Term.
8.2 Right to Terminate. Notwithstanding any other provision hereof, this
Agreement may be terminated either (i) by mutual agreement of the parties
hereto; (ii) by either party at any time if the other party has materially
breached any of the provisions hereof and, if the breach is curable, has failed
to cure such alleged breach within fifteen (15) days after written notice
thereof in the case of failure to pay when due amounts owing to such party, and
within thirty (30) days in case of all other alleged curable breaches; or (iii)
by either party immediately and without the giving of notice, in the event that
either party shall become insolvent, or shall ask its creditors for a
moratorium, or shall file a voluntary petition in bankruptcy, or shall be
adjudicated as a bankrupt pursuant to an involuntary petition, or shall suffer
appointment of a temporary or permanent receiver, trustee, or custodian for all
or a substantial part of its assets which shall not be discharged within sixty
(60) days. In the event either party materially breaches any of the provisions
hereof, and such breach is not curable, this Agreement shall be immediately
terminable by the non-breaching party. Without limiting the foregoing, any
violation of Articles VI, VII and IX hereof shall constitute a noncurable breach
and if either party commits such a breach, this Agreement shall be terminable
immediately by the non-breaching party.
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8.3 Effect of Termination.
(a) Upon termination of this Agreement, Reseller shall return to
nFront, promptly and without charge to nFront, all Documentation, price lists,
maintenance and policy manuals, sales aids and other publications of nFront
relating to the nHome System which Reseller has on hand. Reseller shall
thereupon immediately cease using any trademarks, tradenames, service marks or
other identifying marks on any of its materials.
(b) Reseller will continue to receive commissions until the completion
of each Customer's Initial Term. After such Initial Term, if nFront is caused to
renegotiate and/or sell subsequent terms then Reseller's commission plan would
cease for that particular Customer. If nFront is not caused to renegotiate
and/or sell subsequent terms then Reseller's commission plan would continue
until nFront is caused to renegotiate and/or sell subsequent terms.
ARTICLE IX
Non-Competition Agreement
9.1 During the Term Reseller shall not, directly or indirectly, individually, on
behalf of or in conjunction with any other person or legal entity, or for or on
behalf of any person, corporation, partnership, company, trade association,
agent, agency or other entity, engage in the business of selling or
distributing, within the Territory, any Internet Banking solution other than
nHome. nFront agrees not to allow any credit life company to act as a Reseller
of its product, without prior written consent of Reseller, as long as Reseller
meets the following sales goals: Year 1: 50 banks; Year 2: 75 banks; Year 3: 100
banks; Year 4: 125 banks; and Year 5: 125 banks. These goals will be mutually
reviewed on a quarterly basis.
ARTICLE X
Indemnification; Other Relief
10.1 Indemnification by Reseller. Reseller shall indemnify, defend and hold
harmless nFront, its officers, directors, shareholders, employees, agents and
affiliates from and against any claims, losses, damages, liabilities or expenses
(including, without limitation, reasonable attorneys' fees and expenses)
(collectively, "Claims") resulting from or arising out of any representations
made by Reseller with respect to the nHome System or a breach of any of the
provisions of this Agreement, provided, however, that in respect of any Claims
hereunder against Reseller that arise out of or result from any alleged use or
misuse of the nHome System or any part thereof by Reseller or any Bank included
in the Customer Base or any alleged misrepresentations made by Reseller with
respect to the nHome System, Reseller shall be notified promptly of such Claim
in writing and shall be given authority, control and full and proper information
and assistance in the defense and settlement of such Claim. Notwithstanding the
foregoing, Reseller shall not have the authority to settle or compromise any
Claim in a manner that indicates that nFront contributed to or was responsible
for the cause of any such Claim unless nFront consents in writing to such
settlement.
10.2 Indemnification by nFront. Subject to the limitations set forth in Section
10.5 hereof, nFront shall indemnify, defend and hold harmless Reseller, its
officers, directors, shareholders, employees, agents and affiliates from and
against any claim, suit or proceeding based upon an allegation that the nHome
System (or any portion thereof) infringe upon or misappropriate any copyright,
patent, trademark or trade secret of any third party, provided that nFront is
notified promptly of such claim, suit or proceeding in writing and is given
authority, control and full and proper information and assistance in the defense
and settlement of such claim, suit or proceeding. If the nHome System is finally
determined by a court of competent jurisdiction to constitute an infringement of
any patent, copyright, trademark or other trade secret of a third party and its
use is enjoined, nFront shall either:
(a) procure the right for Reseller to continue to use the nHome
System under this Agreement; or
(b) replace or modify the nHome System with a version of the nHome
System that is not so infringing and that satisfies this provision of this
Agreement.
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10.3 Arbitration. The parties to this Agreement agree that any controversies or
claims arising out of or relating to this Agreement (including, without
limitation, any alleged breach thereof or the termination or non-renewal
thereof) shall be settled by arbitration pursuant to the Federal Arbitration
Act, 9 U.S.C. ss. 1 et seq., in accordance with the Commercial Arbitration Rules
of the American Arbitration Association. The parties hereto further agree that
the arbitrators in any such arbitration shall not be authorized to award any
punitive damages in connection with any controversy or a claim settled by
arbitration hereunder. The decision of the arbitrator in any such arbitration
shall be final and binding upon the parties and judgment upon the award may be
entered in any court having jurisdiction thereof. Any arbitration shall take
place in Atlanta, Georgia, and the expenses of the arbitrators shall be
allocated by such arbitrators. The arbitration shall be conducted before a panel
of three (3) arbitrators, one selected by Reseller, one selected by nFront, and
one selected by mutual agreement of the arbitrators selected by Reseller and
nFront.
10.4 Injunctive Relief. Notwithstanding the provisions of Section 10.3 hereof,
the parties acknowledge and agree that any breach of the provisions of Articles
VI, VII or XI of this Agreement shall result in irreparable harm to nFront for
which no adequate remedy at law exists. Accordingly, upon any such breach,
nFront shall be entitled to injunctive or other appropriate extraordinary
relief, such relief being in addition to, and not in lieu of, any other rights
and remedies, including the award of damages, available at law or in equity.
Reseller acknowledges and agrees that no serious harm to it shall result from
the entry of any such equitable relief against it, and therefore any bond
required of nFront in connection with such relief shall be set in an amount not
in excess of One Thousand Dollars ($1,000.00) Any violation of the restraints
set forth herein shall automatically extend the period of such restraints for
the amount of time such violation continues, provided nFront seeks enforcement
promptly after discovery of such violation. nFront shall not be required to
prove money damages to enforce any provision of this Agreement.
10.5 LIMITATION OF LIABILITY. IN NO EVENT SHALL NFRONT BE LIABLE FOR ANY LOSS OF
PROFIT OR ANY OTHER COMMERCIAL DAMAGE, INCLUDING BUT NOT LIMITED TO SPECIAL,
INCIDENTAL, CONSEQUENTIAL OR OTHER INDIRECT DAMAGES UNDER ANY CAUSE OF ACTION
ARISING OUT OF OR RELATING TO THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION,
CLAIMS ARISING FROM MALFUNCTION OR DEFECTS IN THE NHOME SYSTEM OR NON-DELIVERY
OF NHOME SYSTEM EVEN IF NFRONT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES. SUBJECT TO THE MAXIMUM LIABILITY SET FORTH IN THIS PARAGRAPH, IN NO
EVENT SHALL NFRONT'S LIABILITY FOR ANY CLAIM ARISING OUT OF THIS AGREEMENT
EXCEED THE AMOUNT PAID TO NFRONT BY RESELLER UNDER THIS AGREEMENT WITHIN THE
THREE (3) MONTH PERIOD IMMEDIATELY PRECEDING THE ACCRUAL OF SUCH CLAIM. IN NO
EVENT SHALL NFRONT'S MAXIMUM, CUMULATIVE LIABILITY FOR ALL CLAIMS UNDER THIS
AGREEMENT EXCEED $25,000 OR ALL AMOUNTS PAID BY RESELLER TO NFRONT HEREUNDER,
WHICHEVER IS LESS. NO CLAIM MAY BE BROUGHT BY RESELLER UNDER THIS AGREEMENT MORE
THAN TWO (2) YEARS AFTER ACCRUAL OF SUCH CLAIM.
ARTICLE XI
Miscellaneous Provisions
11.1 Waiver. Any failure of a party to comply with any obligation, covenant,
agreement or condition herein may be expressly waived in writing by the other
party, but such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
11.2 Entire Agreement. This Agreement, the exhibits and schedules hereto
constitutes the entire understanding of the parties with respect to the subject
matter of this Agreement and are intended to supersede all prior understandings,
whether written or oral, between the parties with respect thereto.
11.3 No Third Party Beneficiary Rights. No provision of this Agreement is
intended or shall be construed to provide or create any third party beneficiary
right or any other right of any kind in any Bank or any client, customer,
affiliate, insurer, lender, shareholder, partner, officer, director, employee or
agent of any party hereto, or in any other
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person.
11.4 Amendment; Binding Effect; Assignment. No amendment, modification or
alteration of the terms of this Agreement shall be binding unless in writing and
executed by the parties hereto. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the parties hereto and their respective
successors, assigns, heirs, executors and administrators. Reseller may not
assign this Agreement, in whole or in part, or any of its rights or obligations
hereunder without the prior written consent of nFront, and any such attempted
assignment shall be void.
11.5 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Georgia, without giving
effect to the conflict-of-laws principles thereof.
11.6 Severability. If any provision of this Agreement is held to be illegal,
invalid or unenforceable under present or future laws effective during the Term,
such provision shall be fully severable. This Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part of this Agreement, and the remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance from this
Agreement.
11.7 Counterparts. This Agreement may be executed simultaneously or in two or
more counterparts, each of which together shall constitute one and the same
instrument and shall be deemed an original hereof.
11.8 Notices. All notices required or permitted under this Agreement shall be
made in writing and shall be deemed to have been duly given if delivered
personally or sent by registered or certified mail (return receipt requested),
U.S. mail or facsimile. All notices shall be addressed to the parties at the
respective addresses indicated above.
11.9 Survival. The provisions of Articles V, VI, VII, VIII, IX, X and XI shall
survive any termination or expiration of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
NFRONT, INC.
By: /s/ Tripp Rackley
-----------------------------------------
Its: President/CEO
----------------------------------------
Date: 9/17/97
---------------------------------------
RESELLER
By: /s/ J.D. Smith
-----------------------------------------
Its: COO/CFO
----------------------------------------
Date: 9/16/97
---------------------------------------
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EXHIBIT A
Refer to the first column of Exhibit D
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EXHIBIT B
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EXHIBIT C
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EXHIBIT D
<TABLE>
<CAPTION>
<S> <C> <C>
PRICE COMMISSIONS
1) NHOME SYSTEM $[++++] #1
a) Products and Services
i) Five Secure Product Applications (Select from the following)
(1) Checking
(2) Savings
(3) CD
(4) Mortgage
(5) Consumer Loan
(6) Overdraft Protection
(7) Equity Line
ii) Additional Secure Applications
(1) Quiz
(2) Survey
(3) Guest Book
(4) Bill Payment
iii) Secure Database Retrieval
b) Online Banking
i) View Account Balances and Histories
ii) Checking
iii) Savings
iv) CDs/IRA
v) Loans
vi) Funds Transfer
c) Online Banking Demo
d) Bill Payment
e) Frequently Asked Questions
f) Marketing Section
g) Hot Product Link
h) What's New
i) Bank Information
j) Interactive Calculators
i) Loans (Payment and total Interest)
ii) Maximum Loan (Payment and total Interest)
iii) College Planning (Excess or deficiency, plus savings tips) iv)
Mortgage (Calculates principal and interest mortgages) v) Retirement
(Future value calculations)
k) Contact Us
l) Search Engine
m) Email
n) Administrative Site
o) Featured Banks Spotlight
2) SYSTEM SUPPORT MONTHLY $ [++++] #2
3) CUSTOMER FEES
a) Bill Payment Customer Set-up (per customer) $ [++++] 0%
b) On-line Banking Customer Set-up (per customer) $ [++++] #2
c) Application (per application) $ [++++] #2
</TABLE>
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<TABLE>
<S> <C> <C>
4) CUSTOMER SERVICE FEES ($[++++] MONTHLY MINIMUM)
a) Online Banking Customer Maintenance $ [++++] #2
b) Bill Payment Maintenance (up to 20, thereafter [++++] cents) $ [++++] 0%
5) NHOME OPTIONS
a) nForm (10 frames) $[++++] #1
b) Site Map Construction $[++++] #1
c) Management Reporting (Annually) $[++++] #2
d) Internet TV Site Quote #1
e) Telephone Bill Payment Quote #1
</TABLE>
*The royalty percentage is based upon the actual sales dollars contracted by
Reseller to Customer. Example: If Reseller charges $[++++] for initial setup
then nFront would receive $[++++] and Reseller would receive $[++++]. The prices
listed in Exhibit D are nFront's minimum price level.
<TABLE>
<CAPTION>
<S> <C> <C>
All contracts in which Commission #1 - See Below
nFront directly 5%
participate in selling**
0 - 50 20% 7.5%
51 - 100 25% 10%
101 + 25% 12.5%
</TABLE>
**This would apply unless the nFront employee's salary and expenses are fully
reimbursed by Reseller.
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EXHIBIT E
LICENSE AND MAINTENANCE AGREEMENT
BETWEEN
NFRONT, INC.
("NFRONT")
A GEORGIA CORPORATION
HAVING ITS PRINCIPAL PLACE OF BUSINESS AT:
1551 JENNINGS MILL ROAD, SUITE 800A
BOGART, GEORGIA 30622
AND
BANK NAME
("CUSTOMER")
HAVING ITS PRINCIPAL PLACE OF BUSINESS AT:
BANK ADDRESS
BANK CITY, STATE, ZIP
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1. AGREEMENT
This agreement ("Agreement") provides for the grant of a non-exclusive
license of Software ("Software") and the provision of Software
maintenance services by nFront to Customer.
2. INITIAL TERM
The initial term (the "Initial Term") of this Agreement shall begin
upon signing (the "Effective Date"), and shall remain in effect,
subject to the renewal provisions contained within Paragraph 3 hereof,
and subject to earlier termination as provided for in Paragraph 13 or
Paragraph 15 hereof, for a period of five (5) years following the
Effective Date.
3. AUTOMATIC RENEWAL AND SUBSEQUENT TERM
Upon expiration of the Initial Term, this Agreement shall be
automatically extended for an indeterminate number of successive five
(5) year periods (each a "Subsequent Term"), unless Customer notifies
nFront of its election not to renew at least ninety (90) days prior to
the end of the Initial Term of any Subsequent Term.
4. SOFTWARE RIGHTS
This Agreement grants Customer non-exclusive license rights to nFront
Software. For all purposes of this Agreement, the term "Software" shall
mean all those software products described in the Software Applications
attached hereto as Exhibit 1 ("Software Applications"). Customer may,
by addendum to this Agreement agreed to in writing by nFront, or by
separate written agreement with nFront, license other software products
provided by nFront. Unless Customer otherwise notifies nFront, all
subsequently licensed and installed Software shall be automatically
added to this Agreement.
5. FEES, INSTALLATION CHARGES AND TAXES
(a) Fees
Customer has been granted hereunder a non-exclusive license
for the Software for the duration of this Agreement. The
initial and annual Software fees for this license are set
forth in the Customer Software Fees attached hereto as Exhibit
2 ("Software Fees and Deliverables").
(b) Installation and Special Charges
Customer shall pay for Software installation, modification,
and non-covered maintenance of Software at nFront's then
prevailing professional service fees. A list of nFront's
current prevailing professional service fees is attached
hereto as Exhibit 3 ("Professional Service Fees"). Expenses
for travel and all related expenses for Software installation,
modification, and covered and non-covered maintenance shall be
reimbursed by Customer to nFront upon invoice.
(c) Taxes
Customer is additionally responsible for all applicable
federal, state, or local taxes (exclusive of income taxes
properly payable by nFront) and other governmental fees or
assessments incurred as a result of this License, use of the
Software by Customer, and services provided by nFront
hereunder.
6. PAYMENT
(a) Payment of Fees and charges hereunder will be due as follows:
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(1) One hundred percent (100%) of the Initial Software
Fees is due at the time Customer signs this
Agreement.
(2) All other fees are billed monthly. All monthly
minimum fees begin on the software acceptance date.
(3) Non-covered maintenance and travel and related
charges are due upon invoice by nFront.
(b) In the event payment is not made as specified herein, or
within thirty (30) days following invoice by nFront, as
applicable, Customer shall pay interest at the rate of one and
one half percent (1.5%) per month (or the highest applicable
legal rate, whichever is lower) on the outstanding overdue
balance for each month or part thereof that such sum is
overdue. Customer agrees to pay all costs of collection of
overdue amounts, including reasonable attorneys' fees and
court costs.
7. SOFTWARE LICENSE
(a) nFront and/or its suppliers have designed, developed, and made
available proprietary computer Software containing trade
secrets of nFront and/or its suppliers. Use of this Software
is strictly governed by this Agreement. No title or ownership
in the Software is transferred to Customer. Customer shall not
copy or in any way duplicate the Software, except for
reasonable backup procedures approved by nFront. The Software
may not be assigned, sublicensed, or otherwise transferred or
used by Customer for the benefit of a third party.
(b) Customer shall hold the Software, together with all materials
and knowledge related thereto obtained by Customer, in
confidence, and shall use reasonable controls to protect the
confidential nature of the Software and such related materials
and knowledge.
(c) Customer agrees to execute any documents reasonably requested
by nFront with respect to the Software of any third party
licensed or sublicensed by nFront to Customer hereunder.
8. BASIC MAINTENANCE PERIOD
The Basic Maintenance Period commences on Monday and continues through
Friday of each week (8:00 a.m. to 5:00 p.m. Customer Local Time),
except on any day on which banking institutions in Athens, Georgia, are
authorized by law or executive order to close ("Holidays").
9. EXTENDED MAINTENANCE PERIOD (IN HOUSE CUSTOMERS ONLY)
The Extended Maintenance Period (all Customer local times):
<TABLE>
Initial all that apply: Surcharge
<S> <C> <C> <C>
______ Monday through Friday* 8:00 a.m. to 8:00 p.m. 4%
______ Monday through Friday* 8:00 a.m. to 12:00 midnight 8%
______ Monday through Friday* 24 hours starting 8:00 a.m. 16%
______ Saturday* 8:00 a.m. to 5:00 p.m. 9%
______ Saturday* 8:00 a.m. to 8:00 p.m. 10%
______ Saturday* 8:00 a.m. to 12:00 midnight 12%
______ Saturday* 24 hours starting 8:00 a.m. 14%
______ Sunday or Holiday 8:00 a.m. to 5:00 p.m. 16%
</TABLE>
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<TABLE>
<S> <C> <C> <C>
______ Sunday or Holiday 8:00 a.m. to 8:00 p.m. 19%
______ Sunday or Holiday 8:00 a.m. to 12:00 p.m. 22%
______ Sunday or Holiday 24 hours starting 8:00 a.m. 27%
*Except Holidays
</TABLE>
10. COVERED MAINTENANCE
(a) General
nFront will provide the maintenance required to assure that
the Software operates according to nFront's standard
specifications. Such maintenance will be performed during the
Basic Maintenance Period, and, if Paragraph 9 of this
Agreement applies, during the time periods specified therein.
(b) Software Maintenance
Software Maintenance includes:
(i) New software releases of existing licensed
products/modules
(ii) Application updates
(iii) Mandatory federal regulatory compliance
(iv) Malfunction remedies ("Bug Fixes")
(v) Documentation maintenance
(vi) Remote diagnostics
(vii) Service desk and dispatch
(viii) Non-chargeable user error remedies
It is the policy of nFront to provide improvements to the
Software and to assist the Customer in its duty to comply with
mandatory federal governmental regulations applicable to the
data utilized in the Software. nFront reserves the right to
discontinue support of previous versions of Software one
hundred eighty (180) days after the availability of a new
release. Failure of the Customer to install Software releases
or any other correction or improvement provided by nFront
shall relieve nFront of responsibility for the improper
operation or any malfunction of the Software as modified by
any subsequent correction or improvement, but in no such event
shall any fees paid (or to be paid) by Customer be returned to
Customer, and nFront shall be released thereafter from its
obligation to support the Software as provided herein.
(c) Non-Covered Maintenance
Covered maintenance does not include the following: (i)
maintenance outside the agreed Basic Maintenance Period unless
and to the extent indicated in Paragraph 9 of this agreement;
(ii) maintenance required by: (a) operator error or improper
operation of the Software, (b) modifications or additions to
Software performed by other than nFront personnel or by their
designees, (c) modifications or additions by Customer to
equipment such that the Software requires modifications in
order to operate according to nFront documentation, (d) damage
to Software by Customer's employees or third parties, (e)
causes beyond the reasonable control of nFront including, but
not limited to, acts of God or public enemies, labor disputes,
supplier or materials shortages, embargoes, rationing, acts of
government authorities, utility or communication
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failures, epidemics, riots, strikes, or war, or (f) electrical
disturbances, outages or brownouts; (iii) nFront's requested
involvement in determining or solving a problem on Software
not covered by this Agreement; (iv) Software modification or
customization requested by Customer.
11. SOFTWARE ACCEPTANCE DATE
The Software Acceptance Date shall be the date the Software is first
used for daily operations by Customer.
12. DISCLAIMER
EXCEPT TO THE EXTENT OTHERWISE SPECIFICALLY STATED IN THIS AGREEMENT,
NFRONT DISCLAIMS ALL WARRANTIES ON THE SOFTWARE AND SERVICES FURNISHED
HEREUNDER, INCLUDING, WITHOUT LIMITATION, ALL IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL
NFRONT'S LIABILITY UNDER THIS AGREEMENT EXCEED THE AMOUNT PAID TO
NFRONT UNDER THIS AGREEMENT DURING ANY PERIOD OF TWELVE (12)
CONSECUTIVE MONTHS. NFRONT SHALL NOT BE LIABLE IN ANY EVENT FOR DAMAGES
RESULTING FROM LOSS OF DATA, LOSS OF PROFITS, USE OF PRODUCT, OR FOR
ANY INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES, EVEN IF ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES. THIS LIMITATION OF NFRONT'S LIABILITY
SHALL APPLY REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT OR
TORT, INCLUDING NEGLIGENCE. ANY ACTION AGAINST NFRONT MUST BE BROUGHT
WITHIN ONE (1) YEAR AFTER THE CAUSE OF ACTION ACCRUES.
13. TERMINATION
nFront may, at its option, terminate this Agreement upon notice to
Customer if Customer fails to comply with any of the terms and
conditions hereof, including, without limitation, payment terms,
applicable to Customer. Upon notice of termination of this Agreement
under this Paragraph 13, or upon any other termination or expiration of
this Agreement, Customer agrees to discontinue all use of the Software
and return to nFront all copies of the Software and related
documentation in Customer's control or possession, together with a
written certification that it has done so. No termination of this
Agreement by nFront shall constitute a waiver of any rights available
to nFront as a result of any breach of this Agreement by Customer.
14. EXCUSABLE DELAYS
nFront shall not be liable for delays in delivery, failure to deliver,
or otherwise to perform any obligation hereunder when such delay or
failure arises beyond the reasonable control and without the fault or
negligence of nFront, including, without limitation, such causes as
acts of God or public enemies, labor disputes, supplier or material
shortages, embargoes, rationing, acts of local, state, or national
governments or public agencies, utility or communication failures,
fire, flood, epidemics, riots, strikes, or war. The time for
performance of any obligation delayed by such events will be postponed
for a period equal to the delay, unless Customer and nFront agree to
the contrary in writing.
15. INTELLECTUAL PROPERTY RIGHTS.
nFront shall indemnify Customer from any and all damages and costs
finally awarded for infringement of any valid United States patent,
trademark, or copyright in any suit based upon the license by nFront or
the proper use by Customer of the Software hereunder, where nFront is
the infringer with respect thereto, and from reasonable expenses
incurred in defense of such suit if nFront does not undertake the
defense thereof, provided that nFront is promptly notified of any such
suit, and, at its option, is given full and exclusive authority for the
control and defense of the same and all negotiations for its settlement
or compromise, and,
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<PAGE> 20
further provided that this indemnity shall not extend to infringement
resulting from: (i) nFront's compliance with Customer's designs,
processes, or formulas; (ii) a combination with or an addition to the
Software of any software not supplied by nFront hereunder; or, (iii) a
modification of the Software by any person other than nFront. If any
claim has occurred, or in nFront's opinion is likely to occur, Customer
shall permit nFront, at nFront's option and expense, either to procure
for Customer the right to continue using the Software or to replace or
modify the same so that it becomes non-infringing. If neither of the
foregoing alternatives is acceptable to nFront, Customer shall return
the Software on written request by nFront and this Agreement shall
terminate with no continuing obligation or liability of nFront to
Customer. THE FOREGOING STATES THE SOLE AND EXCLUSIVE LIABILITY OF
NFRONT FOR INFRINGEMENT AND IS IN LIEU OF ALL WARRANTIES, EXPRESSED OR
IMPLIED, IN REGARD THERETO.
16. NOTICES
Whenever any party hereto desires or is required to give any notice,
demand, consent, approval, satisfaction, or request with respect to
this Agreement, each such communication shall be in writing and shall
be effective only if it is delivered by personal service (which shall
include delivery by delivery service, over-night delivery service,
telecopy, or telefax) or mailed, by United States certified mail,
postage prepaid, and addressed as follows:
If to nFront: nFront, Inc.
1551 Jennings Mill Road, Suite 800A
Bogart, Georgia 30622
Attn.: President
Facsimile: (706) 369-8611
If to Customer: Customer's Address as specified on
the signature page hereof
Facsimile: (xxx) xxx-xxxx
Such communications, when personally delivered, shall be effective upon
receipt, but, if sent by certified mail in the manner set forth above,
shall be effective three (3) business days following deposit in the
United States mail. Any party may change its address for such
communications by giving notice thereof to the other party in
accordance with the requirements of this section.
17. MISCELLANEOUS
Except as otherwise provided herein, this Agreement, including any
attachments hereto, constitutes the entire agreement between Customer
and nFront, and there are no other agreements, representations, or
warranties, expressed or implied, written or oral. The validity,
enforcement, interpretation, and construction of this Agreement shall
be determined in accordance with the laws of the State of Georgia. Each
party consents to the exclusive personal jurisdiction and venue of the
state and federal courts with jurisdiction in Fulton County, Georgia
for a resolution of all disputes arising hereunder. If any provision of
this Agreement shall, for any reason, be held unenforceable in any
respect, such unenforceability shall not affect any other provision
hereof, and this Agreement shall be construed to limit the application
of such unenforceable provision to the minimum extent necessary to
render the same enforceable, and, if such a limiting construction is
not possible, such unenforceable provision shall be deleted as if never
contained herein. Special provisions to this Agreement, if any, shall
be attached as exhibits or addenda hereto, and shall be binding only
when executed or initiated by authorized representatives of Customer
and nFront. Any such special provisions shall control any conflict with
the provisions hereof Customer may not assign its rights hereunder or
delegate its duties hereunder, whether voluntarily, involuntarily, by
operation of law or otherwise, without the prior written consent of
nFront, which consent may be withheld in the sole discretion of nFront.
The headings and sub-headings used in this Agreement are for
convenience only and do not limit or amplify the terms hereof. The
authorization, following the execution of this Agreement, of additional
workstations or items of software shall be deemed an amendment to this
Agreement binding
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<PAGE> 21
upon the parties during the entire term hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the dates
indicated below. This Agreement shall be effective, following execution by
Customer, upon acceptance by nFront at its principal place of business indicated
herein.
ACCEPTED:
Customer: nFront:
- ------------------------------ -----------------------------------
Signature Signature
- ------------------------------ -----------------------------------
Name Name
- ------------------------------ -----------------------------------
Title Title
- ------------------------------ -----------------------------------
Date Date
BILLING ADDRESS:
21
<PAGE> 1
CONFIDENTIAL TREATMENT* EXHIBIT 10.7
*CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO THE RULES
AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS AND "+"
HAVE BEEN USED TO IDENTIFY INFORMATION WHICH IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST.
MARKETING AGREEMENT
THIS MARKETING AGREEMENT (the "Agreement") is made this 10th day of
April 1998 by and between NFRONT, INC. ("nFront"), a Georgia corporation having
its principal offices at 1551 Jennings Mill Road, Suite 800A, Bogart, Georgia
30622 and BISYS, INC. ("Reseller"), a Delaware corporation having its principal
offices 11 Greenway Plaza, Suite 300, Houston, Texas 77046-1102.
W I T N E S S E T H:
WHEREAS, nFront is in the business of providing home banking and bill
payment services through the Internet to customers of banks and other financial
institutions;
WHEREAS, Reseller is in the business of providing transaction
processing and other administrative and computer processing services to banks
and financial institutions;
WHEREAS, Reseller desires to offer to its Customer Base (as hereinafter
defined) and potential customers Internet home banking capabilities;
WHEREAS, nFront desires Reseller to offer nFront's proprietary Internet
home banking system as more fully described in Exhibit A attached hereto (the
"nHome System") to Reseller's Customer Base and to potential Bank customers of
Reseller
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, agreements and conditions set forth herein, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
Definitions
As used in this Agreement, each of the following terms has the meaning
set forth thereafter, such meaning to be equally applicable both to the singular
and plural forms of the terms herein defined:
(a) "Agreement" means this agreement, together with all exhibits and
schedules hereto now or hereafter signed by Reseller and nFront (all of which
are herein incorporated by reference), as the same may be modified, amended or
supplemented from time to time.
(b) "Bank" means banks and other financial institutions that offer
banking services to the general public.
(c) "Customer Base" means those banks who are existing customers of
Reseller (see Exhibit B) and any other Banks who become customers of Reseller
during the Term.
(d) "Documentation" means that portion of the nHome System that
provides installation and operating instructions for use of the nHome System.
(e) "End-User" means the ultimate user of the nHome System.
(f) "Generic Hardware" means computer equipment and configurations
thereof that meets the specifications provided by nFront for use with the nHome
System.
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<PAGE> 2
(g) "nHome System" shall have the meaning set forth in the fourth
recital hereof and shall also include all future improvements, enhancements and
modifications thereof, and all releases and upgrades related thereto.
(h) The terms "sale" and "resale" and any grammatical variant thereof
shall include, without limitation, sales, contracts for sale, conditional sales,
installment sales, rentals, leases or licenses of software to Banks, and any
other arrangement whereby the nHome System is placed at the disposal of the
Banks.
(i) "Software" means that portion of the nHome System that is comprised
of computer applications programs.
(j) "Term" shall have the meaning set forth in Section 8.1 hereof.
ARTICLE II
Reseller Appointment
2.1 Appointment. During the Term, nFront hereby grants to Reseller the
non-exclusive right to market the nHome System to its Customer Base and
potential Bank customers of Reseller, and Reseller hereby accepts such
appointment. Reseller may market the nHome System anywhere in the continental
United States but shall have no right to market the nHome system outside the
United States. Reseller understands, acknowledges and agrees that this
appointment is non-exclusive as to both the nHome System and geographic area and
that nFront may appoint more than one reseller in any given geographic area to
sell and market the same nHome System as any other reseller. nFront expressly
reserves the right to sell and deliver the nHome System to any other entity,
including Banks. Notwithstanding the immediately preceding sentence, for so long
as Reseller is actively marketing the nHome System as its preferred Internet
banking solution to its Customer Base, nFront agrees that it will not contact
those Banks that are included in the Customer Base as of the date hereof. nFront
reserves the right to review the status of Reseller's marketing efforts to the
Customer Base on a quarterly basis, and if it determines, in the exercise of its
reasonable discretion, that Reseller is not making reasonable efforts to market
the nHome System to the Customer Base, then on thirty (30) days prior written
notice to the Reseller the restrictions set forth in the immediately preceding
sentence shall no longer apply. Unless otherwise set forth on Exhibit C attached
hereto or hereafter as consented to in writing by nFront, Reseller shall sell
the nHome System only to Banks, and shall not sell the nHome System to other
parties providing core processing services to Banks, or to Bank service bureaus,
software providers, other resellers of automated bank services or to any other
buyer who intends, directly or indirectly, to resell the nHome System. Reseller
has no authority to appoint any associate resellers or subdealers of the nHome
System without nFront's consent. If nFront significantly participates, either by
request or prior approval of Reseller or without the request or prior approval
of Reseller in the sales process resulting in the signing of a current Reseller
customer to the nHome agreement. nFront agrees to recognize the Customer as a
Reseller sale. Reseller agrees to rebate the then current commission payment
representing the nFront sales commission plan to nFront.
2.2 Relationship between nFront and Reseller. Reseller shall conduct its
business in the purchase and resale of nHome System as a principal for its own
account and at its own expense and risk. This Agreement does not in any way
create the relationship of principal and agent, or any similar relationship
between nFront and Reseller, including, but not limited to that of joint
ventures, partners or associates. Neither party is granted a right or authority
hereunder to assume or create any obligation or responsibility for or on behalf
of the other party or otherwise to bind or to use the other party's name other
than as may be expressly authorized by the other party.
ARTICLE III
Sales, Service, and Training and Related Obligations
3.1 Selling and Promotion. Reseller shall use commercially reasonable efforts to
sell and promote the sale of the nHome System, which commercially reasonable
efforts shall include, but not be limited to, promotion of the nHome
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<PAGE> 3
System to the Customer Base and prompt performance of all of its obligations
under this Agreement.
3.2 Staffing and Training. Reseller shall appoint its technically suitable
employees to sell the nHome System, and provide Bank and End-User support.
Reseller shall, at its sole cost and expense, send the appropriate sales,
technical and training personnel to such training programs and other refresher
and upgrade training as nFront may, at reasonable intervals, require. nFront
shall provide periodic routine consultation and advice to Reseller in connection
with Reseller's sales and service hereunder and shall provide (a) technical,
specification and sales advice, (b) assistance and advice concerning promotional
and training programs, and (c) suggestions for new applications for the nHome
System at Reseller's cost. nFront shall furnish Reseller with a supply of price
lists, sales literature, catalogues, specifications for Generic Hardware,
Documentation and advisory assistance with respect to the nHome System at
Reseller's cost. All proprietary demonstration equipment, manuals, instruction
books, contract forms, sales and promotional materials, Documentation and
similar material furnished to Reseller by nFront, whether furnished free of
charge or not, shall remain the property of nFront and upon reasonable request
shall be returned to nFront by Reseller upon Reseller's receipt of replacement
materials or termination of this Agreement.
3.3 Installation and Training. Reseller acknowledges, understands and agrees
that the nHome System that it shall provide to Banks shall remain resident on
nFront's servers, and that such Banks shall, through Reseller, gain access to
the nHome System upon execution of a contract with nFront. nFront shall be
responsible for installation, training and systems maintenance of the nHome
System resident on its servers. Reseller hereby agrees that it shall provide
Bank and End-User support services to Banks and shall provide such services in
respect of the nHome System as used by any such Banks who receive access to the
nHome System from Reseller.
3.4 Reseller Promotional Activity. nFront shall not share in the expense of any
advertising or promotional activities by Reseller or other sales promotion
projects except by express agreement in writing. All materials prepared by
Reseller that promote the nHome System, including, but not limited to, any
materials that include any trademark or trade name (or any mark or name closely
resembling the same) now or hereafter owned or licensed by nFront or any of its
affiliates shall be approved in writing by nFront prior to use.
3.5 Reseller Recordkeeping. Reseller shall keep records of its business relating
to the nHome System as may be reasonably required by nFront. nFront or its
authorized representative may, from time to time during regular business hours,
examine such records and Resellers accounts relating to the sale and servicing
of the nHome System, at nFront's cost. Reseller agrees to make available, at
their cost, any and all resources, including people, reasonably necessary to
successfully provide the necessary information to complete the examination.
ARTICLE IV
Conditions of Sale
4.1 Pricing and Payment. The price for access to the nHome System to the Banks
and the processing fees for services thereunder shall be as set forth in Exhibit
D attached hereto. As compensation for its sales, marketing, and support
services provided hereunder, Reseller shall be entitled to retain the percentage
of such fees as set forth in Exhibit D attached hereto. For any such sales as to
which nFront does not require prepayment, payment of nFront's portion of the
initial access fee shall be due net fifteen (15) days from the date of
Reseller's invoice to the Bank, subject to credit approval, payable to nFront at
its principal place of business. Payment of nFront's portion of any processing
fees shall be paid within thirty (30) days following the end of each calendar
month for the first six (6) months after the live date of the first customer,
and thereafter will be due forty-five (45) days following the end of each
calendar month. A late payment charge equal to one and one-half percent (1 1/2%)
of the unpaid amount for each succeeding thirty (30) day period or forty-five
(45) day period or portion thereof in which fees remain unpaid.
4.2 Force Majeure. nFront shall not be liable for loss or damage due to
interruption of service or access to the nHome System resulting from any cause
beyond its reasonable control, including, but not limited to, the following
causes (if beyond nFront's reasonable control), Internet systems or network
failure, capacity limitations, compliance with regulations, orders or
instructions of any federal, state or municipal government or any department or
agent
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thereof, acts of God, acts or omissions of Reseller, acts of civil or military
authority, fires, strikes, facilities shutdowns or alterations, embargoes, war,
riot, delays in transportation, or inability to obtain necessary labor,
facilities or materials from usual sources. IN NO EVENT SHALL NFRONT BE LIABLE
FOR CONSEQUENTIAL OR SPECIAL DAMAGES DUE TO ANY SUCH CAUSE.
4.3 Price and System Changes. nFront shall have the right to make material
change to the nHome System without notice with ninety (90) days' written notice
to Reseller, and shall have the right within ninety (90) days' written notice to
Reseller to discontinue the sale of any version of the nHome System, to make
material changes in method of access or delivery, including interface
procedures, and to add improvements, all without incurring any liability
whatever, including any obligation to install or modify the same on the nHome
System previously accessed by the Customer Base. nFront may change its prices to
Reseller for the nHome System upon sixty (60) days' written notice to Reseller.
Any contract between Reseller and a Bank which includes the nHome System
executed prior to the date of any such notice with a scheduled delivery date
after the effective date of such price increase shall be sold to Reseller at the
revised price for the nHome System. Any nHome System scheduled for delivery to a
Bank prior to the effective date of any such price increase but delayed due to
the fault of nFront or for reasons beyond nFront's control shall be sold to
Reseller at the price as in effect on the date Reseller ordered the nHome
System. The price protection provisions contained in this Section 4.3 shall
apply only to the initial access fees listed on Exhibit D attached hereto, and
shall not apply to any increase in processing fees, which increase shall be
effective as of the thirtieth day following written notice of such increase to
Reseller.
4.4 Taxes and Other Fees. Reseller shall pay all sales, use, service use,
occupation, personal property and excise taxes and any other fees, assessments
or taxes which may be assessed or levied by any federal, state or local
government and any departments and subdivisions thereof, against any of the
nHome System ordered by Reseller, or in Reseller's possession, or related
service fees.
ARTICLE V
Warranties
5.1 nFront's Warranty. nFront represents and warranties that: (a) the Software
will perform in accordance with the applicable specifications and documentation;
(b) the Software will (i) store all date-related information and process all
data interfaces involving dates in a manner that unambiguously identifies the
century, for all date values before, during and after the Year 2000; (ii)
calculate, sort, report and otherwise operate correctly and in a consistent
manner for all date information processed by the Software, whether before,
during or after the Year 2000; (iii) calculate, sort, report and otherwise
operate correctly, in a consistent manner and without interruption regardless
whether the date on which the Software is operated or executed is before, during
or after the Year 2000; (iv) report and display all dates with a four-digit date
so that the century is unambiguously identified; and (v) handle all leap years,
including but not limited to the Year 2000 leap year, correctly. Except as
specifically set forth in this Section 5.1, THE NHOME SYSTEM IS PROVIDED
"AS-IS", "WHERE-IS". NFRONT SPECIFICALLY DISCLAIMS ALL WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING, BUT NOT LIMITED TO, IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE AS TO THE NHOME SYSTEM PROVIDED UNDER THIS
AGREEMENT.
ARTICLE VI
Special Agreements Regarding Software and Other Intellectual Property
6.1 Limited License. In the performance of Reseller's obligations hereunder, it
shall be necessary for Reseller to demonstrate the nHome System. Accordingly,
subject to the terms and conditions contained herein, nFront hereby grants to
Reseller, and Reseller hereby accepts from nFront, a non-exclusive license (the
"License") of the Software solely for the purpose of demonstrating the nHome
System in operation to potential Bank customers of Reseller.
6.2 Software Covenants. Reseller agrees to comply with each of the following
requirements:
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(a) Reseller shall not copy, alter, modify, translate, decompile,
disassemble, reverse engineer or otherwise attempt to derive source code, or
create derivative works of the Software, or any part thereof, or knowingly allow
others to do so, during or after the Term.
(b) Except as otherwise specifically provided in this Agreement,
Reseller shall not loan, rent, lease, give, sub-license, or otherwise transfer,
nor communicate or otherwise disclose, the Software, including any part or any
copy thereof, in whole or in part, to any person. Reseller agrees that except
for copies of the Software provided to Reseller pursuant to Section 6.1 hereof,
all such software provided to Reseller hereunder shall remain in its sealed
package, as provided by nFront to Reseller, until delivered to a Bank customer
of Reseller.
(c) Except with respect to providing access to the nHome System to Bank
customers as authorized and specifically provided in this Agreement, Reseller
shall not electronically transfer the Software, or any part thereof, from one
computer to another over a network, irrespective of how linked.
(d) The Software, including all parts thereof, and any copies, in whole
or in part, and any and all copyrights thereto, are and remain the property of
nFront, irrespective of the ownership of the media on which such Software and
any parts or copies thereof are contained.
(e) Each copy of the Software sold to Banks shall include a service
agreement, the form of which shall be as set forth in the Exhibit E, which
agreement shall be incorporated into any Reseller agreement given to Banks,
provided, however, that nFront shall approve in advance the form of any such
agreement. To enable nFront to verify compliance herewith, Reseller shall
provide nFront with any form agreements which Reseller plans to use in
connection herewith at least thirty (30) days prior to such use.
(f) Reseller acknowledges that the laws and regulations of the United
States restrict the export and re-export of commodities and technical data of
United States origin, including the nHome System. Reseller agrees that it shall
not export or re-export such Software in any form without nFront's consent,
which consent shall, among other things be conditioned upon Reseller receiving
the appropriate United States and foreign government licenses and approvals.
(g) Reseller shall not, by any act or omission, impair or prejudice the
copyright or any other right of whatever nature of nFront in and to the nHome
System or any part thereof, and shall not deal with the same in any manner which
may allow any third party to obtain any rights in the same which are
inconsistent or which conflict with the rights of nFront.
6.3 Notices; Markings; Trademarks; Tradenames. Reseller agrees to comply with
the following:
(a) Reseller shall not delete any trademarks, tradename or copyright
notice present in, on or displayed by the nHome System, or any part thereof.
(b) Reseller shall not add to any notice present in, on or displayed by
the nHome System its own copyright, trademark or other proprietary notices
unless such notices have been previously approved in writing by nFront.
(c) Except as already present in, on or displayed by the nHome System
software and/or accompanying packaging or Documentation provided by nFront,
Reseller shall not use any trademarks and/or tradenames of nFront without prior
written approval of nFront.
6.4 Documentation. Each nHome System sold by Reseller to a Bank shall include
one (1) set of accompanying Documentation. Reseller shall only distribute
complete and separate copies of the Documentation to Banks and shall not
reproduce, in whole or in part, or transfer in any manner to a third party other
than a Bank, such Documentation. Any and all copyrights to such Documentation
are and shall remain the property of nFront.
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ARTICLE VII
Confidentiality and Non-Disclosure
7.1 Reseller Obligations.
(a) Reseller recognizes, acknowledges and agrees that during the Term,
nFront may furnish to Reseller certain technical and commercial information,
including but not limited to, designs, procedures, formulas, discoveries,
inventions, improvements, innovations, concepts and ideas, lists of customers,
computer programs, business methods, and plans for future developments
("nFront's Confidential Information") which is the confidential, proprietary
property of nFront. Information that is not disclosed or marked as confidential
shall not be regarded as nFront's Confidential Information unless such
information is of the type that Reseller should reasonably expect to be of a
confidential nature in which case Reseller shall treat such information as
nFront's Confidential Information. Reseller recognizes, acknowledges and agrees
that nFront's Confidential Information is to be maintained in secrecy and
confidence by Reseller and Reseller's employees, agents or representatives to
whom Reseller discloses any of nFront's Confidential Information. Reseller
agrees for itself and for each of its employees, agents or representatives to
whom Reseller discloses any of nFront's Confidential Information that such
information shall be used only in accordance with the terms, covenants,
conditions and limitations of this Agreement, and not for the benefit of or for,
directly or indirectly, Reseller or any of its employees, agents or
representatives. Information previously known to Reseller without an obligation
of confidentiality, and information independently developed by Reseller, shall
not be considered to be nFront's Confidential Information. Information made
available to the general public by nFront and information obtained from third
parties not associated with nFront shall not be considered to be nFront's
Confidential Information, except for information received from third parties
that Reseller knows or should have known was obtained illegally or in violation
of this Agreement. In the event Reseller or a representative of Reseller is
requested by law, order of court or any agency to disclose any of nFront's
Confidential Information, Reseller shall give nFront prompt notice of such
request so that nFront may seek an appropriate protective order. If, in the
absence of a protective order, Reseller or a representative of Reseller is
nonetheless compelled by law to disclose any of nFront's Confidential
Information, Reseller or a representative of Reseller, as the case may be, may
disclose such information in such proceeding without liability hereunder;
provided, however, that Reseller gives nFront written notice of the information
to be disclosed after receipt of such order by Reseller and, upon nFront's
request and at its expense, Reseller shall use its best efforts to obtain
assurances that confidential treatment shall be accorded to such information.
(b) In the event this Agreement is terminated for any reason, the
Reseller agrees to return promptly nFront's Confidential Information, including
all copies thereof, to nFront, or to deliver all such information promptly to
such party as may be designated by nFront or to destroy such information.
Reseller further agrees thereafter not to use or disclose nFront's Confidential
Information in any manner whatsoever without the prior written approval of
nFront unless and until such information shall lawfully become generally known
in the public domain through no fault of the Reseller or breach by the Reseller
of the covenants contained herein.
(c) Reseller shall disclose nFront's Confidential Information to Banks
only to the extent necessary to enable such customers to use the nHome System,
and only after any such Bank executes an agreement in form and substance
acceptable to nFront, acknowledging the confidential nature of such information
and setting forth the appropriate treatment of such information.
7.2 nFront's Obligations.
(a) nFront recognizes, acknowledges and agrees that during the Term,
Reseller may furnish to nFront certain technical and commercial information,
including but not limited to, designs, procedures, formulas, discoveries,
inventions, improvements, innovations, concepts and ideas, list of customers,
computer programs, business methods, and plans for future developments
("Reseller's Confidential Information"), which is the confidential, proprietary
property of Reseller. Information that is not disclosed or marked as
confidential shall not be regarded as Reseller's Confidential Information unless
such information is of the type that nFront should reasonably expect to be of a
confidential nature in which case nFront shall treat such information as
Reseller's Confidential Information. nFront recognizes, acknowledges and agrees
that Reseller's Confidential Information is to be maintained in secrecy
6
<PAGE> 7
and confidence by nFront and nFront's employees, agents or representatives to
whom nFront discloses any of Reseller's Confidential Information. nFront agrees
for itself and for each of its employees, agents or representatives to whom
nFront discloses any of Reseller's Confidential Information that such
information shall be used only in accordance with the terms, covenants,
conditions and limitations of this Agreement, and for the benefit of or for,
directly or indirectly, nFront or any of its employees, agents or
representatives. Information previously known to nFront without an obligation of
confidentiality, and information independently developed by nFront, shall not be
considered to be Reseller's Confidential Information. Information made available
to the general public by Reseller and information obtained from third parties
not associated with Reseller shall not be considered to be Reseller's
Confidential Information, except for information received from third parties
that nFront knows or should have known was obtained illegally or in violation of
this Agreement. In the event nFront or a representative of nFront is requested
by law, order of court or any agency to disclose any of Reseller's Confidential
Information, nFront shall give Reseller prompt notice of such request so that
Reseller may seek an appropriate protective order. If, in the absence of a
protective order, nFront or a representative of nFront is nonetheless compelled
by law to disclose any of Reseller's Confidential Information, nFront or a
representative of nFront, as the case may be, may disclose such information in
such proceeding without liability hereunder; provided, however, that nFront
gives Reseller written notice of the information to be disclosed after receipt
of such order by nFront and, upon Reseller's request and at its expense, nFront
shall use its best efforts to obtain assurances that confidential treatment
shall be accorded to such information.
(b) In the event this Agreement is terminated for any reason, nFront
agrees to return promptly Reseller's Confidential Information, including all
copies thereof, to Reseller or to deliver all such information promptly to such
party as may be designated by Reseller or to destroy such information. nFront
further agrees thereafter not to use or disclose Reseller's Confidential
Information in any manner whatsoever without the prior written approval of
Reseller unless and until such information shall lawfully become generally known
in the public domain through no fault of nFront or breach by nFront of the
covenants contained herein.
(c) nFront shall disclose Reseller's Confidential Information to Banks
only to the extent necessary to enable such customers to use the nHome System,
and only after any such Bank executes an agreement in form and substance
acceptable to Reseller, acknowledging the confidential nature of such
information and setting forth the appropriate treatment of such information.
ARTICLE VIII
Term and Termination
8.1 Term. This Agreement shall commence as of the date hereof and shall remain
in effect (unless sooner terminated pursuant to Section 8.2 hereof) for five (5)
years (the "Term"). It shall be renewed automatically without interruption for
successive five-year terms, unless, not less than sixty (60) days before the end
of any Term, either nFront or Reseller notifies the other party in writing of
its election (at its sole option, for any reason or for no reason) not to renew.
Any such renewal periods shall be considered an extension of and part of the
Term.
8.2 Right to Terminate. Notwithstanding any other provision hereof, this
Agreement may be terminated either (i) by mutual agreement of the parties
hereto; (ii) by either party at any time if the other party has materially
breached any of the provisions hereof and, if the breach is curable, has failed
to cure such alleged breach within thirty (30) days after written notice thereof
in the case of failure to pay when due amounts owing to such party, and within
sixty (60) days in case of all other alleged curable breaches; or (iii) by
either party immediately and without the giving of notice, in the event that
either party shall become insolvent, or shall ask its creditors for a
moratorium, or shall file a voluntary petition in bankruptcy, or shall be
adjudicated as a bankrupt pursuant to an involuntary petition, or shall suffer
appointment of a temporary or permanent receiver, trustee, or custodian for all
or a substantial part of its assets which shall not be discharged within sixty
(60) days. In the event either party materially breaches any of the provisions
hereof, and such breach is not curable, this Agreement shall be immediately
terminable by the non-breaching party. Without limiting the foregoing, any
violation of Articles VI, VII and IX hereof shall constitute a noncurable breach
and if either party commits such a breach, this Agreement shall be terminable
immediately by the non-breaching party.
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<PAGE> 8
8.3 Effect of Termination.
(a) Any termination of this Agreement shall not release Reseller from
paying any amount which may then be owing to nFront. In the event of any
termination of this Agreement, all obligations owed by Reseller to nFront shall
become immediately due and payable on the effective date of termination whether
otherwise then due or not (without presentation, demand, protest or notice of
any kind, all of which are hereby waived by Reseller); and nFront may offset and
deduct from any or all amounts owed to Reseller, if any, any or all amounts owed
by Reseller to nFront, rendering to Reseller the excess, if any.
(b) Upon termination of this Agreement, Reseller shall return to
nFront, promptly and without charge to nFront, all Documentation, price lists,
maintenance and policy manuals, sales aids and other publications of nFront
relating to the nHome System which Reseller has on hand. Reseller shall
thereupon immediately cease using any trademarks, tradenames, service marks or
other identifying marks on any of its materials.
(c) Reseller shall be solely responsible for all commitments incurred
or assumed by it during the Term or thereafter, and nFront shall not be held
responsible in any manner therefor, irrespective of any suggestion or
recommendation with respect thereto by nFront or any of its employees or
representatives unless nFront has expressly agreed in writing to assume the
responsibility.
ARTICLE IX
Non-Competition Agreement
9.1 During the Term Reseller shall use best efforts to not, directly or
indirectly, individually, on behalf of or in conjunction with any other person
or legal entity, or for or on behalf of any person, corporation, partnership,
company, trade association, agent, agency or other entity, engage in the
business of selling or distributing any Internet Banking solution other than
nHome which provides substantially similar banking functionality to Reseller's
Customer Base provided the nHome product remains competitive in both pricing and
functionality in the overall marketplace. Reseller is not precluded from
providing interfaces to other Internet banking solutions upon Customer's
request, however, Reseller cannot receive revenue from any outside Internet
banking vendor other than nFront for such interface or processing.
Notwithstanding the above, should Reseller acquire a transaction processing
business who has a substantially similar agreement with an alternate Internet
banking provider, this Agreement will not prohibit Reseller from generating
revenue from the acquired base.
ARTICLE X
Indemnification; Other Relief
10.1 Indemnification by Reseller. Reseller shall indemnify, defend and hold
harmless nFront, its officers, directors, shareholders, employees, agents and
affiliates from and against any claims, losses, damages, liabilities or expenses
(including, without limitation, reasonable attorneys' fees and expenses)
(collectively, "Claims") resulting from or arising out of negligence or
intentional misconduct in Reseller's use or misuse of the nHome System or any
part thereof by Reseller or any Bank included in the Customer Base, any
misrepresentations made by Reseller with respect to the nHome System or a breach
of any of the provisions of this Agreement, provided, however, that in respect
of any Claims hereunder against Reseller that arise out of or result from any
alleged use or misuse of the nHome System or any part thereof by Reseller or any
Bank Customer of Reseller or any alleged misrepresentation made by Reseller with
respect to the nHome System, Reseller shall be notified promptly of such Claim
in writing and shall be given authority, control and full and proper information
and assistance in the defense and settlement of such Claim. Notwithstanding the
foregoing, Reseller shall not have the authority to settle or compromise any
Claim in a manner that indicates that nFront contributed to or was responsible
for the cause of any such Claim unless nFront consents in writing to such
settlement.
10.2 Indemnification by nFront. Subject to the limitations set forth in Section
10.5 hereof, nFront shall indemnify, defend and hold harmless Reseller, its
officers, directors, shareholders, employees, agents and affiliates from and
against any claim, suit or proceeding based upon an allegation that the nHome
System (or any portion thereof) infringe
8
<PAGE> 9
upon or misappropriate any copyright, patent, trademark or trade secret of any
third party, provided that nFront is notified promptly of such claim, suit or
proceeding in writing and is given authority, control and full and proper
information and assistance in the defense and settlement of such claim, suit or
proceeding. If the nHome System is finally determined by a court of competent
jurisdiction to constitute an infringement of any patent, copyright, trademark
or other trade secret of a third party and its use is enjoined, nFront shall
either:
(a) procure the right for Reseller to continue to use the nHome System
under this Agreement; or
(b) replace or modify the nHome System with a version of the nHome
System that is not so infringing and that satisfies this provision of this
Agreement.
10.3 Arbitration. The parties to this Agreement agree that any controversies or
claims arising out of or relating to this Agreement (including, without
limitation, any alleged breach thereof or the termination or non-renewal
thereof) shall be settled by arbitration pursuant to the Federal Arbitration
Act, 9 U.S.C. ss. 1 et seq., in accordance with the Commercial Arbitration Rules
of the American Arbitration Association. The parties hereto further agree that
the arbitrators in any such arbitration shall not be authorized to award any
punitive damages in connection with any controversy or a claim settled by
arbitration hereunder. The decision of the arbitrator in any such arbitration
shall be final and binding upon the parties and judgment upon the award may be
entered in any court having jurisdiction thereof. Any arbitration shall take
place in Atlanta, Georgia, and the expenses of the arbitrators shall be
allocated by such arbitrators. The arbitration shall be conducted before a panel
of three (3) arbitrators, one selected by Reseller, one selected by nFront, and
one selected by mutual agreement of the arbitrators selected by Reseller and
nFront.
10.4 Injunctive Relief. Notwithstanding the provisions of Section 10.3 hereof,
the parties acknowledge and agree that any breach of the provisions of Articles
VI, VII or XI of this Agreement shall result in irreparable harm to nFront for
which no adequate remedy at law exists. Accordingly, upon any such breach, the
non-breaching party shall be entitled to injunctive or other appropriate
extraordinary relief, such relief being in addition to, and not in lieu of, any
other rights and remedies, including the award of damages, available at law or
in equity. Reseller acknowledges and agrees that no serious harm to it shall
result from the entry of any such equitable relief against it, and therefore any
bond required of a non-breaching party in connection with such relief shall be
set in an amount not in excess of One Thousand Dollars ($1,000.00) The parties
shall not be required to prove money damages to enforce any provision of this
Agreement.
10.5 LIMITATION OF LIABILITY. EXCEPT WITH RESPECT TO A BREACH OF ARTICLES XI,
XII AND XI OF THIS AGREEMENT, IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY
LOSS OF PROFIT OR ANY OTHER COMMERCIAL DAMAGE, INCLUDING BUT NOT LIMITED TO
SPECIAL, INCIDENTAL, CONSEQUENTIAL OR OTHER INDIRECT DAMAGES UNDER ANY CAUSE OF
ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, INCLUDING, WITHOUT
LIMITATION, CLAIMS ARISING FROM MALFUNCTION OR DEFECTS IN THE NHOME SYSTEM OR
NON-DELIVERY OF NHOME SYSTEM EVEN IF NFRONT HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES. SUBJECT TO THE MAXIMUM LIABILITY SET FORTH IN THIS PARAGRAPH,
IN NO EVENT SHALL NFRONT'S LIABILITY FOR ANY CLAIM ARISING OUT OF THIS AGREEMENT
EXCEED THE AMOUNT PAID TO NFRONT BY RESELLER UNDER THIS AGREEMENT WITHIN THE
THREE (3) MONTH PERIOD IMMEDIATELY PRECEDING THE ACCRUAL OF SUCH CLAIM. EXCEPT
WITH RESPECT TO A BREACH OF ARTICLES XI, XII AND XI OF THIS AGREEMENT, IN NO
EVENT SHALL EITHER PARTY'S MAXIMUM, CUMULATIVE LIABILITY FOR ALL CLAIMS UNDER
THIS AGREEMENT EXCEED $25,000 OR ALL AMOUNTS PAID BY RESELLER TO NFRONT
HEREUNDER, WHICHEVER IS LESS. NO CLAIM MAY BE BROUGHT BY RESELLER UNDER THIS
AGREEMENT MORE THAN TWO (2) YEARS AFTER ACCRUAL OF SUCH CLAIM.
9
<PAGE> 10
ARTICLE XI
Back-up System
11.1 Back-up System.
(a) Within a reasonable period after execution of this Agreement,
nFront shall deliver to Reseller, the nHome System on appropriate media, which
Reseller shall store in a secure location (the "Back-up System"). During the
Term and until the Password Release Date, nFront shall update the Back-up System
no more frequently than twice annually unless mutually agreed upon. Concurrently
with the execution of this Agreement, nFront and Reseller shall enter into a
Password Escrow Agreement in respect of the Back-up System in the form attached
hereto as Exhibit G. If, pursuant to such agreement the Password (as defined in
such agreement) is released to Reseller (the "Password Release Date"), Reseller
may use the Password solely to continue to provide services to its Customer Base
as in effect as of the Password Release Date for a period ending on the earlier
of (i) the date that Reseller secures the services of an alternate provider of
Internet home banking services or (ii) one (1) year from the date of such
release (the "Password Termination Date"). On the Password Termination Date,
Reseller shall deliver to nFront (or its successor-in-interest to the Password
and Back-up System) the nHome System and all copies thereof then in Reseller's
custody or control. Reseller's obligations under Articles VI and VII of the
Agreement shall apply to the Back-up System.
(b) Prior to the Password Release Date, Reseller shall not access, or
attempt to access, the Back-up System. If, prior to the Password Release Date,
Reseller breaches the provisions of this Section 11.1(b), in addition to any
other remedies that nFront may have in law or in equity, nFront may, without
notice to Reseller, terminate this Agreement forthwith.
(c) Reseller shall pay all costs and expenses associated with the
generation, maintenance and storage of the Back-up System and the Password
Escrow Agreement. The generation and maintenance cost and expenses are estimated
to be a one-time $300.00 per bank setup and $2,500 per semi-annual Customer Base
backup.
(d) Upon the Password Release Date, nFront shall be available to assist
the Reseller to implement the System in accordance with a project plan and cost
structure to be mutually agreed upon by the parties.
ARTICLE XII
Miscellaneous Provisions
12.1 Waiver. Any failure of a party to comply with any obligation, covenant,
agreement or condition herein may be expressly waived in writing by the other
party, but such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
12.2 Entire Agreement. This Agreement, the exhibits and schedules hereto
constitutes the entire understanding of the parties with respect to the subject
matter of this Agreement and are intended to supersede all prior understandings,
whether written or oral, between the parties with respect thereto.
12.3 No Third Party Beneficiary Rights. No provision of this Agreement is
intended or shall be construed to provide or create any third party beneficiary
right or any other right of any kind in any Bank or any client, customer,
affiliate, insurer, lender, shareholder, partner, officer, director, employee or
agent of any party hereto, or in any other person.
12.4 Amendment; Binding Effect; Assignment. No amendment, modification or
alteration of the terms of this Agreement shall be binding unless in writing and
executed by the parties hereto. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the parties hereto and their respective
successors, assigns, heirs, executors and administrators. Neither party may
assign this Agreement, in whole or in part, or any of its rights or obligations
hereunder without the prior written consent of the other party, which will not
be reasonably withheld, and
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<PAGE> 11
any such attempted assignment shall be void. Notwithstanding the immediately
preceding sentence, nothing herein shall be construed as prohibiting the
assignment of this Agreement as a result of the merger, consolidation or other
corporate reorganization or acquisition of the parties including, without
limitation, the assignment of this Agreement in connection with the sale of all
or substantially all of the assets of the parties.
12.5 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Georgia, without giving
effect to the conflict-of-laws principles thereof.
12.6 Severability. If any provision of this Agreement is held to be illegal,
invalid or unenforceable under present or future laws effective during the Term,
such provision shall be fully severable. This Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part of this Agreement, and the remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance from this
Agreement.
12.7 Counterparts. This Agreement may be executed simultaneously or in two or
more counterparts, each of which together shall constitute one and the same
instrument and shall be deemed an original hereof.
12.8 Notices. All notices required or permitted under this Agreement shall be
made in writing and shall be deemed to have been duly given if delivered
personally or sent by registered or certified mail (return receipt requested),
U.S. mail or facsimile. All notices shall be addressed to the parties at the
respective addresses indicated above.
12.9 Survival. The provisions of Articles V, VI, VII, VIII, IX, X, XI and XII
shall survive any termination or expiration of this Agreement.
ARTICLE XIII
Special Provisions
13.1 Special Provisions. All special provisions are fully described in
Exhibit F attached hereto ("Special Provisions.")
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
NFRONT, INC.
By: /s/ Tripp Rackley
-----------------------------------------
Its: President / CEO
----------------------------------------
Date: 4/10/98
---------------------------------------
RESELLER
By: /s/ Paul Bloirke
-----------------------------------------
Its: President & COO
----------------------------------------
Date: 4/10/98
---------------------------------------
11
<PAGE> 12
EXHIBIT A
ONLINE BANKING APPLICATION
1. View Account Balances and Histories
- DDA/Savings
- CD/IRA
- Loans
2. Transfer Funds between DDA and Savings accounts
- Immediate and Future Transfers
- One Time and Recurring Transfers
3. Bill Payment
4. Pending Transactions
5. Custom Reports
6. PIN Manager
7. Personal Information
8. PFM Downloads
- Microsoft Money
- Quicken
9. Online Help
10. Online Banking Demo
SECURE ACCOUNT OPENING
1. 7 Secure Product Applications
- Checking
- Savings
- CD/IRA
- Consumer/Commercial Loans
- Line of Credit
2. Additional Secure Application (also considered a secure product
application)
- Quizzes
- Surveys, etc.
INTERNET WEB SITE
1. Home Page
- Bank branding (logo)
- Custom navigational controls
- scanned images or custom graphics
2. Product and Service (28 sub-page maximum)
- Bank branding (logo)
- Custom navigational controls
3. Bank Information and Contact Us (25 sub-page maximum)
- Bank branding (logo)
- Custom navigational controls
- Up to 10 scanned images or 5 graphics
4. Feature Product, Guestbook, Frequently Asked Questions (FAQ) and Search
Engine
- Bank branding (logo)
- Custom navigational controls
12
<PAGE> 13
5. Financial Calculators
- Loan
- Maximum Loan
- College Planning
- Mortgage
- Retirement
ADMINISTRATION SITE
1. Product Application Secure Database Management
2. Guestbook Secure Database Management
3. Site Updates
- Rates and Terms
- Email Notifications
4. Detailed Billing
5. Online Help
EMAIL
1. Email - The bank will be assigned one @banking.com email address. This
"general" mailbox will forward all incoming mail to any/all bank
specified email addresses.
13
<PAGE> 14
EXHIBIT B
Reseller will provide Specific Customer information to nFront, within 72 hours,
upon request through out the duration of this Agreement.
14
<PAGE> 15
EXHIBIT C
1) DSI - Will receive 20% of all initial fees and 10% of all recurring fees,
unless the Bank is a TotalPlus Legacy or Client Server customer then will
receive the standard Reseller 40% revenue.
2) Creative Solutions - Will receive 20% of all initial fees and 10% of all
recurring fees, unless the Bank is a TotalPlus Legacy or Client Server
customer then will receive the standard Reseller 40% revenue.
15
<PAGE> 16
EXHIBIT D
ONLINE BANKING APPLICATION
1. View Account Balances and Histories
- DDA/Savings
- CD/IRA
- Loans
2. Transfer Funds between DDA and Savings accounts
- Immediate and Future Transfers
- One Time and Recurring Transfers
3. Bill Payment
4. Pending Transactions
5. Custom Reports
6. PIN Manager
7. Personal Information
8. PFM Downloads
- Microsoft Money
- Quicken
9. Online Help
10. Online Banking Demo
SECURE ACCOUNT OPENING
1. 7 Secure Product Applications
- Checking
- Savings
- CD/IRA
- Consumer/Commercial Loans
- Line of Credit
2. Additional Secure Application (also considered a secure product
application)
- Quizzes
- Surveys, etc.
INTERNET WEB SITE
1. Home Page
- Bank branding (logo)
- Custom navigational controls
- 3 scanned images or custom graphics
2. Product and Service (28 sub-page maximum)
- Bank branding (logo)
- Custom navigational controls
3. Bank Information and Contact Us (25 sub-page maximum)
- Bank branding (logo)
- Custom navigational controls
- Up to 10 scanned images or 5 graphics
4. Feature Product, Guestbook, Frequently Asked Questions (FAQ) and Search
Engine
- Bank branding (logo)
- Custom navigational controls
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<PAGE> 17
5. Financial Calculators
- Loan
- Maximum Loan
- College Planning
- Mortgage
- Retirement
ADMINISTRATION SITE
1. Product Application Secure Database Management
2. Guestbook Secure Database Retrieval
3. Site Updates
- Rates and Terms
- Email Notifications
4. Detailed Billing
5. Online Help
EMAIL
1. Email - The bank will be assigned one @banking.com email address. This
"general" mailbox will forward all incoming mail to any/all bank
specified email addresses.
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<PAGE> 18
1. NHOME PRICING (RESELLER WILL RECEIVE 40% OF ALL NHOME PRICING). ANY CHANGE
IN PRICING MUST BE MUTUALLY AGREED UPON. IN THE EVENT OF A PRICING CHANGE,
THE REVENUE SPLIT BETWEEN NFRONT AND RESELLER WILL REMAIN THE SAME UNLESS
OTHERWISE MUTUALLY AGREED UPON.
NFRONT ACKNOWLEDGES THAT RESELLER HAS EXISTING AND POTENTIAL RELATIONSHIP
DISCOUNTS WITH CUSTOMERS AND PROSPECTS. IN THE EVENT THAT A CUSTOMER OR
PROSPECT RECEIVES SUCH DISCOUNT, RESELLER WILL APPRIZE NFRONT OF THE
DISCOUNT. THE RELATIONSHIP DISCOUNT WILL BE ACCOUNTED FOR BY REDUCING THE
RESELLER REVENUE FOR THAT SPECIFIC ACCOUNT.
<TABLE>
<CAPTION>
ASSET SIZE LICENSE FEE SYSTEM SUPPORT (MO.) PER CUSTOMER COST**
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
0-1000 1000-2500 2500-5000 5000&>
$0-50M $[+++] $[+++]/Mo. $[+++] $[+++] $[+++] $[+++]
$50-100M $[+++] $[+++]/Mo. $[+++] $[+++] $[+++] $[+++]
$100-150M $[+++] $[+++]/Mo. $[+++] $[+++] $[+++] $[+++]
$150-250M $[+++] $[+++]/Mo. $[+++] $[+++] $[+++] $[+++]
$250-500M $[+++] $[+++]/Mo. $[+++] $[+++] $[+++] $[+++]
$500-750M $[+++] $[+++]/Mo. $[+++] $[+++] $[+++] $[+++]
$750-1B $[+++] $[+++]/Mo. $[+++] $[+++] $[+++] $[+++]
$1-1.5B $[+++] $[+++]/Mo. $[+++] $[+++] $[+++] $[+++]
$1.5B & > $[+++] $[+++]/Mo. $[+++] $[+++] $[+++] $[+++]
</TABLE>
2. ONLINE BILL PAYMENT (RESELLER WILL ADD A MARGIN TO THE FOLLOWING FEES AND
WILL RECEIVE 100% OF THE ADDED MARGIN)
- $[+++] per month/per customer
- $[+++] per bill
3. ONLINE BANKING ONLY
- License Fee x ([+++]%)
<TABLE>
<S> <C>
4. CUSTOMER FEES (RESELLER WILL RECEIVE 40% OF THE CUSTOMER FEES)
- Bill Payment Customer Set-up (per customer) $ [+++]
- On-line Banking Customer Set-up (per customer) $ [+++]
- Application (per application) $ [+++]
5. HOME OPTIONS (RESELLER WILL RECEIVE 40% OF THE NHOME OPTION FEES)
- nForm- multimedia presentation (10 frames) $ [+++]
- Site Map Construction $ [+++]
- Management Reporting (Annually) $ [+++]
- Internet TV Site Quote
</TABLE>
*Customer URL (Universal Resource Locator) and Verisign security key will be
billed, at cost, directly to the customer.
**$[+++] Monthly minimum.
18
<PAGE> 1
CONFIDENTIAL TREATMENT* EXHIBIT 10.8
* CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO THE
RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION.
BRACKETS AND "+" HAVE BEEN USED TO IDENTIFY INFORMATION WHICH IS THE
SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.
NBUSINESS ADDENDUM TO
NFRONT MARKETING AGREEMENT
THIS NBUSINESS ADDENDUM ("Addendum") is made effective this 5th day of
January, 1999 ("Addendum Effective Date") by and between NFRONT, INC.
("nFront"), a Georgia corporation having its principal offices at 520 Guthridge
Court N.W., Suite 100, Norcross, Georgia 30092, facsimile number (770) 209-9093
and BISYS, INC. ("Reseller"), a Delaware corporation having its principal
offices at 11 Greenway Plaza, Suite 300, Houston, Texas 77046-1102.
1. Purpose. This Addendum revises and amends the Marketing Agreement
executed by and between the parties and dated 10th day of April, 1998
("Agreement").
2. nBusiness System. "nBusiness System" means nFront's proprietary
Internet Cash Management System and related services as more fully
described in SCHEDULE A attached to this Addendum hereto, together with
all future modifications thereof made available to Reseller by nFront.
"nBusiness System" shall be deemed a part of the nHome System for all
purposes under the Agreement and this Addendum including, without
limitation, the applicable warranties, limitation of warranties and
limitation of liability. Notwithstanding anything to the contrary
contained in Article IX of the Agreement, Reseller may offer a
competitive solution to nBusiness provided by ADP (or by ADP's
successor), and Reseller may receive revenue from ADP (or from ADP's
successor) for such competitive solution.
3. nBusiness Fees. Pursuant to the terms and conditions of the Agreement
and this Addendum, (i) nFront will provide to Reseller the nBusiness
System, and (ii) nFront will pay Reseller the percentage of the Fees
for the nBusiness System as set forth in SCHEDULE B to this Addendum.
4. Term. The term of this Addendum shall be deemed to commence as of the
Addendum Effective Date and shall remain in effect according to the
Term set forth in the Agreement.
5. Interpretation.
(a) The Agreement and this Addendum and any Schedules are complementary
and additive. The requirements and provisions of any one document shall
be equally applicable in the other document. In the case of an
inconsistency or conflict in the terms of the documents, the terms of
this Addendum and any Schedules hereto shall control and any
conflicting or inconsistent terms in the Agreement or exhibits thereto
shall be void and of no effect.
(b) All capitalized terms used in this Addendum and not otherwise
defined herein shall have the same meanings set forth in the Agreement.
IN WITNESS WHEREOF, the parties have executed this Addendum as of
Addendum Effective Date for valuable consideration, the sufficiency of which the
parties hereby acknowledge.
NFRONT, INC. RESELLER
By: /s/ Tripp Rackley By: /s/ W. W. Neville
----------------------------------- -------------------------
Name: Tripp Rackley Name: W. W. Neville
--------------------------------- -----------------------
Title: CEO Title: President
-------------------------------- ----------------------
Date: 1-14-98 Date: 1-15-98
--------------------------------- -----------------------
<PAGE> 2
EXHIBIT A - SYSTEM
NBUSINESS ONLINE BANKING SERVICE
<TABLE>
<CAPTION>
CURRENT FUTURE
FUNCTION FUNCTION
-------- --------
<S> <C> <C>
1. View Account Balances and Histories
- DDA/Savings X
- CD/IRA X
- Loans and Line of Credit X
2. ACH formatted Transfers - Book Transfers, Drafts, Disbursements, Direct
Deposits between DDA, Savings, Loan, LOC accounts
- Immediate and Future Transfers
- One Time, Recurring Transfers and Pending Transfers X
- View Historical Transfers X
X
3. Bill Payment
- Immediate and Future Bill Payments X
- One Time and Recurring Payments X
- Pending Bill Payments X
- Historical Bill Payments X
4. User Resources
- Online Payee Database X
- Business Calculators X
- Text Messaging X
- Categories & Journal Entries X
5. Balance Reporting
- View customer account information for up to two years X
6. Multi-User permissions
- SuperUser sets up and controls subordinate members' functional X
access
- Secure log-in X
- Create and change customer password information X
- Control Account access and disbursement levels X
7. Business application integration
- Microsoft Money, Quicken X
- Peachtree, Quick Books, Comma Delimited X
8. Online Help X
9. Virtual Status Requests - EFTPS (Electronic Federal Tax Payments),
Stop Payments, Wire Transfers
- Immediate and Future transactions (where applicable) X
- Recurring Transactions X
- Pending Transactions X
- View Historical Transfers X
10. Additional Functions
- Cash Concentration X
- Controlled Disbursements X
- Cash Flow Manager/Daily Transaction Journal X
- ACH version of EFTPS X
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
13. Bank Administration Site - nBusiness Functions
- Set/Reset challenge code/Password for SuperUser X
- Flag accounts as Cash Management X
- Audit Management
- Receive/Respond to time-sensitive Virtual Status
Requests (VSRs): Stop Pay, Wire Transfers, EFTPS X
- Detailed Internet Branch Billing X
- Billing System for nBusiness(SM) Customers using ACH formatted file X
- nReach(SM) - Data Mining and Marketing module
- Database Query Capability X
- Promotional e-mails to selected nBusiness(SM) customers X
- Internet Branch Reporting X
X
</TABLE>
<PAGE> 4
SCHEDULE B - FEES
<PAGE> 5
NEW PRICING
<TABLE>
<S> <C>
I. INTERNET BANKING (DOES NOT INCLUDE WEBSITE DESIGN) $[++++]*
1. View Account Balances and Histories
- DDA/Savings
- CD/IRA
- Loans
2. Transfer funds between DDA and Savings accounts
- Immediate and Future Transfers
- One Time and Recurring Transfers
3. Pending Transactions
- View, edit, delete future transactions
4. Customer Reports
- View customer account information for up to two years
5. PIN Manager
- Secure log-in
- Create and change customer password information
6. Personal Information
- View customer information file
7. PFM Downloads
- Microsoft Money
- Quicken
8. Online Help
9. Online Banking Demo
II. BILL PAYMENT $[++++]
1. Pay any bill electronically (EFT or non-EFT)
2. Database reporting for cleared bills
III. WEBSITE DESIGN* $[++++]**
1. Home Page
- Bank branding (logo)
- Contact us
- 3 scanned images or custom graphics
- Bank information
2. Bank Information and Contact Us (25 sub-page maximum)
- Bank branding (logo)
- Custom navigational controls
- Up to 10 scanned images or 5 graphics
3. Financial Calculators
- Loan
- Maximum Loan
- College Planning
- Mortgage
- Retirement
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
IV. INTERNET ELECTRONIC BRANCH (INCLUDES WEBSITE DESIGN*) $[++++]**
1. Home Page
- Bank branding (logo)
- Custom navigational controls
- 3 scanned images or custom graphics
2. Product and Services (28 sub-page maximum)
- Bank branding (logo)
- Custom navigational controls
3. Bank Information and Contact Us (25 sub-page maximum)
- Bank branding (logo)
- Custom navigational controls
- Up to 10 scanned images or 5 graphics
4. Feature Product, Guestbook, Frequently Asked Questions (FAQ) and Search Engine
- Bank branding (logo)
- Custom navigational controls
5. Financial Calculators
- Loan
- Maximum Loan
- College Planning
- Mortgage
- Retirement
SECURE ACCOUNT OPENING
1. 7 Secure Product Applications
- Checking
- Savings
- CD/IRA
- Consumer/Commercial Loans
- Mortgage Loans
- Lines of Credit
2. Additional Secure Application (also considered a secure product application)
- Internet Sign-up Sheet
- Quizzes
- Surveys, etc.
- Guestbook
- Bill Payment
ADMINISTRATION SITE
1. Product Application Secure Datebase Retrieval
2. Guestbook Secure Database Retrieval
3. Site Updates
- Rates and Terms
- Email Notifications
4. Detailed Billing
5. Data Mining
- nTouch customer specific marketing module
- nTouch branch reporting tool
6. Online Invoicing
- Automatic ACH billing system for online banking & bill payment customers
7. Online Help
</TABLE>
<PAGE> 7
<TABLE>
<S> <C> <C>
8. PIN Maintenance Interface
9. Audit Interface
- Bank can view pending or processed applications and who approved
or denied application
- Bank can view changes to products and services which are
automatically logged into the secure database
V. FULL SERVICE INTERNET BANKING (COMBINATION I, II, AND IV) $[++++]**
1. Online Banking
2. Bill Payment
3. Internet Electronic Branch
4. Administrative Site
EMAIL
1. The bank will be assigned one @banking.com email address. This
"general" mailbox will forward all incoming mail to any/all
bank specified email addresses.
* All Web site content must be submitted to nFront in an IBM Microsoft
Word (.doc) or PC Text (.txt) Format
VI. FEE SCHEDULE
1. Online Bill Payment
a) Bill Payment Customer Set-up (per customer) $ [++++]
b) Bill Payment (per month/per customer) $ [++++]
c) Transaction fee (per bill) $ [++++]
2. Internet Customer Fees
a) Online Banking Customer Set-up (per customer) $ [++++]
b) Online Customer Maintenance (per customer/per month) $ [++++]
c) Online Secure Application processing (per application) $ [++++]
d) Service Bureau Monthly Maintenance $ [++++]
3. nHome Options
a) nForm-multimedia presentation (10 frames) $ [++++]
b) Site Map Construction $ [++++]
c) Management Reporting (per month) $ [++++]
d) Internet TV Site Quote
</TABLE>
**Customer URL (Universal Resource Locator) and Verisign security key will be
billed, at cost, directly to the customer.
<PAGE> 1
EXHIBIT 10.9
CONFIDENTIAL TREATMENT*
* CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO THE
RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION.
BRACKETS AND "+" HAVE BEEN USED TO IDENTIFY INFORMATION WHICH IS THE
SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.
MARKETING AGREEMENT
THIS MARKETING AGREEMENT (the "Agreement") is made this 22nd day of
July 1997 by and between NFRONT, Inc. ("nFront"), a Georgia corporation having
its principal offices at 1551 Jennings Mill Road, Suite 800A, Bogart, Georgia
30622 and SPARAK ("Reseller"), a North Dakota corporation having its principal
offices at 1322 Gateway Drive, Fargo, North Dakota 58103.
W I T N E S S E T H:
WHEREAS, nFront is in the business of providing home banking and bill
payment services through the Internet to customers of banks and other financial
institutions;
WHEREAS, Reseller is in the business of providing transaction
processing and other administrative and computer processing services to banks
and financial institutions;
WHEREAS, Reseller desires to offer to its Customer Base (as hereinafter
defined) and potential customers Internet home banking capabilities;
WHEREAS, nFront desires Reseller to offer nFront's proprietary Internet
home banking system as more fully described in Exhibit A attached hereto (the
"nHome System") to Reseller's Customer Base and to potential Bank customers of
Reseller.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, agreements and conditions set forth herein, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
Definitions
As used in this Agreement, each of the following terms has the meaning
set forth thereafter, such meaning to be equally applicable both to the singular
and plural forms of the terms herein defined:
(a) "Agreement" means this agreement, together with all exhibits and
schedules hereto now or hereafter signed by Reseller and nFront (all of which
are herein incorporated by reference), as the same may be modified, amended or
supplemented from time to time.
(b) "Bank" means banks and other financial institutions that offer
banking services to the general public.
(c) "Customer Base" means those customers listed on Exhibit B attached
hereto and any other Banks who become customers of Reseller during the Term.
(d) "Documentation" means that portion of the nHome System that
provides installation and operating instructions for use of the nHome System.
<PAGE> 2
(e) "End-User" means the ultimate user of the nHome System.
(f) "Generic Hardware" means computer equipment and configurations
thereof that meets the specifications provided by nFront for use with the nHome
System.
(g) "nHome System" shall have the meaning set forth in the fourth
recital hereof and shall also include all future improvements, enhancements and
modifications thereof, and all releases and upgrades related thereto.
(h) The terms "sale" and "resale" and any grammatical variant thereof
shall include, without limitation, sales, contracts for sale, conditional sales,
installment sales, rentals, leases or licenses of software to Banks, and any
other arrangement whereby the nHome System is placed at the disposal of the
Banks.
(j) "Software" means that portion of the nHome System that is comprised
of computer applications programs intended to be processed on the central
processing unit of Generic Hardware.
(k) "Term" shall have the meaning set forth in Section 8.1 hereof.
ARTICLE II
Reseller Appointment
2.1 Appointment. During the Term, nFront hereby grants to Reseller (a)
the exclusive right to market the nHome System to its Customer Base and (b) the
non-exclusive right to market the nHome System to potential Bank customers of
Reseller, and Reseller hereby accepts such appointment. There are no geographic
restrictions on where Reseller may market the nHome System. Reseller
understands, acknowledges and agrees that this appointment is non-exclusive as
to both the nHome System and geographic area and that nFront may appoint more
than one reseller in any given geographic area to sell and market the same nHome
System as any other reseller. nFront expressly reserves the right to sell and
deliver the nHome System to any other entity, including Banks. Notwithstanding
the immediately preceding sentence, for so long as Reseller is actively
marketing the nHome System to its Customer Base, nFront agrees that it will not
contact those Banks that are included in the Customer Base as of the date
hereof. nFront reserves the right to review the status of Reseller's marketing
efforts to the Customer Base on a quarterly basis, and if it determines, in the
exercise of its reasonable discretion, that Reseller is not making reasonable
efforts to market the nHome System to the Customer Base, the restrictions set
forth in the immediately preceding sentence shall no longer apply. Unless
otherwise set forth on Exhibit C attached hereto or hereafter as consented to in
writing by nFront, Reseller shall sell the nHome System only to Banks, and shall
not sell the nHome System to other parties providing core processing services to
Banks, or to Bank service bureaus, software providers, other resellers of
automated bank services or to any other buyer who intends, directly or
indirectly, to resell the nHome System. Reseller has no authority to appoint any
associate resellers or subdealers of the nHome System without nFront's consent.
2.2 Relationship between nFront and Reseller. Reseller shall conduct
its business in the purchase and resale of nHome System as a principal for its
own account and at its own expense and risk. This Agreement does not in any way
create the relationship of principal and agent, or any similar relationship
between nFront and Reseller, including, but not limited to that of joint
ventures, partners or associates. Reseller is granted no right or authority
hereunder to assume or create any obligation or responsibility for or on behalf
of nFront or otherwise to bind or to use nFront's name other than as may be
expressly authorized by nFront.
ARTICLE III
Sales, Service, and Training and Related Obligations
3.1 Selling and Promotion. Reseller shall use its best efforts to sell
and promote the sale of the nHome System within the territory, which best
efforts shall include, but not be limited to, promotion of the nHome System to
the Customer Base and prompt performance of all of its obligations under this
Agreement.
2
<PAGE> 3
3.2 Staffing and Training. Reseller shall appoint its technically
suitable employees to sell the nHome System, and provide Bank and End-User
support. Reseller shall, at its sole cost and expense, send the appropriate
sales, technical and training personnel to such training programs and other
refresher and upgrade training as nFront may, at reasonable intervals, require.
nFront shall provide periodic routine consultation and advice to Reseller in
connection with Reseller's sales and service hereunder and shall provide (a)
technical, specification and sales advice, (b) assistance and advice concerning
promotional and training programs, and (c) suggestions for new applications for
the nHome System at Reseller's cost. nFront shall furnish Reseller with a
reasonable supply of price lists, sales literature, catalogues, specifications
for Generic Hardware, Documentation and advisory assistance with respect to
installing the nHome System. All proprietary demonstration equipment, manuals,
instruction books, contract forms, sales and promotional materials,
Documentation and similar material furnished to Reseller by nFront, whether
furnished free of charge or not, shall remain the property of nFront and upon
request shall be returned to nFront by Reseller.
3.3 Installation and Training. Reseller acknowledges, understands and
agrees that the nHome System that it shall provide to Banks shall remain
resident on nFront's servers, and that such Banks shall, through Reseller, gain
access to the nHome System upon purchase. nFront shall be responsible for
systems maintenance of the nHome System resident on its servers. Reseller hereby
agrees that it shall provide installation, training, maintenance and Bank and
End-User support services to Banks and shall provide such services in respect of
the nHome System as used by any such Banks who purchase access to the nHome
System from Reseller. Reseller may charge any such Bank a reasonable fee for
providing such services. Installation and training services shall include, but
not be limited to, setting up and installing nHome System access on the Bank's
Generic Hardware, providing Documentation as appropriate to Bank personnel,
giving operating and maintenance instructions to the Bank's technical support
staff, training the Bank's professional staff in the use of the nHome System,
and making necessary adjustments at the time of delivery and installation and at
such subsequent times as may be necessary to ensure proper and efficient
operation of the nHome System on the Bank's Generic Hardware. Reseller shall
employ personnel who have received all necessary and appropriate training to
provide installation and Bank training services. Reseller shall use its best
efforts to handle satisfactorily all matters related to the installation and
initial training of Bank personnel in the use of the nHome System, and shall
report promptly to nFront each complaint received by Reseller relating to nHome
System which the Reseller cannot remedy. If the Reseller's installation and
training obligations hereunder are not discharged properly by Reseller, nFront,
in its sole discretion, may discharge such obligations directly or through
third-parties, and Reseller agrees to reimburse nFront upon demand for all
reasonable costs and expense incurred by nFront in connection therewith.
3.4 Reseller Promotional Activity. nFront shall not share in the
expense of any advertising or promotional activities by Reseller or other sales
promotion projects except by express agreement in writing. All materials
prepared by Reseller that promote the nHome System, including, but not limited
to, any materials that include any trademark or trade name (or any mark or name
closely resembling the same) now or hereafter owned or licensed by nFront or any
of its affiliates shall be approved in writing by nFront prior to use.
3.5 Reseller Recordkeeping. Reseller shall keep records of its
business relating to the nHome System as may be reasonably required by nFront.
nFront or its authorized representative may, from time to time during regular
business hours, examine such records and Resellers accounts relating to the sale
and servicing of the nHome System. Within a reasonable period after the close of
each of the parties' fiscal years, Reseller and nFront shall submit to each
other a copy of its representative financial statements for such fiscal year.
ARTICLE IV
Conditions of Sale
4.1 Pricing and Payment. The price for access to the nHome System to
the Banks and the processing fees for transactions thereunder shall be as set
forth in Exhibit D attached hereto. As compensation for its sales, marketing,
installation, training and support services provided hereunder, Reseller shall
be entitled to retain the percentage of such fees as set forth in Exhibit D
attached hereto. For any such sales as to which nFront does not require
prepayment, payment of nFront's portion of the initial access fee shall be due
net fifteen (15) days from the date of Reseller's invoice to the Bank, subject
to credit approval, payable to nFront at its principal place of business.
Payment
3
<PAGE> 4
of nFront's portion of any processing fees shall be paid within ten (10) days
following the end of each calendar month. A late payment charge equal to one and
one-half percent (1 1/2%) of the unpaid amount for each succeeding thirty (30)
day period or portion thereof in which fees remain unpaid.
4.2 Force Majeure. nFront shall not be liable for loss or damage due
to interruption of service or access to the nHome System resulting from any
cause beyond its reasonable control, including, but not limited to, Internet
systems or network failure, capacity limitations, compliance with regulations,
orders or instructions of any federal, state or municipal government or any
department or agent thereof, acts of God, acts or omissions of Reseller, acts of
civil or military authority, fires, strikes, facilities shutdowns or
alterations, embargoes, war, riot, delays in transportation, or inability to
obtain necessary labor, facilities or materials from usual sources. IN NO EVENT
SHALL NFRONT BE LIABLE FOR CONSEQUENTIAL OR SPECIAL DAMAGES DUE TO ANY SUCH
CAUSE.
4.3 Price and System Changes. nFront shall have the right to change
the nHome System without notice to Reseller, and shall have the right at any
time to discontinue the sale of any version of the nHome System, to make changes
in method of access or delivery, including interface procedures, and to add
improvements, all without incurring any liability whatever, including any
obligation to install or modify the same on the nHome System previously accessed
by the Customer Base. nFront may change its prices to Reseller for the nHome
System upon thirty (30) days' written notice to Reseller. Any contract between
Reseller and a Bank which includes the nHome System executed prior to the date
of any such notice with a scheduled delivery date after the effective date of
such price increase shall be sold to Reseller at the revised price for the nHome
System. Any nHome System scheduled for delivery to a Bank prior to the effective
date of any such price increase but delayed due to the fault of nFront or for
reasons beyond nFront's control shall be sold to Reseller at the price as in
effect on the date Reseller ordered the nHome System. The price protection
provisions contained in this Section 4.3 shall apply only to the initial access
fees listed on Exhibit D attached hereto, and shall not apply to any increase in
processing fees, which increase shall be effective as of the thirtieth day
following written notice of such increase to Reseller.
4.4 Taxes and Other Fees. Reseller shall pay all license fees, sales,
use, service use, occupation, personal property and excise taxes and any other
fees, assessments or taxes which may be assessed or levied by any federal, state
or local government and any departments and subdivisions thereof, against any of
the nHome System ordered by Reseller or under Reseller's direct or indirect
control.
ARTICLE V
Warranties
5.1 nFront's Warranty. THE NHOME SYSTEM IS PROVIDED "AS-IS",
"WHERE-IS". NFRONT SPECIFICALLY DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING, BUT NOT LIMITED TO, IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE AS TO THE NHOME SYSTEM PROVIDED UNDER THIS AGREEMENT.
ARTICLE VI
Special Agreements Regarding Software and Other Intellectual Property
6.1 Limited License. In the performance of Reseller's obligations
hereunder, it shall be necessary for Reseller to demonstrate the nHome System.
Accordingly, subject to the terms and conditions contained herein, nFront hereby
grants to Reseller, and Reseller hereby accepts from nFront, a non-exclusive
license (the "License") of the Software solely for the purpose of demonstrating
the nHome System in operation to potential Bank customers of Reseller.
6.2 Software Covenants. Reseller agrees to comply with each of the
following requirements:
(a) Reseller shall not copy, alter, modify, translate, decompile,
disassemble, reverse engineer or otherwise attempt to derive source code, or
create derivative works of the Software, or any part thereof, or knowingly
4
<PAGE> 5
allow others to do so, during or after the Term.
(b) Except as otherwise specifically provided in this Agreement,
Reseller shall not loan, rent, lease, give, sub-license, or otherwise transfer,
nor communicate or otherwise disclose, the Software, including any part or any
copy thereof, in whole or in part, to any person. Reseller agrees that except
for copies of the Software provided to Reseller pursuant to Section 6.1 hereof,
all such software provided to Reseller hereunder shall remain in its sealed
package, as provided by nFront to Reseller, until delivered to a Bank customer
of Reseller.
(c) Except with respect to providing access to the nHome System to
Bank customers as authorized and specifically provided in this Agreement,
Reseller shall not electronically transfer the Software, or any part thereof,
from one computer to another over a network, irrespective of how linked.
(d) The Software, including all parts thereof, and any copies,
in whole or in part, and any and all copyrights thereto, are and remain the
property of nFront, irrespective of the ownership of the media on which such
Software and any parts or copies thereof are contained.
(e) Each copy of the Software sold to Banks shall include a
license agreement, the form of which shall be as set forth in the Exhibit E,
which license shall be incorporated into any Reseller license given to Banks,
provided, however, that nFront shall approve in advance the form of any such
license. In addition to the license to be provided to Banks upon delivery of
access to the nHome System, Reseller shall include in each invoice for use with
such software a statement specifically referring to such license agreement and
stating that acceptance and/or any use constitutes an assent to all of the terms
and conditions of such license agreement, as limited by terms and conditions
included therein. To enable nFront to verify compliance herewith, Reseller shall
provide nFront with any form agreements and invoices which Reseller plans to use
in connection herewith at least thirty (30) days prior to such use.
(f) Reseller acknowledges that the laws and regulations of the
United States restrict the export and re-export of commodities and technical
data of United States origin, including the nHome System. Reseller agrees that
it shall not export or re-export such Software in any form without nFront's
consent, which consent shall, among other things be conditioned upon Reseller
receiving the appropriate United States and foreign government licenses and
approvals.
(g) Reseller shall not, by any act or omission, impair or
prejudice the copyright or any other right of whatever nature of nFront in and
to the nHome System or any part thereof, and shall not deal with the same in any
manner which may allow any third party to obtain any rights in the same which
are inconsistent or which conflict with the rights of nFront.
6.3 Notices; Markings; Trademarks; Tradenames. Reseller agrees to
comply with the following:
(a) Reseller shall not delete any trademarks, tradename or
copyright notice present in, on or displayed by the nHome System, or any part
thereof.
(b) Reseller shall not add to any notice present in, on or
displayed by the nHome System its own copyright, trademark or other proprietary
notices unless such notices have been previously approved in writing by nFront.
(c) Except as already present in, on or displayed by the nHome
System software and/or accompanying packaging or Documentation provided by
nFront, Reseller shall not use any trademarks and/or tradenames of nFront
without prior written approval of nFront.
6.4 Documentation. Each nHome System sold by Reseller to a Bank shall
include one (1) set of accompanying Documentation. Reseller shall only
distribute complete and separate copies of the Documentation to Banks and shall
not reproduce, in whole or in part, or transfer in any manner to a third party
other than a Bank, such Documentation. Any and all copyrights to such
Documentation are and shall remain the property of nFront.
5
<PAGE> 6
ARTICLE VII
Confidentiality and Non-Disclosure
7.1 Reseller Obligations.
(a) Reseller recognizes, acknowledges and agrees that during the Term,
nFront may furnish to Reseller certain technical and commercial information,
including but not limited to, designs, procedures, formulas, discoveries,
inventions, improvements, innovations, concepts and ideas, lists of customers,
computer programs, business methods, and plans for future developments
("nFront's Confidential Information") which is the confidential, proprietary
property of nFront. Reseller recognizes, acknowledges and agrees that nFront's
Confidential Information was not previously known to the Reseller and is to be
maintained in secrecy and confidence by Reseller and Reseller's employees,
agents or representatives to whom Reseller discloses any of nFront's
Confidential Information. Reseller agrees for itself and for each of its
employees, agents or representatives to whom Reseller discloses any of nFront's
Confidential Information that such information shall be used only in accordance
with the terms, covenants, conditions and limitations of this Agreement, and not
for the benefit of or for, directly or indirectly, Reseller or any of its
employees, agents or representatives. Information made available to the general
public by nFront and information obtained from third parties not associated with
nFront shall not be considered to be nFront's Confidential Information, except
for information received from third parties that Reseller knows or should have
known was obtained illegally or in violation of this Agreement. In the event
Reseller or a representative of Reseller is requested by law, order of court or
any agency to disclose any of nFront's Confidential Information, Reseller shall
give nFront prompt notice of such request so that nFront may seek an appropriate
protective order. If, in the absence of a protective order, Reseller or a
representative of Reseller is nonetheless compelled by law to disclose any of
nFront's Confidential Information, Reseller or a representative of Reseller, as
the case may be, may disclose such information in such proceeding without
liability hereunder; provided, however, that Reseller gives nFront written
notice of the information to be disclosed within twenty-four (24) hours after
receipt of such order by Reseller and, upon nFront's request and at its expense,
Reseller shall use its best efforts to obtain assurances that confidential
treatment shall be accorded to such information.
(b) In the event this Agreement is terminated for any reason, the
Reseller agrees to return promptly nFront's Confidential Information, including
all copies thereof, to nFront, or to deliver all such information promptly to
such party as may be designated by nFront. Reseller further agrees thereafter
not to use or disclose nFront's Confidential Information in any manner
whatsoever without the prior written approval of nFront unless and until such
information shall lawfully become generally known in the public domain through
no fault of the Reseller or breach by the Reseller of the covenants contained
herein.
(c) Reseller shall disclose nFront's Confidential Information to Banks
only to the extent necessary to enable such customers to use the nHome System,
and only after any such Bank executes an agreement in form and substance
acceptable to nFront, acknowledging the confidential nature of such information
and setting forth the appropriate treatment of such information.
7.2 nFront's Obligations.
(a) nFront recognizes and agrees that, except as otherwise provided
herein, certain business information provided by the Reseller to nFront, not
related to nFront's ongoing business ("Reseller's Confidential Information"), is
the proprietary property of Reseller, is not previously known to nFront and is
to be maintained in secrecy and confidence, except as provided herein, and used
only in accordance with the terms, covenants, conditions and limitations of this
Agreement. Information made available to the general public and information
obtained from third parties not associated with Reseller shall not be considered
to be Reseller's Confidential Information, except for information received from
third parties that nFront knows or has reason to know was obtained illegally or
in violation of this Agreement. In the event nFront or a representative of
nFront is requested by law, order of court or any agency to disclose any of
Reseller's Confidential Information, nFront shall give Reseller prompt notice of
such request so that Reseller may seek an appropriate protective order. If, in
the absence of a protective order, nFront or a representative of nFront is
nonetheless compelled by law to disclose any of Reseller's Confidential
Information, nFront or a representative of nFront, as the case may be, may
disclose such information in such proceeding without liability
6
<PAGE> 7
hereunder; provided, however, that nFront gives Reseller written notice of the
information to be disclosed within twenty-four (24) hours after receipt of such
order by nFront and, upon Reseller's request and at its expense, nFront shall
use its best efforts to obtain assurances that confidential treatment shall be
accorded to such information.
(b) In the event this Agreement is terminated for any reason, nFront
agrees to return promptly Reseller's Confidential Information, including all
copies thereof, to Reseller or to deliver all such information promptly to such
party as may be designated by Reseller. nFront further agrees thereafter not to
use or disclose Reseller's Confidential Information in any manner whatsoever
without the prior written approval of Reseller unless and until such information
shall lawfully become generally known in the public domain through no fault of
nFront or breach by nFront of the covenants contained herein.
ARTICLE VIII
Term and Termination
8.1 Term. This Agreement shall commence as of the date hereof and shall
remain in effect (unless sooner terminated pursuant to Section 8.2 hereof) for
five (5) years (the "Term"). It shall be renewed automatically without
interruption for successive five-year terms, unless, not less than sixty (60)
days before the end of any Term, either nFront or Reseller notifies the other
party in writing of its election (at its sole option, for any reason or for no
reason) not to renew. Any such renewal periods shall be considered an extension
of and part of the Term.
8.2 Right to Terminate. Notwithstanding any other provision hereof,
this Agreement may be terminated either (i) by mutual agreement of the parties
hereto; (ii) by either party at any time if the other party has materially
breached any of the provisions hereof and, if the breach is curable, has failed
to cure such alleged breach within thirty (30) days after written notice thereof
in the case of failure to pay when due amounts owing to such party, and within
sixty (60) days in case of all other alleged curable breaches; (iii) by either
party immediately and without the giving of notice, in the event that either
party shall become insolvent, or shall ask its creditors for a moratorium, or
shall file a voluntary petition in bankruptcy, or shall be adjudicated as a
bankrupt pursuant to an involuntary petition, or shall suffer appointment of a
temporary or permanent receiver, trustee, or custodian for all or a substantial
part of its assets which shall not be discharged within thirty (30) days; and
(iv) by Reseller if, in the exercise of its reasonable discretion, it determines
that the nHome System is not being maintained by nFront in accordance with
industry standards for Internet home banking systems and, after due notice to
nFront of such deficiencies, nFront has not cured, or commenced to cure, such
deficiencies within a reasonable period after the giving of such notice. In the
event either party materially breaches any of the provisions hereof, and such
breach is not curable, this Agreement shall be immediately terminable by the
non-breaching party. Without limiting the foregoing, any violation of Articles
VI and VII hereof shall constitute a noncurable breach and if either party
commits such a breach, this Agreement shall be terminable immediately by the
non-breaching party.
8.3 Effect of Termination.
(a) Any termination of this Agreement shall not release Reseller from
paying any amount which may then be owing to nFront. In the event of any
termination of this Agreement, all obligations owed by Reseller to nFront shall
become immediately due and payable on the effective date of termination whether
otherwise then due or not (without presentation, demand, protest or notice of
any kind, all of which are hereby waived by Reseller); and nFront may offset and
deduct from any or all amounts owed to Reseller, if any, any or all amounts owed
by Reseller to nFront, rendering to Reseller the excess, if any.
(b) In the event of termination of this Agreement by either party or
automatically as provided herein, nFront shall be automatically relieved from
any obligation to provide further access to Reseller's Customer Base. nFront
shall have no obligation to provide or liability to Reseller or its Customer
Base as of the date of termination in connection with any such termination to
provide further access to Reseller's Customer Base. If nFront continues to
provide access to all or any part of Reseller's Customer Base after termination
of this Agreement, such continuation shall not be construed as a renewal of this
Agreement for any further term nor as a waiver of such termination.
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<PAGE> 8
(c) Upon termination of this Agreement, Reseller shall return to
nFront, promptly and without charge to nFront, all Documentation, price lists,
maintenance and policy manuals, sales aids and other publications of nFront
relating to the nHome System which Reseller has on hand. Reseller shall
thereupon immediately cease using any trademarks, tradenames, service marks or
other identifying marks on any of its materials.
(e) Reseller shall be solely responsible for all commitments incurred
or assumed by it during the Term or thereafter, and nFront shall not be held
responsible in any manner therefor, irrespective of any suggestion or
recommendation with respect thereto by nFront or any of its employees or
representatives unless nFront has expressly agreed in writing to assume the
responsibility.
ARTICLE IX
Indemnification; Other Relief
9.1 Indemnification by Reseller. Reseller shall indemnify, defend and
hold harmless nFront, its officers, directors, shareholders, employees, agents
and affiliates from and against any claims, losses, damages, liabilities or
expenses (including, without limitation, reasonable attorneys' fees and
expenses) (collectively, "Claims") resulting from or arising out of Reseller's
use or misuse of the nHome System or any part thereof by Reseller or any Bank
included in the Customer Base, any misrepresentations made by Reseller with
respect to the nHome System or a breach of any of the provisions of this
Agreement, provided, however, that in respect of any Claims hereunder against
Reseller that arise out of or result from any alleged use or misuse of the nHome
System or any part thereof by Reseller or any Bank included in the Customer Base
or any alleged misrepresentation made by Reseller with respect to the nHome
System, Reseller shall be notified promptly of such Claim in writing and shall
be given authority, control and full and proper information and assistance in
the defense and settlement of such Claim. Notwithstanding the foregoing,
Reseller shall not have the authority to settle or compromise any Claim in a
manner that indicates that nFront contributed to or was responsible for the
cause of any such Claim unless nFront consents in writing to such settlement.
9.2 Indemnification by nFront. Subject to the limitations set forth in
Section 9.5 hereof, nFront shall indemnify, defend and hold harmless Reseller,
its officers, directors, shareholders, employees, agents and affiliates from and
against any claim, suit or proceeding based upon an allegation that the nHome
System (or any portion thereof) infringe upon or misappropriate any copyright,
patent, trademark or trade secret of any third party, provided that nFront is
notified promptly of such claim, suit or proceeding in writing and is given
authority, control and full and proper information and assistance in the defense
and settlement of such claim, suit or proceeding. If the nHome System is finally
determined by a court of competent jurisdiction to constitute an infringement of
any patent, copyright, trademark or other trade secret of a third party and its
use is enjoined, nFront shall either:
(a) procure the right for Reseller to continue to use the nHome
System under this Agreement; or
(b) replace or modify the nHome System with a version of the nHome
System that is not so infringing and that satisfies this provision of this
Agreement.
9.3 Arbitration. The parties to this Agreement agree that any
controversies or claims arising out of or relating to this Agreement (including,
without limitation, any alleged breach thereof or the termination or non-renewal
thereof) shall be settled by arbitration pursuant to the Federal Arbitration
Act, 9 U.S.C. ss. 1 et seq., in accordance with the Commercial Arbitration Rules
of the American Arbitration Association. The parties hereto further agree that
the arbitrators in any such arbitration shall not be authorized to award any
punitive damages in connection with any controversy or a claim settled by
arbitration hereunder. The decision of the arbitrator in any such arbitration
shall be final and binding upon the parties and judgment upon the award may be
entered in any court having jurisdiction thereof. Any arbitration shall take
place in Atlanta, Georgia, and the expenses of the arbitrators shall be
allocated by such arbitrators. The arbitration shall be conducted before a panel
of three (3) arbitrators, one selected by Reseller, one selected by nFront, and
one selected by mutual agreement of the arbitrators selected by Reseller and
nFront.
9.4 Injunctive Relief. Notwithstanding the provisions of Section 9.3
hereof, the parties acknowledge and agree that any breach of the provisions of
Articles VI or VII of this Agreement shall result in irreparable harm to nFront
8
<PAGE> 9
for which no adequate remedy at law exists. Accordingly, upon any such breach,
nFront shall be entitled to injunctive or other appropriate extraordinary
relief, such relief being in addition to, and not in lieu of, any other rights
and remedies, including the award of damages, available at law or in equity.
Reseller acknowledges and agrees that no serious harm to it shall result from
the entry of any such equitable relief against it, and therefore any bond
required of nFront in connection with such relief shall be set in an amount not
in excess of One Thousand Dollars ($1,000.00). Any violation of the restraints
set forth herein shall automatically extend the period of such restraints for
the amount of time such violation continues, provided nFront seeks enforcement
promptly after discovery of such violation. nFront shall not be required to
prove money damages to enforce any provision of this Agreement.
9.5 LIMITATION OF LIABILITY. IN NO EVENT SHALL NFRONT BE LIABLE FOR ANY
LOSS OF PROFIT OR ANY OTHER COMMERCIAL DAMAGE, INCLUDING BUT NOT LIMITED TO
SPECIAL, INCIDENTAL, CONSEQUENTIAL OR OTHER INDIRECT DAMAGES UNDER ANY CAUSE OF
ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, INCLUDING, WITHOUT
LIMITATION, CLAIMS ARISING FROM MALFUNCTION OR DEFECTS IN THE NHOME SYSTEM OR
NON-DELIVERY OF NHOME SYSTEM EVEN IF NFRONT HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES. SUBJECT TO THE MAXIMUM LIABILITY SET FORTH IN THIS PARAGRAPH,
IN NO EVENT SHALL NFRONT'S LIABILITY FOR ANY CLAIM ARISING OUT OF THIS AGREEMENT
EXCEED THE AMOUNT PAID TO NFRONT BY RESELLER UNDER THIS AGREEMENT WITHIN THE
THREE (3) MONTH PERIOD IMMEDIATELY PRECEDING THE ACCRUAL OF SUCH CLAIM. IN NO
EVENT SHALL NFRONT'S MAXIMUM, CUMULATIVE LIABILITY FOR ALL CLAIMS UNDER THIS
AGREEMENT EXCEED $25,000 OR ALL AMOUNTS PAID BY RESELLER TO NFRONT HEREUNDER,
WHICHEVER IS LESS. NO CLAIM MAY BE BROUGHT BY RESELLER UNDER THIS AGREEMENT MORE
THAN TWO (2) YEARS AFTER ACCRUAL OF SUCH CLAIM.
ARTICLE X
Miscellaneous Provisions
10.1 Waiver. Any failure of a party to comply with any obligation,
covenant, agreement or condition herein may be expressly waived in writing by
the other party, but such waiver or failure to insist upon strict compliance
with such obligation, covenant, agreement or condition shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure.
10.2 Entire Agreement. This Agreement, the exhibits and schedules hereto
constitutes the entire understanding of the parties with respect to the subject
matter of this Agreement and are intended to supersede all prior understandings,
whether written or oral, between the parties with respect thereto.
10.3 No Third Party Beneficiary Rights. No provision of this Agreement
is intended or shall be construed to provide or create any third party
beneficiary right or any other right of any kind in any Bank or any client,
customer, affiliate, insurer, lender, shareholder, partner, officer, director,
employee or agent of any party hereto, or in any other person.
10.4 Amendment; Binding Effect; Assignment. No amendment, modification
or alteration of the terms of this Agreement shall be binding unless in writing
and executed by the parties hereto. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective successors, assigns, heirs, executors and administrators. Reseller
may not assign this Agreement, in whole or in part, or any of its rights or
obligations hereunder without the prior written consent of nFront, which shall
not be unreasonably withheld, and any such attempted assignment shall be void.
10.5 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Georgia, without giving
effect to the conflict-of-laws principles thereof.
10.6 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective during
the Term, such provision shall be fully severable. This Agreement shall be
9
<PAGE> 10
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part of this Agreement, and the remaining provisions of
this Agreement shall remain in full force and effect and shall not be affected
by the illegal, invalid or unenforceable provision or by its severance from this
Agreement.
10.7 Counterparts. This Agreement may be executed simultaneously or in
two or more counterparts, each of which together shall constitute one and the
same instrument and shall be deemed an original hereof.
10.8 Notices. All notices required or permitted under this Agreement
shall be made in writing and shall be deemed to have been duly given if
delivered personally or sent by registered or certified mail (return receipt
requested), U.S. mail or facsimile. All notices shall be addressed to the
parties at the respective addresses indicated above.
10.9 Survival. The provisions of Articles V, VI, VII, VIII, IX, X and XI
shall survive any termination or expiration of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
NFRONT, INC.
By: /s/ Tripp Rackley
------------------------
Its: President
Date: 7/22/97
RESELLER
By: /s/ Steve Anderson
------------------------
Its: Sec/Treas
Date: 7/22/97
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ADDENDUM TO MARKETING AGREEMENT
11.1 Back-up System. (a) Within a reasonable period after execution of
this Agreement, nFront shall deliver to Reseller, the nHome System on
appropriate media, which Reseller shall store in a secure location (the "Back-up
System"). During the Term and until the Password Release Date, nFront shall
update the Back-up System no less frequently than twice annually. Concurrently
with the execution of this Agreement, nFront and Reseller shall enter into a
Password Escrow Agreement in respect of the Back-up System in the form attached
hereto as Exhibit F. If, pursuant to such agreement the Password (as defined in
such agreement) is released to Reseller (the "Password Release Date"), Reseller
may use the Password solely to continue to provide services to its Customer Base
as in effect as of the Password Release Date for a period ending on the earlier
of (i) the date that Reseller secures the services of an alternate provider of
Internet home banking services or (ii) three (3) years from the date of such
release (the "Password Termination Date"). On the Password Termination Date,
Reseller shall deliver to nFront (or its successor-in-interest to the Password
and Back-up System) the nHome System and all copies thereof then in Reseller's
custody or control. Reseller's obligations under Articles VI and VII of the
Agreement shall apply to the Back-up System.
(b) Prior to the Password Release Date, Reseller shall not access, or
attempt to access, the Back-up System. If, prior to the Password Release Date,
Reseller breaches the provisions of this Section 11.1(b), in addition to any
other remedies than nFront may have in law or in equity, nFront may, without
notice to Reseller, terminate this Agreement forthwith.
(c) Reseller shall pay all costs and expenses associated with the
generation, maintenance and storage of the Back-up System.
(d) Upon the Password Release Date, nFront shall be available to assist
the Reseller to implement the System in accordance with a project plan and cost
structure to be mutually agreed upon by the parties.
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EXHIBIT A
Referred to the first column of Exhibit D
12
<PAGE> 13
EXHIBIT B
13
<PAGE> 14
EXHIBIT C
14
<PAGE> 15
EXHIBIT D
<TABLE>
<CAPTION>
Price Royalty(1)
Asset Based(2) 50%
----------- --------
<S> <C> <C> <C>
1) NHOME SYSTEM
a) Products and Services
i) Five Secure Product Applications (Select from the following)
(1) Checking
(2) Savings
(3) CD
(4) Mortgage
(5) Consumer Loan
(6) Overdraft Protection
(7) Equity Line
ii) Additional Secure Applications
(1) Quiz
(2) Survey
(3) Guest Book
(4) Bill Payment
iii) Secure Database Retrieval
b) Hot Product Link
c) Online Banking
i) View Account Balances and Histories
ii) Checking
iii) Savings
iv) CDs/IRA
v) Loans
vi) Transfer Between Checking and Savings Account
d) Online Banking Demo
e) Frequently Asked Questions
f) Marketing Section
g) What's New
h) Bank Information
i) Interactive Calculators
i) Loans (Payment and total Interest)
ii) Maximum Loan (Payment and total Interest)
iii) College Planning (Excess or deficiency, plus savings tips)
iv) Mortgage (Calculates principal and interest mortgages)
v) Retirement (Future value calculations)
j) Contact Us
k) Search Engine
l) Email
m) Bill Payment Interface
n) Administrative Site
o) Featured Banks Spotlight
2) SYSTEM SUPPORT (MONTHLY) $[+++] 0%
3) CUSTOMER FEES
a) Bill Payment Customer Set-up (per customer) $[+++] 0%
b) On-line Banking Customer Set-up (per customer) $[+++] 50%
c) Application (per application) $[+++] 50%
</TABLE>
15
<PAGE> 16
<TABLE>
<S> <C> <C> <C>
4) CUSTOMER SERVICE FEES ($0.00 MONTHLY MINIMUM)
a) Online Banking Customer Maintenance $[+++] 50%
b) Bill Payment Maintenance (up to 20, thereafter .32 cents) $[+++] 0%
5) NHOME OPTIONS
a) nForm (10 Frames) $[++++] 25%
b) Site Map Construction $[++++] 25%
c) Management Reporting $[++++] 25%
d) Bank Specific Branding (Annually) $[++++] 25%
e) Web TV Site Quote 25%
f) Telephone Bill Statement Quote 0%
</TABLE>
1) The royalty percentage is based upon the actual sales dollars
contracted by Reseller to Customer. Example: If Reseller charges
$[++++] for initial setup then nFront would receive $[++++] and
Reseller would receive $[++++]. The prices listed in Exhibit 4 are
nFront's minimum price level. All contracted sales dollars, on any 0%
royalty items, above nFront's minimum price will be due to Reseller in
its entirety.
2) Asset Pricing
<TABLE>
<CAPTION>
ASSET SIZE (IN MILLIONS) NHOME LICENSE SPARAK INTERFACE TOTAL PRICE
----------------------- ------------- ---------------- -----------
<S> <C> <C> <C>
0-20 $[++++] $[++++] $[++++]
21-50 $[++++] $[++++] $[++++]
51-100 $[++++] $[++++] $[++++]
101+ $[++++] $[++++] $[++++]
</TABLE>
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ADDENDUM TO PRICE AGREEMENT
1. In addition to the items described in Exhibit D, Microsoft Money and
Quicken will be added at no extra charge for a period not to exceed
January 1, 1998. Thereafter, one of the following fee schedules will be
implemented:
<TABLE>
<S> <C>
a) Purchase each module separately for a one-time fee and pay an annual maintenance.
Microsoft Money (one time fee) $[++++]
Quicken (one time fee) $[++++]
Annual Maintenance $[++++]*
b) Purchase each module separately as a monthly fee.
Microsoft Money $[++++]/mo.*
Quicken $[++++]/mo.*
</TABLE>
*These fees will apply for the duration of the contract period.
17
<PAGE> 18
EXHIBIT E
LICENSE AND MAINTENANCE AGREEMENT
BETWEEN
NFRONT, INC.
("VENDOR")
A GEORGIA CORPORATION
HAVING ITS PRINCIPAL PLACE OF BUSINESS AT:
1551 JENNINGS MILL ROAD, SUITE 800A
BOGART, GEORGIA 30622
AND
SPARAK
("VENDOR")
A NORTH DAKOTA CORPORATION
HAVING ITS PRINCIPAL PLACE OF BUSINESS AT:
1322 GATEWAY DRIVE
FARGO, NORTH DAKOTA 58103
AND
BANK NAME
("CUSTOMER")
HAVING ITS PRINCIPAL PLACE OF BUSINESS AT:
BANK ADDRESS
BANK CITY, STATE, ZIP
18
<PAGE> 19
1. AGREEMENT
This agreement ("Agreement") provides for the grant of a non-exclusive
license of Software ("Software") and the provision of Software
maintenance services by Vendor to Customer.
2. INITIAL TERM
The initial term (the "Initial Term") of this Agreement shall begin
upon signing (the "Effective Date"), and shall remain in effect,
subject to the renewal provisions contained within Section 3 hereof,
and subject to earlier termination as provided for in Section 13 or
Section 15 hereof, for a period of five (5) years following the
Effective Date.
3. AUTOMATIC RENEWAL AND SUBSEQUENT TERM
Upon expiration of the Initial Term, this Agreement shall be
automatically extended for an indeterminate number of successive five
(5) year periods (each a "Subsequent Term"), unless Customer notifies
Vendor of its election not to renew at least ninety (90) days prior to
the end of the Initial Term of any Subsequent Term.
4. SOFTWARE RIGHTS
This Agreement grants Customer non-exclusive license rights to Vendor
Software. For all purposes of this Agreement, the term "Software" shall
mean all those software products described in the Software Applications
attached hereto as Exhibit 1 ("Software Applications"). Customer may,
by addendum to this Agreement agreed to in writing by Vendor, or by
separate written agreement with Vendor, license other software products
provided by Vendor. Unless Customer otherwise notifies Vendor, all
subsequently licensed and installed Software shall be automatically
added to this Agreement.
5. FEES, INSTALLATION CHARGES AND TAXES
(a) Fees
Customer has been granted hereunder a non-exclusive license
for the Software for the duration of this Agreement. The
initial and annual Software fees for this license are set
forth in the Customer Software Fees attached hereto as Exhibit
2 ("Software Fees and Deliverables").
(b) Installation and Special Charges
Customer shall pay for Software installation, modification,
and non-covered maintenance of Software at Vendor's then
prevailing professional service fees. A list of Vendor's
current prevailing professional service fees is attached
hereto as Exhibit 3 ("Professional Service Fees"). Expenses
for travel and all related expenses for Software installation,
modification, and covered and non-covered maintenance shall be
reimbursed by Customer to Vendor upon invoice.
(c) Taxes
Customer is additionally responsible for all applicable
federal, state, or local taxes (exclusive of income taxes
properly payable by Vendor) and other governmental fees or
assessments incurred as a result of this License, use of the
Software by Customer, and services provided by Vendor
hereunder.
6. PAYMENT
(a) Payment of Fees and charges hereunder will be due as follows:
(1) One hundred percent (100%) of the Initial Software
Fees is due at the time Customer signs this
Agreement.
(2) All other fees are billed monthly. All monthly
minimum fees begin on the software acceptance date.
(3) Non-covered maintenance and travel and related
charges are due upon invoice by Vendor.
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<PAGE> 20
(b) In the event payment is not made as specified herein, or
within thirty (30) days following invoice by Vendor, as
applicable, Customer shall pay interest at the rate of one and
one half percent (1.5%) per month (or the highest applicable
legal rate, whichever is lower) on the outstanding overdue
balance for each month or part thereof that such sum is
overdue. Customer agrees to pay all costs of collection of
overdue amounts, including reasonable attorneys' fees and
court costs.
7. SOFTWARE LICENSE
(a) Vendor and/or its suppliers have designed, developed, and made
available proprietary computer Software containing trade
secrets of Vendor and/or its suppliers. Use of this Software
is strictly governed by this Agreement. No title or ownership
in the Software is transferred to Customer. Customer shall not
copy or in any way duplicate the Software, except for
reasonable backup procedures approved by Vendor. The Software
may not be assigned, sublicensed, or otherwise transferred or
used by Customer for the benefit of a third party.
(b) Customer shall hold the Software, together with all materials
and knowledge related thereto obtained by Customer, in
confidence, and shall use reasonable controls to protect the
confidential nature of the Software and such related materials
and knowledge.
(c) Customer agrees to execute any documents reasonably requested
by Vendor with respect to the Software of any third party
licensed or sublicensed by Vendor to Customer hereunder.
8. BASIC MAINTENANCE PERIOD
The Basic Maintenance Period commences on Monday and continues through
Friday of each week (8:00 a.m. to 5:00 p.m. Customer Local Time),
except on any day on which banking institutions in Athens, Georgia, are
authorized by law or executive order to close ("Holidays").
9. EXTENDED MAINTENANCE PERIOD (ONLY APPLICABLE TO IN-HOUSE CUSTOMERS)
The Extended Maintenance Period (all Customer local times):
Initial all that apply:
<TABLE>
<CAPTION>
Surcharge
---------
<S> <C> <C> <C>
______ Monday through Friday* 8:00 a.m. to 8:00 p.m. 4%
______ Monday through Friday* 8:00 a.m. to 12:00 midnight 8%
______ Monday through Friday* 24 hours starting 8:00 a.m. 16%
______ Saturday* 8:00 a.m. to 5:00 p.m. 9%
______ Saturday* 8:00 a.m. to 8:00 p.m. 10%
______ Saturday* 8:00 a.m. to 12:00 midnight 12%
______ Saturday* 24 hours starting 8:00 a.m. 14%
______ Sunday or Holiday 8:00 a.m. to 5:00 p.m. 16%
______ Sunday or Holiday 8:00 a.m. to 8:00 p.m. 19%
______ Sunday or Holiday 8:00 a.m. to 12:00 p.m. 22%
______ Sunday or Holiday 24 hours starting 8:00 a.m. 27%
*Except Holidays
</TABLE>
10. COVERED MAINTENANCE
(a) General
Vendor will provide the maintenance required to assure that
the Software operates according to Vendor's standard
specifications. Such maintenance will be performed during the
Basic Maintenance Period, and, if Section 9 of this Agreement
applies, during the time periods specified therein.
20
<PAGE> 21
(b) Software Maintenance
Software Maintenance includes:
(i) New software releases of existing licensed
products/modules
(ii) Application updates
(iii) Mandatory federal regulatory compliance
(iv) Malfunction remedies ("Bug Fixes")
(v) Documentation maintenance
(vi) Remote diagnostics
(vii) Service desk and dispatch
(viii) Non-chargeable user error remedies
It is the policy of Vendor to provide improvements to the
Software and to assist the Customer in its duty to comply with
mandatory federal governmental regulations applicable to the
data utilized in the Software. Vendor reserves the right to
discontinue support of previous versions of Software one
hundred eighty (180) days after the availability of a new
release. Failure of the Customer to install Software releases
or any other correction or improvement provided by Vendor
shall relieve Vendor of responsibility for the improper
operation or any malfunction of the Software as modified by
any subsequent correction or improvement, but in no such event
shall any fees paid (or to be paid) by Customer be returned to
Customer, and Vendor shall be released thereafter from its
obligation to support the Software as provided herein.
(c) Non-Covered Maintenance
Covered maintenance does not include the following: (i)
maintenance outside the agreed Basic Maintenance Period unless
and to the extent indicated in Section 9 of this agreement;
(ii) maintenance required by: (a) operator error or improper
operation of the Software, (b) modifications or additions to
Software performed by other than Vendor personnel or by their
designees, (c) modifications or additions by Customer to
equipment such that the Software requires modifications in
order to operate according to Vendor documentation, (d) damage
to Software by Customer's employees or third parties, (e)
causes beyond the reasonable control of Vendor including, but
not limited to, acts of God or public enemies, labor disputes,
supplier or materials shortages, embargoes, rationing, acts of
government authorities, utility or communication failures,
epidemics, riots, strikes, or war, or (f) electrical
disturbances, outages or brownouts; (iii) Vendor's requested
involvement in determining or solving a problem on Software
not covered by this Agreement; (iv) Software modification or
customization requested by Customer.
11. SOFTWARE ACCEPTANCE DATE
The Software Acceptance Date shall be the date the Software is first
used for daily operations by Customer.
12. DISCLAIMER
EXCEPT TO THE EXTENT OTHERWISE SPECIFICALLY STATED IN THIS AGREEMENT,
VENDOR DISCLAIMS ALL WARRANTIES ON THE SOFTWARE AND SERVICES FURNISHED
HEREUNDER, INCLUDING, WITHOUT LIMITATION, ALL IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL
VENDOR'S LIABILITY UNDER THIS AGREEMENT EXCEED THE AMOUNT PAID TO
VENDOR UNDER THIS AGREEMENT DURING ANY PERIOD OF TWELVE (12)
CONSECUTIVE MONTHS. VENDOR SHALL NOT BE LIABLE IN ANY EVENT FOR DAMAGES
RESULTING FROM LOSS OF DATA, LOSS OF PROFITS, USE OF PRODUCT, OR FOR
ANY INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES, EVEN IF ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES. THIS LIMITATION OF VENDOR'S LIABILITY
SHALL APPLY REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT OR
TORT, INCLUDING NEGLIGENCE. ANY ACTION AGAINST VENDOR MUST BE BROUGHT
WITHIN ONE (1) YEAR AFTER THE CAUSE OF ACTION ACCRUES.
13. TERMINATION
Vendor may, at its option, terminate this Agreement upon notice to
Customer if Customer fails to comply with any of the terms and
conditions hereof, including, without limitation, payment terms,
applicable to Customer. Upon notice of termination of this Agreement
21
<PAGE> 22
under this Section 13, or upon any other termination or expiration of
this Agreement, Customer agrees to discontinue all use of the Software
and return to Vendor all copies of the Software and related
documentation in Customer's control or possession, together with a
written certification that it has done so. No termination of this
Agreement by Vendor shall constitute a waiver of any rights available
to Vendor as a result of any breach of this Agreement by Customer.
14. EXCUSABLE DELAYS
Vendor shall not be liable for delays in delivery, failure to deliver,
or otherwise to perform any obligation hereunder when such delay or
failure arises beyond the reasonable control and without the fault or
negligence of Vendor, including, without limitation, such causes as
acts of God or public enemies, labor disputes, supplier or material
shortages, embargoes, rationing, acts of local, state, or national
governments or public agencies, utility or communication failures,
fire, flood, epidemics, riots, strikes, or war. The time for
performance of any obligation delayed by such events will be postponed
for a period equal to the delay, unless Customer and Vendor agree to
the contrary in writing.
15. INTELLECTUAL PROPERTY RIGHTS.
Vendor shall indemnify Customer from any and all damages and costs
finally awarded for infringement of any valid United States patent,
trademark, or copyright in any suit based upon the license by Vendor or
the proper use by Customer of the Software hereunder, where Vendor is
the infringer with respect thereto, and from reasonable expenses
incurred in defense of such suit if Vendor does not undertake the
defense thereof, provided that Vendor is promptly notified of any such
suit, and, at its option, is given full and exclusive authority for the
control and defense of the same and all negotiations for its settlement
or compromise, and, further provided that this indemnity shall not
extend to infringement resulting from: (i) Vendor's compliance with
Customer's designs, processes, or formulas; (ii) a combination with or
an addition to the Software of any software not supplied by Vendor
hereunder; or, (iii) a modification of the Software by any person other
than Vendor. If any claim has occurred, or in Vendor's opinion is
likely to occur, Customer shall permit Vendor, at Vendor's option and
expense, either to procure for Customer the right to continue using the
Software or to replace or modify the same so that it becomes
non-infringing. If neither of the foregoing alternatives is acceptable
to Vendor, Customer shall return the Software on written request by
Vendor and this Agreement shall terminate with no continuing obligation
or liability of Vendor to Customer. THE FOREGOING STATES THE SOLE AND
EXCLUSIVE LIABILITY OF VENDOR FOR INFRINGEMENT AND IS IN LIEU OF ALL
WARRANTIES, EXPRESSED OR IMPLIED, IN REGARD THERETO.
16. NOTICES
Whenever any party hereto desires or is required to give any notice,
demand, consent, approval, satisfaction, or request with respect to
this Agreement, each such communication shall be in writing and shall
be effective only if it is delivered by personal service (which shall
include delivery by delivery service, over-night delivery service,
telecopy, or telefax) or mailed, by United States certified mail,
postage prepaid, and addressed as follows:
If to nFront: nFront, Inc.
1551 Jennings Mill Road, Suite 800A
Bogart, Georgia 30622
Attn.: President
Facsimile: (706) 369-8611
If to Sparak: Sparak
1322 Gateway Drive
Fargo, North Dakota 58103
Attn.: President
Facsimile: (701) 293-9654
If to Customer: Customer's Address as specified on the signature
page hereof
Facsimile: (xxx) xxx-xxxx
Such communications, when personally delivered, shall be effective upon
receipt, but, if sent by certified mail in the manner set forth above,
shall be effective three (3) business days following deposit in the
United States mail. Any party may change its address for such
communications by giving notice thereof to the other party in
accordance with the requirements of this section.
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<PAGE> 23
17. MISCELLANEOUS
Except as otherwise provided herein, this Agreement, including any
attachments hereto, constitutes the entire agreement between Customer
and Vendor, and there are no other agreements, representations, or
warranties, expressed or implied, written or oral. The validity,
enforcement, interpretation, and construction of this Agreement shall
be determined in accordance with the laws of the State of Georgia. Each
party consents to the exclusive personal jurisdiction and venue of the
state and federal courts with jurisdiction in Fulton County, Georgia
for a resolution of all disputes arising hereunder. If any provision of
this Agreement shall, for any reason, be held unenforceable in any
respect, such unenforceability shall not affect any other provision
hereof, and this Agreement shall be construed to limit the application
of such unenforceable provision to the minimum extent necessary to
render the same enforceable, and, if such a limiting construction is
not possible, such unenforceable provision shall be deleted as if never
contained herein. Special provisions to this Agreement, if any, shall
be attached as exhibits or addenda hereto, and shall be binding only
when executed or initiated by authorized representatives of Customer
and Vendor. Any such special provisions shall control any conflict with
the provisions hereof Customer may not assign its rights hereunder or
delegate its duties hereunder, whether voluntarily, involuntarily, by
operation of law or otherwise, without the prior written consent of
Vendor, which consent may be withheld in the sole discretion of Vendor.
The headings and sub-headings used in this Agreement are for
convenience only and do not limit or amplify the terms hereof. The
authorization, following the execution of this Agreement, of additional
workstations or items of software shall be deemed an amendment to this
Agreement binding upon the parties during the entire term hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the dates
indicated below. This Agreement shall be effective, following execution by
Customer, upon acceptance by Vendor at its principal place of business indicated
herein.
ACCEPTED:
Customer: VENDOR:
- --------------------------- --------------------------------
Signature Signature
- --------------------------- --------------------------------
Name Name
- --------------------------- --------------------------------
Title Title
- --------------------------- --------------------------------
Date Date
BILLING ADDRESS:
23
<PAGE> 24
EXHIBIT F
PASSWORD ESCROW AGREEMENT
THIS PASSWORD ESCROW AGREEMENT, made and entered into this 22nd day of
July, 1997, by and among nFront, Inc., (hereinafter "Licensor"), a Georgia
corporation with principal offices at 1551 Jennings Mill Road, Suite 800A,
Bogart, Georgia 30622, Sparak (hereinafter "Licensee"), a North Dakota
corporation with principal offices at 1322 Gateway Drive, Fargo, North Dakota
58103 and _____________________ (hereinafter "Escrow Agent"), a Georgia trust
company with principal offices at _______________.
W I T N E S S E T H:
WHEREAS, Licensor and Licensee entered into that certain Marketing
Agreement of even date herewith (the "Marketing Agreement"), pursuant to which
Licensor has agreed to provide to Licensee the Back-up System (as defined in the
Marketing Agreement); and
WHEREAS, the Marketing Agreement provides for the delivery by Licensor
to License of the Password (as hereinafter defined) for the Back-up System under
certain circumstances.
NOW, THEREFORE, in consideration of the premises, as well as the
obligations herein made and undertaken. the parties hereto do hereby covenant
and agree as follows:
SECTION I.
DEFINITIONS
For the purposes of this Agreement, in addition to definitions set
forth elsewhere in this Agreement, the definitions set forth in this Section
shall apply to the respective capitalized terms immediately preceding each
definition.
1.1 "AGREEMENT." This Password Escrow Agreement, including any
exhibits, addenda, amendments, and modifications hereto.
1.2 "PASSWORD." A series of letter, numbers or symbols which,
will grant Licensee access to the Back-up System.
SECTION II.
REPRESENTATIONS AND WARRANTIES OF LICENSOR
2.1 OWNERSHIP OF PASSWORD. Licensor warrants and represents to
Licensee that it is the owner of and holder of all rights in the Password and
that the Password embodies highly valuable trade secret information, and that
Licensor has and will have the right to grant to Licensee the right to the
Password pursuant to the Marketing Agreement and to deposit the Password with
Escrow Agent pursuant to the terms hereof.
2.2 BACK-UP SYSTEM CORRESPOND WITH PASSWORD. Licensor warrants
and represents to Licensee that the Password to be deposited with Escrow Agent
will provide Access to the Back-up System.
SECTION III.
PURPOSE OF AGREEMENT; DEPOSIT OF PASSWORD
3.1 DEPOSIT OF PASSWORD. The deposit of the Password and the
release thereof to Licensee pursuant to the Marketing Agreement is intended to
provide assurance to Licensee of access and right of use of the Back-up
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<PAGE> 25
System in the event of the occurrence of certain events as set forth in Section
5.
SECTION IV.
TITLE TO PASSWORD
4.1 Title to the Password shall remain in Licensor, but title to
the copy thereof to be deposited in escrow hereunder shall, in the event the
Password shall be delivered to Licensee pursuant hereto, pass to and vest in
Licensee. Notwithstanding its ownership of a copy of the Password in such event,
Licensee shall remain subject to the terms of the license granted pursuant to
the License Agreement with respect to the use thereof.
SECTION V.
RELEASE OF PASSWORD TO LICENSEE
5.1 RELEASE OF PASSWORD. The copy of the Password to be deposited
in escrow pursuant to this Agreement shall be released to Licensee only in
accordance with the terms of this Agreement.
5.2 Licensee shall be entitled to the Password under the Marketing
Agreement and under this Agreement should any of the following events occur: (a)
Licensee shall reasonably believe that the Licensor shall have become insolvent;
(b) Licensor shall invoke as a debtor any law relating to relief of debtors' or
creditors' rights, or have any such law invoked against it; (c) Licensor shall
have become involved in any liquidation or termination of business; (d) Licensor
shall be adjudicated as bankrupt; (e) Licensor shall be involved in any
assignment for the benefit of its creditors; or (f) if (i) more than fifty
percent (50%) of the equity or (ii) all of substantially all of the assets, of
Licensor shall have been acquired by an entity that conducts, either directly or
through a subsidiary or affiliated entity, a business that provides core
processing services for banks and other financial institutions that is
substantially similar to the business of Licensee as conducted on the date
hereof. In any such event, Licensee may thereupon so notify Escrow Agent in
writing and provide evidence of the same. Escrow Agent shall in such event
promptly release and deliver the Password to Licensee pursuant to the terms
hereof.
5.3 Right to unrestricted possession of the Password shall vest
in Licensee immediately upon a cause of release from escrow, and Licensee may
use the Password as specified in the Marketing Agreement.
SECTION VI.
DISPUTES
6.1 If a dispute arises out of or relates to this Agreement, or
its breach, and the parties have not been successful in resolving the dispute
through direct negotiation, the parties shall attempt to resolve the dispute
through non-binding mediation by submitting the dispute to a sole mediator
selected by the parties or, at any time at the option of a party, to mediation
by the American Arbitration Association ("AAA") in Atlanta, Georgia. If not thus
resolved, it shall be referred to a sole arbitrator selected by the parties
within days after the unsuccessful mediation or, in the absence of such
selection, to final and binding arbitration by a sole arbitrator under the AAA
Arbitration Rules ("Rules") in effect on the date of this Agreement. The
arbitrator may not limit, expand or otherwise modify the terms of this Agreement
or award exemplary or punitive damages or attorney's fees. The arbitrator shall
be knowledgeable in the law and technology aspects of the Agreement and shall
apply the substantive (not the conflicts) law of the state specified in Section
13.4 of this Agreement. Judgment upon the award rendered in the arbitration
shall be made within four (4) months of the appointment of the arbitrator and
may be entered in any court having jurisdiction thereof. Defenses based on the
passage of time are suspended upon submitting the dispute to the mediator or the
arbitrator and during the mediation or the arbitration. The time period during
the mediation or arbitration shall be disregarded in calculating such defenses.
Nothing in this clause shall be construed to preclude any party from seeking
injunctive relief in order to protect its rights during mediation or
arbitration. A request by a party to a court for the injunctive relief shall not
be deemed a waiver of the obligation to mediate or arbitrate. Each party shall
bear its own expenses and an equal share of the expenses of the mediator and
arbitrator and the fees of
25
<PAGE> 26
the AAA. The parties, their representatives, other participants and the mediator
and arbitrator shall hold the existence, content and result of the mediation and
arbitration in confidence.
SECTION VII.
FEES OF ESCROW AGENT
7.1 Licensee shall pay to Escrow Agent, annually in advance
during the terms hereof, the fees of the Escrow Agent at the rate prescribed on
the attached Exhibit A for its performance of services hereunder.
SECTION VIII.
LIMITATION ON OBLIGATION OF ESCROW AGENT
8.1 Escrow Agent shall not be required to inquire into the truth
of any statements or representations contained in any notices, certificates, or
other documents required or otherwise provided hereunder, and it shall be
entitled to assume that the signatures on such documents are genuine, that the
persons signing on behalf of any party thereto are duly authorized to execute
the same, and that all actions necessary to render any such documents binding on
the party purporting to be executing the same have been duly undertaken.
SECTION IX.
RELEASE AND INDEMNIFICATION OF ESCROW AGENT
9.1 Licensor and Licensee, severally, hereby do release Escrow
Agent from any and all liability for losses, damages, and expenses (including
attorney fees) that may be incurred on account of any action by Escrow Agent in
good faith pursuant to this Agreement, and such parties do hereby severally
indemnify Escrow Agent and undertake to hold harmless Escrow Agent from and
against any and all claims, demands, or actions arising out of or resulting from
such performance by Escrow Agent under this Agreement. The obligations of this
Section 9 shall survive the termination of this Agreement for any reason.
SECTION X.
CONFIDENTIALITY AND USE OF PASSWORD
10.1 CONFIDENTIALITY UNDERTAKING. The Password released to
Licensee pursuant to this Agreement shall be used by Licensee solely for the
purposes permitted by the Marketing Agreement. Licensee shall treat and preserve
the Password as a trade secret of Licensor in accordance with the same practices
employed by Licensee to safeguard its own trade secrets against unauthorized use
and disclosure, and in accordance with Article VII of the Marketing Agreement.
10.2 SURVIVAL OF OBLIGATIONS. The obligations of this Section 10
shall survive the termination of this Agreement for any reason and shall
continue for as long as the Password continues to embody trade secrets of
Licensor.
SECTION XI.
INDEPENDENT CONTRACTOR STATUS
11.1 The parties are and shall be independent contractors under
this Agreement, and nothing herein shall be construed to create a partnership,
joint venture, or agency relationship between the parties hereto. No party shall
have the authority to enter into agreements of any kind on behalf of the other
parties in any manner.
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<PAGE> 27
SECTION XII.
TERM OF AGREEMENT
12.1 The term of this Agreement shall commence on the effective
date hereof and shall continue until the Password shall be transferred to
Licensee pursuant to the terms hereof, or, if such transfer shall not have so
occurred, the Agreement shall terminate and the Password shall be returned to
Licensor upon expiration or termination of the Marketing Agreement.
SECTION XIII.
MISCELLANEOUS
13.1 COMPLIANCE WITH LAWS. The parties hereto agree that they shall
comply with all applicable laws and regulations of governmental bodies or
agencies in their respective performance of obligations under this Agreement.
13.2 NO UNDISCLOSED AGENCY; NO ASSIGNMENT. Each party represents
that it is acting on its own behalf and is not acting as an agent for or on
behalf of any third party and agrees that it may not assign its rights or
obligations under this Agreement without the prior written consent of the other
parties hereto.
13.3 NOTICES. All notices and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
addressed to the respective party at the address noted above, unless by such
notice a different address shall have been designated.
13.4 GOVERNING LAW. All questions concerning the validity,
operation, interpretation, and construction of this Agreement shall be governed
by and determined in accordance with the laws of the State of Georgia.
13.5 NO WAIVER. No party shall, by mere lapse of time, without
giving notice or taking other action hereunder, be deemed to have waived any
breach by the other party (parties) of any of the provisions of this Agreement.
Further, the waiver by any party of a particular breach of this Agreement by any
other party shall not be construed as or constitute a continuing waiver of such
breach or of other breaches of the same or other provisions of this Agreement.
13.6 FORCE MAJEURE. No party shall be in default if failure to
perform any obligation hereunder is caused solely by supervening conditions
beyond such party's control, including acts of God, civil commotion, strikes,
labor disputes, or governmental demands or requirements.
13.7 PARTIAL INVALIDITY. If any part, term, or provision of this
Agreement shall be held illegal, unenforceable, or in conflict with any law of a
federal, state, or local government having jurisdiction over this Agreement, the
validity of the remaining portions or provisions hereof shall not be affected
thereby.
13.8 COMPLETE STATEMENT OF AGREEMENT. Each of the parties hereto
acknowledges that it has read this Agreement, understands it, and agrees to be
bound by its terms. The parties further agree that this Agreement is the
complete and exclusive state of agreement and supersedes all proposals (oral or
written), understandings, representations, conditions, warranties, covenants,
and all other communications between the parties relating hereto.
13.9 AMENDMENT. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party hereto.
13.10 RESIGNATION OF ESCROW AGENT. The Escrow Agent may resign its
duties and obligations hereunder by giving not less than sixty (60) days' prior
written notice thereof to Licensor and Licensee at their respective addresses as
set forth hereinabove or such other address as Licensor or Licensee may provide
in writing
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<PAGE> 28
to the Escrow Agent.
13.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized representatives as set forth below:
"LICENSOR"
NFRONT, INC.
By: /s/ Tripp Rackley
----------------------------------------
"LICENSEE"
By: /s/ Steve Anderson
----------------------------------------
"ESCROW AGENT"
By:
----------------------------------------
Title:
-------------------------------------
28
<PAGE> 29
NFRONT
UNIVERSAL NON-DISCLOSURE AGREEMENT
THIS UNIVERSAL NON-DISCLOSURE AGREEMENT (the "Agreement"), is made June 30,
1997, by and between nFRONT, with offices at 1551 Jennings Mill Road, Suite
800A, Bogart, Georgia 30622 ("nFront"), and Steve Anderson, of Sparak Financial
Systems, Inc. (the "Counterparty").
WITNESSETH:
This Agreement is made and entered into under the following circumstances:
(i) nFront and Counterparty each desire to exchange certain
documentation, trade secrets, and other information which may,
in whole or in part, constitute proprietary and confidential
information of the disclosing party for the purpose of
exploring mutual future potential business relationships.
(ii) Each party hereto is willing to disclose its respective
proprietary and confidential information to the other only
upon receipt of the assurances contained within this
Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
(1) Definitions.
For all purposes of this Agreement, the following terms shall have the
meanings assigned to them in this section 1:
(a) Owner - shall mean and include the party hereto, and any
affiliate thereof, disclosing Proprietary information to the
Recipients.
(b) Recipients - shall mean and include the party hereto, and any
affiliate thereof, disclosing Proprietary information from an
Owner.
(c) Proprietary Information - shall mean and include all
information, whether written or oral, and whether in the form
of documentation, correspondence, memoranda, reports, notes
computer retained information, software, computer programs,
technical and engineering specifications, source codes,
customer and supplier lists, patents, copyrights, trade names,
trade secrets, or otherwise (collectively, "Information"),
disclosed by an Owner to a Recipient, together with all
information derived, in whole or in part, by any person or
entity from any information; provided, however, that
Information shall not be deemed to be Proprietary information
hereunder to the extent, and only to the extent, that such
Information:
(i) is within the public domain prior to the time of
disclosure by an Owner to a Recipient, or thereafter comes
within the public domain other than as a result of unpermitted
disclosure by a Recipient; or,
(ii) was, prior to the date of disclosure to a Recipient, in
the lawful possession of such Recipient; or,
(iii) is independently acquired by a Recipient from a third
person or entity not under an obligation of confidentiality to
an Owner.
(2) Non-Disclosure and Non-Use of Proprietary Information.
Each Recipient shall, at all times, keep strictly confidential, and
shall not disclose or permit the disclosure to any third person or
entity, of any or all Proprietary Information received from an Owner,
and shall not, in any manner or at any time, use or permit the use of
any such Proprietary Information, for the benefit of
29
<PAGE> 30
itself or others except: (i) as contemplated in this Agreement; or,
(ii) upon the prior written consent of the Owner given in each specific
instance. Each party hereto shall cause its officers, employees, and
agents (collectively, "Employees") who may gain access to any
Proprietary Information of an Owner in connection with this Agreement,
prior to any disclosure to any such Employee, to execute and deliver to
the Owner a Confidentiality Statement in the form attached hereto as
Exhibit 1.
(3) Return of Proprietary Information.
Upon termination of this Agreement, each party hereto shall return or
cause to be returned to each Owner, respectively, all Proprietary
Information in tangible form received by it or any affiliate thereof
from such Owner, together with all copies thereof.
(4) Termination.
This agreement shall terminate twenty-four (24) months from the date
hereof, unless extended by mutual written agreement of the parties.
Termination of this Agreement shall not release either party of any of
its respective obligations hereunder.
(5) Specific Performance.
Each party hereto specifically acknowledges that the Proprietary
Information to be received hereunder is proprietary, unique, and
confidential information, and that a violation of the covenants
contained in section 2 or section 3 of this Agreement will cause
continuing and irreparable harm to a respective Owner thereof.
Therefore, each party hereto, and any Owner or other person or entity
with rights to enforce the restriction contained within such section 2
or section 3 shall, in addition to any other rights or remedies
available to it, at law or in equity, have the right to apply to a
court of competent jurisdiction for an injunction to restrain the
violation or continuing violation of such covenants.
(6) No Proprietary Rights.
Nothing contained in this Agreement shall be construed as granting or
conferring any rights, by license or otherwise, expressly, or by
implication, for any invention, discovery, or improvement made,
conceived, or acquired prior to or following the date of this
Agreement.
(7) Severability.
If any provision of this Agreement is deemed invalid or unenforceable,
such provision shall be deemed limited by construction in scope and
effect the minimum extent necessary to render the same valid and
enforceable, and, in the event no such limiting construction is
possible, such invalid or unenforceable provision shall be deemed
severed from this Agreement without affecting the validity of any other
term or provision hereof.
(8) Assignment; Third Party Beneficiaries.
Each party hereto may assign its rights hereunder (but not delegate its
duties hereunder), only upon the assignment by such party of all of its
rights in the corresponding Proprietary Information to the same
assignee. Each Owner shall be deemed to be a third party beneficiary of
this Agreement, entitled to enforce the provisions hereof, to the
extent of its ownership of any Proprietary Information.
(9) Governing law; Jurisdiction.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Georgia, without giving effect to the
principles of the conflicts of laws thereof. Each party hereby effect
to the principles of the conflicts of law thereof. Each party hereby
consents and agrees to the exclusive in personam jurisdiction and venue
of the state and federal trial courts located in Oconee County,
Georgia, for resolution of all disputes arising out of or in connection
with the interpretation or enforcement of the Agreement.
(10) Cost of Enforcement.
In the event any party hereto initiates legal action (including both
trial and appellate proceedings, at law in equity, or otherwise) to
enforce its rights hereunder, the prevailing party in any such action
shall recover
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<PAGE> 31
from the nonprevailing party its reasonable litigational expenses
(including, but not limited to, reasonable attorney's fees and court
costs) of all such proceedings.
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the date
first written above.
Signed in the presence of: nFRONT
By: /s/ Tripp Rackley
- -------------------------------- ------------------------------------
Its: President
- -------------------------------- ------------------------------------
Signed in the presence of: SPARAK FINANCIAL SYSTEMS
By: /s/ Steve Anderson
- -------------------------------- ------------------------------------
Its: Sec/Treas.
- -------------------------------- ------------------------------------
31
<PAGE> 32
EXHIBIT 1
CONFIDENTIALITY STATEMENT
This Confidentiality Statement is given in accordance with the
requirements of a certain Universal Non-Disclosure Agreement, dated June 30,
1997 (the "Agreement"), by and between nFront and Steve Anderson. All
capitalized terms used herein shall have the same meaning as are assigned
thereto in the Agreement.
The undersigned, an officer, employee, or agent of a Recipient,
recognizes that the undersigned will, in connection with duties to be performed
on behalf of the Recipient or others by the undersigned, be granted access to
certain Proprietary Information of an Owner. In consideration of such Owner's
release of such Proprietary Information to the undersigned's Recipient, the
undersigned hereby recognizes, agrees, covenants, represents, and warrants to
Owner that:
(a) the undersigned will abide by all of the terms and provisions
of the Agreement binding upon the Recipient, including,
without limitation, those terms and provisions regarding the
non-disclosure and non-use of Proprietary Information of the
Owner, as if the undersigned were an additional party to the
Agreement; and,
(b) any Owner shall be entitled, as against the undersigned, to
those rights and remedies, including, without limitation,
injunctive relief, as are permitted to Owner against Recipient
pursuant to section 5 of the Agreement for any breach of the
Confidentiality Statement by the undersigned.
Signed in the presence of:
/s/ Steve Anderson
- -------------------------------- -----------------------------------------
(Signature)
Steve Anderson, Sparak Financial Systems
- -------------------------------- -----------------------------------------
Please Print Name
Name of Owner:
Dated: 7/1/97
- -------------------------------- ------------------------------------
32
<PAGE> 1
CONFIDENTIAL TREATMENT* EXHIBIT 10.10
* CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO THE
RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION.
BRACKETS AND "+" HAVE BEEN USED TO IDENTIFY INFORMATION WHICH IS THE
SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.
nBUSINESS ADDENDUM TO
nFRONT MARKETING AGREEMENT
THIS nBUSINESS ADDENDUM ("Addendum") is made effective this 15th day of
February, 1999 ("Addendum Effective Date") by and between nFRONT, INC.
("nFront"), a Georgia corporation having its principal offices at 520 Guthridge
Court N.W., Suite 100, Norcross, Georgia 30092, facsimile number (770) 209-9093
and SPARAK ("Reseller"), a Wisconsin LLC having its principal offices at 2701
12th Avenue, SW, Fargo, North Dakota 58103.
1. Purpose. This Addendum revises and amends the Marketing Agreement
executed by and between the parties and dated 22nd day of July, 1997
("Agreement").
2. nBusiness System. "nBusiness System" means nFront's proprietary
Internet Cash Management System and related services as more fully
described in SCHEDULE A attached to this Addendum hereto, together with
all future modifications thereof made available to Reseller by nFront.
"nBusiness System" shall be deemed a part of the nHome System for all
purposes under the Agreement and this Addendum including, without
limitation, the applicable warranties, limitation of warranties and
limitation of liability.
3. nBusiness Fees. Pursuant to the terms and conditions of the Agreement
and this Addendum, (i) nFront will provide to Reseller the nBusiness
System, and (ii) nFront will pay Reseller the percentage of the Fees
for the nBusiness System as set forth in SCHEDULE B to this Addendum.
4. Term. The term of this Addendum shall be deemed to commence as of the
Addendum Effective Date and shall remain in effect according to the
Term set forth in the Agreement.
5. Interpretation.
(a) The Agreement and this Addendum and any Schedules are complementary
and additive. The requirements and provisions of any one document shall
be equally applicable in the other document. In the case of an
inconsistency or conflict in the terms of the documents, the terms of
this Addendum and any Schedules hereto shall control and any
conflicting or inconsistent terms in the Agreement or exhibits thereto
shall be void and of no effect.
(b) All capitalized terms used in this Addendum and not otherwise
defined herein shall have the same meanings set forth in the Agreement.
IN WITNESS WHEREOF, the parties have executed this Addendum as of
Addendum Effective Date for valuable consideration, the sufficiency of which the
parties hereby acknowledge.
nFRONT, INC. RESELLER
By: /s/ Tripp Rackley By: /s/ Steve Anderson
--------------------------- ----------------------------
Name: Tripp Rackley Name: Steve Anderson
---------------------------------- ------------------
Title: CEO Title: President & CEO
--------------------------------- -----------------
Date: 3/2/99 Date: 2/16/99
---------------------------------- ------------------
<PAGE> 2
<TABLE>
EXHIBIT A - SYSTEM
nBUSINESS ONLINE BANKING SERVICE
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
CURRENT FUTURE
FUNCTION FUNCTION
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. View Account Balances and Histories
- DDA/Savings X
- CD/IRA X
- Loans and Line of Credit X
- ------------------------------------------------------------------------------------------------------------------
2. ACH formatted Transfers - Book Transfers, Drafts, Disbursements, Direct
Deposits between DDA, Savings, Loan, LOC accounts
- Immediate and Future Transfers
- One Time, Recurring Transfers and Pending Transfers X
- View Historical Transfers X
X
- ------------------------------------------------------------------------------------------------------------------
3. Bill Payment
- Immediate and Future Bill Payments X
- One Time and Recurring Payments X
- Pending Bill Payments X
- Historical Bill Payments X
- ------------------------------------------------------------------------------------------------------------------
4. User Resources
- Online Payee Database X
- Business Calculators X
- Text Messaging X
- Categories & Journal Entries X
- ------------------------------------------------------------------------------------------------------------------
5. Balance Reporting
- View customer account information for up to two years X
- ------------------------------------------------------------------------------------------------------------------
6. Multi-User permissions
- SuperUser sets up and controls subordinate members' functional X
access
- Secure log-in X
- Create and change customer password information X
- Control Account access and disbursement levels X
- ------------------------------------------------------------------------------------------------------------------
7. Business application integration
- Microsoft Money, Quicken X
- Peachtree, Quick Books, Comma Delimited X
- ------------------------------------------------------------------------------------------------------------------
8. Online Help X
- ------------------------------------------------------------------------------------------------------------------
9. Virtual Status Requests - EFTPS (Electronic Federal Tax Payments), Stop
Payments, Wire Transfers
- Immediate and Future Transactions (where applicable) X
- Recurring Transactions X
- Pending Transactions X
- View Historical Transfers X
- ------------------------------------------------------------------------------------------------------------------
10. Additional Functions
- Cash Concentration X
- Controlled Disbursements X
- Cash Flow Manager/Daily Transaction Journal X
- ACH version of EFTPS X
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
-2-
<PAGE> 3
<TABLE>
EXHIBIT A - SYSTEM
NBUSINESS ONLINE BANKING SERVICE (CONT'D)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
CURRENT FUTURE
FUNCTION FUNCTION
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
13. Bank Administration Site - nBusiness Functions
- Set/Reset challenge code/Password for SuperUser X
- Flag accounts as Cash Management X
- Audit Management
- Receive/Respond to time-sensitive Virtual Status
Requests (VSRs): Stop Pay, Wire Transfer, EFTPS X
- Detailed Internet Branch Billing X
- Billing System for nBusiness(SM) Customers using ACH formatted file
- nReach(SM) - Data Mining and Marketing module X
- Database Query Capability X
- Promotional e-mails to selected nBusiness(SM) customers X
- Internet Branch Reporting X
X
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
-3-
<PAGE> 4
SCHEDULE B - FEES
<TABLE>
<CAPTION>
--------------------------------------------
nHOME nBUSINESS COMBO PARTNER REV
SHARING
- -------------------------------------------------------------------------------------------
IMPLEMENTATION FEE - NEW CUSTOMERS
<S> <C> <C> <C> <C>
(Based on Bank Assets - $Millions)
0-20 $[++++] $[++++] $[++++] 50%
21-50 $[++++] $[++++] $[++++] 50%
51-100 $[++++] $[++++] $[++++] 50%
101-300 $[++++] $[++++] $[++++] 50%
300+ $[++++] $[++++] $[++++] 50%
- -------------------------------------------------------------------------------------------
MONTHLY MAINTENANCE FEE
(Based on Bank Assets - $Millions)
0-20 $ -- $ [++++] $ [++++] 50%
21-50 $ -- $ [++++] $ [++++] 50%
51-100 $ -- $ [++++] $ [++++] 50%
101-300 $ -- $ [++++] $ [++++] 50%
300+ $ -- $ [++++] $ [++++] 50%
PER CUSTOMER FEES
(Based on number of Endusers at
Bank)
Up to 50 Endusers $ [++++] $ [++++] 50%
51 Plus $ [++++] $ [++++] 50%
New Customer Setup-One Time Fee $ [++++] $ [++++] 50%
- -------------------------------------------------------------------------------------------
TRANSACTION FEES
nBranch Product and Service Fees $ [++++] $[++++]
ACH Draft $[++++]
ACH Disbursement $[++++]
Direct Deposit $[++++]
Book Transfer $[++++]
Wire Transfer $[++++]
Stop Pay $[++++]
EFTPS - same day request $[++++]
EFTPS - pass through ACH $[++++] When Available
Controlled Disbursement (per day) $[++++] When Available
Cash Concentration $[++++] When Available
- -------------------------------------------------------------------------------------------
BILL PAYMENT
Monthly Fee/Account $[++++] $[++++] 0%
Per Payment after 20 $[++++] $[++++] 0%
Customer Setup $[++++] $[++++] 0%
Canceled Check Copy $[++++] $[++++] 0%
NSF Fee $[++++] $[++++] 0%
Stop Pay Fee $[++++] $[++++] 0%
Additional User Kits $[++++] $[++++] 0%
- -------------------------------------------------------------------------------------------
</TABLE>
PRICES EFFECTIVE 11/1/98 CONFIDENTIAL - DO NOT REPRODUCE
-4-
<PAGE> 5
ADDENDUM TO nFRONT MARKETING AGREEMENT
THIS ADDENDUM ("ADDENDUM") REVISES AND AMENDS THE nFRONT MARKETING AGREEMENT
DATED THE 22ND DAY OF JULY, 1997 AND EXECUTED BETWEEN THE PARTIES ("AGREEMENT").
1. FEES. Bank shall pay nFront the following fees for the following services:
<TABLE>
<CAPTION>
New Customers
--------------------------------------------
nHOME nBUSINESS nHOME AND COMMISSION
nBUSINESS
- -------------------------------------------------------------------------------------------
IMPLEMENTATION FEE - NEW CUSTOMERS
<S> <C> <C> <C> <C>
(Based on Bank Assets - $Millions)
0-20 $[++++] $[++++] $[++++] 50% footnote
21-50 $[++++] $[++++] $[++++] 50% footnote
51-100 $[++++] $[++++] $[++++] 50% footnote
101-300 $[++++] $[++++] $[++++] 50% footnote
300+ $[++++] $[++++] $[++++] 50% footnote
- -------------------------------------------------------------------------------------------
MONTHLY MAINTENANCE FEE
(Based on Bank Assets - $Millions)
0-20 $[++++] $[++++] $[++++] 25%
21-50 $[++++] $[++++] $[++++] 25%
51-100 $[++++] $[++++] $[++++] 25%
101-300 $[++++] $[++++] $[++++] 25%
300+ $[++++] $[++++] $[++++] 25%
PER CUSTOMER FEES
(Based on number of EndUsers at
Bank)
Up to 50 $[++++] 25%
51 Plus $[++++] 25%
Customer Monthly Fee nBusiness $[++++] 25%
New Customer Setup-One Time Fee $[++++] $[++++] 25%
(After 1st month)
Each Additional Account N/A $[++++] 25%
Each Additional User N/A $[++++] 25%
- -------------------------------------------------------------------------------------------
TRANSACTION FEES
Product and Service Application Fees $[++++] $[++++] $[++++]
nReach Data Mining Reports (Per Report) $[++++] $[++++]
ACH Draft $[++++] $[++++]
ACH Disbursement $[++++] $[++++]
Direct Deposit $[++++] $[++++]
Book Transfer $[++++] $[++++]
Wire Transfer $[++++] $[++++]
Stop Pay $[++++] $[++++]
EFTPS - same day request $[++++] $[++++]
EFTPS - pass through ACH $[++++] $[++++]
Controlled Disbursement (per day) $[++++] $[++++] When Available
Cash Concentration $[++++] $[++++] When Available
- -------------------------------------------------------------------------------------------
BILL PAYMENT
Monthly Fee/Account $[++++] $[++++] $[++++]
Per Payment (Internet/Phone) $[++++] $[++++] $[++++]
Internet Customer Setup Fee $[++++] included included
Telephone-Only Customer Setup Fee $[++++] N/A When Available
Canceled Check Copy $[++++] $[++++] $[++++]
NSF Fee $[++++] $[++++] $[++++]
Stop Pay Fee $[++++] $[++++] $[++++]
Additional User Kits $[++++] $[++++]
Telephone Bill Payment Access Fee $[++++] $[++++] $[++++]
Telephone Monthly Communication Fee (per
250 Accounts) $[++++] N/A $[++++]
CHECK IMAGING
ADS-Document Solutions
Internet Access License Fee $[++++] $[++++] $[++++]
Monthly Maintenance (includes 1000 images) $[++++] $[++++] $[++++]
Per Image Fee (for Images over 1000) $[++++] $[++++] $[++++]
Communication Charges - Bank $[++++] $[++++] $[++++]
Connection to Internet Via Internet Via Internet Via Internet
OPTIONS
nMotion Multimedia Presentation (10 Frames) $[++++] $[++++] 50%
Management Reporting (Per Month) $[++++] $[++++] 25%
Internet TV Bill Quote
nHome Employee Education Program - $[++++] N/A
Includes Full Day Session
Onsite, Certification of 2
Trainers, 2 Leader Guides,
10 Participation Kits
- -------------------------------------------------------------------------------------------
</TABLE>
PRICES EFFECTIVE 11/1/98 CONFIDENTIAL - DO NOT REPRODUCE
<PAGE> 6
Bank shall also pay all other Fees due under the Agreement not superseded by
this Addendum.
2. INTERPRETATION.
The Agreement and this Addendum and any exhibits are complementary and additive.
The requirements and provisions of any one document shall be equally applicable
in the other document. In the case of an inconsistency or conflict in the terms
of the documents, the terms of this Addendum and any exhibits hereto shall
control and any conflicting or inconsistent terms in the Agreement or exhibits
thereto shall be void and of no effect. All capitalized terms used in this
Addendum and not otherwise defined herein shall have the same meanings set forth
in the Agreement.
IN WITNESS WHEREOF, the parties have executed this Addendum as of the dates
listed below.
nFront, Inc. Reseller: SPARAK Financial Systems, LLC
------------------------------
By: /s/ Robert Campbell By: /s/ Steve Anderson
--------------------------------- ------------------------------------
Name: Robert Campbell Name: Steve Anderson
------------------------------- ----------------------------------
Print Name Print Name
Title: President & CEO Title: President/CEO
------------------------------ ---------------------------------
Date: 6-22-99 Date: 6-22-99
------------------------------- ----------------------------------
-5-
<PAGE> 1
CONFIDENTIAL TREATMENT* EXHIBIT 10.11
* CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN
OMITTED PURSUANT TO THE RULES AND REGULATIONS OF THE
SECURITIES AND EXCHANGE COMMISSION. BRACKETS AND "+"
HAVE BEEN USED TO IDENTIFY INFORMATION WHICH IS THE
SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST.
May 2, 1997
First Commerce Bank
1731 North Elm Street
Commerce, Georgia 30529
Attention: Larry Cole
Ladies and Gentlemen:
This letter agreement (the "Agreement") will confirm our understanding
with respect to the ongoing business relationship between nFront, Inc., a
Georgia corporation (the "Company"), and First Commerce Bank, a national bank
(the "Bank").
1. Internet Banking Services. The Company shall provide certain
Internet Banking services, as described herein, to the Bank on the following
basis:
(a) April 1997. During April 1997, the Company shall
provide the Bank the services outlined on Schedule A attached hereto in
consideration of a payment of $[++++], payable on or before April 30,
1997.
(b) May and June 1997. On or before April 30, 1997, the
Company shall provide the Bank a development project outline that
identifies development projects to be undertaken by the Company on the
Bank's behalf in May and June, 1997. On or before May 1, 1997, the Bank
may elect either to (i) pay a development fee of $[++++] per month for
each of May and June, 1997, such monthly payments to be due on or
before the first day of each such month, and such development fees to
be used and accounted for by the Company in the same manner as the
development work undertaken by the Company on behalf of Bank during the
first calendar quarter of 1997 (such development fees paid for May and
June 1997, together with the $[++++] paid pursuant to Section l(a)
hereof, are referred to herein as "Development Fees"); (ii) engage
Company to undertake development work on its behalf on a project by
project basis at the current hourly rate of $75.00 per hour, with a
monthly minimum of 100 hours; or (iii) license software products from
the Company on such terms and rates as are then offered to other banks
by the Company generally.
(c) July 1997 and Thereafter. Commencing on July 1, 1997
and thereafter, until terminated by either the Company or Bank in
accordance herewith, the following provisions shall be operative:
(i) Bank shall pay an annual software
maintenance fee of $[++++], which maintenance fee shall not
increase until such time as the Company has no further royalty
obligations pursuant to Section 5 hereof, whereupon such
annual maintenance fee may be increased by the Company;
provided, however, such increase shall not exceed [++++]% of
the prior annual fee. The annual fee increases will be within
Industry Standards. The annual software maintenance fee shall
be payable annually in advance beginning July 1, 1997.
(ii) The Company shall continue to provide to the
Bank Internet service and support for $[++++] per annum, this
amount to be adjusted upward or downward by the Company based
on changes in level of service and ability along with changes
in the industry. If the Bank elects to use another provider
for these services or elects to bring these services in house,
no further annual Internet fee will be due the Company
hereunder. If the Bank elects to move the Internet software in
house, the Company will develop, for the Bank's approval, a
project plan and cost structure to accomplish the move.
<PAGE> 2
First Commerce Bank
May 2, 1997
Page 2
(iii) The Bank shall be obligated to utilize at
least 100 hours per month of additional maintenance and/or
product development services of the Company, such services to
be provided at the rate of $[++++] per hour. With at least two
months notice to the Company, the Bank may modify its monthly
hours commitment under this Section 1(c). Hours actually spent
by the Company's personnel on behalf of the Bank will be
summarized in a monthly accounting report. Any hours in excess
of 100 (but not to exceed 300) will be billed on a monthly
basis to Bank at the rate of [++++]% of the then hourly
maintenance rate of the Company. The company will keep its
then hourly rate within Industry Standards.
(iv) The Company will host Bank at www.nbank.com
Maintenance services and Internet services and support pursuant to this Section
1(c) shall be as outlined on Schedule B attached hereto.
2. Support of Bank Personnel. On or after July 1, 1997, the Bank
has a right to hire personnel to maintain and modify the "non-transactional"
nBank Internet banking center. Such personnel, however, will be trained by the
Company, which training time will be billed in the manner contemplated by
Section l(c)(iii). The Bank, with the Company's approval which will not be
unreasonably withheld, may hire a full time nBank person whose activities will
be managed by the Company for a managerial fee to be quoted by the Company,
which fee shall be competitive with the market for similar management and
consulting services.
3. Termination. This Agreement shall continue until terminated in
the manner set forth below:
(a) Either party may terminate this Agreement immediately
upon written notice to the other party if there is a material breach of
this Agreement by the other party, and such breach remains uncured for
a period of 30 days following written notice to the other party setting
forth the nature of the breach in reasonable detail.
(b) Either party may terminate this Agreement immediately
upon written notice to the other party if (i) a petition of bankruptcy
is filed (or other commencement of a bankruptcy or similar proceeding
shall have occurred) against the other party without its consent under
applicable bankruptcy, insolvency, or similar laws as now or hereafter
in effect, and such proceeding is not dismissed within sixty days
thereafter; (ii) the other party consents to the institution of
bankruptcy or insolvency proceedings against it or files a petition,
answer or consent seeking reorganization or relief (other than as a
creditor) under the U.S. Bankruptcy Code or any other federal or state
law relating to bankruptcy or insolvency; (iii) the other party
consents to the appointment of a receiver; (iv) the other party makes
an assignment for the benefit of its creditors; or (v) the other party
admits in writing that it is unable to pay its debts generally as they
become due.
(c) The Bank has a right to terminate this relationship
if the Company fails to provide the quality of site development work,
uptime and responsiveness to request as is equal to the market standard
for top quality and such failure shall continue for a period of 30 days
following written notice by the Bank to the Company setting forth the
nature of such failure in reasonable detail.
(d) All other termination provisions are included in the
License and Maintenance Agreement dated July 16, 1996.
4. Change in Control of the Company. If the Company experiences a
change in control, or enters into an agreement that has the effect of a change
in control, then the Company. must either (i) pay to the Bank, within 90 days
after such change in control, an amount equal to the maximum amount that would
then be payable as a royalty to the Bank pursuant to Section 5 hereof or (ii)
deliver to the Bank a copy of its then current source code necessary to operate
the Bank's Internet site; provided, however, such delivery shall be made
pursuant to a license
<PAGE> 3
First Commerce Bank
May 2, 1997
Page 3
whereby the Bank shall be limited in its use of such source code to applications
relevant to the Bank's internal use only. If the Company elects to so transfer
such source code to the Bank, the Company shall be available to assist the Bank
in accomplishing same in accordance with a project plan and cost structure to be
mutually agreed upon by the parties. "Change in control" shall mean a change in
ownership of the Company such that persons other than the current owners of the
company, or their respective affiliates, own equity interest in the Company
possessing in excess of 50% of the voting power of all such outstanding equity
interests, or do not have the free and unrestrained ability to vote their
interest. In addition, should the Company cease conducting all business
operations, the Bank shall have the right to secure such source code, subject to
the limitation identified above.
5. Royalty Payments to Bank. The Company hereby agrees to make a
royalty payment to the Bank equal to 10% of all license fees received by the
Company in consideration of the licensing of Internet banking products described
on Schedule C attached hereto; provided; however, in no event shall aggregate
royalty payments pursuant hereto exceed the sum of $160,000 plus the aggregate
amount of Development Fees paid by the Bank to the Company pursuant to Section
l(a) and (b) hereof (such sum referred to herein as the "Royalty Cap"). The
Company shall be obligated to make a payment to the Bank equal to the unpaid
amount of the Royalty Cap in the event that the Company shall receive a cash
infusion, whether by way of equity or debt investment, of $2.2 million or
greater at any time during the term hereof, whereupon this royalty obligation
shall be extinguished.
6. Miscellaneous. The Company and the Bank agree to cooperate in
an effort to (i) move the "ISP Project" to the Bank and (ii) to relocate the
Bank's training center equipment to a mutually agreed upon location. The manner
in which, and compensation payable to Company for, the accomplishment of these
projects are to be mutually agreed upon by the Bank and the Company. The Bank
will continue to be responsible for the T-1 and rent until the first to occur of
the ISP relocation or September 31, 1997. During the term of this Agreement,
fees and charges payable by the Bank to the Company shall generally be no less
favorable to the Bank than such fees and charges as would be payable by any
other community bank contracting with the Company for similar services or
products under circumstances in which the Company has not elected, for marketing
or other reasons, to reduce its fee structure in order obtain a new client or a
particular business opportunity.
7. Entire Agreement. This Agreement, together with the License
and Maintenance Agreement dated July 16, 1996, constitute the entire agreement
among the parties and supersedes any prior understandings, agreements or
representations by and among the parties, written or oral, to the extent they
related in any way to the subject matter hereof.
8. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
parties hereto. No waiver by any party of any default, misrepresentation or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
9. Georgia Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Georgia without giving
effect to any choice or conflict of law provision or rule that would cause the
application of any laws of any jurisdiction other than the State of Georgia.
<PAGE> 4
First Commerce Bank
May 2, 1997
Page 4
If the foregoing correctly sets forth our understanding with respect to
these matters, please indicate your acceptance thereof in the space provided
below whereupon this letter and your acceptance shall constitute a binding
agreement between us.
Very truly yours,
nFront, INC.
By: /s/ Tripp Rackley
---------------------------
Its: President
---------------------------
Accepted and agreed as of
the date first above written
FIRST COMMERCE BANK
By: /s/ L.R. Cole
------------------------
Its: EVP
------------------------
<PAGE> 5
SCHEDULE A
Description of Services to be Provided in April 1997
<TABLE>
<CAPTION>
TASK DESCRIPTION
- ---- -----------
<S> <C>
ISP Setup beta customers, and email.
Holiday Site Easter
Survey Our list of questions has been given to Patty for
approval, revision. Awaiting procedures
Web TV Site is done. ASP detection script.
Site registration nBank re-registration at search engines (nBank Is at
Yahoo now) Altavista, Excite, Infoseek, Webcrawler,
Lycos
Mortgage rates Daily updating of mortgage rates
Checking + Rates Monthly updating of Checking + Rates
Web tracking research Capture and provided initial Web site traffic reports
DELL orders Negotiated Price and ordered DELL, Server, and PCs
nBank marketing Discussion and participation in nBank marketing
meeting
Bill Pay Technical review - Derek
nBank guest book Built guest book for the nBank site
Guest book to access database and admin site
Guest book to SQL
CD Loan DEV File layouts / importer development
Award entries Submitted entries in 7 categories for the On-line
Banking Association's, On-line Banking Excellence
award ceremony
Customer Service Handled service calls regarding accessing secure
pages
Training nBank/nFront overview for Patty Pass
</TABLE>
<PAGE> 6
SCHEDULE B
Description of Software Maintenance and
Internet Service and Support
Software Maintenance includes:
- New software releases
- Application updates
- Mandatory federal regulatory compliance
- Malfunction remedies ("Bug Fixes")
- Documentation maintenance
- Remote diagnostics
- Service desk and dispatch
- Non-chargeable user error remedies
It is the policy of nFront to provide improvements to the Software and
to assist the Customer in its duty to comply with mandatory federal
governmental regulations applicable to the data utilized in the
Software. nFront reserves the right to discontinue support of previous
versions of Software one hundred eighty (180) days after the
availability of a new release. Failure of the Customer to install
Software releases or any other correction or improvement provided by
nFront shall relieve nFront of responsibility for the improper
operation or any malfunction of the Software as modified by any
subsequent correction or improvement, but in no such event shall any
fees paid (or to be paid) by Customer be returned to Customer, and
nFront shall be released thereafter from its obligation to support the
Software as provided herein.
Internet Service and Support includes:
- Incoming Internet access for consumers to access nBank.
<PAGE> 7
SCHEDULE C
Description of Internet Banking Products
Subject of Royalty Obligation
- - Balance Inquiry
- - Funds Transfer
<PAGE> 8
SCHEDULE D
DOMAIN BRANDING
This service will provide hosting and SSL keys for www.nbank.com.
nFront, Inc. will handle DNS service for the above domains.
The fee for this service is $[++++] per year.
nFront, Inc. will handle the SSL key registration and annual renewals. This
pricing model assumes that SSL key renewal costs remain at current prices. In
event of a SSL Key renewal price increase, the increase will be passed on to
First Commerce Bank.
nFront, Inc.
By: /s/ Tripp Rackley
-----------------------------
Its: President
-----------------------------
Date: 8/18/97
-----------------------------
First Commerce Bank
By: /s/ L.R. Cole
-----------------------------
Its: EVP
-----------------------------
Date: 8/22/97
-----------------------------
<PAGE> 9
EXHIBIT 1-A
SOFTWARE APPLICATIONS
Server Applications
- nBusiness On Line Software (See Attached Description)
Fees for the foregoing application are listed in Exhibit 2-A.
This Exhibit is an addendum to the Agreement between nFront, Inc. and First
Commerce Bank of Commerce dated July 19, 1996.
First Commerce Bank has the right to cancel the nBusiness portion of this
Agreement with written notice to nFront until June 30, 1999.
Customer: Accepted:
First Commerce Bank nFront, Inc.
/s/ Charles W. Blair, Jr. /s/ Tripp Rackley
- ------------------------------------ --------------------------------
Signature Signature
Charles W. Blair, Jr. Tripp Rackley
- ------------------------------------ --------------------------------
Name Name
President CEO
- ------------------------------------ --------------------------------
Title Title
1/18/99 2/17/99
- ------------------------------------ --------------------------------
Date Date
<PAGE> 10
Exhibit 1-A
Software Applications - nBusiness
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
CURRENT FUNCTION FUTURE
FUNCTION
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. View Account Balances and Histories
- DDA/Savings X
- CD/IRA X
- Loans and Line of Credit X
- -------------------------------------------------------------------------------------------------------------------
2. ACH formatted Transfers - Book Transfers, Drafts, Disbursements, Direct
Deposits between DDA, Savings, Loan, LOC accounts
- Immediate and Future Transfers
- One Time, Recurring Transfers and Pending Transfers X
- View Historical Transfers X
X
- -------------------------------------------------------------------------------------------------------------------
3. Bill Payment
- Immediate and Future Bill Payments X
- One Time and Recurring Payments X
- Pending Bill Payments X
- Historical Bill Payments X
- -------------------------------------------------------------------------------------------------------------------
4. User resources
- - Online Payee Database X
- - Business Calculators X
- - Text Messaging X
- - Categories & Journal Entries X
- -------------------------------------------------------------------------------------------------------------------
5. Balance Reporting
- - View customer account information for up to two years X
- -------------------------------------------------------------------------------------------------------------------
6. Multi-User permissions
- - SuperUser sets up and controls subordinate members' functional access X
- - Secure log-in
- - Create and change customer password information X
- - Control Account access and disbursement levels X
X
- -------------------------------------------------------------------------------------------------------------------
7. Business application integration
- - Microsoft Money, Quicken X
- - Peachtree, Quick Books, Comma Delimited X
- -------------------------------------------------------------------------------------------------------------------
8. Online Help X
- -------------------------------------------------------------------------------------------------------------------
9. Virtual Status Requests - EFTPS (Electronic Federal Tax Payments), Stop
Payments, Wire Transfers
- Immediate and Future transactions (where applicable) X
- Recurring transactions X
- Pending Transactions X
- View Historical Transfers X
- -------------------------------------------------------------------------------------------------------------------
10. Additional Functions
- - Cash Concentration X
- - Controlled Disbursements X
- - Cash Flow Manager / Daily Transaction Journal X
- - ACH version of EFTPS X
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 11
Exhibit 1-A
Software Applications - nBusiness
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
CURRENT FUTURE
FUNCTION FUNCTION
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
13. Bank Administration Site - nBusiness Functions
- Set / Reset challenge code / Password for SuperUser X
- Flag accounts as Cash Management X
- Audit Management
- Receive / respond to time-sensitive Virtual Status X
Requests (VSRs): Stop Pay, Wire Transfers, EFTPS
- Detailed Internet Branch Billing X
- Billing System for nBusiness(SM) Customers using
ACH formatted file X
- nReach(SM) - Data Mining and Marketing module X
- Database Query Capability X
- Promotional e-mails to selected nBusiness(SM) X
Customers
- Internet Branch Reporting X
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 12
Exhibit 2-A
nBusiness Software Fees
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
IMPLEMENTATION FEE (INCLUDES NBRANCH) N/A
- ---------------------------------------------------------------------------
<S> <C>
MONTHLY MAINTENANCE FEE $[++++]
PER CUSTOMER FEES
Customer Monthly Fee $[++++]
New Customer Setup - One Time $[++++]
- ---------------------------------------------------------------------------
TRANSACTION FEES
New Product Application
ACH Draft $[++++]
ACH Disbursement $[++++]
Direct Deposit $[++++]
Book Transfer $[++++]
Wire Transfer $[++++]
Stop Pay $[++++]
EFTPS - same day request $[++++]
EFTPS - pass through ACH $[++++]
Controlled Disbursement (per day) $[++++]
Cash Concentration $[++++]
- ---------------------------------------------------------------------------
BILL PAYMENT
Monthly Fee/Account $[++++]
Per Payment (Internet or Phone) $[++++]
Customer Setup included
Canceled Check Copy $[++++]
NSF Fee $[++++]
Stop Pay Fee $[++++]
Additional User Kits $[++++]
Telephone Bill Payment Setup Fee (One Time) $[++++]
Telephone Bill Payment Monthly Maint Fee $[++++]
Telephone Bill Payment Communications Quote
- ---------------------------------------------------------------------------
CHECK IMAGING
DSI Setup Fee Quote
Greenway Setup Fee Quote
Per Check Image Fee Quote
Check Imaging Communications Charges Quote
- ---------------------------------------------------------------------------
OPTIONS
nReach Data Mining Reports (Per Report) $[++++]
nForm Multimedia Presentation (10 Frames) $[++++]
Site Map Construction $[++++]
Management Reporting (Per Month) $[++++]
Internet TV Site Quote
- ---------------------------------------------------------------------------
</TABLE>
<PAGE> 13
NBANK 3.0
Enhancement Agreement
<TABLE>
<CAPTION>
- ----------------------- --------------------------- --------------------------- --------------------------------------
DESCRIPTION MONTHLY COMMITMENT MONTHLY COST CURRENT EXTENDED COMMITMENT
<S> <C> <C> <C>
12/15/96 - 12/31/9 1 $ [++++] $ [++++]
1/1/97 - 3/31/97 3 [++++] [++++]
TOTAL $ [++++]
- ----------------------- --------------------------- --------------------------- --------------------------------------
</TABLE>
First Commerce Bank agrees to pay the following fees for the duration shown in
the monthly commitment column. nFront(R) will provide the following services for
payment of these fees(1):
- Set up nBank office
- ISP
- Recruit new employees
- Happy New Year site
- New Product Suite
- Bill Payment
- FAQ
- Site Map
- Quicken export
- Games/Quiz/Giveaways
- Virtual Vault
- Web TV
- Network computers
- Enhance register program
- Scheduled transfers
- Enhance pending register
The completion of these projects is based on a full time effort by nFront and
will also involve effort from First Commerce Bank. nFront will deliver a
schedule of milestones to be completed by First Commerce Bank by January 6,
1996.
Any additional 3rd party costs necessary to complete these projects will be
presented to First Commerce Bank for approval. First Commerce Bank agrees to pay
nFront these items at the time of order.
- --------
(1) These projects are detailed in the 1997 build plan project schedule. Due to
the fact that these projects are estimates, First Commerce Bank and nFront
agrees that there can be differences in the estimated hours. If the difference
is more or less than 20% for any of the projects, nFront will prepare a formal
document stating the reasons and will requests FCB approval or to continue with
the specific task.
<PAGE> 14
nFront agrees to participate as a consultants and technical advisor for First
Commerce Bank at all times. If a specific project outside of the first quarter
projects begins to hamper the development of the existing project schedule,
nFront will discuss the projects with First Commerce Bank and jointly set the
priorities of the projects.
Signatures:
/s/ Charles W. Blair, Jr. /s/ Tripp Rackley
- ------------------------------ ---------------------------
Charles W. Blair, Jr. Tripp Rackley
First Commerce Bank nFront
President President
<PAGE> 15
LICENSE AND MAINTENANCE AGREEMENT
BETWEEN
NFRONT, INC.
("NFRONT")
A GEORGIA CORPORATION
HAVING ITS PRINCIPAL PLACE OF BUSINESS AT:
215 CAMBRIDGE DRIVE
ATHENS, GEORGIA 30606
AND
FIRST COMMERCE BANK
("CUSTOMER")
HAVING ITS PRINCIPAL PLACE OF BUSINESS AT:
1731 N. ELM STREET
COMMERCE, GA. 30529
<PAGE> 16
1. AGREEMENT
This agreement ("Agreement") provides for the grant of a non-exclusive
license of Software ("Software") and the provision of Software
maintenance services by nFront to Customer.
2. INITIAL TERM
The initial term (the "Initial Term") of this Agreement shall begin on
July 16, 1996 (the *Effective Date), and shall remain in effect,
subject to the renewal provisions contained within ss.3 hereof, and
subject to earlier termination as provided for in ss.13 or ss.15
hereof, for a period of five (5) years following the Effective Date.
3. AUTOMATIC RENEWAL AND SUBSEQUENT TERM
Upon expiration of the Initial Term, this Agreement shall be
automatically extended for an indeterminate number of successive five
(5) year periods (each a "Subsequent Term"), unless Customer notifies
nFront of its election not to renew at least ninety (90) days prior to
the end of the Initial Term or any Subsequent Term.
4. SOFTWARE RIGHTS
This Agreement grants Customer non-exclusive license rights to nFront
Software. For all purposes of this Agreement, the term "Software" shall
mean all those software products described in the Software Applications
attached hereto as Exhibit 1 ("Software Applications"). Customer may,
by addendum to this Agreement agreed to in writing by nFront, or by
separate written agreement with nFront, license other software products
provided by nFront. Unless Customer otherwise notifies nFront, all
subsequently licensed and installed Software shall be automatically
added to this Agreement.
5. FEES, INSTALLATION CHARGES AND TAXES
(a) Fees
Customer has been granted hereunder a non-exclusive license
for the Software for the duration of this Agreement. The
initial and annual Software fees for this license are set
forth in the Customer Software Fees attached hereto as Exhibit
2 ("Software Fees").
(b) Installation and Special Charges
Customer shall pay for Software installation, modification,
and non-covered maintenance of Software at nFront's then
prevailing professional service fees. A list of nFront's
current prevailing professional service fees is attached
hereto as Exhibit 3 ("Professional Service Fees"). Expenses
for travel and all related expenses for Software installation,
modification, and covered and non-covered maintenance shall be
reimbursed by Customer to nFront upon invoice.
(c) Taxes
Customer is additionally responsible for all applicable
federal, state, or local taxes (exclusive of income taxes
properly payable by nFront) and other governmental fees or
assessments incurred as a result of this License, use of the
Software by Customer, and services provided by nFront
hereunder.
6. PAYMENT
(a) Payment of fees and charges hereunder will be due as follows:
(1) One hundred percent (100%) of the initial Software
Fees is due at the time Customer signs this
Agreement.
(2) Fifty percent (50%) of the estimated professional
service charges and hardware costs of installation
are due at the time Customer signs this Agreement.
All professional services are due on an as completed
basis.
2
<PAGE> 17
(3) Annual Software Fees for the Software begin to accrue
upon the Software Acceptance Date and are due on an
annual basis in advance.
(4) Non-covered maintenance and travel and related
charges are due upon invoice by nFront.
(b) In the event payment is not made as specified herein, or
within thirty (30) days following invoice by nFront, as
applicable, Customer shall pay interest at the rate of one and
one half percent (1.5%) per month (or the highest applicable
legal rate, whichever is lower) on the outstanding overdue
balance for each month or part thereof that such sum is
overdue. Customer agrees to pay all costs of collection of
overdue amounts, including reasonable attorneys' fees and
court costs.
7. SOFTWARE LICENSE
(a) nFront and/or its suppliers have designed, developed, and made
available proprietary computer Software containing trade
secrets of nFront and/or its suppliers. Use of this Software
is strictly governed by this Agreement. No title or ownership
in the Software is transferred to Customer. Customer shall not
copy or in any way duplicate the Software, except for
reasonable backup procedures approved by nFront. The Software
may not be assigned, sublicensed, or otherwise transferred or
used by Customer for the benefit of a third party.
(b) Customer shall hold the Software, together with all materials
and knowledge related thereto obtained by Customer, in
confidence, and shall use reasonable controls to protect the
confidential nature of the Software and such related materials
and knowledge.
(c) Customer agrees to execute any documents reasonably requested
by nFront with respect to the Software of any third party
licensed or sublicensed by nFront to Customer hereunder.
8. BASIC MAINTENANCE PERIOD
The Basic Maintenance Period commences on Monday and continues through
Friday of each week (8:00 a.m. to 5:00 p.m. Customer Local Time),
except on any day on which banking institutions in Commerce, Georgia,
are authorized by law or executive order to close ("Holidays").
9. EXTENDED MAINTENANCE PERIOD
The Extended Maintenance Period (all Customer local times):
<TABLE>
<CAPTION>
Initial all that apply: Surcharge
<S> <C> <C> <C>
_____ Monday through Friday* 8:00 a.m. to 8:00 p.m. 4%
_____ Monday through Friday* 8:00 a.m. to 12:00 midnight 8%
_____ Monday through Friday* 24 hours starting 8:00 a.m. 16%
_____ Saturday* 8:00 a.m. to 5:00 p.m. 9%
_____ Saturday* 8:00 a.m. to 8:00 p.m. 10%
_____ Saturday* 8:00 a.m. to 12:00 midnight 12%
_____ Saturday* 24 hours starting 8:00 a.m. 14%
_____ Sunday or Holiday 8:00 a.m. to 5:00 p.m. 16%
_____ Sunday or Holiday 8:00 a.m. to 8:00 p.m. 19%
_____ Sunday or Holiday 8:00 a.m. to 12:00 p.m. 22%
_____ Sunday or Holiday 24 hours starting 8:00 a.m. 27%
*Except Holidays
</TABLE>
3
<PAGE> 18
10. COVERED MAINTENANCE
(a) General
nFront will provide the maintenance required to assure that
the Software operates according to nFront's standard
specifications. Such maintenance will be performed during the
Basic Maintenance Period, and, if ss.9 of this Agreement
applies, during the time periods specified therein.
(b) Software Maintenance
Software Maintenance includes:
(I) New software releases
(ii) Application updates
(iii) Mandatory federal regulatory compliance
(iv) Malfunction remedies ("Bug Fixes")
(v) Documentation maintenance
(vi) Remote diagnostics
(vii) Service desk and dispatch
(viii) Non-chargeable user error remedies
It is the policy of nFront to provide improvements to the
Software and to assist the Customer in its duty to comply with
mandatory federal governmental regulations applicable to the
data utilized in the Software. nFront reserves the right to
discontinue support of previous versions of Software one
hundred eighty (180) days after the availability of a new
release. Failure of the Customer to install Software releases
or any other correction or improvement provided by nFront
shall relieve nFront of responsibility for the improper
operation or any malfunction of the Software as modified by
any subsequent correction or improvement, but in no such event
shall any fees paid (or to be paid) by Customer be returned to
Customer, and nFront shall be released thereafter from its
obligation to support the Software as provided herein.
(c) Non-Covered Maintenance
Covered maintenance does not include the following: (i)
maintenance outside the agreed Basic Maintenance Period unless
and to the extent indicated in ss.9 of this agreement; (ii)
maintenance required by: (a) operator error or improper
operation of the Software, (b) modifications or additions to
Software performed by other than nFront personnel or by their
designees, (c) modifications or additions by Customer to
equipment such that the Software requires modifications in
order to operate according to nFront documentation, (d) damage
to Software by Customer's employees or third parties, (e)
causes beyond the reasonable control of nFront including, but
not limited to, acts of God or public enemies, labor disputes,
supplier or materials shortages, embargoes, rationing, acts of
government authorities, utility or communication failures,
epidemics, riots, strikes, or war, or (f) electrical
disturbances, outages or brownouts; (iii) nFront's requested
involvement in determining or solving a problem on Software
not covered by this Agreement; (iv) Software modification or
customization requested by Customer.
11. SOFTWARE ACCEPTANCE DATE
The Software Acceptance Date shall be the date the Software is first
used for daily operations by Customer.
12. DISCLAIMER
EXCEPT TO THE EXTENT OTHERWISE SPECIFICALLY STATED IN THIS AGREEMENT,
NFRONT DISCLAIMS ALL WARRANTIES ON THE SOFTWARE AND SERVICES FURNISHED
HEREUNDER, INCLUDING, WITHOUT LIMITATION, ALL IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL
NFRONT'S LIABILITY UNDER THIS AGREEMENT EXCEED THE AMOUNT PAID TO
NFRONT UNDER THIS AGREEMENT DURING ANY PERIOD OF TWELVE (12)
CONSECUTIVE MONTHS. NFRONT SHALL NOT BE LIABLE IN ANY EVENT FOR DAMAGES
RESULTING FROM LOSS OF DATA, LOSS OF PROFITS, USE OF PRODUCT, OR FOR
ANY INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES, EVEN IF ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES. THIS LIMITATION OF NFRONT'S LIABILITY
SHALL APPLY REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT OR
TORT, INCLUDING NEGLIGENCE. ANY ACTION AGAINST NFRONT MUST BE BROUGHT
WITHIN ONE (1) YEAR AFTER THE CAUSE OF ACTION ACCRUES.
4
<PAGE> 19
13. TERMINATION
nFront may, at its option, terminate this Agreement upon notice to
Customer if Customer fails to comply with any of the terms and
conditions hereof, including, without limitation, payment terms,
applicable to Customer. Upon notice of termination of this Agreement
under this ss.13, or upon any other termination or expiration of this
Agreement, Customer agrees to discontinue all use of the Software and
return to nFront all copies of the Software and related documentation
in Customer's control or possession, together with a written
certification that it has done so. No termination of this Agreement by
nFront shall constitute a waiver of any rights available to nFront as a
result of any breach of this Agreement by Customer.
14. EXCUSABLE DELAYS
nFront shall not be liable for delays in delivery, failure to deliver,
or otherwise to perform any obligation hereunder when such delay or
failure arises beyond the reasonable control and without the fault or
negligence of nFront, including, without limitation, such causes as
acts of God or public enemies, labor disputes, supplier or material
shortages, embargoes, rationing, acts of local, state, or national
governments or public agencies, utility or communication failures,
fire, flood, epidemics, riots, strikes, or war. The time for
performance of any obligation delayed by such events will be postponed
for a period equal to the delay, unless Customer and nFront agree to
the contrary in writing.
15. INTELLECTUAL PROPERTY RIGHTS
nFront shall indemnify Customer from any and all damages and costs
finally awarded for infringement of any valid United States patent,
trademark, or copyright in any suit based upon the license by nFront or
the proper use by Customer of the Software hereunder, where nFront is
the infringer with respect thereto, and from reasonable expenses
incurred in defense of such suit if nFront does not undertake the
defense thereof, provided that nFront is promptly notified of any such
suit, and, at its option, is given full and exclusive authority for the
control and defense of the same and all negotiations for its settlement
or compromise, and, further provided that this indemnity shall not
extend to infringement resulting from: (i) nFront's compliance with
Customer's designs, processes, or formulas; (ii) a combination with or
an addition to the Software of any software not supplied by nFront
hereunder; or, (iii) a modification of the Software by any person other
than nFront. If any claim has occurred, or in nFront's opinion is
likely to occur, Customer shall permit nFront, at nFront's option and
expense, either to procure for Customer the right to continue using the
Software or to replace or modify the same so that it becomes
non-infringing. If neither of the foregoing alternatives is acceptable
to nFront, Customer shall return the Software on written request by
nFront and this Agreement shall terminate with no continuing obligation
or liability of nFront to Customer. THE FOREGOING STATES THE SOLE AND
EXCLUSIVE LIABILITY OF NFRONT FOR INFRINGEMENT AND IS IN LIEU OF ALL
WARRANTIES, EXPRESSED OR IMPLIED, IN REGARD THERETO.
16. NOTICES
Whenever any party hereto desires or is required to give any notice,
demand, consent, approval, satisfaction, or request with respect to
this Agreement, each such communication shall be in writing and shall
be effective only if it is delivered by personal service (which shall
include delivery by delivery service, over-night delivery service,
telecopy, or telefax) or mailed, by United States certified mail,
postage prepaid, and addressed as follows:
If to nFront: nFront
215 Cambridge Drive
Athens, Georgia 30606
Attn.: President
Facsimile: (706) 613-9201
If to Customer: Customer's Address as specified on the
signature page hereof
Facsimile: (706) 335-8249
5
<PAGE> 20
Such communications, when personally delivered, shall be effective upon
receipt, but, if sent by certified mail in the manner set forth above,
shall be effective three (3) business days following deposit in the
United States mail. Any party may change its address for such
communications by giving notice thereof to the other party in
accordance with the requirements of this section.
17. MISCELLANEOUS
Except as otherwise provided herein, this Agreement, including any
attachments hereto, constitutes the entire agreement between Customer
and nFront, and there are no other agreements, representations, or
warranties, expressed or implied, written or oral. The validity,
enforcement, interpretation, and construction of this Agreement shall
be determined in accordance with the laws of the state of Georgia. Each
party consents to the exclusive personal jurisdiction and venue of the
state and federal courts with jurisdiction in Fulton County, Georgia
for a resolution of all disputes arising hereunder. If any provision of
this Agreement shall, for any reason, be held unenforceable in any
respect, such unenforceability shall not affect any other provision
hereof, and this Agreement shall be construed to limit the application
of such unenforceable provision to the minimum extent necessary to
render the same enforceable, and, if such a limiting construction is
not possible, such unenforceable provision shall be deleted as if never
contained herein. Special provisions to this Agreement, if any, shall
be attached as exhibits or addenda hereto, and shall be binding only
when executed or initialed by authorized representatives of Customer
and nFront. Any such special provisions shall control any conflict with
the provisions hereof Customer may not assign its rights hereunder or
delegate its duties hereunder, whether voluntarily, involuntarily, by
operation of law or otherwise, without the prior written consent of
nFront, which consent may be withheld in the sole discretion of nFront.
The headings and sub-headings used in this Agreement are for
convenience only and do not limit or amplify the terms hereof. The
authorization, following the execution of this Agreement, of additional
workstations or items of software shall be deemed an amendment to this
Agreement binding upon the parties during the entire term hereof.
18. SPECIAL PROVISIONS
nFront will pay Customer 10% of all Balance Inquiry and Funds Transfer
Sales until Customer has received $96,000.00
IN WITNESS WHEREOF, the parties have executed this Agreement as of the dates
indicated below. This Agreement shall be effective, following execution by
Customer, upon acceptance by nFront at its principal place of business indicated
herein.
ACCEPTED:
Customer: nFront:
/s/ Charles W. Blair, Jr. /s/ Tripp Rackley
- -------------------------------- --------------------------------
Signature Signature
Charles W. Blair, Jr. Tripp Rackley
- -------------------------------- --------------------------------
Charles W. Blair, Jr. Tripp Rackley
- -------------------------------- --------------------------------
President President
7/19/96 7/19/96
- -------------------------------- --------------------------------
Date Date
BILLING ADDRESS:
First Commerce Bank
1731 N. Elm Street
Commerce, Georgia 30529
6
<PAGE> 21
EXHIBIT 1
SOFTWARE APPLICATIONS
Server Applications
- WebBank(TM) Membership
- WebBank(TM) Online Software
- WebBank(TM) Balance Inquiry Software Module
- WebBank(TM) Funds Transfer Module
<PAGE> 22
EXHIBIT 2
SOFTWARE FEES
COST SUMMARY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
PROJECT DESCRIPTION COST
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
SECURE TRANSACTION
- ----------------------------------------------------------------------------------------------
NetBank 2.0 Transaction Software & Hardware $[++++]
- ----------------------------------------------------------------------------------------------
NETBANK SITE IMPROVEMENTS
- ----------------------------------------------------------------------------------------------
ATM Interface Web Site $[++++]
- ----------------------------------------------------------------------------------------------
Customer/Guestbook database $[++++]
- ----------------------------------------------------------------------------------------------
Customer Training Session $ -
- ----------------------------------------------------------------------------------------------
</TABLE>
ANNUAL SOFTWARE FEE COST SUMMARY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
DESCRIPTION COST QUANTITY EXTENDED COST
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Annual Software Fees $ [+++++++] 1 $[+++++++]
</TABLE>
<PAGE> 23
EXHIBIT 3
PROFESSIONAL SERVICES
<TABLE>
<CAPTION>
HOURLY BLOCKS COST PER HOUR
- ------------- -------------
<S> <C>
0 - 100 $[++++]
101 - 200 $[++++]
201 - 300 $[++++]
</TABLE>
<PAGE> 24
NREACH CONTRACT ADDENDUM
By accessing the bank's administrative site, nReach options will be made
available. These features will provide the bank the capability to communicate
with their web bank customers using a web browser. The initial release of nReach
enables bank management to query their on-line nHome customers using the bank's
Internet branch and communicate with them using email capabilities. This
provides the bank a means to send marketing or informational e-mails to the
selected customers. The bank can use standard queries as well as create
bank-defined queries. The queries will generate lists of customers meeting the
criteria defined in the selected query. An e-mail message can then be assigned
and sent to the selected customer list.
NREACH CURRENT CHARGES
Institution Set Up Fee: $[++++] - waived
License Fee $[++++]
Service Fee: $[++++] - included with nHome
Annual Maintenance $[++++]
nHome Per `Run Query' Fee: $[++++] - included in License Fee/Annual Maintenance
nFront, Inc.
By: /s/ Tripp Rackley
------------------------------------------
Its: Chairman / CEO
------------------------------------------
Date: 12/18/98
------------------------------------------
Bank Name: First Commerce Bank
------------------------------------------
By: /s/ L.R. Cole
------------------------------------------
Its: EVP
------------------------------------------
Date: 12/8/98
------------------------------------------
<PAGE> 1
CONFIDENTIAL TREATMENT* EXHIBIT 10.12
* CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO
THE RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS
AND "+" HAVE BEEN USED TO IDENTIFY INFORMATION WHICH IS THE SUBJECT OF A
CONFIDENTIAL TREATMENT REQUEST.
NFRONT, INC. AND
MONEYLINE EXPRESS, INC.
AGREEMENT
HOME BANKING BILL PAYMENT PROCESSING
AND FUNDS TRANSFER SERVICES
1. Parties. This Agreement is between nFront, Inc., ("Company"),
and Moneyline Express, Inc. ("Moneyline").
2. Effective Date. This Agreement is effective immediately upon
signing.
3. Purpose. Company provides services to financial institutions
("Financial Institutions") that are made available to account holders or
customers of such Financial Institutions ("Customers") to pay bills ("Bill
Payment Services") and/or receive other banking services through telephone or
home computer activated instructions (collectively, "Home Banking"). Moneyline
provides to Company as a part of the Bill Payment Services, back-room processing
of Customer activated payment instructions, funds transfer services for payment
to payees ("Vendors") listed in such instructions, and certain Customer
information services ( collectively, "Moneyline Services"). Company may provide
Moneyline with a list of Financial Institutions under contract with Company for
Bill Payment Services, as well as additions or deletions to such list as they
occur.
4. Contractual Relationship. This Agreement is intended and shall
be construed solely as an independent contract of Moneyline to Company to
facilitate its offering of Moneyline Services in the offering by Company of Bill
Payment Services. This Agreement is not intended for the benefit of Financial
Institutions, Customers or any other third persons, and shall not be deemed a
joint venture, partnership or similar joint undertaking.
Company will offer, on a nonexclusive basis, Moneyline Services in
connection with its offering of Bill Payment Services to Financial Institutions
provided that such Financial Institutions are depository institutions insured,
or eligible for insurance, by the Federal Deposit Insurance Corporation, or the
National Credit Union Administration.
This Agreement is not exclusive. Neither Party is restricted from
entering into similar agreements with third persons.
5. Services. The Moneyline Services provided by Moneyline for
Company, and the services provided by Company as a part of Bill Payment Services
("Company Services") are described in Exhibit A (collectively "Services").
6. Credit Risk.
A. Consumer DDA Accounts: Between the parties, Moneyline bears
the credit risk associated with potential NSF/return items for
all consumer DDA accounts.
<PAGE> 2
B. Business DDA Accounts: Between the parties, Moneyline bears
the credit risk associated with potential NSF/return items for
business DDA accounts only when all of the following
conditions are met:
(i) Moneyline's total exposure for the entire duration of
this Agreement is limited to a maximum loss of
$5,000.00 per business account. Between the parties
to this Agreement, Company bears any excess
liability.
(ii) The business is in good financial condition and has
been a customer of the Financial Institution for at
least one year. For businesses open less than one
year, Moneyline requires the opportunity to review
and approve or disapprove the financial condition of
the business. Costs associated with this credit
review process will be paid by the participating
Financial Institution.
C. Each payment is capped for both business and consumer bill
payments. The cap on the effective date of this Agreement is
$9,999.00. Moneyline may change the cap from time to time with
the prior consent of Company and prior notice to Financial
Institution.
D. Risk Reduction Measures: Moneyline may at its option implement
reasonable features to reduce credit risks. These may include
but are not limited to pre-authorized drafts for business
customers, verifying funds through an ATM network, and
separating debits from credits so that payments are not sent
until after good funds are received. Moneyline will advise
Company in advance of the risk-reduction features Moneyline
intends to implement.
7. Performance Standards. The Parties agree that they will be
held to a standard of due care in accordance with recognized industry practices
of the highest standards and will use all best efforts to meet such performance
standards necessary to provide the Bill Payment Services and Moneyline Services,
respectively. Failure by any Party, or the Parties, to meet such standards,
shall obligate such Party(s) to take corrective action as provided in Paragraph
14. Payments delivered over an automated clearing house system ("ACH"), or other
payment networks, shall be governed by and subject to the rules, regulations and
performance standards of such networks.
8. Fees. Company agrees to pay Moneyline those fees provided in
Exhibit B ("Fees").
9. Ownership. Each Party shall have and retain sole ownership of
their respective proprietary source codes and software packages used as a part
of the Services described in Exhibit A, including any enhancements or
improvements thereon. Company shall have and retain sole ownership of any
interface developed by it between the respective source codes and software
packages, including any enhances or improvements thereon; Moneyline shall have
and retain sole ownership of any source codes provided by it in connection with
said interface. Moneyline shall also retain sole ownership of any Vendor list
supplied by it as a part of the Services and the Company shall retain sole
ownership of any list of Financial Institutions or Customers provided to
Moneyline. No rights of ownership or use by one Party or by third persons, of
the proprietary source code and software of the other, or of the Company
interface by Moneyline or third persons, or of any internal source data or
Vendor list of Moneyline by Company or third persons, or Financial Institution
or Customer lists of the Company by Moneyline, shall arise by implication or
otherwise as a result of this Agreement except with the express written consent
or license by the owner. Any and all rights by one Party to use and/or possess
proprietary property of the other Party shall be extinguished and returned to
the owner immediately upon termination of this Agreement. Each Party grants to
the other Party a limited, nonexclusive and nontransferable license to use the
other Party's software and lists only for the purposes of this Agreement only
for so long as this Agreement is in effect. The license from Moneyline to
Company is more specifically stated in Exhibit C, "Software
-2-
<PAGE> 3
License Agreement." To the extent that the terms and conditions of such license
conflict with the terms of this Agreement, the terms of this Agreement shall
control.
10. Confidentiality. The Mutual Confidentiality Agreement between
the Parties is incorporated and made part of this Agreement as Exhibit D. The
Mutual Confidentiality Agreement is in effect while this Agreement is in effect.
11. Security. Moneyline shall take all responsible and customary
precautions to safeguard the security of data transmitted by it whether over
communication lines, via the postal system or via ACH or other payment networks;
provided, however, Moneyline shall not be responsible for the loss,
confidentiality or security of data or other payment information while in
transmission over communication lines, in the postal system, or in an ACH or
other payment networks over which payments are delivered.
12. Term.
A. The initial term of this Agreement is three (3) years from the
Effective Date. The Agreement shall be automatically renewed
for successive one (1) year terms unless a Party shall give
the other Party written notice of its intent to terminate at
least three (3) months prior to the expiration of the initial
or a renewal term.
B. Notwithstanding paragraph A of this Section 12 of any other
provision of this Agreement, Company may terminate this
Agreement after 60 days if it finds that the parties' systems
are not compatible. In that case, Company must give written
notice to Moneyline within ten (10) business days after the
sixtieth (60th) day of the first Customer going live. Live is
defined as the first day the Moneyline Services system is in
use by a Customer.
13. Cooperation. The Parties agree to cooperate in good faith and
use their efforts to sell the products of both Parties for their mutual
advantage. The Parties will meet periodically to discuss service performance,
service improvement, or any other issues related to the provision of Bill
Payment Services. Such meetings shall be held at least annually.
14. Errors. No Party shall be liable for payment errors, payment
delays, or other performance failures caused solely by software, computer, or
other system defects under the control and responsibility of the other Party.
Action shall be taken by the responsible Party to correct such system defects
within sixty (60) days during the test period or within thirty (30) days
thereafter after knowledge by that Party, or notice from the other Party, of
such defects. In the event that the cause of such defects is partly attributable
to both Parties, corrective action shall be the joint responsibility of both
Parties and the expense of any such corrective action shall be shared.
15. Limitations of Liability.
A. Except for credit risks governed by Section 6 hereof or
indemnification obligations pursuant to Section 17 hereof
which shall not be so limited, liability of either Party as
the result of any act or omission related to this Agreement
shall not exceed six (6) times the average amount of monthly
fees paid by Company to Moneyline (calculated based on the
twelve-month period immediately before the act or omission
that gives rise to the claim of liability). This limitation of
liability does not apply to any loss covered by insurance, in
which case liability is limited to the amount of the insurance
claim paid or payable.
B. Force Majeure. A Party will not be liable for a failure to
perform, or any loss occasioned thereby, arising out of an
event or condition beyond the reasonable control of such Party
and
-3-
<PAGE> 4
having an adverse affect on the performance by such Party
under this Agreement. Such events shall include, but not be
limited to, communications breakdown or interruption, acts of
God, labor disputes, interruption of service by ACH or other
payment networks, and nonperformance by the other Party under
this Agreement. Loss or nonperformance caused by a breakdown
or malfunction of computer equipment under the control of a
Party are not excused, disclaimed or limited under this
Subparagraph B.
C. The Parties will not be liable for punitive, consequential,
indirect, remote or special damages.
D. Moneyline will pay late fees incurred by Customers because of
late payments handled by Moneyline provided the Customer
allowed 10 business days for a payment by check and 4 business
days for an electronic payment.
16. Dispute Resolution.
A. Except as otherwise specifically provided herein, if a dispute
or disagreement arises between the Parties with respect to the
interpretation of any provision of this Agreement, or the
performance by either Party of its obligations under this
Agreement, then one or both of the Parties shall submit such
dispute, disagreement or default in writing to the other Party
specifying the nature of such dispute, disagreement or
default. The Parties shall use their best efforts in good
faith to attempt to resolve such dispute, disagreement or
default, or to negotiate an appropriate modification or
amendment to this Agreement.
B. If the Parties are unable to resolve the foregoing dispute,
disagreement or default on a mutual basis within ten (10)
business days from the date of submission, then the Parties
shall promptly designate in writing one (1) representative
from each of the Parties, to use their best effort in good
faith to attempt to resolve such dispute, disagreement or
default. The foregoing representatives shall meet as often as
they reasonably deem necessary in order to gather and exchange
all applicable information with respect to such dispute,
disagreements or default. Except as provided in Subparagraph 4
of Paragraph 18, neither Party shall be permitted to exercise
any remedies available to such Party under this Agreement
until the earlier of (i) the date that both of the designated
representatives conclude in good faith that an amicable
resolution of the dispute, disagreement or default through
continued negotiation does not appear likely, or (ii) thirty
(30) days following the date that representatives are first
designated in writing by the respective parties.
This Provision will not be construed to prevent a Party from
instituting, and a Party is hereby authorized to institute,
formal proceedings earlier to avoid the expiration of any
applicable limitation period, or to preserve a superior
position with respect to other creditors, or to preserve those
rights under Paragraph 10 regarding confidentiality, or where
a Party in good faith otherwise determines that a breach of
this Agreement by the other Party may cause irreparable harm
from such breach and relief in the form of a restraining
order, injunctive order or other equitable remedy is the only
adequate remedy.
C. The Parties hereby stipulate and agree that if they are unable
to resolve any controversy subject to this Paragraph 16, and
except as otherwise provided in Subparagraph 16.B above, they
will submit the controversy to binding arbitration in Chicago,
Illinois. Such arbitration shall be in accordance with the
Federal Arbitration Act, 9 U.S.C., Section 1 et. seq. and in
accordance with the Commercial Arbitration Rules of the
American Arbitration Association. The parties hereby agree
that reimbursement of the costs of such arbitration, including
attorney's fees, and the costs incurred in connection with
efforts to resolve such dispute
-4-
<PAGE> 5
pursuant to subparagraph 16.B, may be awarded by the
arbitrator(s) based on the arbitrator(s) determination of the
relative responsibility of the parties for such dispute. The
parties hereby further agree to permit the joinder of any
related claim brought by a Financial Institution or Customer
against either the Company or Moneyline so that any and all
such related disputes may be resolved in the same proceeding,
provided that either Moneyline or the Company shall desire
such joinder.
17. Warranties - Cross Indemnification. The Parties hereby warrant
and represent to each other that they have all rights necessary to perform their
respective obligations under this Agreement and that the respective Moneyline
Services and Bill Payment Services to be provided hereunder shall be conducted
in a professional, workmanlike manner to meet the performance standards provided
in Paragraph 7. EXCEPT AS SPECIFICALLY PROVIDED IN THIS PARAGRAPH, THE PARTIES
MAKE NO WARRANTIES EITHER EXPRESS OR IMPLIED INCLUDING WITHOUT LIMITATION, THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
The Parties shall each indemnify, defend and hold harmless the other
Party from and against any and all claims by third persons (including claims of
Financial Institutions or Customers), together with all damages, demands,
liabilities, costs and expenses, including reasonable attorney's fees and
expenses, incurred by the indemnitee to the extent such claims proximately
result from and are caused by any act or omission of the indemnitor, its
officers, employees, agents or representatives performing on behalf of the
indemnitor hereunder, or arise out of performance (or failure to perform) the
respective Services to be provided by the indemnitor hereunder.
18. Termination. A Party may terminate this Agreement by giving
the other Party three (3) months written notice of termination prior to a term
expiration date as provided in Paragraph 12.
A Party may also at its option terminate this Agreement prior to a term
expiration date upon occurrence of any of the following events ("Events of
Default"):
1. If either Party fails to correct errors or defects under the
conditions and within the period provided in Paragraph 14.
2. If Company fails to pay to Moneyline the fees as required in
Exhibit B ("Fees") and fails to make such payments upon
receipt by Company of Moneyline invoices sent under such
Schedule.
3. Any other material breach by a Party of its obligations under
this Agreement and said Party fails to cure said breach within
one hundred twenty (120) days after written notice from the
other Party; provided, however, that the breaching Party
starts work on the cure promptly and pursues it diligently.
4. Immediately, upon written notice of a Party, when the other
Party becomes insolvent, makes an assignment for the benefit
of creditors, admits in writing an inability to pay its debts
when they become due, or, without notice, files a petition for
bankruptcy or reorganization under Federal or State bankruptcy
laws, or is subject to a proceeding commenced in bankruptcy
which is not vacated or stayed within thirty (30) days.
19. Rights after Termination. Upon termination, all rights and
obligations of the Parties hereunder for the provision of Moneyline Services and
Bill Payment Services shall cease and be of no further effect whatsoever,
provided that any payments by Customers activated prior to termination date but
not completed by termination date shall be carried out in accordance with this
Agreement. Company
-5-
<PAGE> 6
shall be liable to, and shall reimburse Moneyline, for any and all payments made
by Moneyline to Vendors arising out of Customer payment instructions activated
prior to termination date. The continued use or possession by a Party of
proprietary property or Confidential Information of the other Party shall cease
and be immediately returned to the other Party. The provisions of Paragraphs 9,
10, 15, 16, 17 and 19 shall survive termination of this Agreement.
20. Assignment/Guarantee. This Agreement shall be binding on the
Parties and their respective successors and assigns. Company shall not assign
its rights and obligations hereunder without the express written consent of
Moneyline, its successors or assigns. Moneyline, its successors and assigns,
shall not have the right to assign its rights and obligations hereunder, or any
part thereof, without the consent of Company.
21. Notices. Notices may be sent by registered or certified mail,
return receipt requested, or by facsimile transmission followed by overnight
delivery of the original copy addressed to:
Moneyline Express, Inc. nFront, Inc.
1550 Utica Avenue S. 1551 Jennings Mill Road, Suite 800A
Minneapolis, MN 55416 Bogart, GA 30622
Tel: 612/591-3000 Tel: 706/369-3779
Fax: 612/591-3860 Fax: 706/369-8611
Attn: Manager, Moneyline Express Attn: Mr. Tripp Rackley
Notices so addressed are effective when received and addresses in this Paragraph
21 may be changed by a Party by prior written notice to the other Party of the
new address and the effective date of such change.
22. General Provisions. This Agreement, together with Exhibits
hereto, constitutes the entire agreement between the Parties and may be amended
only in writing signed by both Parties. The failure of either Party to exercise
or enforce its rights hereunder shall not be deemed as a waiver of such right or
of the power to enforce such right. This Agreement may be executed in
counterparts, all of which taken together constitute one single agreement.
Paragraph headings are for reference and convenience only and are not a part of
this Agreement.
23. Governing Law. This Agreement shall be governed by the laws of
the State of Minnesota.
24. Software License. The Software License Agreement, Exhibit C,
is incorporated and made part of this Agreement.
The Parties have caused this Agreement to be signed and delivered as of
the effective date provided above.
NFRONT, INC. MONEYLINE EXPRESS, INC.
By: /s/ Tripp Rackley By: /s/ David R. Roy
----------------------------- --------------------
Name: Tripp Rackley Name: David R. Roy
Title: President Title: Vice President
Date: 7/23/97 Date: 7/25/97
-6-
<PAGE> 7
EXHIBIT A
SERVICES
MONEYLINE EXPRESS, INC. SERVICES
BILL PAYMENT BACK-END PROCESSING
1. Accurate Payment data, including Customer account number and payment
information, provided by Customers in files supplied Moneyline Express,
Inc. will be taken through a batch interface to Company each business
day during the late evening hours (Day 0). The payment transactions
will be processed the following day (Day 1) after the transaction was
initiated by the Customer. On Day 1, Moneyline Express will initiate
ACH debits and credits. Credits may be sent via check, electronic
transmissions, or ACH to vendor payees. All debits and credits are sent
on Day 1.
2. Funds Transfer in accordance with Customer payment instructions
activated in accordance with paragraph 1. Moneyline Express will supply
and transmit to our sponsoring financial institution payment
information for debit against Customer account. The initiation of this
transfer occurs on Day 1. The Customer account is debited on Day 2.
3. Moneyline Express will handle Customer inquiries regarding payments
made on behalf of Customer to Vendor payees. Customer Service is
available from 7 a.m. to 7 p.m. Monday through Friday and Saturday from
8 a.m. to 5 p.m. Central Standard Time.
4. Moneyline Express will provide support at no additional cost; however,
Customer will pay reasonable travel and lodging expenses associated
with installation and on-site support
5. From time to time Moneyline Express may make changes to the system.
Moneyline Express will notify Company in advance of any data changes.
COMPANY
PC HOME BANKING AND BILL PAYMENT FRONT-END SOFTWARE
1. Company will develop applications software required to operate Home
Banking services which interface to Moneyline Express back-end bill
payment processing software and other Home Banking services.
2. Support for Company Payment Transactions
Company will, on request by Moneyline Express, cooperate to remedy
Customer account inquiries related to the applications software
provided above.
-7-
<PAGE> 8
EXHIBIT B
FEES
nFront, Inc., agrees to pay fees to Moneyline Express at the following Schedule
of Charges:
SERVICE START UP FEES
Financial Institution Set Up Fee $[++++] per institution
USER FEES
1. Application Fee
$[++++] per
customer - one
time fee to set up
the end user. Fee
includes initial
user kit.
2. Monthly User Fee $[++++] flat fee per
customer per month plus:
Transaction fees per month:
$[++++] up to 250,000
$[++++] 250,001 to 500,000
$[++++] 500,001 to 750,000
$[++++] 750,001 to 1,000,000
$[++++] 1,000,000 and above
3. Distribution of Additional User Kits $[++++] per kit
4. Fee for a copy of a canceled check $[++++] per check
ASSUMPTIONS AND ADDITIONAL PRICING IS AS FOLLOWS:
1. Bill payment transaction pricing reflects blending of electronic and manual
payments to payees. End user can pay any payee, and the fee schedule reflects
an open payee list.
2. Moneyline would perform customer service support for payment transactions at
a cost of $[++++] per customer.
3. NSF fees will be charged at the rate of $[++++] per occurrence.
4. Stop payments will be charged at the rate of $[++++] per occurrence.
5. The license fee to use our touch-tone system is $[++++].
6. Other services will be negotiated separately.
Monthly Minimums
Month Value
1 - 36 $[++++]
Moneyline may increase fees once every 12 months by [++++] percent or by the
same percentage as any increase in the Consumer Price Index, whichever is less.
THIS INFORMATION IS PROPRIETARY AND CONFIDENTIAL AND IS COVERED UNDER THE
CONFIDENTIALITY AGREEMENT BETWEEN nFRONT, INC., AND MONEYLINE EXPRESS, INC.
-8-
<PAGE> 9
EXHIBIT C
SOFTWARE LICENSE AGREEMENT
1. PARTIES. This Software License Agreement is part of the foregoing
Agreement between Moneyline Express, Inc. ("Moneyline") and nFront,
Inc. ("Company").
2. SOFTWARE. "Moneyline Software" is defined as software that resides on
an NT server and accepts, stores and processes bill payment
transactions from Company access devices. Moneyline Software includes
voice software for telephone bill payments which will reside on Company
hardware.
3. PURPOSE. This License authorizes Company to use Moneyline Software at
Company's site on its hardware for the purpose of selling any of the
Moneyline Express, Inc. bill payment and home banking services to
Company's customers.
4. LICENSE. Moneyline grants to Company a non-exclusive license to use the
Moneyline Software as provided herein. The Software remains the sole
property of Moneyline.
5. CONDITIONS OF THE LICENSE. Without the prior written consent of
Moneyline, Company shall not do any of the following:
(1) Copy the Moneyline Software or manuals or other materials
containing information about the Software;
(2) Reverse compile Moneyline Software or permit any other person
to do so;
(3) Permit any third person to inspect the Moneyline Software,
manuals, or other materials containing information about the
Software;
(4) Transfer the Moneyline Software, manuals or other materials
containing any information about the Software to any third
person;
(5) Make any modifications, additions, or upgrades to the
Moneyline Software.
6. CONFIDENTIALITY. The Mutual Confidentiality Agreement between the
Parties is part of this Software License Agreement. "Confidential
Information" includes the Moneyline Software, manuals, and materials.
7. IDENTIFYING MARKS. Company will not remove or obscure any marks which
identify the Moneyline Software, manuals or other materials as
Moneyline's property. Company agrees to display screens a notice of
Moneyline's intellectual property rights as directed by Moneyline.
8. DISCLAIMER OF WARRANTIES. Moneyline DISCLAIMS ALL WARRANTIES, INCLUDING
ANY WARRANTY OF MERCHANTABILITY AND ANY WARRANTY OF FITNESS FOR A
PARTICULAR PURPOSE. Moneyline makes no warranty against infringement of
patent or intellectual property rights of third parties.
9. INSTALLATION. Company is responsible for installation of the Moneyline
Software.
-9-
<PAGE> 10
10. RISK OF LOSS AND INDEMNITY.
A. Company is responsible for any loss, theft, or damage to the
Moneyline Software, manuals or materials from the time that
they are delivered to the shipper until they are returned to
Moneyline.
B. Moneyline will indemnify Company, its subsidiaries, its
corporate parent, and their directors, officers, employees and
agents for all losses, damages, claims, lawsuits, judgments,
liabilities or expenses (including reasonable attorneys' fees)
which arise from or relate to any claim of infringement of
patent or intellectual property rights of third parties.
11. TERM AND TERMINATION.
A. This License is in effect for so long as the Agreement between
Moneyline and Company relating to home banking bill payment
processing and funds transfer services is in effect.
B. Moneyline may terminate this License immediately upon written
notice to Company if Company has materially breached this
License. In addition, either party may terminate at any time
without cause after sixty (60) days advance written notice to
the other party. Upon termination of this License, Company
shall immediately stop using the Software, delete it from all
computers, and promptly certify compliance with this provision
to Moneyline. Company shall promptly return the Software,
manuals and other materials containing information about the
Software to Moneyline at Company's expense.
C. Sections 5, 6, 8, 9, and 11 survive termination of this
License.
-10-
<PAGE> 11
EXHIBIT D
MUTUAL CONFIDENTIALITY AGREEMENT
1. PARTIES. The parties to this Agreement are Moneyline Express, Inc.
("Moneyline") and nFront, Inc. ("Company").
2. CONFIDENTIAL INFORMATION. Company and Moneyline intend to engage in
confidential business discussions concerning a project of mutual
interest to them ("Project"). The parties may disclose to each other
information and materials which may include (but is not limited to) the
following:
- business plans, financials;
- qualitative aspects of the parties' businesses;
- plans, concepts, methods, strategies, management tools,
designs, formats, systems, research, works in process;
- customers, marketing plans;
- policies and procedures, business practices, organization;
- reports, data, figures, statistics, analyses, benchmarks,
compilations, summaries, plans, projections;
- forms, specifications, charts, graphs, tapes, diskettes,
papers, books, records, materials, and information in any
medium.
All of this information is confidential information except as
specifically excepted below. The parties are willing to disclose it to
each other only pursuant to this Agreement.
3. REPRESENTATIONS AND WARRANTIES. Each party represents and warrants that
it has the right to disclose the confidential information to the other
party. Each party agrees to indemnify the other party against any claim
by a third party that the disclosure or use of the information breaches
an agreement between the claimant and the disclosing party.
4. RESTRICTIONS ON USE OR DISCLOSURE. The parties agree that they will not
disclose any information that they receive pursuant to the confidential
business discussions except as is reasonably necessary for the/
purposes of the present discussions, and they will not use the
information except for the purposes of the present discussions.
Specifically, neither party will disclose that it has received
confidential information. Each party will use its best efforts to
ensure that its directors, officers and employees comply with this
Agreement.
5. NOT AN OFFER FOR SALE OR LICENSE. The disclosures made pursuant to this
Agreement are for evaluation purposes only and do not constitute an
offer for sale or license of any kind. The parties' discussions and
involvement in the Project shall not be construed as granting either
party a license under any patents, trade secrets, copyrights,
trademarks, or other intellectual or proprietary rights owned or
controlled by the other party.
6. INFORMATION EXCLUDED. The following is not confidential information:
a. Information which is in the public domain as evidenced by
printed publication or otherwise before it is acquired by a
party;
b. Information which, through no fault of a party, becomes part
of the public domain by printed publication or otherwise after
it is acquired by the party;
-11-
<PAGE> 12
c. Information which a party can show was in its possession prior
to the time of disclosure and was not acquired directly or
indirectly from the other party on a confidential basis; or
d. Information which is rightfully received by a party from a
third party, without obligation of confidentiality, which did
not acquire such information directly or indirectly on a
confidential basis.
7. COURT ORDERS AND SUBPOENAS. A party may disclose confidential
information as required by a court order or subpoena, but the
information remains confidential and subject to this Confidentiality
Agreement. In the event that a party receives a subpoena or other legal
process concerning confidential information of the other party, each
party agrees to notify the other party immediately and to cooperate in
any lawful effort to contest the subpoena or other legal process.
8. MATERIALS. Each party understands and agrees that any writings,
correspondence, memoranda, notes, drawings, sketches, tapes, disks,
data sheets, agent lists, or other documents, and any prototypes, or
any other materials containing any of said information, whether
furnished to a party by the other party or prepared by a party in
connection with the present business discussions, are the sole property
of the party whose information is contained in the materials and must
be kept confidential as provided herein, and delivered to the party
upon its request. Each party further agrees that it will make no copies
or reproductions of any said materials without the express, written
consent of the party that owns the information.
9. REMEDIES. Each party understands that any breach of this Agreement may
cause irreparable harm to the other party. Each party agrees that in
the event of a breach the other party may seek injunctive relief in
addition to its other remedies.
10. TERM. The term of this Agreement is five years.
NFRONT, INC. MONEYLINE EXPRESS, INC.
By: /s/ Tripp Rackley By: /s/ David R. Roy
------------------------------- ------------------------
Name/Title: Tripp Rackley/President Name/Title: David R. Roy/V.P.
Date: 7/23/97 Date: 7/25/97
-12-
<PAGE> 13
NFRONT, INC. AND
MONEYLINE EXPRESS, INC.
AMENDMENT TO AGREEMENT
HOME BANKING, BILL PAYMENT PROCESSING
AND FUNDS TRANSFER SERVICES
This Amendment amends the Agreement between nFront, Inc. ("Company") and
Moneyline Express, Inc. ("Moneyline").
Section 25 is added to the Agreement to read as follows:
"25. GUARANTEED FUNDS. Company may elect to guaranty funds for all bill
payment transactions of Customers of a financial institution. Funds are
"guaranteed" when Company initiates the debit to a Customer's bank account.
Company shall bear the credit risk associated with bill payment transactions and
shall guarantee settlement of all funds associated with said bill payment
transactions. Section 6 of this Agreement, "Credit Risk," does not apply when
Company guarantees funds."
NFRONT, INC. MONEYLINE EXPRESS, INC.
By: /s/ Tripp Rackley By: /s/ David R. Roy
------------------ ----------------
Name: Tripp Rackley Name: David R. Roy
Title: President/CEO Title: Vice President
-13-
<PAGE> 14
[Travelers Express Letterhead]
January 19, 1999
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
nFront, Inc.
Mr. Robert Campbell
520 Guthridge Court, NW
Suite 100
Norcross, GA 30092
Re: Assignment of Your Agreement with Moneyline Express to M&I Data
Services
Dear Mr. Campbell,
Moneyline Express, Inc. ("Moneyline") and M&I Data Services, a division
of Marshall & Ilsley Corporation ("M&I"), are pleased to inform you that M&I is
purchasing electronic bill payment assets of Moneyline's electronic bill payment
financial institution customers. After a transition period, M&I will provide
electronic bill payment services directly to many of Moneyline's customers.
Under the Moneyline agreement with you mentioned above, Moneyline is
currently providing you with electronic bill payment services. ("Agreement"
includes the referenced agreement, including any and all related documents and
agreements, amendments, modifications, renewals, extensions, supplements,
exhibits, schedules and addenda.) In connection with the transaction, Moneyline
and M&I seek your consent to permit Moneyline to assign the Agreement to M&I.
Subject to your consent, M&I has agreed to assume and discharge Moneyline's
payment and performance obligations under the Agreement which arise or are due
after the date you sign this consent. Your obligations under the Agreement
arising after your consent would be to M&I.
Please indicate your consent to and agreement with the terms of this
letter by executing each of the three (3) copies enclosed and by returning two
(2) originally-executed copies of this letter within ten (10) days to:
Joseph Hafermann
Moneyline Express, Inc.
1550 Utica Avenue South
Minneapolis, MN 55416
Fax: (612) 591-3859
For your reference, thereafter, all future notices and communications
to M&I Data pursuant to the Agreement should be sent to the following address:
Daniel Shannon
BD2E
M&I Data Services
4900 West Brown Deer Road
Brown Deer, WI 53223
Fax: (414) 362-1705
<PAGE> 15
January 19, 1999
Page 2
If you have any questions for M&I, please contact Dan Shannon at (414)
357-3551. If you have any questions for Moneyline, please contact Joe Hafermann
at (612) 591-3806. Thank you very much for your prompt consideration.
Sincerely,
MONEYLINE EXPRESS, INC.
By: /s/ Joseph Hafermann
----------------------------------
M&I DATA SERVICES
By: /s/ By M&I Data Services
----------------------------------
The undersigned hereby consents to the assignment of the Agreement by
Moneyline to M&I, and to M&I's assumption and agreement to pay, perform in
accordance with the terms of, and be bound by, the covenants, terms, and
obligations under the Agreement arising and to be performed by Moneyline on or
after the date below.
EXECUTED as a sealed instrument this 8th day of February, 1999.
[NAME]
By /s/ Robert Campbell
----------------------------------
Name: Robert L. Campbell
----------------------------------
(Please type or print)
Company: nFront, Inc.
------------------------------
Title: President
--------------------------------
<PAGE> 16
02/04/99
Confidential Information
nFront credit risk contract addendum
AMENDMENT TO THE AGREEMENT BETWEEN NFRONT AND MONEYLINE EXPRESS:
The following language replaces Item 6: Credit Risk in the Agreement dated July
25, 1997:
CREDIT RISK
(FUNDS NOT GUARANTEED)
1. CONSUMER ACCOUNTS. Between the parties, MLE bears the credit risk
associated with potential Non Sufficient Funds ("NSF") or return items
for all consumer demand deposit accounts.
2. BUSINESS ACCOUNTS. Between the parties, MLE bears the credit risk
associated with potential NSF or return items for business demand
deposit accounts only when the following condition is met: MLE's total
exposure for the entire time this Agreement is in effect is limited to
a maximum loss of:
- $1,000.00 per business account that has been open with the
financial institution for less than one year and
- $2,500.00 per business account that has been opened with the
financial institution for one year or longer.
3. PAYMENT CAP. Each payment is capped at $9,999.00. MLE may change the
cap from time to time. The financial institution may choose to modify
the payment cap for Consumer Accounts, Business Accounts, or individual
end users. Written notification must be received by MLE from the
financial institution. Financial Institution will bear the credit risk
for all payments in excess of $9,999.00 for consumer accounts and/or in
excess of the liability limits outlined for Business Accounts should
the Financial Institution choose to modify the payment cap.
4. RISK REDUCTION MEASURES. MLE may at its option implement features to
reduce credit risks. These may include but are not limited to
pre-authorized drafts for business customers, verifying funds through
an ATM network, and separating debits from credits so that payments are
not sent until after good funds are received.
5. CONTRACT INCLUSION. nFront agrees to include the credit risk parameters
shown above in the agreements between it and its clients.
COMPANY: MLE:
NFRONT, INC. MONEYLINE EXPRESS, INC.
By: /s/ Robert L. Campbell By: /s/ David R. Roy
---------------------- ----------------
Name: Robert L. Campbell Name: David R. Roy
Title: President & COO Title: Vice President
Date: 2/4/99 Date: 2/4/99
<PAGE> 1
EXHIBIT 10.26
DESCRIPTION OF nFRONT, INC. CASH INCENTIVE COMPENSATION PLAN
nFront, Inc. (the "Company") maintains an annual bonus plan for the benefit of
its corporate officers and certain other employees of the Company. Bonuses are
specified as a percentage of the employee's annual base salary. Bonus
percentages generally are set by organizational level or title within the
Company. The plan is administered by the Compensation Committee of the Board of
Directors, which determines eligible participants, performance goals,
measurement criteria, performance ratings and amount and timing of payments. The
Compensation Committee establishes annual target bonus awards based on the
achievement of the financial and operating objectives set by the Compensation
Committee for the Company. All awards are paid in full, in cash, following the
year of performance. Awards are granted under the plan at the sole discretion of
the Compensation Committee.
<PAGE> 1
EXHIBIT 10.27
FORM OF
NFRONT INTERNET BANKING SERVICES AGREEMENT
THIS NFRONT INTERNET BANKING SERVICES AGREEMENT ("Agreement") is made
effective this ____ day of ____, 1999 ("Effective Date") by and between NFRONT,
INC. ("nFront"), a Georgia corporation having its primary offices at 520
Guthridge Court NW, Suite 100, Norcross, Georgia 30092-3503, facsimile number
(770) 209-9093 and _______________________________________________________
("Bank"), a _____________________________________________________ corporation
having its primary offices at __________________________________________,
facsimile number ____________________________.
nFront is in the business of providing Internet-based banking services to banks
and other financial institutions. Bank desires to offer to its Customer Base
(defined below) and potential customers Internet-based banking capabilities.
NOW, THEREFORE, in consideration of the mutual agreements set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. DEFINITIONS. In addition to all other terms defined herein, the
following terms shall have the following meanings:
(a) "Agreement" means this agreement, together with all schedules and
Exhibits attached hereto or hereafter attached by mutual consent of the
parties (all of which are herein incorporated by reference).
(b) "Customer Base" means those customers of Bank as of the Effective
Date and those who become customers of Bank during the Term.
(c) "Documentation" means that portion of the System that provides
installation and operating instructions for use of the System by Bank.
(d) "End-User" means a Bank customer who uses the System.
(e) "Fees" means all fees payable by Bank to nFront under this
Agreement including, but not limited to, all the fees listed in EXHIBIT
B, Termination Fees and Bill Payment Fees.
(f) "File Transmission Computer" means Bank's computer equipment,
software, secure communications software and secure communications
lines that meet the specifications for use with the System.
(g) "nFront's Secure Server" means the server-grade computers owned and
maintained by nFront on which the System and Bank's Internet Branch
resides.
(h) "Services" mean all services provided to Bank by nFront under this
Agreement.
(i) "Software" means that portion of the System that is comprised of
nFront's computer programs installed on nFront's Secure Server.
(j) "System" shall mean nFront's Software and nFront's proprietary
Internet banking system as more fully described in EXHIBIT C attached
hereto, together with all System Modifications made available to Bank
under this Agreement.
(k) "Term" means the Initial Term and all Renewal Terms.
1
<PAGE> 2
(l) "Bank Data Center" shall mean the Bank's internal data processing
department, the Bank's core processor or the Bank's service bureau that
provides nFront with the electronic customer files that nFront will
process.
2. SCOPE OF SERVICES.
2.1 Authorized Services. During the Term, Bank is authorized to use the
capabilities of the System as specified in EXHIBIT A ("Authorized Services").
2.1.1 nFront's Obligations. During the Term and for the Authorized
Services, nFront shall provide Bank with the following:
(a) design and installation of nBranch - an Internet branch of
Bank on the World Wide Web of the Internet ("Internet Branch")
in accordance with the specifications set forth in EXHIBIT D;
(b) host and maintain the Internet Branch on nFront's Secure
Server;
(c) register an Internet domain name on behalf of the Bank. Bank
will be invoiced by nFront annually at the current up-front
and renewal list prices offered by the third party that
provides the domain registration service;
(d) register a web site security key on behalf of the Bank. Bank
will be invoiced by nFront annually at the current up-front
and renewal list prices offered by the third party that
provides the security key registration service;
(e) provide interactive banking service capabilities to Bank
through the use of the System; (f) provide specifications for
File Transmission Computer as set forth in EXHIBIT E or as
modified by nFront from time to time ("Technical
Specifications");
(g) train Bank's personnel in the daily operation and update
procedures for the System as set forth in EXHIBIT F;
(h) through a third party processing agent, provide the bill
payment services listed in EXHIBIT G and on the terms set
forth therein ("Bill Payment Services").
2.1.2 Software Access License. During the Term of this Agreement and
for the Authorized Services and subject to the limitations set forth herein,
nFront grants to Bank a limited, non-exclusive, and non-assignable (except as
expressly set forth below) license to access the Software located on nFront's
Secure Server for the purpose of receiving the Services and using the System.
nFront reserves all rights not expressly granted herein. Without limiting the
foregoing, Bank has no right to possess the Software or any copies thereof in
any form.
2.1.3 nFront Mark License. During the Term of this Agreement and
subject to the limitations set forth herein, nFront grants to Bank a limited,
non-exclusive, and non-assignable license to use nFront's service mark and
trademark "NFRONT" solely for the purpose of describing the Services and the
System to the Customer Base and for no other purpose.
2.1.4 Consulting Services. Bank may request that nFront perform
consulting services in addition to the Services set forth herein ("Consulting
Services"). Consulting Services, if any, are described in EXHIBIT H. When the
parties have agreed to the scope of Consulting Services as set forth in EXHIBIT
H, such Consulting Services shall be considered part of the "Services" provided
under this Agreement. All Consulting Services shall be performed pursuant to the
terms of this Agreement and EXHIBIT H.
2.2 Bank's Obligations. As promptly as practicable following the execution
of this Agreement and at its sole cost and expense, Bank shall obtain or
otherwise make available to nFront the File Transmission Computer and other
recommended equipment meeting the Technical Specifications. During the Term,
Bank at its sole cost and expense, shall:
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(a) employ technically suitable employees to support the System
and provide End User support;
(b) make available the appropriate Bank personnel to attend such
training programs and other refresher and upgrade training as
nFront may, at reasonable intervals, recommend or require (at
either the executive offices of Bank or nFront, as designated
by nFront);
(c) adhere, and cause its employees and agents to adhere, to the
commercially reasonable security procedures established by
nFront from time to time;
(d) perform periodic file updates as provided in EXHIBIT F
attached hereto;
(e) not offer, directly or indirectly, any Internet banking
service similar to the System as described in EXHIBIT C; and
(f) set up and maintain test accounts throughout the Term of the
Agreement. Test accounts should consist of a DDA and savings
account tied to the same social security number or tax
identification number with balances of at least $10.
2.3 Relationship Between nFront and Bank. This Agreement does not in any
way create the relationship of principal and agent, or any similar relationship
between nFront and Bank, including, but not limited to that of joint ventures,
partners, employees or associates. Neither party is granted any right or
authority to assume or create any obligation or responsibility for or on behalf
of the other party or to otherwise bind the other party other than as may be
expressly authorized in this Agreement.
3. FEES AND PAYMENT TERMS.
3.1 Fees and Payment Terms. Bank agrees to pay the Fees for the Services
set forth herein and in the EXHIBITS. Bank also agrees to pay or reimburse
nFront for any reasonable travel-related and other out-of-pocket expenses
incurred by nFront in the performance of Services. nFront will invoice Bank for
the Implementation Fees set forth in EXHIBIT B on the Effective Date and payment
is due within thirty (30) days from receipt of the invoice. All monthly Fees,
Consulting Fees and all other Fees and expenses are due and payable within
thirty (30) days of receipt of the invoice. nFront will assess a late payment
Fee equal to the lesser of one and one-half percent (1-1/2%) of the unpaid
amount or the highest interest rate allowed by applicable law for each
succeeding thirty (30) day period or portion thereof in which Fees or expenses
remain unpaid.
3.2 System Changes and Fee Changes.
(a) nFront shall have the right to modify the System including,
without limitation, to: (i) make changes in method of access
to or delivery of the System including, without limitation,
file interface procedures ("File Interface Changes"), or (ii)
add improvements to the System which are provided to Bank at
no additional cost ("System Enhancements"), or (iii) provide
additional functionality that is offered to Bank for such Fees
as nFront may deem appropriate ("System Options")
(collectively "System Modifications").
(b) Bank may, at its option, elect to pay the additional Fees for
System Options and thereafter have access to such System
Options.
(c) nFront will provide Bank and Bank Data Center sixty (60) days
written notice of any File Interface Changes.
(d) nFront reserves the right to increase Fees and will provide
forty-five (45) days written notice to Bank prior to any
increase in the Fees. nFront may increase the monthly System
Maintenance Fees and the monthly per Customer Fees (described
in EXHIBIT B) only after the first anniversary of the
Effective Date and no more than twelve percent (12%) in any 12
month period thereafter. The Fees described in the previous
sentence do not include any telecommunication and/or Internet
fees, bill payment Fees or per transaction Fees. Within ten
(10) days of receipt of notice from nFront of a Fee change,
Bank may, at its option, terminate this Agreement as set forth
in Section 6 below.
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3.3 Taxes and Other Fees. Bank shall pay all sales, use, service,
occupation, personal property, value-added and excise taxes and any other Fees,
assessments or taxes which may be assessed or levied by any taxing authority
against Bank's use of the System or receipt of the Services, excluding any taxes
based on nFront's income.
3.4 Service Level Credits. If nFront fails to provide the Services and
System as set forth in EXHIBIT I ("System Service Levels"), then nFront will
apply the credits against the Fees as set forth in EXHIBIT I.
4. WARRANTIES.
4.1 System Warranty. nFront represents and warrants to Bank that, during
the Term, the System (i) will perform in material conformance with the
functionality listed in EXHIBIT C, (ii) is Year 2000 Compliant (as defined
below), and (iii) as developed and implemented by nFront, is free from viruses
or other damaging or malicious code. "Year 2000 Compliant" means that the nFront
Software will: (i) report and display all dates, including dates occurring
before and after the year 2000, with a four-digit date; and (ii) handle all leap
years, including but not limited to the Year 2000 leap year, correctly;
provided, however, that nFront shall not be responsible or liable for any date
errors caused or contributed to by any third party software, operating system,
or hardware. EXCEPT AS SPECIFICALLY SET FORTH IN THIS SECTION 4, THE SYSTEM AND
ALL SERVICES ARE PROVIDED BY NFRONT "AS-IS." NFRONT SPECIFICALLY DISCLAIMS ALL
OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, IMPLIED
WARRANTIES OF MERCHANTABILITY, ACCURACY AND FITNESS FOR A PARTICULAR PURPOSE AS
TO THE SYSTEM OR SERVICES PROVIDED UNDER THIS AGREEMENT. Without limiting the
foregoing, nFront does not warrant that the use of the System, the nFront
Software or nFront's computer servers will be uninterrupted or error free.
4.2 Security. nFront has made available to Bank a description of its
methods and procedures to safeguard the System (i.e. SAS70 Report and third
party Intrusion Test), and, as part of nFront's Services, will provide Bank and
Bank Data Center with procedures which Bank is obligated to employ to help
secure the integrity of the System and Bank's data. nFront agrees to notify Bank
of any security breach of any End User's account on the System by 5:00 pm (EST)
of the business day following discovery. Bank understands and acknowledges that
certain risks are inherent in the transmission of information over the Internet.
Bank chooses to use the security measures provided by nFront even though other
security procedures are available. nFront warrants to Bank that, during the
Term, nFront will employ commercially reasonable System security measures.
Except as expressly provided in this Section, nFront makes no representation,
warranty, covenant or agreement that its security measures will be effective and
neither nFront nor its successors or assigns shall have any liability for the
breach of its security measures, or the integrity of the System or nFront's
computer servers, unless caused by the willful misconduct of nFront or its
employees.
5. CONFIDENTIALITY AND NON-DISCLOSURE.
5.1 In the performance of this Agreement, either party may disclose to the
other certain Proprietary Information. For the purposes of this Agreement, (i)
"Proprietary Information" means Trade Secrets and Confidential Information; (ii)
"Trade Secrets" means trade secrets as defined under Georgia law; and (iii)
"Confidential Information" means information that is of value to its owner and
is treated as confidential other than Trade Secrets. Proprietary Information
includes, without limitation, all information regarding End Users and their
accounts, all financial information, the Software, Documentation, business
plans, customer lists, procedures, formulas, discoveries, inventions,
improvements, innovations, concepts and ideas. The receiving party agrees to
hold the Proprietary
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Information disclosed by the other party in strictest confidence and not to,
directly or indirectly, copy, use, reproduce, distribute, manufacture,
duplicate, reveal, report, publish, disclose, cause to be disclosed, or
otherwise transfer the Proprietary Information for any purpose whatsoever other
than as expressly provided by this Agreement.
5.2 Both parties acknowledge and agree that the Proprietary Information
shall remain the sole and exclusive property of the disclosing party or a third
party providing such information to the disclosing party. The disclosure of the
Proprietary Information does not confer upon the receiving party any license,
interest, or rights of any kind in or to the Proprietary Information, except as
expressly provided under this Agreement. Subject to the terms set forth herein,
the receiving party shall protect the Proprietary Information of the disclosing
party with the same degree of protection and care the receiving party uses to
protect its own Proprietary Information, but in no event less than reasonable
care. With regard to Trade Secrets, the obligations in this Section shall
continue for so long as such information constitutes a Trade Secret. With regard
to Confidential Information, the obligations in this Section shall continue for
the longer of (i) the duration dictated under governing law or (ii) the term of
this Agreement and for a period of five (5) years thereafter.
5.3 Nothing in this Section 5 shall prohibit or limit the receiving party's
use of information if (i) at the time of disclosure hereunder such information
is generally available to the public; (ii) after disclosure hereunder such
information becomes generally available to the public, except through breach of
this Agreement by the receiving party; (iii) the receiving party can demonstrate
such information was in its possession prior to the time of disclosure by the
disclosing party; (iv) the information becomes available to the receiving party
from a third party which is not legally prohibited from disclosing such
information; (v) the receiving party can demonstrate the information was
developed by or for it independently without the use of such information; or
(vi) if disclosure is required under applicable law or regulation.
5.4 Neither party shall disclose the terms of this Agreement except (i) as
required by applicable law or regulation, (ii) to its employees and agents with
a need to know such terms, or (iii) in connection with a potential merger or
sale of all or substantially all of its assets; provided that the receiving
party agrees in writing to be bound by the restrictions of this Agreement.
6. TERM AND TERMINATION.
6.1 Term. This Agreement shall commence as of the Effective Date and shall
remain in effect (unless sooner terminated pursuant to Section 6.2) for five (5)
years thereafter (the "Initial Term"). The Agreement shall thereafter
automatically renew without interruption for successive two-year periods (each a
"Renewal Term"), unless either party (at its sole option, for any reason or for
no reason) gives written notice of intent not to renew the Agreement at least
sixty (60) days before the beginning of any Renewal Term.
6.2 Right to Terminate. Notwithstanding any other provision hereof, this
Agreement may be terminated as follows:
(a) by mutual agreement of the parties;
(b) by either party at any time if the other party has materially
breached the Agreement and, if the breach is curable, the
breaching party has failed to cure such breach (i) within
fifteen (15) days after written notice thereof in the case of
failure to pay amounts due and owing, or (ii) within thirty
(30) days in case of all other curable breaches;
(c) in the event either party materially breaches any of the
provisions hereof, and such breach is not curable, this
Agreement shall be immediately terminable by the non-breaching
party upon written notice to other party. Without limiting the
foregoing, any violation of Section 5 hereof or any use of the
System in a manner inconsistent with the terms of this
Agreement, shall
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constitute a non-curable breach.
(d) immediately by nFront in the event that the Bank becomes
insolvent, files or is forced to file any petition in
bankruptcy, or makes an assignment for the benefit of its
creditors;
(e) immediately by Bank if nFront files bankruptcy under Chapter 7
of the U.S. Bankruptcy Code;
(f) by Bank during the Initial Term upon ninety (90) days written
notice to nFront ("Bank Termination Notice"); provided,
however, that Bank shall pay to nFront the applicable
Termination Fees in an amount equal to:
(i) the greater of: (A) the average monthly Fees paid by Bank
during the four full calendar months immediately preceding
nFront's receipt of the Bank Termination Notice, or (B) the
average monthly Fees paid by Bank during the twelve month
period immediately preceding the actual date of termination
multiplied by
(ii) the number of whole and/or partial months remaining in
the Initial Term following the actual date of termination.
6.3 Effect of Termination.
(a) Any termination of this Agreement shall not release Bank from paying
any Fees or expenses owed to nFront. In the event of any termination of
this Agreement, all obligations owed by Bank to nFront shall become
immediately due and payable upon termination.
(b) Upon termination of this Agreement, Bank shall promptly and without
charge return to nFront all copies of all Documentation, maintenance
and policy manuals and other publications of nFront relating to the
System (collectively "Copies"). Bank shall destroy all Copies contained
on any hard drive or other fixed medium of storage. Bank's license to
access the Software and license to use the nFront Marks as provided in
this Agreement shall immediately terminate. Within sixty (60) days from
the date of termination of this Agreement, an officer of Bank shall
certify in writing to nFront that Bank has complied with all
requirements of this Section.
(c) Upon termination of this Agreement, nFront shall (i) assign Bank's
domain name to another Internet service provider designated in writing
by Bank; and (ii) provide a notice at Bank's former Internet Branch
location for a thirty (30) day period of the new location of Bank's
home page on the Internet. Bank shall retain all rights in any
graphics, trademarks, and works of authorship provided by Bank.
7. INDEMNIFICATION; OTHER RELIEF.
7.1 Indemnification by Bank. Bank shall indemnify, defend and hold harmless
nFront, its officers, directors, shareholders, employees, agents and affiliates
from and against any claims, losses, damages, liabilities or expenses
(including, without limitation, reasonable attorneys' fees and expenses)
(collectively, "Claims") resulting from or arising out of (i) mistakes relating
to or misuse of the System or any part thereof by Bank, Bank's agents or any
End-User, including, without limitation, any misrepresentations made by Bank
with respect to the System, or (ii) Bank's compliance or alleged noncompliance
with the provisions of Regulation E, 12 CFR Section 205 et seq., or other
applicable law or regulation, or (iii) an allegation that any trademark, trade
name, service mark, logo or other information (or any portion thereof) provided
by Bank to nFront in connection with the design of the Bank's Internet Branch
infringe upon or misappropriate any copyright, patent, trademark or trade secret
of any third party, or (iv) a violation of any provision of any agreement
between Bank and any third party. nFront shall promptly notify Bank in writing
and in reasonable detail of any Claim. Bank
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shall have the authority to control the defense and settlement of such Claim,
suit or proceeding, and nFront shall give reasonable assistance to Bank to
enable Bank to defend the Claim. nFront shall have the right, but not the
obligation, to participate, at its own expense, with respect to any such third
party Claim. No such third party Claim shall be settled or compromised by Bank
without the prior written consent of nFront if such settlement or compromise in
any manner indicates that nFront contributed to or was responsible for the cause
of any such Claim.
7.2 Indemnification by nFront. nFront shall indemnify, defend and hold
harmless Bank, its officers, directors, shareholders, employees, agents and
affiliates from and against any claims, losses, damages, liabilities or expenses
(including, without limitation, reasonable attorneys' fees and expenses)
(collectively, "Indemnified Claims") resulting from or arising out of (i) the
willful misconduct by nFront, its employees or agents (including without
limitation unauthorized funds transfers), and (ii) an allegation that the System
(or any portion thereof) infringes upon or misappropriate any copyright, patent,
trademark or trade secret of any third party. nFront shall have the authority to
control the defense and settlement of such Indemnified Claims and Bank shall
give reasonable assistance to nFront to enable nFront to defend the Indemnified
Claim. Bank shall have the right, but not the obligation, to participate, at its
own expense, with respect to any such Indemnified Claim. No such Indemnified
Claim shall be settled or compromised by nFront without the prior written
consent of Bank if such settlement or compromise in any manner indicates that
Bank contributed to or was responsible for the cause of any such Indemnified
Claim. If the System is finally determined by a court of competent jurisdiction
to constitute an infringement of any patent, copyright, trademark or other trade
secret of a third party and its use is enjoined, nFront shall have sole
discretion to settle or not to settle the Claim and shall either:
(i) procure the right for Bank to continue to use the System under this
Agreement;
(ii) replace or modify the System with a version of the System that is not
so infringing; or
(ii) if (i) and (ii) above are not reasonably available, then, in nFront's
sole discretion, remove the System, and terminate the Agreement.
This Section sets forth the sole and exclusive remedy of Bank and the complete
liability of nFront with respect to any Indemnified Claim hereunder. nFront
shall have no liability for any Indemnified Claim based upon the unauthorized
modification, combination, operation or use of any portion of the System with
equipment, data, software, or programming not supplied by nFront.
7.3 Arbitration. Except as provided below, all disputes or claims relating
in any manner to this Agreement (including, without limitation, any alleged
breach thereof or the termination or non-renewal thereof) shall be settled by
binding arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. The parties agree that the arbitrators in any
such arbitration shall not be authorized to award any punitive damages in
connection with any controversy or a claim settled by arbitration hereunder. The
decision of the arbitrators shall be final and binding upon the parties and
judgment upon the award may be entered in any court having jurisdiction thereof.
Any arbitration shall take place in Atlanta, Georgia, if initiated by Bank, or
in the county where Bank's corporate offices are located, if initiated by
nFront; provided however that nFront may initiate arbitration under this Section
in Atlanta, Georgia for collection of Fees owed by Bank under this Agreement.
The expenses of the arbitrators shall be allocated by such arbitrators. The
arbitration shall be conducted before a panel of three (3) arbitrators, one
selected by Bank, one selected by nFront, and one selected by mutual agreement
of the arbitrators selected by Bank and nFront. If a party fails to select an
arbitrator as required herein within thirty (30) days from the written request
by the other party ("Selecting Party"), the Selecting Party shall then be
entitled to select the second arbitrator, with the two selected arbitrators
selecting the final arbitrator by mutual agreement.
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7.4 Injunctive Relief. Notwithstanding any other term of this Agreement,
the parties may apply to a court of competent jurisdiction for any appropriate
equitable or injunctive relief, including, without limitation, preliminary and
permanent injunctions and temporary restraining orders. The parties also
acknowledge that (i) any use or threatened use of data related to End Users, the
Software, System, nFront Marks or Bank Marks in a manner inconsistent with this
Agreement, or (ii) any other misuse of the Proprietary Information of either
party will cause immediate irreparable harm to the non-breaching party for which
there is no adequate remedy at law. Accordingly, the parties agree that the
non-breaching party shall be entitled to immediate and permanent injunctive
relief from a court of competent jurisdiction in the event of any such breach or
threatened breach. The parties hereby waive the defense that the non-breaching
party has or will have an adequate remedy at law for any such breach or
threatened breach. The parties agree and stipulate that the non-breaching party
shall be entitled to such injunctive relief without posting a bond or other
security; provided however that if the posting of a bond is a prerequisite to
obtaining injunctive relief, then a bond in the amount of $1000 shall be
sufficient. Nothing contained herein shall limit either party's right to any
remedies at law, including the recovery of damages from the other party for
breach of this Agreement. The prevailing party in any action pursuant to this
Section 7.4 shall be entitled to collect from the losing party its attorneys'
fees and full costs of such action.
7.5 Limitation of Liability. For the purpose of this Section 7.5: (i) the
term "nFront" shall mean nFront and its affiliates, officers, shareholders and
endorsers (including without limitation the Corporation for American Banking and
the American Bankers Association, Inc.), and (ii) the term "Bank" means Bank and
its affiliates, officers and shareholders. Except for Bank's payment obligations
hereunder, in no event shall either party or their be liable for special,
incidental, consequential or other indirect damages arising out of or relating
in any manner to this Agreement under any cause of action, including, without
limitation, lost profits, even if the parties have been advised of the
possibility of such damages. In no event shall the maximum, cumulative liability
of nFront or Bank relating in any manner to this Agreement (excluding any claims
arising under Sections 7.1 or 7.2 hereof) regardless of the type or nature of
the claim(s), exceed the greater of (i) the Fees paid to nFront by Bank under
this Agreement within the twenty-four (24) month period immediately preceding
the occurrence of such claim(s), or (ii) $50,000. In no event shall either
party's maximum, cumulative liability for claims under Sections 7.1 or 7.2
hereof exceed $1,000,000. The limitations of liability in this Section 7.5 shall
not apply to Bank's obligation to pay Fees including, without limitation,
Termination Fees. Neither party may bring any claim under this Agreement more
than two (2) years after such claim first accrues. The parties agree that the
Corporation for American Banking and the American Bankers Association, Inc. are
express third party beneficiaries to the limitations under this Section 7.5.
7.6 Use of the System by Third Parties. Without limiting the terms of
Section 7.5, the parties acknowledge that Bank is solely responsible for the use
of the System (and any resulting damages) by End Users and other third parties
including, without limitation, any improper or unauthorized transfers of funds
from accounts via the System; provided however that nFront shall be responsible
for any improper or unauthorized transfers of funds from accounts via the System
by its employees and contractors hereunder.
8. MISCELLANEOUS PROVISIONS.
8.1 Waiver. Any failure of a party to comply with any obligation, covenant,
agreement or condition herein may be expressly waived in writing by the other
party, but such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
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8.2 Entire Agreement. This Agreement, the Exhibits and schedules hereto
constitute the entire understanding of the parties with respect to the subject
matter of this Agreement and supersede all prior understandings, whether written
or oral, between the parties with respect thereto.
8.3 No Third Party Beneficiary Rights. Except for the express third party
beneficiaries named in Section 7.5 (Limitation of Liability), no provision of
this Agreement is intended or shall be construed to provide or create any third
party beneficiary right or any other right of any kind in any End User or any
client, customer, affiliate, insurer, lender, shareholder, partner, officer,
director, employee or agent of any party hereto, or in any other person.
8.4 Third Party Processor. If Bank utilizes a third party to process Bank's
file information, the use of such third party shall not diminish or relieve Bank
of its obligations under this Agreement.
8.5 Amendment; Binding Effect; Assignment.
(a) No amendment, modification or alteration of the terms of this Agreement
shall be binding unless in writing and executed by the parties hereto.
This Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors (including
without limitation successors by merger) and permitted assigns.
(b) Except as provided below, neither party may assign this Agreement in
whole or in part without the prior written consent of the other party.
Either party may freely assign this Agreement in conjunction with (i) a
sale of all or substantially all of its assets, or (ii) a merger or
similar transaction; provided that the acquiring or resulting entity
agree in writing to be bound by the terms of this Agreement.
(c) Neither party shall unreasonably withhold or delay its consent to a
requested an assignment by the other party. Any attempted assignment in
violation of this Section shall be void and of no effect.
8.6 Force Majeure. nFront shall not be liable for loss or damage resulting
from any cause beyond its reasonable control, including, but not limited to: (i)
Internet network failures or capacity limitations, (ii) compliance with
regulations, orders or instructions of any federal, state or municipal
government or any department or agent thereof that delay or restrict performance
hereunder, or (iii) acts of God, acts of third parties, acts or omissions of
Bank, acts of civil or military authority, fires, embargoes, war or riot.
8.7 Governing Law. This Agreement shall be governed, construed and enforced
in accordance with the laws of the State of Georgia and the U.S. without giving
effect to the conflict-of-laws principles thereof.
8.8 Severability. If any provision of this Agreement is held to be illegal,
invalid or unenforceable under present or future laws effective during the Term,
such provision shall be fully severable. This Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part of this Agreement, and the remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance from this
Agreement.
8.9 Counterparts. This Agreement may be executed simultaneously or in two
or more counterparts, each of which together shall constitute one and the same
instrument and shall be deemed an original hereof.
8.10 Notices. All notices required or permitted under this Agreement shall
be made in writing and shall be deemed to have been duly given if delivered
personally or sent by registered or certified mail
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(return receipt requested), U.S. mail or facsimile. All notices shall be
addressed to the parties at the respective addresses or facsimile numbers
indicated above.
8.11 Survival. All provisions of this Agreement which by their nature are
intended to survive the expiration or termination of this Agreement shall
survive and remain in full force and effect including, but not limited to, the
applicable provisions of Sections 3, 4, 5, 6, 7, and 8.
8.12 Headings; Interpretation. Headings of particular Sections are inserted
only for convenience and are not to be considered a part of this Agreement or be
used to define, limit or construe the scope of any term or provision of this
Agreement. Should any provision of this Agreement require judicial
interpretation, the parties agree that the court or arbitrators construing the
same shall not apply a presumption that the terms of this Agreement shall be
more strictly construed against one party than against another. The parties
agree and stipulate that the Termination Fees are a reasonable pre-estimate of
potential losses that (i) nFront would incur, (ii) are otherwise difficult of
impossible to estimate, and (iii) are not intended as a penalty.
8.13 This Agreement Controls. Notwithstanding the content of any purchase
order, sale order, sale confirmation or any other document relating to the
subject matter of this Agreement, this Agreement shall take precedence over any
such document, and any conflicting, inconsistent, or additional terms contained
therein shall be null and void.
8.14 Sample End User Agreement. nFront may, at Bank's request, provide Bank
with sample End User Internet banking agreements ("Sample Agreements"). All
Sample Agreements are for reference purposes only. nFront makes no
representations or warranties regarding the Sample Agreements and provides all
Sample Agreements to Bank "AS IS" and with all faults. Bank must independently
verify the completeness, effectiveness and enforceability of all terms of the
Sample Agreements through its own legal counsel. By accepting delivery of any
Sample Agreement, Bank agrees that nFront shall have no liability under any
legal theory relating to any Sample Agreement or Bank's use thereof.
8.15 Exhibits. Exhibits attached hereto are incorporated into this Agreement
for all purposes.
EXHIBIT A Authorized Services
EXHIBIT B Fees
EXHIBIT C The System
EXHIBIT D nBranch - Internet Branch Specifications
EXHIBIT E Technical Specifications
EXHIBIT F Installation, Training and Daily Processing Requirements
EXHIBIT G Bill Payment Services
EXHIBIT H Consulting Services
EXHIBIT I System Service Levels
EXHIBIT J Optional Features
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IN WITNESS WHEREOF, the parties have executed this Agreement as of Effective
Date.
NFRONT, INC.
By:
- ---------------------------------------
Name:
- ---------------------------------------
Print Name
Title:
- ---------------------------------------
Date:
- ---------------------------------------
BANK
By:
- ---------------------------------------
Name:
- ---------------------------------------
Print Name
Title:
- ---------------------------------------
Date:
- ---------------------------------------
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EXHIBIT A - AUTHORIZED SERVICES
Bank is authorized to use the services indicated below for the Fees listed in
EXHIBIT B.
[ ] The nBranch Service (described in EXHIBIT C)
--------- --------- ----------- ----------
nFront Date Bank Date
[ ] The nHome Service (described in EXHIBIT C)
--------- --------- ----------- ----------
nFront Date Bank Date
[ ] The nBusiness Service (described in EXHIBIT C)
--------- --------- ----------- ----------
nFront Date Bank Date
Options:
[ ] nMotion (10 frames)
[ ] Management Statistics Reporting
[ ] Telephone Bill Payment
[ ] Check Imaging - DSI
[ ] Check Imaging - Greenway
[ ] nHome Employee Training Program
[ ] nHome Jump Start Marketing and Promotion Program
[ ] Internet TV Site
[ ] Zack's Stock Research
[ ] Other Special Services (Describe)
--------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
--------- --------- ----------- ----------
nFront Date Bank Date
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<PAGE> 13
EXHIBIT B - FEES
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<PAGE> 14
EXHIBIT C - THE SYSTEM
NBRANCH - INTERNET BRANCH SERVICE
1. Bank Branding of Internet Site
2. 7 Secure Product Services
- Checking
- Savings
- Certificate of Deposit
- IRA
- Consumer/Commercial Loans
- Mortgage Loans
- Line of Credit
3. Additional Secure Product Service
- Guestbook
4. Financial Calculators
- Loan
- Maximum Loan
- College Planning
- Mortgage
- Retirement
5. Administration Site
- Guestbook Secure Database Management
- Products & Services Applications with Secure Database
Management
- Products & Services Application Email Notifications
- Products & Services - Update Rates and Terms
- Password Maintenance Interface
- Audit Management
- Bank can view pending or processed applications and
who approved/denied application
- Bank can view changes to products and services rates
and terms which are automatically logged into the
secure database
6. Email - The Bank will be assigned one @banking.com email address. This
"general" mailbox will forward all incoming mail to any/all Bank
specified email addresses
NHOME - ONLINE INTERNET BANKING SERVICE
1. View Account Balances and Current Statement Transactions
- DDA/Savings
- CD/IRA
- Loans
- Line of Credit
2. Internal Transfer of Funds between DDA, Savings, Loan and Line of
Credit accounts, using ACH formatted file
- Immediate and Future Transfers
- One Time and Recurring Transfers
3. Pending Web Transfer and Bill Pay Transactions
- View, edit, delete future Web Transactions
4. Bill Payment
- One Time, Future and Recurring Payments
- Payment Reporting
5. Custom Reports for Historical Transactions
- View customer account information for up to two years
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<PAGE> 15
6. Password Manager
- Secure log-in
- Create and change customer password information
7. Personal Information
- View customer information file
8. PFM Downloads
- Microsoft Money(TM)
- Quicken(TM)
9. Online Help
10. Online Banking Demo
11. Bank Administration Site - nHome Functions
- Detailed Internet Branch Billing
- Billing System for nHome On-Line Banking and Bill Payment
Customers, using ACH formatted file
- nReach - Data Mining and Marketing module
- Database Query Capability
- Promotional E-mails to selected customers
NBUSINESS ONLINE BANKING SERVICE
1. View Account Balances and Histories
- DDA/Savings
- CD/IRA
- Loans and Line of Credit
2. ACH formatted Transfers - Book Transfers, Drafts, Disbursements, Direct
Deposits between DDA, Savings, Loan, LOC accounts
- Immediate and Future Transfers
- One Time, Recurring Transfers and Pending Transfers
- View Historical Transfers
3. Bill Payment
- Immediate and Future Bill Payments
- One Time and Recurring Payments
- Pending Bill Payments
- Historical Bill Payments
4. User resources
- Online Payee Database
5. Balance Reporting
- View customer account information for up to two years
6. Multi-User permissions
- SuperUser sets up and controls subordinate members' functional
access
- Secure log-in
- Create and change customer password information
- Control Account access and disbursement levels
7. Business application integration
- Microsoft Money, Quicken
- Quick Books, Comma Delimited
8. Online Help
9. Virtual Status Requests - EFTPS (Electronic Federal Tax Payments), Stop
Payments, Wire Transfers
- Immediate and Future transactions (where applicable)
- Recurring transactions
- Pending Transactions
- View Historical Transfers
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<PAGE> 16
10. Additional Functions
- ACH version of EFTPS
11. Bank Administration Site - nBusiness Functions
- Set / Reset challenge code / Password for SuperUser
- Flag accounts as Cash Management
- Audit Management
- Receive / respond to time-sensitive Virtual Status Requests
(VSRs): Stop Pay, Wire Transfer, EFTPS
- Detailed Internet Branch Billing
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<PAGE> 17
EXHIBIT D -
INTERNET BRANCH SPECIFICATIONS
1. Home Page
- Bank branding (logo)
- Custom navigational controls
- Maximum of 3 scanned images or 5 custom graphics
2. Product and Services (60 sub-page maximum or 20 unique products)
- Bank branding (logo)
- Custom navigational controls
- Standardized or customized forms/applications
- Maximum of 5 scanned images or custom graphics
3. Feature Product (3 sub-page maximum or 1 product)
- Bank branding (logo)
- Custom navigational controls
- Standardized or customized forms/applications
- Maximum of 1 scanned image or custom graphic
4. Guest Book
- Bank branding (logo)
- Custom navigational controls
- Standardized or customized forms/applications
5. Financial Calculators
- Bank branding (logo)
- Custom navigational controls
- Standard nFront financial calculator suite
6. Search Engine
- Bank branding (logo)
- Custom navigational controls
- Standard nFront search engine application with documented
instructions
7. Frequently Asked Questions (FAQ)
- Bank branding (logo)
- Custom navigational controls
- Standardized nFront copy available to Bank for use or can be
completely customized to suit the Bank's needs
8. Contact Us (5 sub-page maximum)
- Bank branding (logo)
- Custom navigational controls
- Maximum of 5 scanned images or 1 custom graphic
9. Bank Information (15 sub-page maximum)
- Bank branding (logo)
- Custom navigational controls
- Maximum of 10 scanned images or 5 custom graphics
10. Web Development Criteria:
- All Web site content must be submitted to nFront in an IBM
Microsoft Word (.doc) or PC Text (.txt) Format.
- A single page may contain up to a maximum of 500 words of
text.
- Scanned images are defined as static images of photographs or
printed copy that have been scanned into an electronic format.
nFront recommends that these image files be no larger than 50k
each or more than 100k on any one particular page.
- Custom Graphics are defined as static images of line art that
have been scanned into an electronic format. nFront recommends
that these image files be no larger than 50k each or more than
100k on any one particular page.
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<PAGE> 18
- nFront will work with the Bank to generate minor animation
effects in the form of animated GIFs or mouse rollovers to the
extent they do not deviate from standard Web design
techniques. nFront recommends that these animated image files
be no larger than 30k each or more than 60K on any one
particular page.
- If the Bank requests elements of the Web site that would
require advanced or non-standard design techniques outside the
scope of the contract nFront will provide the Bank with an
estimate of time and cost. nFront will provide the Bank with
design suggestions/alternatives that can reduce the cost while
attempting to maintain the design concept.
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EXHIBIT E - TECHNICAL SPECIFICATIONS
FILE TRANSMISSION COMPUTER
1. Pentium 75 Processor or greater PC
2. 16 MB RAM or greater
3. 28.8 BPS Asynch modem or greater
4. CD ROM drive
5. Monitor
6. Keyboard
7. Mouse
8. Dedicated analog telephone line for dialup connectivity
9. PC must be housed in a secure area of the Bank or Bank's data
processor and be available to receive daily ACH files and
transmit nightly balance files.
REQUIRED SOFTWARE
1. Microsoft Windows 95 Version 4.00.950 B or greater on CD ROM
2. Microsoft Plus!
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<PAGE> 20
EXHIBIT F - INSTALLATION, TRAINING AND
DAILY PROCESSING REQUIREMENTS
IMPLEMENTATION AND TRAINING SCHEDULE
The implementation of the nFront product line involves up to three
individual installation projects, nBranch, nHome, and nBusiness,
depending on which products the Bank has purchased. Each product will
be scheduled separately based on the availability of nFront resources.
NBRANCH
1. Upon execution of this Agreement nFront will forward to Bank a
copy of nFront's implementation manual.
2. At a mutually agreeable time following contract execution
nFront will conduct a kick off meeting with Bank personnel.
The kick off meeting will be in the form of a conference call
and will last approximately 2 hours. Bank must have Internet
access at their location during the session. During this
meeting the following topics will be discussed:
- Description of Web site content needed to begin work
(See Implementation Manual)
- Proposed graphic design for the Web site
- Proposed timelines for project completion with
agreed-upon due dates ("Project Timeline")
3. By the due dates in the Project Timeline, Bank will provide
nFront the nBranch Web site content, setup parameters for
nHome, and setup parameters for nBusiness which are detailed
in the Implementation Manual. Upon receipt of the Web site
content and setup parameters, nFront will begin site
construction based on the Project Timeline. If the Bank fails
to deliver the necessary Web site content and setup parameters
by the due dates in the Project Timeline, nFront reserves the
right to adjust the Project timeline based on the then-current
nFront implementation schedule.
4. Bank will need to make available to nFront a primary and
secondary "Internet Branch Manager." These individuals will be
responsible for receiving and processing Web site product
Services, guest book entries and emails, updating product
rates and terms and general administrative functions. nFront
will conduct a training session prior to the Bank completing
the testing phase. The session will be in the form of a
conference call and will last 2-3 hours. The Bank must have
Internet access at their location during the session. The
session will include instruction on Web site administrative
functions.
5. Upon completion of the nBranch Web site, Bank will be asked to
sign nFront's Web Site Acceptance Agreement which stipulates
the completion of the Web Site.
NHOME AND NBUSINESS
1. At a mutually agreeable time following contract execution
nFront will conduct a kick off meeting with Bank personnel.
The kick off meeting will be in the form of a conference call
and will last approximately 1 hour. During this meeting the
following topics will be discussed:
- Set up parameters for nHome and/or nBusiness
- Proposed timelines for project completion with
agreed-upon due dates ("Project Timeline")
2. Bank will need to make available to nFront a primary and
secondary training subject. These individuals will be
responsible for learning the nHome products. nFront will
conduct a training session prior to the training phase. The
session will be in the form of a conference call and will last
2-3 hours. The Bank must have Internet access at their
location during the session. The session will include
instruction on application functions. Trainees will be
directed to utilize nFront's Online Banking Training
Checklist.
3. The Bank will be invoiced on the first day of the month
following the completion of the Online Banking Training
Checklist.
NBRANCH WEB SITE CHANGES
nFront will provide 3 hours of nBranch Web site changes monthly at no cost.
Unused hours may not be carried over into future months. All changes exceeding 3
hours monthly will be billed at nFront's then
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<PAGE> 21
standard hourly rate. All requested changes must be submitted to nFront in
writing. nFront will provide a good faith, non-binding estimate of hours needed
to complete, cost if applicable and a delivery date. nFront's current rates are
listed below:
<TABLE>
<CAPTION>
Hourly Blocks Cost per Hour
- ------------- -------------
<S> <C>
0 - 100 $ 150.00
101 - 200 $ 125.00
200 + $ 100.00
</TABLE>
DAILY PROCESSING
1. Bank's Data Center is responsible for verifying that account balance
files for nHome and nBusiness have been sent to nFront from the Bank
Data Center on a daily basis.
2. Bank's Data Center on a daily basis is responsible for retrieving and
processing the ACH formatted file created by nFront for the Bank .
3. Bank is responsible for obtaining all proper authorizations for
electronic funds transfers, including, but not limited to ACH drafts,
ACH disbursements, direct deposits, stop pays, wire transfers, and
EFTPS.
4. Bank is responsible for obtaining proper authorization from End Users
in order to process ACH drafts when billing the End Users using
nFront's end-user billing feature.
5. For nBusiness:
a. Bank or Banks' Data Center must be the ACH originator; and
b. Bank must maintain an Electronic Services Agreement with their
End Users regarding the acknowledgment and use of the Internet
as a delivery channel for banking transactions. The agreement
shall also document Bank's procedure and requirements for each
type of transaction; and
c. Bank is responsible for verifying that the morning transaction
"in-clearing" file(s) have been sent to nFront from the Bank
or Bank's data center on a daily basis.
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<PAGE> 22
EXHIBIT G - BILL PAYMENT SERVICES
1. Bill Payment Services. Subject to the terms of the Agreement and this
Exhibit, nFront will provide the Bill Payment Services listed herein
through a third party processing agent ("Processing Agent").
2. Terms of Bill Payment Services. nFront will provide Bill Payment
Services to End Users upon the following conditions:
a. Eligibility. Only the following End Users shall be eligible to
receive Bill Payment Services: (i) consumer demand deposit
account holders ("Consumer Account Holders") or (ii) business
demand deposit account holders ("Business Account Holders").
b. Transaction Cap. nFront is not obligated to forward for
processing a payment to the Processing Agent in excess of
$9,999.00 ("the Transaction Cap"). nFront or the Processing
Agent reserves the right to increase or decrease the
Transaction Cap in its sole discretion and nFront shall give
Bank reasonable notice of any such increase or decrease. Bank
may choose to modify the Transaction Cap upon written
notification to nFront; however, if Bank chooses to increase
the Transaction Cap, Bank will bear the credit risk for all
payments in excess of the Transaction Cap as specified below.
c. Credit Risk.
i nFront bears the credit risk associated with
potential Non Sufficient Funds ("NSF") or return
items for all Consumer Account Holders up to the
Transaction Cap. Bank bears the credit risk for all
Consumer Account Holder payments in excess of the
Transaction Cap if Bank chooses to increase the
Transaction Cap.
ii nFront bears the credit risk associated with NSF or
return items for Business Account Holders up to a
maximum loss during the Term of the Agreement of:
- $1,000.00 per Business Account Holder that
has been open with the Bank for less than
one year, and
- $2,500.00 per Business Account Holder that
has been open with the Bank for one year or
longer.
iii Bank bears the credit risk for all Business Account
Holders in excess of the above limits regardless of
the Transaction Cap.
d. Risk Reduction Measures. nFront or the Processing Agent may,
from time to time, institute certain operating procedures to
reduce credit risk and exposure ("Procedures"). Such measures
may include, but are not limited to, pre-authorized drafts for
Business Account Holders, verification of funds through ATM
networks, separating debits from credit so that payments are
not sent until good funds confirmations are received, and the
like. Bank and all eligible End Users are subject to and shall
conform to all such Procedures. nFront shall use commercially
reasonable efforts to inform Customer in advance of the
implementation of such risk-reduction procedures.
3. Fees and Expenses. Bank shall pay the bill payment Fees listed on
EXHIBIT B ("Bill Payment Fees"). nFront shall bill Bank all Bill
Payment Fees incurred in the previous month. Payment by Bank is due
within thirty (30) days of receipt of the invoice.
4. Bill Payment Services - Back-End Processing.
a. Accurate payment data, including End User account number and
payment information, provided by End users in files supplied
to the Processing Agent, will be taken through a batch
interface from nFront each business day during the late
evening hours (Day 0). The payment transactions will be
processed the following day (Day 1) after the transaction was
initiated by the End User. On Day 1, Processing Agent will
initiate ACH debits and credits. Credits may be sent via
check, electronic transmissions, or ACH to vendor payees. All
debits and credits are sent on Day 1.
b. Processing Agent will handle Funds Transfer in accordance with
End User payment instructions activated in accordance with
paragraph 5 (a). Processing Agent will supply and transmit to
the sponsoring Bank payment information for debit against End
User account. The initiation of this transfer occurs on Day 1.
The End User account is debited on Day 2.
c. Processing Agent will handle End User inquiries regarding
payments made on behalf of End User to Vendor payees. Customer
Service is available from 7 a.m. to 7 p.m. Monday through
Friday and
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<PAGE> 23
Saturday from 8 a.m. to 5 p.m. Central Standard Time or as
otherwise designated by Processing Agent.
d. From time to time Processing Agent may make changes to the
system. nFront will notify Bank or Bank's Data Center in
advance of any data changes.
5. Late Fees. End Users are eligible for reimbursement of late fees
attributable to payment errors by the Processing Agent under the
current reimbursement policies referenced in the on-line "HELP" and
"BILL PAYMENT" sections of the System.
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<PAGE> 24
EXHIBIT H - CONSULTING SERVICES
1. CONSULTING AND FEES. Pursuant to the terms and conditions of the
Agreement and this Exhibit, (i) nFront will provide to Bank the
consulting services described in Schedule A, below ("Consulting
Services"), and (ii) Bank will pay to nFront the Fees for the
Consulting Services as set forth in Schedule A, below.
2. PROMOTIONAL MATERIALS. Except as otherwise provided herein, nFront
reserves all rights, including but not limited to all copyrights, in
and to all promotional materials and other works of authorship provided
hereunder ("Materials"). Except as otherwise provided herein, Bank may
not reproduce or copy the Materials.
3. LIMITED WARRANTY. For a period of sixty (60) days from the date of
delivery to Bank, nFront warrants that: (i) the Consulting Services are
performed in accordance with normal industry standards, and (ii) the
media in which the Materials are embodied is free from material
defects. OTHER THAN AS EXPRESSLY SET FORTH IN THIS SECTION 3, NFRONT
DOES NOT MAKE ANY EXPRESS OR IMPLIED WARRANTIES, CONDITIONS OR
REPRESENTATIONS TO BANK WITH RESPECT TO THE CONSULTING SERVICES OR
MATERIALS OR OTHERWISE REGARDING THIS ADDENDUM, WHETHER ORAL, WRITTEN,
EXPRESS, IMPLIED OR STATUTORY. UNLESS SET FORTH IN THIS ADDENDUM, NO
REPRESENTATION OR OTHER AFFIRMATION OF FACTS SHALL BE BINDING ON NFRONT
(INCLUDING BUT NOT LIMITED TO ANY STATEMENT REGARDING PERFORMANCE OF
THE CONSULTING SERVICES OR STATEMENT REGARDING THE QUALITY OF THE
MATERIALS). WITHOUT LIMITING THE FOREGOING, NFRONT EXPRESSLY DISCLAIMS
ANY IMPLIED WARRANTY OR CONDITION OF MERCHANTABILITY, ACCURACY, OR
FITNESS FOR A PARTICULAR PURPOSE REGARDING THE CONSULTING SERVICES OR
MATERIALS OR OTHERWISE.
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<PAGE> 25
SCHEDULE A - CONSULTING SERVICES STATEMENT OF WORK
25
<PAGE> 26
EXHIBIT I -- SYSTEM SERVICE LEVELS
1. CUSTOMER SERVICE.
A. Hours of Operation. Customer support calls can be logged to nFront's
service department on business days between the hours of 8:00 AM and
6:00 PM Eastern Standard Time. nFront attempts to respond to all
service calls within 30 minutes of the call being logged via telephone
or email. nFront observes 10 federal holidays annually, at which point
the customer service department is unavailable. The current holiday
schedule will be provided to the Bank no later than the first business
day of the year.
B. System Maintenance and Scheduled Outages. nFront periodically performs
routine maintenance in the data center and to the System. System
maintenance will be scheduled between the hours of 12:00 AM and 6:00 AM
Eastern Standard Time. When such scheduled maintenance will result in
the System being inaccessible outside of the hours of 12:00 AM and 6:00
AM Eastern Standard Time, or for more than two hours during that time,
the Bank and Bank Data Center will be notified via email at least 2
business days prior to the scheduled outage.
C. Emergency System Maintenance and Unscheduled Outages. It is possible
that nFront may need to perform immediate System maintenance that will
result in the online banking service being inaccessible. In this event,
the Bank will be notified via email as soon as possible.
2. FILE UPDATES. The Bank Data Center is responsible for: (1) the
transmission of nightly data files from its host processing system to
nFront's data center, and (2) the retrieval of the ACH formatted file
created daily in the nFront data center. nFront will make commercially
reasonable efforts to notify the Bank Data Center on the following
business morning if files are not transmitted during the scheduled
download window.
3. SYSTEM AVAILABILITY.
A. Definition. System availability is considered to be access by the Bank
and End Users to the Bank's Web Site and System from outside of the
nFront facilities via a working connection to the Internet. "Systems
Availability" is defined as the acceptable ratio of hours those
production systems are available (excluding regularly scheduled
maintenance of up to four (4) hours per week) in a calendar month to
the total number of hours in that calendar month. nFront is not
responsible of liable for problems or outages associated with systems
or providers outside of nFront's control, such as, but not limited to
telecommunication failures, Internet Service Providers (ISPs) or the
Internet network backbone.
C. Standards
1) Monthly System Availability > 99.5%: no Bank credit.
2) Monthly System Availability => 98.5% and <= 99.5%: no Bank
credit.
3) Monthly System Availability => 98.0% and < 98.5%: Bank credit
of 1.0% of that calendar month's invoice as provided below.
4) Monthly System Availability => 97.5% and < 98.0%: Bank credit
of 2.0% of that calendar month's invoice as provided below.
5) Monthly System Availability => 97.0% and < 97.5%: Bank credit
of 3.0% of that calendar month's invoice as provided below.
6) Monthly System Availability < 97.0%: Bank credit of 5.0% of
that calendar month's invoice as provided below.
D. Bank Credits for Unavailability of the System.
If nFront fails to meet the System Availability standards as described
in this Exhibit during any given month, then nFront will, upon
notification by Bank and verification by nFront, apply the credits set
forth above based on the Fees accrued and paid by Bank during the
applicable month. nFront shall apply those Bank credits against future
Fees due from Bank. nFront will issue the applicable Bank credits
against Bank's following month invoice. In no event shall Bank be
entitled to offset of withhold Fees. In addition, nFront will be
relieved of its obligation to pay such Bank credits one time during
each twelve (12) month period in which nFront would otherwise owe Bank
credits (i.e., nFront is allowed to fall below 98.5% System
Availability for one month per year without paying the Bank credits
listed above).
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<PAGE> 27
4. SYSTEM MODIFICATIONS.
A. Minor System Enhancements. Minor System enhancements are modifications
that provide additional functionality to the existing product/service.
Implementation of such enhancements will be preceded by a description
of the change and directions for its use via email to the Bank at least
3 business days prior to implementation by nFront.
B. Major System Enhancements. Major System enhancements include the
delivery of new product modules/components. If an enhancement is such
that delivery requires a detailed implementation process, such
implementations will be scheduled based on nFront's current resource
availability. Bank will be provided with a detailed timeline including
start and finish dates.
C. File Interface Changes. Certain System enhancements require upgrading
to a different version of the file interface. Bank Data Center will
need to comply with the necessary interface modifications to take
advantage of such enhancements.
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<PAGE> 28
EXHIBIT J- OPTIONAL FEATURES
I. CHECK IMAGING OPTION
DEFINITIONS
- - An "Image" is defined as the image of the front or back of a check
drawn on an End User's checking account. If an End User views both the
front and back of a check, then that is two Images.
- - "Check Imaging" is defined as the process of allowing End Users to view
Images of their checks.
- - "Check Image Software and Server" is defined as the software and
hardware that the Bank uses to capture, store and transmit Images to
nFront.
CHECK IMAGING REQUIREMENTS AND DESCRIPTION
A. At its sole cost and expense, Bank must provide the Check Image
Software and Server with the appropriate functionality required for
nFront to support a web-enabled interface. The Bank's Check Image
Software and Server must be at the appropriate revision levels as
supported by nFront in order to support a web-enabled interface.
B. The Bank will advise nFront how many days from a check's transaction
date that the Image is available for an End User to view. The Images
will display for the End User only if nFront can access the Bank's
Check Image Server and the Image(s) are available on the Bank's Check
Image Server. The selected check's transaction date, sent to nFront
from the Bank's daily import file, will be the date nFront uses to
access the Image on the Bank's Check Image Server.
C. The End User can view Images by either (i) accessing Summary and
Transfer Information and choosing to view details for a specific
checking account, or (ii) accessing Custom Reports and requesting
checking account information be displayed. When the End User reviews
the resulting display from either of these options, the check number
will appear as a button which the End User can select to view the
corresponding Image. The Image will display only if the check number
falls within the time frame the Bank has indicated the Image will be
available on the Check Image Server.
II. INVESTMENT RESEARCH OPTION
DEFINED TERMS
- - "Investment Research" is defined as the ability for End Users to view
Content (as hereinafter defined) related to stocks and bonds.
- - "Content" is defined as the following information that is available
once a symbol is entered:
- Annual Balance Sheet - Monthly update
- Annual Income Statement - Monthly update
- Summary of Analyst Recommendations & Earnings Estimates
- Weekly update
- Industry Rank - Weekly update
- Closing Price - Daily update
- Company Description - Company Periodic - Monthly update
- Inter-day Price and Volume chart - Daily update
- Expected Earnings Report Date - Weekly update
- Quotes (15 minute delayed) - Intraday update
- EPS Surprises - Intraday update
- Ticker Symbol Search - Look Up File - Intraday update
- Investing 101 - Yearly update
- About Zacks - Yearly update.
- Any other information provided hereunder
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<PAGE> 29
A. INVESTMENT RESEARCH REQUIREMENTS AND DESCRIPTION
nFront has entered into an agreement with Zacks Investment Research, Inc.
("Zacks") to provide Investment Research to the Bank and the Bank's End Users
from the Bank's web site. Investment Research and Content will be available to
End Users at the Bank's home page or product and services option using a text
link such as `Wall Street Research', `Investment Research' or `Stock Market
Information'. The End User will be able to enter a symbol value, look up the
symbol value or view earnings surprises. Either the Bank or nFront may cancel
this service upon ninety (90) days written notice.
B. DISCLAIMER
The Content is provided to Bank and End Users on an "AS IS" basis. Neither
nFront nor Zacks or their respective officers, employees, successors, assigns,
affiliates, representatives or agents disclaim any and all warranties including,
but not limited to, any warranties as to the accuracy, suitability, timeliness
or usefulness of any Content, express or implied; any warranties of
merchantability, accuracy or fitness for a particular purpose. In no event will
nFront or Zacks be liable for damages of any type related to the use, inability
to use or inability to access the Content, whether based in contract, tort or
otherwise.
III. TELEPHONE BILL PAYMENT OPTION
DEFINITIONS
- - "Telephone Bill Payment Service or TBP Service" is an option to the
nHome Service that enables the Bank's customers to schedule bill
payments over the telephone.
- - "Voice Response System" is the computer and software that the Bank uses
that enables the customer to call and access information from the Bank.
- - "Processing Agent" is the third party processing agent that provides
the bill payment services on behalf of nFront
TELEPHONE BILL PAYMENT REQUIREMENTS AND DESCRIPTION
A. The nFront Telephone Bill Payment Service enables the Bank's retail
customer to telephone the bank and schedule bill payments over the
telephone. The TBP Service is designed to be used primarily by the
Bank's retail customers who have signed up to use to use the nHome
Internet Banking Service, although non-nHome Internet Banking customers
can use the TBP Service under certain conditions.
B. Internet Banking Customers. These customers will set up their payees on
the Internet. These customers can pay bills via the Internet or via the
telephone. The Internet Service and the TBP service access the same
database of information.
C. Non-Internet Banking Customers. If the Bank chooses to offer the TBP
Service to non-Internet Banking customers, the Bank must create
documents that enable the customer to signup for the service and to do
payee addition/maintenance/deletion/cancellation. The Bank will need to
provide these documents to the non-Internet customers. The customer
will need to fill out the documents and mail these documents to the
Processing Agent. The Processing Agent will provide a toll free number
to be used by both the customer and the Bank to address all questions
regarding non-Internet Banking customers' use of telephone bill
payment.
D. The Bank MUST have a Voice Response System in place to use this
service. The Bank will be responsible for adding a new option to the
Voice Response System that will dial a phone number provided by the
nFront. This will enable the bank's customer to then have access to the
nFront Telephone Bill Payment server. The phone number provided by
nFront will not be dedicated to a particular Bank but will be a series
of telephone lines that are dedicated to nFront's Telephone Bill
Payment server.
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<PAGE> 30
E. In order to use the Telephone Bill Payment Service, the customer will
need to know their checking account number and password to access the
system. The customer also needs the Payee ID number for the payee(s)
for whom they want to schedule bill payments. The customer will be
presented with the following options:
- To make a payment, enter 1
- To set up a future dated payment, enter 2
- To set up a recurring payment, enter 3
- To change personal security code, enter 4
- To exit system, enter 5
F. The transactions an Internet Banking customer enters through the
Telephone Bill Payment system will immediately display in the
customer's online Pending Transactions Register.
30
<PAGE> 1
Exhibit 10.28
AMENDED AND RESTATED
AMENDMENT NO. 2 TO NFRONT, INC.
STOCK INCENTIVE PLAN
THIS AMENDED AND RESTATED AMENDMENT NO. 2 TO nFRONT, INC. STOCK
INCENTIVE PLAN (this "Amendment") is made effective as of the 22nd day of June,
1999 (the "Effective Date"), by NFRONT, INC., a corporation organized and doing
business under the laws of the State of Georgia (the "Company"). All capitalized
terms in this Amendment have the meaning ascribed to such terms in the nFront,
Inc. Stock Incentive Plan (the "Plan"), unless otherwise stated herein.
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company adopted Amendment No. 2
to the Plan effective May 25, 1999 to add certain provisions to adjust on an
annual basis the number of shares available for issuance thereunder;
WHEREAS, the Board of Directors has now determined to reduce the
percentage of the annual adjustment provided in Amendment No. 2 from 1.50% to
1.25% of the total outstanding shares;
NOW, THEREFORE, in consideration of the premises and mutual promises
contained herein, the Plan is hereby amended as follows:
1. Effective upon completion of an initial registered
public offering of the Company's Common Stock, Section 3 of the Plan is amended
by adding the following provision to the end of Section 3:
The total number of Shares that may be issued
pursuant to Stock Incentives under this Plan shall be
automatically increased on the last trading day of the final
calendar month of each fiscal year, beginning with the fiscal
year ending June 30, 2000 and continuing through the fiscal
year ending June 30, 2004, by a number of Shares equal to one
and one-quarter percent (1.25%) of the number of Shares of
Common Stock outstanding on the last trading day of the month
preceding the final calendar month of each such fiscal year,
but in no event shall any such annual increase exceed
1,000,000 Shares (as adjusted for any change contemplated in
Section 11 hereof).
2. Except as specifically amended by this Amended and
Restated Amendment No. 2, the Plan shall remain in full force and effect as
prior to this Amended and Restated Amendment No. 2.
IN WITNESS WHEREOF, the Company has caused this AMENDED AND RESTATED
AMENDMENT NO. 2 TO NFRONT, INC. STOCK INCENTIVE PLAN to be executed as of the
Effective Date.
NFRONT, INC.
By: /s/ Brady L. Rackley
----------------------------
Brady L. "Tripp" Rackley III
Chief Executive Officer
ATTEST:
By: /s/ Jeffrey W. Hodges
-------------------------
Jeffrey Hodges, Secretary
<PAGE> 1
Exhibit 10.29
NFRONT, INC.
EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I
PURPOSE OF PLAN
nFront, Inc. has adopted this employee stock purchase plan to encourage
the employees of the Company (and its participating affiliated companies) to
acquire a proprietary interest, or to increase their existing proprietary
interest, in the Company. The Board of Directors of the Company believes that
employee ownership of the Company's stock will serve as an incentive,
encouraging employees to continue their employment and to perform diligently
their duties as employees. It is further intended that the Plan qualify as an
"employee stock purchase plan" within the meaning of Code ss.423.
ARTICLE II
DEFINITIONS
When used in this Plan with initial capital letters, the following
terms shall have the meanings set forth below:
2.1 Board shall mean the Board of Directors of the Company.
2.2 Code shall mean the Internal Revenue Code of 1986, as amended.
2.3 Committee shall mean the group of individuals appointed by the
Board to administer the Plan, pursuant to Section 10.1.
2.4 Common Stock shall mean the common stock of the Company.
2.5 Company shall mean nFront, Inc..
2.6 Effective Date shall mean the day on which the Common Stock is
initially offered for purchase to the public by the Company.
2.7 Eligible Employee shall mean, with respect to an Offering
Period, an Employee who is not described by the following:
(a) any Employee who is regularly scheduled to work
(determined as of the Enrollment Date for such Offering Period) 20
hours or less per week;
(b) any Employee who is regularly scheduled to work
(determined as of the Enrollment Date for such Offering Period) for not
more than five (5) months in any calendar year; and
(c) any Employee who, immediately after an option is
granted hereunder, would own shares of the Common Stock, or of the
stock of a parent or subsidiary corporation of the Company, possessing
5% or more of the total combined voting
<PAGE> 2
power or value of all classes of such stock. In determining whether an
Employee owns 5% of such shares, (A) the attribution of ownership rules
of Code ss.424(d) shall apply, and (B) an Employee shall be deemed to
own the shares of stock underlying any outstanding option which he has
been granted (whether under the Plan or any other plan or arrangement).
2.8 Employee shall mean any individual who is a common-law
employee of any Participating Company. Certain Employees are not eligible to
participate in the Plan, pursuant to Section 3.2 hereof.
2.9 Enrollment Date shall mean the last business day of the
calendar month immediately preceding each Offering Commencement Date, except
that, with respect to the initial Offering Period, the Enrollment Date shall be
the last business day of the calendar month immediately following the calendar
month in which the initial registration statement registering the shares of
Common Stock issuable hereunder pursuant to the Securities Act of 1933, as
amended, is declared effective.
2.10 Fair Market Value shall mean, as of any date, the value of
Common Stock determined as follows:
(a) For purposes of making purchases under the Plan which
are made on the open market, the Fair Market Value of the Common Stock
shall be the actual market price on the date and at the time of the
purchase;
(b) For purposes other than making purchases under the
Plan, the Fair Market Value of the Common Stock shall be determined as
follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without
limitation the National Market of the National Association of
Securities Dealers, Inc. Automated Quotation ("NASDAQ")
System, its Fair Market Value per share shall be the closing
sale price for the Common Stock (or the mean of the closing
bid and asked prices, if no sales were reported), as quoted on
such exchange or system on the date of such determination, as
reported in The Wall Street Journal or such other source as
the Committee deems reliable;
(ii) If the Common Stock is not listed on any
established stock exchange or a national market system, its
Fair Market Value per share shall be the average of the
closing dealer "bid" and "ask" prices of a share of the Common
Stock as reflected on the NASDAQ interdealer quotation system
of the National Association of Securities Dealers, Inc. on the
date of such determination;
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be
determined in good faith by the Board.
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<PAGE> 3
(iv) If, for any reason, the Fair Market Value per
share cannot be ascertained or is unavailable for the date in
question, the Fair Market Value per share shall be determined
as of the nearest preceding date on which such Fair Market
Value can be ascertained under the appropriate method
indicated above.
2.11 Offering Commencement Date shall mean the first day of each
Offering Period.
2.12 Offering Exercise Date shall mean the last day of each
Offering Period.
2.13 Offering Period shall mean the period during which each option
granted pursuant to the Plan is in effect. The duration and timing of Offering
Periods may be changed by the Committee pursuant to Section 4.2 of this Plan.
2.14 Offering Period Pay shall mean, with respect to an Offering
Period, the product of (i) the number of complete payroll periods in such
Offering Period, times (ii) such Employee's Total Pay for the payroll period
which ends on or immediately prior to the Offering Commencement Date of such
Offering Period.
2.15 Participating Company shall mean (i) the Company, and (ii) any
"parent corporation" or "subsidiary corporation" (as defined in Code
ss.ss.424(e) and (f)) of the Company which have been designated by the Board and
which have adopted (by formal written resolutions of the board of directors of
such corporation) the Plan for the benefit of its employees.
2.16 Plan shall mean the nFront, Inc. Employee Stock Purchase Plan.
2.17 Total Pay shall mean, with respect to an Employee, all of his
regular straight-time earnings, plus commissions, overtime, shift premium,
incentive compensation, incentive payments, bonuses, and other compensation, all
as reported to the Internal Revenue Service for federal income tax purposes on
Form W-2, plus any before-tax contributions made to plans covered by Code
ss.ss.401(k) and 125.
ARTICLE III
ELIGIBILITY
3.1 Participation by Eligible Employees. An Eligible Employee of a
Participating Company shall be eligible to participate in the Plan as of the
first day of the Offering Period which next begins upon completion of ninety
(90) days of continuous employment with the Company if the Employee is an
Eligible Employee as of such date.
3.2 Transfers to/from Eligible Class. An Employee who ceases to be an
Eligible Employee during an Offering Period but who remains an Employee shall be
treated as if he had made an election to modify his payroll deductions to zero
effective for payroll periods ending on or after the date on which such Employee
ceased to be an Eligible Employee. An Employee who becomes an Eligible Employee
during an Offering Period
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<PAGE> 4
and who was an Employee prior to the date on which such Employee became an
Eligible Employee hereunder shall be entitled to participate in the Plan as of
the later of (i) the first day of the Offering Period which next begins upon
completion of ninety (90) days of continuous employment with the Company if the
Employee is an Eligible Employee as of such date, or (ii) the first day of the
Offering Period which next begins on or after the date on which such Employee
becomes an Eligible Employee.
ARTICLE IV
OFFERING PERIODS
4.1 Semi-Annual Offering Periods. The Plan shall be implemented
by a continuous series of Offering Periods. The Offering Periods under the Plan
shall be the six-month periods of July 1 through December 31, and January 1
through June 30, with the initial Offering Period beginning on the Effective
Date and ending on December 31, 1999.
4.2 Other Offering Periods. Without amendment to the Plan, the
Committee may, in its sole discretion, designate other periods as Offering
Periods. These periods may be more or less frequent and may be in addition to or
in lieu of the annual Offering Periods described in Section 4.1 above.
ARTICLE V
ELECTION TO PARTICIPATE
5.1 Election. Each employee who is eligible to participate in the
Plan may file with the Committee, on or before 5:00 p.m. on any Enrollment Date
(within such time period as provided by the Committee), an election form
authorizing specified regular payroll deductions over the next succeeding
Offering Period; provided, however, with respect to the initial Enrollment Date,
no election shall be valid unless given with a period specified by the Committee
prior to such date. These payroll deductions shall be on an after-tax basis, so
that all applicable federal, state, local and Social Security taxes shall apply.
At the time an Employee files his election form, he shall elect to have payroll
deductions made on each payday during the Offering Period (or, for the initial
Offering Period, during the period beginning immediately following the initial
Enrollment Date and ending on the initial Offering Exercise Date) in an amount
which is not less than 1% nor greater than 10% of such Employee's Total Pay for
each payroll period. No cash contributions or payments may be made by an
Employee to the Plan. Payroll deductions for an Employee shall commence on the
first payroll period beginning after the Offering Commencement Date (or, for the
initial Offering Period, the Enrollment Date) and shall end on the last payroll
in the Offering Period before the Offering Exercise Date, to which such
authorization is applicable, unless sooner terminated by the Employee.
5.2 Deemed Election. An Employee who has entered into a written
agreement with the Company not to be eligible for participation in this Plan
and/or any employee benefit plans of the Company shall, by entering into such
written agreement, automatically
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<PAGE> 5
be considered to have elected to have none of his pay deducted under this Plan
during any Offering Period which begins while such written agreement is in
effect.
5.3 Accounts. The Committee shall establish a bookkeeping account
for each Employee in the Plan and shall credit each Employee's payroll
deductions to his account. Any funds actually held in Accounts shall remain part
of the general assets of the Company and may be used by the Company for any
corporate purpose.
5.4 Withdrawals. By written notice to the Committee during an
Offering Period (on such form or in such manner as the Committee may specify),
but at least thirty (30) days prior to the Offering Exercise Date for such
Offering Period, an Employee may elect to cease his payroll deductions effective
as soon as administratively practicable following receipt of such election, and
the Employee may also elect to withdraw the total amount (but not less than the
total amount) credited to his Account. Any such withdrawn amount shall be paid
to the Employee, in cash or its equivalent, without interest, as promptly as
administratively practicable. An Employee who elects to withdraw the total
amount credited to his Account shall cease participation in the Plan as of the
next following Offering Exercise Date and shall not participate again until the
Offering Commencement Date following such Offering Exercise Date, provided he
files an election form with the Committee on or before the Enrollment Date for
such succeeding Offering Commencement Date.
5.5 Modifications. At least ten (10) days prior to each calendar
quarter occurring during an Offering Period, but at least thirty (30) days prior
to the Offering Exercise Date for such Offering Period, by written notice to the
Committee (on such form or in such manner as the Committee may specify), an
Employee may elect to modify his payroll deductions, effective as of the first
day of such calendar quarter, and increase or decrease (but not below 1%) the
amount to be withheld from his pay and credited to his Account during such
Offering Period under the Plan effective for each payroll period occurring on
after the first day of such calendar quarter.
5.6 Leave of Absence. For purposes of participation in the Plan,
an Employee who is on a leave of absence shall be deemed to be an Employee for
the first ninety (90) days of such leave of absence; provided, that as of the
close of business on the ninetieth (90th) day of such leave of absence, the
Employee's employment (solely for purposes of the Plan) shall be deemed to have
terminated unless the Employee shall have returned to his regular employment
prior to the close of business on such ninetieth (90th) day, except as otherwise
required by law. If an Employee's employment is terminated earlier by the
Company, for any reason, his right to participate in the Plan shall terminate
simultaneously.
5.7 Interest. No interest will accrue or be paid on any payroll
deductions contributed to the Plan or credited to the Account of any Employee.
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<PAGE> 6
ARTICLE VI
GRANTING OF OPTIONS
6.1 Number of Option Shares. On each Offering Commencement Date,
each Employee who is eligible to participate in this Plan shall be granted an
option to purchase a maximum number of shares of the Common Stock determined by
dividing 10% of his Offering Period Pay by 85% of the Fair Market Value of one
share of the Common Stock on such Offering Commencement Date and rounding the
result down to the nearest whole number.
6.2 Duration. Each option granted on an Offering Commencement
Date shall terminate on the immediately following Offering Exercise Date, unless
terminated earlier pursuant to the terms of the Plan.
6.3 Annual Limit on Options Granted. No option to purchase shares
under the Plan shall be granted to an Employee if such option, when combined
with all other options granted under all of the Code ss. 423 employee stock
purchase plans of the Company, its parents and its subsidiary corporations,
would permit such Employee to purchase shares of the Common Stock with a Fair
Market Value (determined at the time the option is granted) in excess of $25,000
for each calendar year in which the option is outstanding at any time,
determined in accordance with Code ss.423(b)(8).
6.4 Option Exercise Price. The Option Exercise Price of each share
of the Common Stock shall be the lesser of (i) 85% of the Fair Market Value of
such share on the Offering Commencement Date, or (ii) 85% of the Fair Market
Value of such share on the Offering Exercise Date.
ARTICLE VII
EXERCISE OF OPTIONS
7.1 Automatic Purchase. As of each Offering Exercise Date and
except as provided in Sections 7.2 and 7.3 hereof, the Committee shall purchase,
for each Employee having funds credited to his Account, the number of whole
shares of the Common Stock which is the lesser of (i) the maximum number of such
shares for which such Employee has been granted an option to purchase during
such Offering Period, or (ii) the number of whole shares of the Common Stock
determined by dividing the amount credited to his Account by the Option Exercise
Price. No fractional shares shall be issued, and, except as provided in Sections
7.2 and 7.3 hereof, any amount in an Employee's Account that could have
represented the purchase of such fractional shares, or that exceeds the Option
Exercise Price for the shares of the Common Stock purchased on such Offering
Exercise Date, shall be carried forward in such Employee's Account and shall be
available for purchasing shares of Common Stock in the next succeeding Offering
Period.
7.2 Maximum Amount of Common Stock Purchased. Notwithstanding any
provisions to the contrary contained herein, no Employee may use the amount
credited to his Account pursuant to the Plan during any calendar year for
purchase of Common Stock exceeding $25,000 in Fair Market Value (determined as
of the Offering Commencement
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<PAGE> 7
Date). When this amount of Common Stock has been purchased, any excess amount
credited to an Employee's Account (including any excess resulting from an
inability to purchase a whole share) shall be returned to such Employee, payroll
deductions for such Employee shall cease, and such Employee shall be ineligible
to participate in any subsequent Offering Period occurring during that same
calendar year. Such Employee's election automatically shall become effective on
the first Offering Commencement Date of the next succeeding calendar year,
subject to the termination provisions herein. Additionally, no Employee may
purchase more than 1,500 shares of Common Stock during any calendar year. To the
extent that the amount credited to his Account pursuant to the Plan for purchase
of Common Stock during any calendar year is greater than necessary for such
purchase, any excess shall be returned to such Employee as promptly as
administratively practicable.
ARTICLE VIII
DELIVERY OF COMMON STOCK; SHAREHOLDER RIGHTS
As soon as practicable after each Offering Exercise Date, the Company
shall issue and deliver to each Employee certificates representing the shares of
the Common Stock, if any, purchased for such Employee, together with any cash to
which he may be entitled hereunder. Upon issuance of such certificates (but not
prior thereto), the Employee shall have all of the rights and privileges of a
shareholder of the Company with respect to such shares. Common Stock to be
delivered to an Employee pursuant to the Plan shall be registered in the name of
the Employee.
ARTICLE IX
STOCK RESERVED FOR OPTIONS
9.1 Shares Reserved for Use By Plan. The Company shall reserve a
total of 100,000 shares of the Common Stock for issuance and purchase by
Employees under the Plan; provided, however, this total number of shares of
Common Stock that may be issued pursuant to this Plan shall be automatically
increased on the last trading day of the final calendar month of each fiscal
year of the Company, beginning with the fiscal year ending June 30, 2000 and
continuing through the fiscal year ending June 30, 2004, by a number of Shares
equal to one-quarter of a percent (0.25%) of the number of shares of Common
Stock outstanding on the last trading day of the month preceding the final
calendar month of each such fiscal year, but in no event shall any such annual
increase exceed 1,000,000 Shares (as adjusted for any change contemplated in
Article XII hereof). The number of shares of the Common Stock reserved for the
Plan may be adjusted as provided in Article XII. The shares of the Common Stock
reserved for the Plan may be shares now or hereafter authorized but unissued or
may be shares of treasury stock.
9.2 Shares Subject to Unexercised Options. If and to the extent
that any right to purchase reserved shares of the Common Stock shall not be
exercised by the Employee who is the holder of such right, or if such right
shall terminate as provided herein, then the shares subject to such right to
purchase (i) shall again become available for purposes of
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<PAGE> 8
the Plan, unless the Plan shall have been terminated, and (ii) shall not be
deemed to increase the number of shares of the Common Stock reserved for
purposes of the Plan.
ARTICLE X
ADMINISTRATION OF PLAN
10.1 Appointment of Committee. The Plan shall be administered by a
committee, which shall consist of those persons so designated by the Board. The
Board from time to time may remove members from, or add members to, the
Committee. Vacancies on the Committee shall be filled by the Board.
10.2 Meetings. The Committee shall select one of its members as
Chairman and shall hold meetings at such times and places as the Chairman shall
determine. A majority of the members of the Committee shall constitute a quorum,
and the Committee may act by vote of a majority of its members at a meeting at
which a quorum is present, or without a meeting by a written consent to their
action signed by all members of the Committee.
10.3 Authority. The Committee may request advice or assistance or
employ such other persons as are necessary for proper administration of the
Plan. Subject to the express provisions of the Plan, the Committee shall have
authority to interpret the Plan, to prescribe rules and regulations for
administering the Plan, and to make all other determinations necessary or
advisable in administering the Plan; all of such determinations shall be final
and binding upon all persons, unless otherwise determined by the Board. Without
amendment to the Plan, the Committee shall be authorized to:
(a) limit the frequency and/or number of changes in the
payroll deduction amounts withheld during an Offering Period;
(b) permit payroll withholding in excess of the amount
designated by an Employee in order to adjust for delays or mistakes in
the Company's processing of properly completed election forms;
(c) establish reasonable waiting and adjustment periods
and/or accounting and crediting procedures to ensure that amounts
applied toward the purchase of Company Stock for each Employee properly
correspond with amounts withheld from the Employee's paychecks; and
(d) establish such other limitations or procedures as it
may determine, in its sole discretion, advisable which are consistent
with the terms of the Plan.
ARTICLE XI
RIGHTS NOT TRANSFERABLE
Rights under the Plan are not transferable by an Employee other than by
will or the laws of descent and distribution and are exercisable during his
lifetime only by him.
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ARTICLE XII
ADJUSTMENT IN CASE OF CHANGES
AFFECTING THE COMPANY'S STOCK
12.1 General Rule. In the event of a split, subdivision or
consolidation of outstanding shares of the Common Stock, or in the event of any
"corporate transaction", as defined in Treas. Reg. ss.1.425-1(a)(1)(ii), other
than a transaction described in Section 12.2 hereof, the number of shares of the
Common Stock reserved or authorized to be reserved under the Plan and the number
and price of such shares subject to purchase pursuant to options outstanding
hereunder, in the sole discretion of the Committee, may be adjusted in such
manner as may be deemed necessary or equitable by the Committee to give proper
effect to such event. If any adjustment hereunder would create a fractional
share or a right to acquire a fractional share, such fractional share shall be
disregarded, and the number of shares available under the Plan or the number of
shares to which any Employee shall be entitled will be the next lower number of
shares, rounding all fractions downward. Notwithstanding anything herein to the
contrary, all adjustments to the shares of the Common Stock shall be made in
such a manner as to comply with the requirements of Code ss.424 and to preserve
the options' status under Code ss.423.
12.2 Dissolution or Certain Mergers. A dissolution or liquidation
of the Company or a merger or consolidation in which the Company is not the
surviving corporation, shall cause each outstanding option to terminate;
provided, that each Employee shall, in such event, have paid to him in cash the
amount credited to his Account at that time prior to such dissolution or
liquidation, or merger or consolidation in which the Company is not the
surviving corporation.
12.3 Rights of Employees. Except as hereinabove expressly provided,
no Employee shall have any rights by reason of any subdivision or consolidation
of shares of stock of any class or any other increase or decrease in the number
of shares of stock of any class by reason of any dissolution, liquidation,
merger or consolidation or spin-off of the assets or stock of another
corporation; and any issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number or
price of shares of the Common Stock subject to the option. The grant of an
option pursuant to the Plan shall not affect in any way the right or power of
the Company to make adjustments, reclassifications, reorganizations or changes
of its capital or business structure or to merge or to consolidate or to
dissolve, liquidate or sell, or transfer all or any part of its business or
assets.
ARTICLE XIII
TERMINATION OF EMPLOYMENT OR DEATH OF EMPLOYEE
13.1 Termination of Employment. In the event of an Employee's
termination of employment (for any reason other than death) during a Offering
Period (other than the last day of such Offering Period), any option granted to
him under the Plan shall terminate immediately upon the date his employment
ends, and the amount credited to his Account
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shall be refunded to him in cash as soon as practicable after the earlier of (1)
the Offering Exercise Date of such Offering Period, or (2) the payroll period
next following his termination of employment.
13.2 Death. In the event of an Employee's death during a Offering
Period (other than the last day of such Offering Period), any option granted to
him under the Plan for such Offering Period shall terminate immediately upon the
date of his death, and the amount credited to his Account for such Offering
Period shall be paid in cash to the person(s) designated as his beneficiary as
soon as practicable after the earlier of (1) the Offering Exercise Date of such
Offering Period, or (2) the payroll period next following his termination of
employment. Also, in the event any shares of the Common Stock and/or any cash is
payable to the deceased Employee with respect to an Offering Period ending on or
before his date of death, such shares and/or cash shall be paid to the person(s)
designated as his beneficiary.
13.3 Beneficiary. An Employee may file with the Committee a written
designation of a beneficiary who is to receive any Common Stock or cash pursuant
to the Plan in the event of the death of such Employee prior to delivery to him
of such Common Stock or cash. Such designation of beneficiary may be changed by
the Employee, and upon receipt by the Committee of proof of the identity at the
Employee's death of a beneficiary validly designated by him pursuant to the
Plan, the Company shall deliver such Common Stock or cash to such beneficiary.
In the absence of a validly-designated beneficiary who is living at the time of
such Employee's death, the Company shall deliver such Common Stock or cash to
the estate of such Employee. No designated beneficiary shall, prior to the death
of the Employee by whom he has been designated, acquire any interest in the
Common Stock or cash which may be credited to the account of the Employee under
the Plan. Any decision by the Committee as to the person or persons to whom to
distribute the Common Stock or cash shall be binding and shall not create any
liability whatsoever on the part of the Company or the Committee or its members.
ARTICLE XIV
AMENDMENT AND TERMINATION OF THE PLAN
14.1 Amendment. The Board may amend the Plan in any respect;
provided, any amendment (i) increasing the number of shares of the Common Stock
reserved under the Plan, (ii) changing the designated class of employees
eligible to participate in the Plan, or (iii) materially increasing the benefits
accruing to Employees under the Plan, must be approved within 12 months of the
adoption of such an amendment by the holders of a majority of the voting power
of the outstanding shares of the Common Stock.
14.2 Termination. The Plan and all rights of Employees hereunder
shall terminate:
(a) as of the Offering Exercise Date that Employees
become entitled to purchase a number of shares of the Common Stock that
substantially exhausts the number of such shares available for issuance
under the Plan, to such an extent that
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the Board and the Committee determine that no subsequent options are
practicable; or
(b) in the sole discretion of the Board, as of the end of
any Offering Period with respect to future Offering Periods.
14.3 Compliance. To the extent necessary for compliance with Code
ss.423 (or any successor provisions), the Company shall obtain shareholder
approval in such a manner and to such a degree as may be required for any
amendment to or termination of the Plan.
ARTICLE XV
NOTICES
All notices or other communications by an Employee to the Committee
pursuant to or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Committee at the location, or
by the person, designated by the Committee for the receipt thereof.
ARTICLE XVI
INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification as they may have as
directors, the members of the Committee shall be indemnified by the Company
against reasonable expenses (including, without limitation, attorneys' fees)
actually and necessarily incurred in connection with the defense of any action,
suit or proceeding, or in connection with any appeal, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan or any option granted hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
to the extent required by and in the manner provided by the Bylaws of the
Company relating to indemnification of directors) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such Committee member or members did not act in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the Company.
ARTICLE XVII
WITHHOLDING REQUIREMENTS
At the time the option is exercised, in whole or in part, or at the
time some or all of the Common Stock issued under the Plan is disposed of, the
Employee must make adequate provision for the Company's federal, state, or other
tax withholding obligations, if any, which arise upon the exercise of the option
or the disposition of the Common Stock. At any time, the Company may, but will
not be obligated to, withhold from the Employee's compensation the amount
necessary for the Company to meet applicable withholding obligations, including
any withholding required to make available to the Company any tax deductions or
benefits attributable to sale or early disposition of Common Stock by the
Employee.
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ARTICLE XVIII
CONSTRUCTION OF PLAN
For purposes of the Plan, masculine, feminine, neuter, singular or
plural pronouns shall be deemed to refer to such person, persons or entity as
may be appropriate in the context.
ARTICLE XIX
EXPENSES OF PLAN
The Company shall pay all operational expenses of the Plan, including,
without limitation, all brokerage commissions due and payable for the purchase
and sale of Common Stock.
ARTICLE XX
COMPLIANCE
The Plan is intended to comply with the requirements of Code ss.423
(and any of its successor provisions). Pursuant to Code ss.423, an Employee may
be eligible for certain favorable tax treatment with regard to Common Stock
purchased under the Plan, if no disposition of the Common Stock is made by such
Employee within 2 years after the date of the granting of the option to him
under the Plan nor within 1 year after the transfer of the Common Stock to him.
ARTICLE XXI
EMPLOYEE STATEMENTS AND REPORTING
On or before January 31 of each calendar year, the Committee shall
provide a statement to each Employee who exercised an option under the Plan
during the previous calendar year. The Employee's statement shall contain the
following information: the name, address and employer identification number of
the Company, the date the Common Stock was transferred to the Employee, the
number of shares which were transferred to the Employee, and the type of option
under which the transferred shares were acquired. In addition, pursuant to Code
ss.6039, the Committee shall make any and all filings necessary to the Internal
Revenue Service with regard to options granted and exercised under the Plan.
ARTICLE XXII
EFFECTIVE DATE OF PLAN
The Plan shall become effective as of the Effective Date; provided,
within 12 months of the adoption of the Plan by the Board, the Plan is approved
by the holders of a majority of the voting power of the outstanding shares of
the Common Stock. If the Plan is not so approved, the Plan shall not become
effective and any prior grant of options hereunder shall be null and void ab
initio.
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<PAGE> 13
IN WITNESS WHEREOF, the Plan is hereby executed by a duly authorized
officer of the Company, on this ____________ day of June, 1999.
COMPANY:
NFRONT, INC.
By:
------------------------------------
Title:
---------------------------------
13
<PAGE> 1
EXHIBIT 10.30
NATIONSBANK, N.A.
LOAN AGREEMENT
This Loan Agreement (the "Agreement") dated as of June 17, 1999, by and
between NationsBank, N.A., a national banking association ("Bank") and nFront,
Inc. ("Borrower").
In consideration of the Loan or Loans described below and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, Bank and Borrower agree as follows:
1. DEFINITIONS AND REFERENCE TERMS. In addition to any other
terms defined herein, the following terms shall have the meaning set forth with
respect thereto:
A. LOAN. Any loan described in Section 2 hereof and any
subsequent loan which states that it is subject to this Loan Agreement.
B. LOAN DOCUMENTS. Loan Documents means this Loan
Agreement and any and all promissory notes executed by Borrower in favor of Bank
and all other documents, instruments, guarantees, certificates and agreements
executed and/or delivered by Borrower, any guarantor or third party in
connection with any Loan.
2. LOANS.
A. LOANS. Bank hereby agrees to make (or has made) one
or more loans to Borrower in the aggregate principal face amount of
$5,000,000.00. The obligation to repay the loans is evidenced by a promissory
note or notes dated of even date herewith (the promissory note or notes together
with any and all renewals, extensions or rearrangements thereof being hereafter
collectively referred to as the "Note") having a maturity date, repayment terms
and interest rate as set forth in the respective Note. The Loans includes a
revolving credit "Line" (as defined below) and a "Term Loan" (as defined below).
i. REVOLVING LINE OF CREDIT. The Loans include
a $4,425,000 revolving line of credit (the "Line") under which Borrower may from
time to time, borrow, repay and re-borrow funds.
ii. TERM LOAN. The Loans also include a $575,000
term loan (the "Term Loan") under which Borrower may from time to time, borrow
and repay funds on the terms specified in the Note therefore.
3. REPRESENTATIONS AND WARRANTIES. Except as set forth on
SCHEDULE A attached hereto, Borrower hereby represents and warrants to Bank as
follows:
A. GOOD STANDING. Borrower is a corporation, duly
organized, validly existing and in good standing under the laws of the State of
Georgia and has the power and authority to own its property and to carry on its
business in each jurisdiction in which Borrower does business.
B. AUTHORITY AND COMPLIANCE. Borrower has full power and
authority to execute and deliver the Loan Documents and to incur and perform the
obligations provided for therein, all of which have been duly authorized by all
proper and necessary action of the appropriate governing body of Borrower. No
consent or approval of any public authority or other third party is required as
a condition to the validity of any Loan Document, and Borrower is in compliance
with all laws and regulatory requirements to which it is subject.
C. BINDING AGREEMENT. This Agreement and the other Loan
Documents executed by Borrower constitute valid and legally binding obligations
of Borrower, enforceable in accordance with their terms.
D. LITIGATION. There is no proceeding involving Borrower
pending or, to the knowledge of Borrower, threatened before any court or
governmental authority, agency or arbitration authority, except as disclosed to
Bank in writing and acknowledged by Bank prior to the date of this Agreement.
E. NO CONFLICTING AGREEMENTS. There is no charter,
bylaw, stock provision, partnership agreement or other document pertaining to
the organization, power or authority of Borrower and no provision of any
existing agreement, mortgage, indenture
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<PAGE> 2
or contract binding on Borrower or affecting its property, which would conflict
with or in any way prevent the execution, delivery or carrying out of the terms
of this Agreement and the other Loan Documents.
F. OWNERSHIP OF ASSETS. Borrower has good title to its
assets, and its assets are free and clear of liens, except those granted to Bank
and as disclosed to Bank in writing prior to the date of this Agreement.
G. TAXES. All taxes and assessments due and payable by
Borrower have been paid or are being contested in good faith by appropriate
proceedings and the Borrower has filed all tax returns which it is required to
file.
H. FINANCIAL STATEMENTS. The financial statements of
Borrower heretofore delivered to Bank have been prepared in accordance with GAAP
applied on a consistent basis throughout the period involved and fairly present
Borrower's financial condition as of the date or dates thereof, and there has
been no material adverse change in Borrower's financial condition or operations
since March 31, 1999. All factual information furnished by Borrower to Bank in
connection with this Agreement and the other Loan Documents is and will be
accurate and complete in all material respects on the date as of which such
information is delivered to Bank and is not and will not be incomplete by the
omission of any material fact necessary to make such information not misleading.
I. PLACE OF BUSINESS. Borrower's chief executive office
is located at
520 Guthridge Court
Suite 100
Norcross, Georgia 30092.
J. CONTINUATION OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made under this Agreement shall be deemed to be
made at and as of the date hereof and at and as of the date of any advance under
any Loan.
4. AFFIRMATIVE COVENANTS. Until full payment and performance of
all obligations of Borrower under the Loan Documents, Borrower will, unless Bank
consents otherwise in writing (and without limiting any requirement of any other
Loan Document):
A. FINANCIAL STATEMENTS AND OTHER INFORMATION. Maintain
a system of accounting satisfactory to Bank and in accordance with GAAP applied
on a consistent basis throughout the period involved, permit Bank's officers or
authorized representatives to visit and inspect Borrower's books of account and
other records at such reasonable times and as often as Bank may desire, and pay
the reasonable fees and disbursements of any accountants or other agents of Bank
selected by Bank for the foregoing purposes. Unless written notice of another
location is given to Bank, Borrower's books and records will be located at
Borrower's chief executive office set forth above. All financial statements
called for below shall be prepared in form and content acceptable to Bank and by
independent certified public accountants acceptable to Bank.
In addition, Borrower will:
i. Furnish to Bank audited financial statements of Borrower for
each fiscal year of Borrower, within 120 days after the close of each such
fiscal year, provided that if and so long as Borrower is required to file
periodic reports under the Securities Exchange Act of 1934, then furnishing a
copy of Borrower's Annual Report following its filing with the SEC shall satisfy
this undertaking.
ii. Furnish to Bank unaudited financial statements (including a
balance sheet and profit and loss statement) of Borrower for each quarter of
each fiscal year of Borrower, within 60 days after the close of each such
period, provided that if and so long as Borrower is required to file periodic
reports under the Securities Exchange Act of 1934, then furnishing a copy of
Borrower's Quarterly Report following its filing with the SEC shall satisfy this
undertaking.
iii. Furnish to Bank a compliance certificate for (and executed by
an authorized representative of) Borrower concurrently with and dated as of the
date of delivery of each of the financial statements as required in paragraphs i
and ii above, containing (a) a certification that the financial statements of
even date are true and correct and that the Borrower is not in default under the
terms of this Agreement, and (b) computations and conclusions, in such detail as
Bank may request, with respect to compliance with this Agreement, and the other
Loan Documents, including computations of all quantitative covenants.
iv. Furnish to Bank promptly such additional information, reports
and statements respecting the business operations and financial condition of
Borrower from time to time, as Bank may reasonably request.
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<PAGE> 3
B. INSURANCE. Maintain insurance with responsible
insurance companies on such of its properties, in such amounts and against such
risks as is customarily maintained by similar businesses operating in the same
vicinity, specifically to include fire and extended coverage insurance covering
all assets, business interruption insurance, workers compensation insurance and
liability insurance, all to be with such companies and in such amounts as are
satisfactory to Bank and providing for at least 30 days prior notice to Bank of
any cancellation thereof. Satisfactory evidence of such insurance will be
supplied to Bank prior to funding under the Loan(s) and 30 days prior to each
policy renewal.
C. EXISTENCE AND COMPLIANCE. Maintain its existence,
good standing and qualification to do business, where required and comply with
all laws, regulations and governmental requirements including, without
limitation, environmental laws applicable to it or to any of its property,
business operations and transactions.
D. ADVERSE CONDITIONS OR EVENTS. Promptly advise Bank in
writing of (i) any condition, event or act which comes to its attention that
would or might materially adversely affect Borrower's financial condition or
operations or Bank's rights under the Loan Documents, (ii) any litigation filed
by or against Borrower, (iii) any event that has occurred that would constitute
an event of default under any Loan Document; (iv) any uninsured or partially
uninsured loss through fire, theft, liability or property damage in excess of an
aggregate of $100,000; and (v) any claim by any party seeking damages or
injunctive relief based on any claim arising under any environmental law or
regulation.
E. TAXES AND OTHER OBLIGATIONS. Pay all of its taxes,
assessments and other obligations, including, but not limited to taxes, costs or
other expenses arising out of this transaction, as the same become due and
payable, except to the extent the same are being contested in good faith by
appropriate proceedings in a diligent manner.
F. MAINTENANCE. Maintain all of its tangible property in
good condition and repair and make all necessary replacements thereof, and
preserve and maintain all licenses, trademarks, privileges, permits, franchises,
certificates and the like necessary for the operation of its business.
G. YEAR 2000 REPRESENTATIONS, COVENANTS AND WARRANTIES
(1) Borrower has (i) begun analyzing the operations of Borrower and its
subsidiaries and affiliates that could be adversely affected by failure
to become Year 2000 compliant (that is, that computer applications,
imbedded microchips and other systems will be able to perform
date-sensitive functions prior to and after December 31, 1999) and;
(ii) developed a plan for becoming Year 2000 compliant in a timely
manner, the implementation of which is on schedule in all material
respects. Borrower reasonably believes that it will become Year 2000
compliant for its operations and those of its subsidiaries and
affiliates on a timely basis except to the extent that a failure to do
so could not reasonably be expected to have a material adverse effect
upon the financial condition of Borrower.
(2) Borrower reasonably believes any suppliers and vendors that are
material to the operations of Borrower or its subsidiaries and
affiliates will be Year 2000 compliant for their own computer
applications except to the extent that a failure to do so could not
reasonably be expected to have a material adverse effect upon the
financial condition of Borrower.
(3) Borrower will promptly notify Bank in the event Borrower determines
that any computer application which is material to the operations of
Borrower, its subsidiaries or any of its material vendors or suppliers
will not be fully Year 2000 compliant on a timely basis, except to the
extent that such failure could not reasonably be expected to have a
material adverse effect upon the financial condition of Borrower.
H. LAWS. Comply in all material respects with all laws
and regulations applicable to Borrower's business operations.
I. NORO-MOSELEY DRAW. In the event that Borrower has not
consummated an initial registered public offering of its common stock on or
before the date ninety (90) days after the date hereof, then, upon written
request from Bank, Borrower shall, within ten (10) days of receipt of such
notice, either refinance the Loans or notify Noro-Moseley Partners IV, L.P.
("Noro-Moseley") of Borrower's intent to borrow under the Debenture Purchase
Agreement between Borrower and Noro-Moseley dated April 22, 1999.
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<PAGE> 4
5. NEGATIVE COVENANTS. Until full payment and performance of all
obligations of Borrower under the Loan Documents, Borrower will not, without the
prior written consent of Bank (and without limiting any requirement of any other
Loan Documents):
A. CAPITAL EXPENDITURES. Make capital expenditures
during each fiscal year (including capitalized leases) exceeding in the
aggregate $2,300,000 per year.
B. LEASE EXPENDITURES. Create or suffer to exist any
obligations for the payment of rent for any property under lease or agreement to
lease, except for leases in existence on the date hereof and any renewal,
extension or refinancing thereof.
C. [RESERVED]
D. TRANSFER OF ASSETS OR CONTROL. Sell, lease, assign or
otherwise dispose of or transfer any assets, except in the normal course of its
business, or enter into any merger or consolidation, or transfer control or
ownership of the Borrower or form or acquire any subsidiary.
E. LIENS. Grant, suffer or permit any contractual or
noncontractual lien on or security interest in its assets, except in favor of
Bank, or fail to promptly pay when due all lawful claims, whether for labor,
materials or otherwise.
F. EXTENSIONS OF CREDIT. Make or permit any subsidiary
to make, any loan or advance to any person or entity, or purchase or otherwise
acquire, or permit any subsidiary to purchase or other wise acquire, any capital
stock, assets, obligations, or other securities of, make any capital
contribution to, or otherwise invest in or acquire any interest in any entity,
or participate as a partner or joint venturer with any person or entity, except
for the purchase of direct obligations of the United States or any agency
thereof with maturities of less than one year.
G. BORROWINGS. Create, incur, assume or become liable in
any manner for any indebtedness (for borrowed money, deferred payment for the
purchase of assets, lease payments, as surety or guarantor for the debt for
another, or otherwise) other than to Bank, except for normal trade debts
incurred in the ordinary course of Borrower's business, and except for existing
indebtedness disclosed to Bank in writing and acknowledged by Bank prior to the
date of this Agreement.
H. DIVIDENDS AND DISTRIBUTIONS. Make any distribution
(other than dividends payable in capital stock of Borrower) on any shares of any
class of its capital stock or apply any of its property or assets to the
purchase, redemption or other retirement of any shares of any class of capital
stock or in any way amend its capital structure.
I. CHARACTER OF BUSINESS. Change the general character
of business as conducted at the date hereof, or engage in any type of business
not reasonably related to its business as presently conducted.
J. MANAGEMENT CHANGE. Make any substantial change in its
present executive or management personnel.
K. INVESTMENTS. Acquire the obligations or stock of, or
any other interest in, any person, firm, joint venture, corporation or other
enterprise whatsoever, or permit any subsidiary to do so except (i) certificates
of deposit issued by banks whose deposits are insured by the Federal Deposit
Insurance Corporation and have total assets or not less than $2,000,000,000;
(ii) direct obligations of the United States of America; (iii) obligations of
agencies of the United States Government if the payment of all principal and
interest thereof is guaranteed by the United States of America; and (iv)
commercial paper issued by corporations domiciled in the United States of
America and maturing within 12 months or less from the date of investment and
given the highest Moody's Investor Service, Inc. or by Standard & Poor's.
L. AFFILIATE TRANSACTIONS. Engage or permit any of its
subsidiaries to engage in any time in any transaction with any person or entity
which is controlled, directly or indirectly by the Borrower or any shareholder
or investor in Borrower (hereinafter defined as "Affiliate"), or make an
assignment or other transfer of its properties or assets to any Affiliate,
whether or not any ordinary course of business, other than on terms and
conditions substantially favorable to Borrower or any subsidiary of Borrower as
would be obtainable by Borrower or any such subsidiary at the time in a
comparable arms-length transaction with any party other than an Affiliate.
M. ERISA. Promptly during each year, pay and cause any
subsidiaries to pay contributions adequate to meet at least the minimum funding
standards under ERISA with respect to each and every Plan; file each annual
report required to be filed
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<PAGE> 5
pursuant to ERISA in connection with each plan for each year; and notify the
Bank within ten (10) days of the occurrence of any Reportable Event that might
constitute grounds for termination of any capital Plan by the Pension Benefit
Guaranty Corporation or for the appointment by the appropriate United States
District Court of a trustee to administer any Plan. Capitalized terms herein
shall have the meaning defined within ERISA.
N. FISCAL YEAR. Change its fiscal year.
O. NEGATIVE PLEDGES. Agree with any third party that it
will not grant a lien on any of its assets.
6. DEFAULT. Borrower shall be in default under this Agreement and
under each of the other Loan Documents if it shall default in the payment of any
amounts due and owing under the Loan or should it fail to timely and properly
observe, keep or perform any term, covenant, agreement or condition in any Loan
Document or in any other loan agreement, promissory note, security agreement,
deed of trust, deed to secure debt, mortgage, assignment or other contract
securing or evidencing payment of any indebtedness of Borrower to Bank or any
affiliate or subsidiary of NationsBank Corporation.
7. REMEDIES UPON DEFAULT. If an event of default shall occur,
Bank shall have all rights, powers and remedies available under each of the Loan
Documents as well as all rights and remedies available at law or in equity.
8. NOTICES. All notices, requests or demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to the other party at the following
address:
Borrower:
520 Guthridge Court
Suite 100
Norcross, Georgia 30092.
- - Fax. No. 770-416-0629
- -
Bank: NationsBank, N.A.
P.O. Box 45247
---------------------------------------------------
---------------------------------------------------
Jacksonville, FL. 32256
---------------------------------------------------
Fax No.
-----------------
or to such other address as any party may designate by written notice to the
other party. Each such notice, request and demand shall be deemed given or made
as follows:
A. If sent by mail, upon the earlier of the date of
receipt or five (5) days after deposit in the U.S. Mail, first class postage
prepaid;
B. If sent by any other means, upon delivery.
9. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to
Bank immediately upon demand the full amount of all costs and expenses,
including reasonable attorneys' fees (to include outside counsel fees and all
allocated costs of Bank's in-house counsel if permitted by applicable law),
incurred by Bank in connection with (a) negotiation and preparation of this
Agreement and each of the Loan Documents, and (b) all other costs and attorneys'
fees incurred by Bank for which Borrower is obligated to reimburse Bank in
accordance with the terms of the Loan Documents.
10. MISCELLANEOUS. Borrower and Bank further covenant and agree as
follows, without limiting any requirement of any other Loan Document:
A. CUMULATIVE RIGHTS AND NO WAIVER. Each and every right
granted to Bank under any Loan Document, or allowed it by law or equity shall be
cumulative of each other and may be exercised in addition to any and all other
rights of Bank, and no delay in exercising any right shall operate as a waiver
thereof, nor shall any single or partial exercise by Bank of any right preclude
any other or future exercise thereof or the exercise of any other right.
Borrower expressly waives any presentment, demand, protest or other
5
<PAGE> 6
notice of any kind, including but not limited to notice of intent to accelerate
and notice of acceleration. No notice to or demand on Borrower in any case
shall, of itself, entitle Borrower to any other or future notice or demand in
similar or other circumstances.
B. APPLICABLE LAW. This Loan Agreement and the rights
and obligations of the parties hereunder shall be governed by and interpreted in
accordance with the laws of Georgia and applicable United States federal law.
C. AMENDMENT. No modification, consent, amendment or
waiver of any provision of this Loan Agreement, nor consent to any departure by
Borrower therefrom, shall be effective unless the same shall be in writing and
signed by an officer of Bank, and then shall be effective only in the specified
instance and for the purpose for which given. This Loan Agreement is binding
upon Borrower, its successors and assigns, and inures to the benefit of Bank,
its successors and assigns; however, no assignment or other transfer of
Borrower's rights or obligations hereunder shall be made or be effective without
Bank's prior written consent, nor shall it relieve Borrower of any obligations
hereunder. There is no third party beneficiary of this Loan Agreement.
D. DOCUMENTS. All documents, certificates and other
items required under this Loan Agreement to be executed and/or delivered to Bank
shall be in form and content satisfactory to Bank and its counsel.
E. PARTIAL INVALIDITY. The unenforceability or
invalidity of any provision of this Loan Agreement shall not affect the
enforceability or validity of any other provision herein and the invalidity or
unenforceability of any provision of any Loan Document to any person or
circumstance shall not affect the enforceability or validity of such provision
as it may apply to other persons or circumstances.
F. SURVIVABILITY. All covenants, agreements,
representations and warranties made herein or in the other Loan Documents shall
survive the making of the Loan and shall continue in full force and effect so
long as the Loan is outstanding or the obligation of the Bank to make any
advances under the Line shall not have expired.
11. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE
PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO
THIS INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR
ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY
TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING AN ACTION, INCLUDING A
SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR
CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH
ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN
THE COUNTY OF ANY BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS
INSTRUMENT, AGREEMENT OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT
AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE
ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL
ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR
ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE
PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60
DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION
PROVISION SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE
APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS
INSTRUMENT, AGREEMENT OR DOCUMENT; OR (II) BE A WAIVER BY BANK OF THE PROTECTION
AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW;
OR (III) LIMIT THE RIGHT OF BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH
AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL
PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY
REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR
THE APPOINTMENT OF A RECEIVER. BANK MAY EXERCISE SUCH SELF HELP RIGHTS,
FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES
BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT
PURSUANT TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF
SELF HELP
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<PAGE> 7
REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR
PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY
PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
12. NO ORAL AGREEMENT. THIS WRITTEN LOAN AGREEMENT AND THE OTHER
LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed under seal by their duly authorized representatives as of the date
first above written.
BORROWER: nFront, Inc. BANK: NationsBank, N.A.
By: /s/ Robert L. Campbell (Seal) By: /s/ Nancy Chastain (Seal)
----------------------- ------------------------
Name: Robert L. Campbell Name: Nancy Chastain
----------------------- -----------------------
Title: President Title: Senior Vice President
--------------------- -----------------------
[Corporate Seal]
Attest: /s/ Craig L. Benn (Seal)
--------------------
Name: Craig L. Benn
---------------------
Title: Assistant Secretary
---------------------
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<PAGE> 8
SCHEDULE A
TO
LOAN AGREEMENT
Contemporaneously with execution of this Agreement, Borrower is using the
proceeds of the Term Loan to repay and cancel its obligations to Silicon Valley
Bank, which obligations are secured by substantially all of the assets of
Borrower. Silicon Valley Bank has provided an undertaking to terminate and
surrender all interests in the assets of Borrower upon receipt of payment in
full of such obligations.
8
<PAGE> 1
EXHIBIT 10.31
<TABLE>
<CAPTION>
NationsBank, N.A.
Date June 17, 1999
SECURITY AGREEMENT
===================================================================================================================================
<S> <C>
BANK/SECURED PARTY: DEBTOR(S)/PLEDGOR(S):
NationsBank, N.A. nFront, Inc.
Banking Center: 520 Guthridge Court
P.O. Box 45247 Suite 100
Jacksonville, FL 32256 Norcross, Georgia 30092
(Street address including county) (Name and street address, including county)
====================================================================================================================================
Debtor/Pledgor is Corporation
Address is Debtor's: Place of Business
====================================================================================================================================
</TABLE>
1. SECURITY INTEREST. For good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Debtor/Pledgor (hereinafter referred
to as "Debtor") assigns and grants to Bank (also known as "Secured Party"), a
security interest and lien in the Collateral (hereinafter defined) to secure the
payment and the performance of the Obligation (hereinafter defined).
2. COLLATERAL. A security interest is granted in the following collateral
described in this Item 2 (the "Collateral"):
A. TYPES OF COLLATERAL
ACCOUNTS: Any and all accounts and other rights of Debtor to the
payment for goods sold or leased or for services rendered whether or not earned
by performance, contract rights, book debts, checks, notes, drafts, instruments,
chattel paper, acceptances, and any and all amounts due to Debtor from a factor
or other forms of obligations and receivables, now existing or hereafter arising
out of the business of Debtor.
INVENTORY: Any and all of Debtor's goods held as inventory, whether now
owned or hereafter acquired, including without limitation, any and all such
goods held for sale or lease or being processed for sale or lease in Debtor's
business, as now or hereafter conducted, including all materials, goods and work
in process, finished goods and other tangible property held for sale or lease or
furnished or to be furnished under contracts of service or used or consumed in
Debtor's business, along with all documents (including documents of title)
covering such inventory.
EQUIPMENT: Any and all of Debtor's goods held as equipment including,
without limitation, all machinery, tools, dies, furnishings, or fixtures,
wherever located, whether now owned or hereafter acquired, together with all
increases, parts, fittings, accessories, equipment, and special tools now or
hereafter affixed to any part thereof or used in connection therewith.
GENERAL INTANGIBLES: Any and all of Debtor's general intangible
property, including but not limited to:
A. All patents and patent applications and all rights
corresponding thereto throughout the world, and all unpatented or unpatentable
developments and inventions.
B. All trademarks, service marks, logos, and all United
States, state and/or foreign applications for registration and registrations
thereof, all trade names, trade styles, designs, and the like, all elements of
package or trade dress of goods, the goodwill of the Borrower's business
connected with the use of, and symbolized by any of the above, and all property
of Borrower necessary to produce any products sold under any of the above.
C. All copyrights and copyrighted works, all derivative works
thereof, all mask works of semiconductor chip products, and United States and/or
foreign applications for registration and registrations thereof.
D. All computer software programs developed or to be developed
by Borrower or in which Borrower asserts or could assert a proprietary interest;
all personal property, including but not limited to source codes, object codes
or similar information, which is necessary to the practical utilization of such
programs; all tangible property of Borrower embodying or incorporating any such
programs.
E. All trade secrets, proprietary information, customer lists,
instructional materials, working drawings, manufacturing techniques, process
technology documentation, and product formulations.
F. All rights to damages or profits due or accrued arising out
of past, present or future infringement of the Collateral or injury to
Borrower's good will connected with the use of the Collateral and the right to
sue therefor.
G. All renewals, modifications, amendments, re-issues,
divisions, continuations in whole or part, and extensions of any Collateral.
B. SUBSTITUTIONS, PROCEEDS AND RELATED ITEMS. Any and all substitutes and
replacements for, accessions, attachments and other additions to, tools, parts
and equipment now or hereafter added to or used in connection with, and all cash
or non-cash proceeds and products of, the Collateral (including, without
limitation, all income, benefits and property receivable, received or
distributed which results from any of the Collateral, such as dividends payable
or distributable in cash, property or stock; insurance distributions of any kind
related to the Collateral, including, without limitation, returned premiums,
interest, premium and principal payments; redemption proceeds and subscription
rights; and shares or other proceeds of conversions or splits of any securities
in the Collateral); any and all choses in action and causes of action of Debtor,
whether now existing or hereafter arising, relating directly or indirectly to
the Collateral (whether arising in contract, tort or otherwise and whether or
not currently in litigation); all certificates of title, manufacturer's
statements of origin, other documents, accounts and chattel paper, whether now
existing or hereafter arising directly or indirectly from or related to the
Collateral; all warranties, wrapping, packaging, advertising and shipping
materials used or to be used in connection with or related to the Collateral;
all of Debtor's books, records, data, plans, manuals, computer software,
computer tapes, computer systems, computer disks, computer programs, source
codes and object codes containing any information, pertaining directly or
indirectly to the Collateral and all rights of Debtor to retrieve data and other
information pertaining directly or indirectly to the Collateral from third
parties, whether now existing or hereafter arising; and all returned, refused,
stopped in transit, or repossessed Collateral, any of which, if received by
Debtor, upon request shall be delivered immediately to Bank.
3. DESCRIPTION OF OBLIGATION(S). The following obligations ("Obligation" or
"Obligations") are secured by this Agreement: (a) All debts, obligations,
liabilities and agreements of Debtor to Bank, now or hereafter existing, arising
directly or indirectly between Debtor and Bank whether absolute or contingent,
joint or several, secured or unsecured, due or not due, contractual or tortious,
liquidated or unliquidated, arising by operation of law or otherwise, and all
renewals, extensions or rearrangement of any of the above; (b) All costs
incurred by Bank to obtain, preserve, perfect and enforce
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this Agreement and maintain, preserve, collect and realize upon the Collateral;
(d) All other costs and attorney's fees reasonably incurred by Bank, for which
Debtor is obligated to reimburse Bank in accordance with the terms of the Loan
Documents (hereinafter defined).
4. DEBTOR'S WARRANTIES. Debtor hereby represents and warrants to Bank as
follows:
A. FINANCING STATEMENTS. Except as may be noted by schedule attached hereto
and incorporated herein by reference, no financing statement covering the
Collateral is or will be on file in any public office, except the financing
statements relating to this security interest, and no security interest, other
than the one herein created, has attached or been perfected in the Collateral or
any part thereof.
B. OWNERSHIP. Debtor owns, or will use the proceeds of any loans by Bank to
become the owner of, the Collateral free from any setoff, claim, restriction,
lien, security interest or encumbrance except liens for taxes not yet due and
the security interest hereunder.
C. FIXTURES AND ACCESSIONS. None of the Collateral is affixed to real
estate or is an accession to any goods, or will become a fixture or accession,
except as expressly set out herein.
D. CLAIMS OF DEBTORS ON THE COLLATERAL. All account debtors and other
obligors whose debts or obligations are part of the Collateral have no right to
setoffs, counterclaims or adjustments, and no defenses in connection therewith.
E. POWER AND AUTHORITY. Debtor has full power and authority to make this
Agreement, and all necessary consents and approvals of any persons, entities,
governmental or regulatory authorities and securities exchanges have been
obtained to effectuate the validity of this Agreement.
5. DEBTOR'S COVENANTS. Until full payment and performance of all of the
Obligation and termination or expiration of any obligation or commitment of Bank
to make advances or loans to Debtor, unless Bank otherwise consents in writing:
A. OBLIGATION AND THIS AGREEMENT. Debtor shall perform all of its
agreements herein and in any other agreements between it and Bank.
B. OWNERSHIP AND MAINTENANCE OF THE COLLATERAL. Debtor shall keep all
tangible Collateral in good condition, ordinary wear and tear excepted. Debtor
shall defend the Collateral against all claims and demands of all persons at any
time claiming any interest therein adverse to Bank. Debtor shall keep the
Collateral free from all liens and security interests except those for taxes not
yet due and the security interest hereby created.
C. INSURANCE. Debtor shall insure the Collateral with companies acceptable
to Bank. Such insurance shall be in an amount not less than the fair market
value of the Collateral and shall be against such casualties, with such
deductible amounts as Bank shall approve. All insurance policies shall be
written for the benefit of Debtor and Bank as their interests may appear,
payable to Bank as loss payee, or in other form satisfactory to Bank, and such
policies or certificates evidencing the same shall be furnished to Bank. All
policies of insurance shall provide for written notice to Bank at least thirty
(30) days prior to cancellation. Risk of loss or damage is Debtor's to the
extent of any deficiency in any effective insurance coverage.
D. BANK'S COSTS. Debtor shall pay all costs necessary to obtain, preserve,
perfect, defend and enforce the security interest created by this Agreement,
collect the Obligation, and preserve, defend, enforce and collect the
Collateral, including but not limited to taxes, assessments, insurance premiums,
repairs, rent, storage costs and expenses of sales, legal expenses, reasonable
attorney's fees and other fees or expenses for which Debtor is obligated to
reimburse Bank in accordance with the terms of the Loan Documents. Whether the
Collateral is or is not in Bank's possession, and without any obligation to do
so and without waiving Debtor's default for failure to make any such payment,
Bank at its option may pay any such costs and expenses, discharge encumbrances
on the Collateral, and pay for insurance of the Collateral, and such payments
shall be a part of the Obligation and bear interest at the rate set out in the
Obligation. Debtor agrees to reimburse Bank on demand for any costs so incurred.
E. INFORMATION AND INSPECTION. Debtor shall (i) promptly furnish Bank any
information with respect to the Collateral requested by Bank; (ii) allow Bank or
its representatives to inspect the Collateral, at any time and wherever located,
and to inspect and copy, or furnish Bank or its representatives with copies of,
all records relating to the Collateral and the Obligation; (iii) promptly
furnish Bank or its representatives such information as Bank may request to
identify the Collateral, at the time and in the form requested by Bank; and (iv)
deliver upon request to Bank shipping and delivery receipts evidencing the
shipment of goods and invoices evidencing the receipt of, and the payment for,
the Collateral.
F. ADDITIONAL DOCUMENTS. Debtor shall sign and deliver any papers deemed
necessary or desirable in the judgment of Bank to obtain, maintain, and perfect
the security interest hereunder and to enable Bank to comply with any federal or
state law in order to obtain or perfect Bank's interest in the Collateral or to
obtain proceeds of the Collateral.
G. PARTIES LIABLE ON THE COLLATERAL. Debtor shall preserve the liability of
all obligors on any Collateral, shall preserve the priority of all security
therefor, and shall deliver to Bank the original certificates of title on all
motor vehicles or other titled vehicles constituting the Collateral. Bank shall
have no duty to preserve such liability or security, but may do so at the
expense of Debtor, without waiving Debtor's default.
H. RECORDS OF THE COLLATERAL. Debtor at all times shall maintain accurate
books and records covering the Collateral. Debtor immediately will mark all
books and records with an entry showing the absolute assignment of all
Collateral to Bank, and Bank is hereby given the right to audit the books and
records of Debtor relating to the Collateral at any time and from time to time.
The amounts shown as owed to Debtor on Debtor's books and on any assignment
schedule will be the undisputed amounts owing and unpaid.
I. DISPOSITION OF THE COLLATERAL. If disposition of any Collateral gives
rise to an account, chattel paper or instrument, Debtor immediately shall notify
Bank, and upon request of Bank shall assign or indorse the same to Bank. No
Collateral may be sold, leased, manufactured, processed or otherwise disposed of
by Debtor in any manner without the prior written consent of Bank, except the
Collateral sold, leased, manufactured, processed or consumed in the ordinary
course of business.
J. ACCOUNTS. Each account held as Collateral will represent the valid
and legally enforceable obligation of third parties and shall not be evidenced
by any instrument or chattel paper.
K. NOTICE/LOCATION OF THE COLLATERAL. Debtor shall give Bank written notice
of each office of Debtor in which records of Debtor pertaining to accounts held
as Collateral are kept, and each location at which the Collateral is or will be
kept, and of any change of any such location. If no such notice is given, all
records of Debtor pertaining to the Collateral and all Collateral of Debtor are
and shall be kept at the address marked by Debtor above.
L. CHANGE OF NAME/STATUS AND NOTICE OF CHANGES. Without the written consent
of Bank, Debtor shall not change its name, change its corporate status, use any
trade name or engage in any business not reasonably related to its business as
presently conducted. Debtor shall notify Bank immediately of (i) any material
change in the Collateral, (ii) a change in Debtor's residence or location, (iii)
a change in any matter warranted or represented by Debtor in this Agreement, or
in any of the Loan Documents or furnished to Bank pursuant to this Agreement,
and (iv) the occurrence of an Event of Default (hereinafter defined).
M. USE AND REMOVAL OF THE COLLATERAL. Debtor shall not use the Collateral
illegally. Debtor shall not, unless previously indicated as a fixture, permit
the Collateral to be affixed to real or personal property without the prior
written consent of Bank. Debtor shall not permit any of the Collateral to be
removed from the locations specified herein without the prior written consent of
Bank, except for Collateral disposed of in the ordinary course of business as
permitted in Section 4(I) above.
N. POSSESSION OF THE COLLATERAL. Debtor shall deliver all investment
securities and other instruments, documents and chattel paper which are part of
the Collateral and in Debtor's possession to Bank immediately, or if hereafter
acquired, immediately following acquisition, appropriately indorsed to Bank's
order, or with appropriate, duly executed powers. Debtor waives presentment,
notice of acceleration, demand, notice of dishonor, protest, and all other
notices with respect thereto.
O. CONSUMER CREDIT. If any Collateral or proceeds includes obligations of
third parties to Debtor, the transactions giving rise to the Collateral shall
conform in all respects to the applicable state or federal law including but not
limited to consumer credit law. Debtor shall hold harmless and indemnify Bank
against any cost, loss or expense arising from Debtor's breach of this covenant.
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<PAGE> 3
P. POWER OF ATTORNEY. Debtor appoints Bank and any officer thereof as
Debtor's attorney-in-fact with full power in Debtor's name and behalf to do
every act which Debtor is obligated to do or may be required to do hereunder;
however, nothing in this paragraph shall be construed to obligate Bank to take
any action hereunder nor shall Bank be liable to Debtor for failure to take any
action hereunder. This appointment shall be deemed a power coupled with an
interest and shall not be terminable as long as the Obligation is outstanding
and shall not terminate on the disability or incompetence of Debtor.
Q. WAIVERS BY DEBTOR. Debtor waives notice of the creation, advance,
increase, existence, extension or renewal of, and of any indulgence with respect
to, the Obligation; waives presentment, demand, notice of dishonor, and protest;
waives notice of the amount of the Obligation outstanding at any time, notice of
any change in financial condition of any person liable for the Obligation or any
part thereof, notice of any Event of Default, and all other notices respecting
the Obligation; and agrees that maturity of the Obligation and any part thereof
may be accelerated, extended or renewed one or more times by Bank in its
discretion, without notice to Debtor. Debtor waives any right to require that
any action be brought against any other person or to require that resort be had
to any other security or to any balance of any deposit account. Debtor further
waives any right of subrogation or to enforce any right of action against any
other Debtor until the Obligation is paid in full.
R. WAIVER OF NOTICE FOR IMMEDIATE WRIT OF POSSESSION. Debtor hereby
acknowledges that the indebtedness arises out of a "commercial transaction" as
that term is defined in O.C.G.A. Sec. 44-14-260(1) concerning foreclosure of
mortgages on personalty, and agrees that if a default has occurred and is
continuing, Bank shall have the right to an immediate writ of possession without
notice of hearing, and Debtor hereby knowingly and intelligently waives any and
all rights it may have to any notice and posting of a bond prior to seizure by
Bank, its transferees, assigns or successors in interest of the Collateral or
any portion thereof. The foregoing is intended by Debtor as a "waiver" as that
term is defined in O.C.G.A. Sec. 44-14-260(3) relating to foreclosure of
mortgages on personalty.
S. OTHER PARTIES AND OTHER COLLATERAL. No renewal or extension of or any
other indulgence with respect to the Obligation or any part thereof, no release
of any security, no release of any person (including any maker, indorser,
guarantor or surety) liable on the Obligation, no delay in enforcement of
payment, and no delay or omission or lack of diligence or care in exercising any
right or power with respect to the Obligation or any security therefor or
guaranty thereof or under this Agreement shall in any manner impair or affect
the rights of Bank under the law, hereunder, or under any other agreement
pertaining to the Collateral. Bank need not file suit or assert a claim for
personal judgment against any person for any part of the Obligation or seek to
realize upon any other security for the Obligation, before foreclosing or
otherwise realizing upon the Collateral. Debtor waives any right to the benefit
of or to require or control application of any other security or proceeds
thereof, and agrees that Bank shall have no duty or obligation to Debtor to
apply to the Obligation any such other security or proceeds thereof.
T. COLLECTION AND SEGREGATION OF ACCOUNTS AND RIGHT TO NOTIFY. Bank hereby
authorizes Debtor to collect the Collateral, subject to the direction and
control of Bank, but Bank may, without cause or notice, curtail or terminate
said authority at any time. Upon notice by Bank, whether oral or in writing, to
Debtor, Debtor shall forthwith upon receipt of all checks, drafts, cash, and
other remittances in payment of or on account of the Collateral, deposit the
same in one or more special accounts maintained with Bank over which Bank alone
shall have the power of withdrawal. The remittance of the proceeds of such
Collateral shall not, however, constitute payment or liquidation of such
Collateral until Bank shall receive good funds for such proceeds. Funds placed
in such special accounts shall be held by Bank as security for all Obligations
secured hereunder. These proceeds shall be deposited in precisely the form
received, except for the indorsement of Debtor where necessary to permit
collection of items, which indorsement Debtor agrees to make, and which
indorsement Bank is also hereby authorized, as attorney-in-fact, to make on
behalf of Debtor. In the event Bank has notified Debtor to make deposits to a
special account, pending such deposit, Debtor agrees that it will not commingle
any such checks, drafts, cash or other remittances with any funds or other
property of Debtor, but will hold them separate and apart therefrom, and upon an
express trust for Bank until deposit thereof is made in the special account.
Bank will, from time to time, apply the whole or any part of the Collateral
funds on deposit in this special account against such Obligations as are secured
hereby as Bank may in its sole discretion elect. At the sole election of Bank,
any portion of said funds on deposit in the special account which Bank shall
elect not to apply to the Obligations, may be paid over by Bank to Debtor. At
any time, during the pendency of an Event of Default hereunder, Bank may notify
persons obligated on any Collateral to make payments directly to Bank and Bank
may take control of all proceeds of any Collateral. Until Bank elects to
exercise such rights, Debtor, as agent of Bank, shall collect and enforce all
payments owed on the Collateral.
U. COMPLIANCE WITH STATE AND FEDERAL LAWS. Debtor will maintain its
existence, good standing and qualification to do business, where required, and
comply with all laws, regulations and governmental requirements, including
without limitation, environmental laws applicable to it or any of its property,
business operations and transactions.
6. RIGHTS AND POWERS OF BANK.
A. GENERAL. Bank, before or after default, without liability to Debtor may:
obtain from any person information regarding Debtor or Debtor's business, which
information any such person also may furnish without liability to Debtor;
require Debtor to give possession or control of any Collateral to Bank; indorse
as Debtor's agent any instruments, documents or chattel paper in the Collateral
or representing proceeds of the Collateral; contact account debtors directly to
verify information furnished by Debtor; take control of proceeds, including
stock received as dividends or by reason of stock splits; release the Collateral
in its possession to any Debtor, temporarily or otherwise; require additional
Collateral; reject as unsatisfactory any property hereafter offered by Debtor as
Collateral; set standards from time to time to govern what may be used as after
acquired Collateral; designate, from time to time, a certain percent of the
Collateral as the loan value and require Debtor to maintain the Obligation at or
below such figure; take control of funds generated by the Collateral, such as
cash dividends, interest and proceeds or refunds from insurance, and use same to
reduce any part of the Obligation and exercise all other rights which an owner
of such Collateral may exercise, except the right to vote or dispose of the
Collateral before an Event of Default; at any time transfer any of the
Collateral or evidence thereof into its own name or that of its nominee; and
demand, collect, convert, redeem, receipt for, settle, compromise, adjust, sue
for, foreclose or realize upon the Collateral, in its own name or in the name of
Debtor, as Bank may determine. Bank shall not be liable for failure to collect
any account or instruments, or for any act or omission on the part of Bank, its
officers, agents or employees, except for its or their own willful misconduct or
gross negligence. The foregoing rights and powers of Bank will be in addition
to, and not a limitation upon, any rights and powers of Bank given by law,
elsewhere in this Agreement, or otherwise. If Debtor fails to maintain any
required insurance, to the extent permitted by applicable law Bank may (but is
not obligated to) purchase single interest insurance coverage for the Collateral
which insurance may at Bank's option (i) protect only Bank and not provide any
remuneration or protection for Debtor directly and (ii) provide coverage only
after the Obligation has been declared due as herein provided. The premiums for
any such insurance purchased by Bank shall be a part of the Obligation and shall
bear interest as provided in 3(d) hereof.
B. CONVERTIBLE COLLATERAL. Bank may present for conversion any Collateral
which is convertible into any other instrument or investment security or a
combination thereof with cash, but Bank shall not have any duty to present for
conversion any Collateral unless it shall have received from Debtor detailed
written instructions to that effect at a time reasonably far in advance of the
final conversion date to make such conversion possible.
7. DEFAULT.
A. EVENT OF DEFAULT. An event of default ("Event of Default") shall occur
if: (i) there is a loss, theft, damage or destruction of any material portion of
the Collateral for which there is no insurance coverage or for which, in the
opinion of Bank, there is insufficient insurance coverage; (ii) Debtor or any
other obligor on all or part of the Obligation shall fail to timely and properly
pay or observe, keep or perform any term, covenant, agreement or condition in
this Agreement (after written notice to Debtor or the obligor of such failure
and a fifteen (15) day opportunity to cure) or in any other agreement between
Debtor and Bank or between Bank and any other obligor on the Obligation,
including, but not limited to, any other note or instrument, loan agreement,
security agreement, deed of trust, mortgage, promissory note, guaranty,
certificate, assignment, instrument, document or other agreement concerning or
related to the Obligation (collectively, the "Loan Documents") (and the
expiration of all cure periods applicable to such failure pursuant to such other
documents); (iii) Debtor or such other obligor shall fail to timely and properly
pay or observe, keep or perform any term, covenant, agreement or condition in
any agreement between such party and any affiliate or subsidiary of NationsBank
Corporation, after written notice to Debtor or obligor, as the case may be, of
such failure and a fifteen (15) day opportunity to cure; (iv) Debtor or such
other obligor shall fail to timely and properly pay or observe, keep or perform
any term, covenant, agreement or condition in any lease agreement between such
party and any lessor pertaining to premises at which any Collateral is located
or stored, after expiration of all notice and cure periods relating to such
agreements; or (v) Debtor or such other obligor abandons any leased premises at
which any Collateral is located or stored and the Collateral is either moved
without the prior written consent of Bank or the Collateral remains at the
abandoned premises.
B. RIGHTS AND REMEDIES. If any Event of Default shall occur, then, in each
and every such case, Bank may, without presentment, demand, or protest; notice
of default, dishonor, demand, non-payment, or protest; notice of intent to
accelerate all or any part of the Obligation; notice of acceleration of all or
any part of the Obligation; or notice of any other kind, all of which Debtor
hereby expressly waives, (except for any notice required
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<PAGE> 4
under this Agreement, any other Loan Document or applicable law); at any time
thereafter exercise and/or enforce any of the following rights and remedies at
Bank's option:
I. ACCELERATION. The Obligation shall, at Bank's option, become
immediately due and payable, and the obligation, if any, of Bank to permit
further borrowings under the Obligation shall at Bank's option immediately cease
and terminate.
II. POSSESSION AND COLLECTION OF THE COLLATERAL. At its option: (a)
take possession or control of, store, lease, operate, manage, sell, or instruct
any Agent or Broker to sell or otherwise dispose of, all or any part of the
Collateral; (b) notify all parties under any account or contract right forming
all or any part of the Collateral to make any payments otherwise due to Debtor
directly to Bank; (c) in Bank's own name, or in the name of Debtor, demand,
collect, receive, sue for, and give receipts and releases for, any and all
amounts due under such accounts and contract rights; (d) indorse as the agent of
Debtor any check, note, chattel paper, documents, or instruments forming all or
any part of the Collateral; (e) make formal application for transfer to Bank (or
to any assignee of Bank or to any purchaser of any of the Collateral) of all of
Debtor's permits, licenses, approvals, agreements, and the like relating to the
Collateral or to Debtor's business; (f) take any other action which Bank deems
necessary or desirable to protect and realize upon its security interest in the
Collateral; and (g) in addition to the foregoing, and not in substitution
therefor, exercise any one or more of the rights and remedies exercisable by
Bank under any other provision of this Agreement, under any of the other Loan
Documents, or as provided by applicable law (including, without limitation, the
Uniform Commercial Code as in effect in Georgia (hereinafter referred to as the
"UCC"). In taking possession of the Collateral Bank may enter Debtor's premises
and otherwise proceed without legal process, if this can be done without breach
of the peace. Debtor shall, upon Bank's demand, promptly make the Collateral or
other security available to Bank at a place designated by Bank, which place
shall be reasonably convenient to both parties.
Bank shall not be liable for, nor be prejudiced by, any loss, depreciation or
other damages to the Collateral, unless caused by Bank's willful and malicious
act. Bank shall have no duty to take any action to preserve or collect the
Collateral.
III. RECEIVER. Obtain the appointment of a receiver for all or any of
the Collateral, Debtor hereby consenting to the appointment of such a receiver
and agreeing not to oppose any such appointment.
IV. RIGHT OF SET OFF. Without notice or demand to Debtor, set off and
apply against any and all of the Obligation any and all deposits (general or
special, time or demand, provisional or final) and any other indebtedness, at
any time held or owing by Bank or any of Bank's agents or affiliates to or for
the credit of the account of Debtor or any guarantor or indorser of Debtor's
Obligation.
Bank shall be entitled to immediate possession of all books and records
evidencing any Collateral or pertaining to chattel paper covered by this
Agreement and it or its representatives shall have the authority to enter upon
any premises upon which any of the same, or any Collateral, may be situated and
remove the same therefrom without liability. Bank may surrender any insurance
policies in the Collateral and receive the unearned premium thereon. Debtor
shall be entitled to any surplus and shall be liable to Bank for any deficiency.
The proceeds of any disposition after default available to satisfy the
Obligation shall be applied to the Obligation in such order and in such manner
as Bank in its discretion shall decide.
Debtor specifically understands and agrees that any sale by Bank of all or part
of the Collateral pursuant to the terms of this Agreement may be effected by
Bank at times and in manners which could result in the proceeds of such sale as
being significantly and materially less than might have been received if such
sale had occurred at different times or in different manners, and Debtor hereby
releases Bank and its officers and representatives from and against any and all
obligations and liabilities arising out of or related to the timing or manner of
any such sale.
If, in the opinion of Bank, there is any question that a public sale or
distribution of any Collateral will violate any state or federal securities law,
Bank may offer and sell such Collateral in a transaction exempt from
registration under federal securities law, and any such sale made in good faith
by Bank shall be deemed "commercially reasonable".
8. GENERAL.
A. PARTIES BOUND. Bank's rights hereunder shall inure to the benefit of its
successors and assigns. In the event of any assignment or transfer by Bank of
any of the Obligation or the Collateral, Bank thereafter shall be fully
discharged from any responsibility with respect to the Collateral so assigned or
transferred, but Bank shall retain all rights and powers hereby given with
respect to any of the Obligation or the Collateral not so assigned or
transferred. All representations, warranties and agreements of Debtor if more
than one are joint and several and all shall be binding upon the personal
representatives, heirs, successors and assigns of Debtor.
B. WAIVER. No delay of Bank in exercising any power or right shall operate
as a waiver thereof; nor shall any single or partial exercise of any power or
right preclude other or further exercise thereof or the exercise of any other
power or right. No waiver by Bank of any right hereunder or of any default by
Debtor shall be binding upon Bank unless in writing, and no failure by Bank to
exercise any power or right hereunder or waiver of any default by Debtor shall
operate as a waiver of any other or further exercise of such right or power or
of any further default. Each right, power and remedy of Bank as provided for
herein or in any of the Loan Documents, or which shall now or hereafter exist at
law or in equity or by statute or otherwise, shall be cumulative and concurrent
and shall be in addition to every other such right, power or remedy. The
exercise or beginning of the exercise by Bank of any one or more of such rights,
powers or remedies shall not preclude the simultaneous or later exercise by Bank
of any or all other such rights, powers or remedies.
C. AGREEMENT CONTINUING. This Agreement shall constitute a continuing
agreement, applying to all future as well as existing transactions, whether or
not of the character contemplated at the date of this Agreement, and if all
transactions between Bank and Debtor shall be closed at any time, shall be
equally applicable to any new transactions thereafter. Provisions of this
Agreement, unless by their terms exclusive, shall be in addition to other
agreements between the parties. Time is of the essence of this Agreement.
D. DEFINITIONS. Unless the context indicates otherwise, definitions in the
UCC apply to words and phrases in this Agreement; if UCC definitions conflict,
Article 9 definitions apply.
E. NOTICES. Notice shall be deemed reasonable if mailed postage prepaid at
least five (5) days before the related action (or if the UCC elsewhere specifies
a longer period, such longer period) to the address of Debtor given above, or to
such other address as any party may designate by written notice to the other
party. Each notice, request and demand shall be deemed given or made, if sent by
mail, upon the earlier of the date of receipt or five (5) days after deposit in
the U.S. Mail, first class postage prepaid, or if sent by any other means, upon
delivery.
F. MODIFICATIONS. No provision hereof shall be modified or limited except
by a written agreement expressly referring hereto and to the provisions so
modified or limited and signed by Debtor and Bank. The provisions of this
Agreement shall not be modified or limited by course of conduct or usage of
trade.
G. APPLICABLE LAW AND PARTIAL INVALIDITY. This Agreement has been delivered
in the State of Georgia and shall be construed in accordance with the laws of
that State. Wherever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provisions
or the remaining provisions of this Agreement. The invalidity or
unenforceability of any provision of any Loan Document to any person or
circumstance shall not affect the enforceability or validity of such provision
as it may apply to other persons or circumstances.
H. FINANCING STATEMENT. To the extent permitted by applicable law, a
carbon, photographic or other reproduction of this Agreement or any financing
statement covering the Collateral shall be sufficient as a financing statement.
I. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES
HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR
ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING
-4-
<PAGE> 5
JURISDICTION. ANY PARTY TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING AN
ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF
ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING
JURISDICTION OVER SUCH ACTION.
I. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY OF ANY
BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS INSTRUMENT, AGREEMENT
OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF
J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN
THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL
BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE
ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
II. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL BE
DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS INSTRUMENT, AGREEMENT OR
DOCUMENT; OR (II) BE A WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY 12
U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE
RIGHT OF BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED
TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY
COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH
AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT
OF A RECEIVER. BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH
PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR
AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES
NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL
OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY,
INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
J. CONTROLLING DOCUMENT. To the extent that this Security Agreement
conflicts with or is in any way incompatible with any other Loan Document
concerning the Obligation, any promissory note shall control over any other
document, and if such note does not address an issue, then each other document
shall control to the extent that it deals most specifically with an issue.
K. EXECUTION UNDER SEAL. This Agreement is being executed under seal by
Debtor(s).
L. NOTICE OF FINAL AGREEMENT. THIS WRITTEN SECURITY AGREEMENT AND THE OTHER
LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
duly executed under seal by their duly authorized representatives as of the date
first above written.
BANK/SECURED PARTY: DEBTOR(S)/PLEDGOR(S):
NATIONSBANK, N.A. NFRONT, INC.
<TABLE>
<S> <C>
By: /s/ Nancy Chastain By: /s/ Robert L. Campbell
----------------------------- ----------------------------- (Seal)
Name: Nancy Chastain Title: President
--------------------------- --------------------------
Title: Senior Vice President
-------------------------- [Corporate Seal]
Attest: Craig L. Benn
-------------------------(Seal)
Assistant Secretary
</TABLE>
-5-
<PAGE> 1
EXHIBIT 10.32
NationsBank
PROMISSORY NOTE
Date June 17, 1999 Amount $4,425,000
================================================================================
Bank: Borrower:
NationsBank, N.A. nFront, Inc.
Banking Center: 520 Guthridge Court
P.O. Box 45247 Suite 100
Jacksonville, FL 32256 Norcross, Georgia 30092
(Street address including county) (Name and street address, including county)
================================================================================
FOR VALUE RECEIVED, the undersigned Borrower unconditionally (and jointly and
severally, if more than one) promises to pay to the order of Bank, its
successors and assigns, without setoff, at its offices indicated at the
beginning of this Note, or at such other place as may be designated by Bank, the
principal amount of $4,425,000.00 or so much thereof as may be advanced from
time to time in immediately available funds, together with interest computed
daily on the outstanding principal balance hereunder, at an annual interest
rate, and in accordance with the payment schedule, indicated below.
1. RATE. Principal shall bear interest hereunder at a rate equal to Libor
Rate plus 1.75% per annum. Interest based on the Libor Rate will be fixed for
periods of one month (each a "Eurodollar Interest Period"). Libor Rate" shall
mean the rate of interest per annum (rounded upwards, if necessary to the
nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as
the London interbank offered rate for deposits in Dollars at approximately 11:00
a.m. (London time) two Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period, as adjusted from time to
time in Bank's sole discretion for then applicable reserve requirements, deposit
insurance assessment rates and other regulatory costs. If for any reason such
rate is not available, the term "Libor Rate" shall mean the rate of interest per
annum (rounded upwards, if necessary to the nearest 1/100 of 1%) appearing on
Reuters Screen LIBO Page as the London interbank offered rate for deposits in
Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the
first day of such Interest Period for a term comparable to such Interest Period,
as adjusted from time to time in Bank's sole discretion for then applicable
reserve requirements, deposit insurance assessment rates and other regulatory
costs; provided, however, if more than one rate is specified on Reuters Screen
LIBO Page, the applicable rate shall be the arithmetic mean of all such rates.
Notwithstanding any provision of this Note, Bank does not intend to charge and
Borrower shall not be required to pay any amount of interest or other charges in
excess of the maximum permitted by the applicable law of the State of Georgia;
if any higher rate ceiling is lawful, then that higher rate ceiling shall apply.
Any payment in excess of such maximum shall be refunded to Borrower or credited
against principal, at the option of Bank.
2. ACCRUAL METHOD. Unless otherwise indicated, interest at the Rate set
forth above will be calculated by the 365/360 day method (a daily amount of
interest is computed for a hypothetical year of 360 days; that amount is
multiplied by the actual number of days for which any principal is outstanding
hereunder).
3. RATE CHANGE DATE. Any Rate based on a fluctuating index or base rate
will change, unless otherwise provided, each time and as of the date that the
index or base rate changes.
4. PAYMENT SCHEDULE. All payments received hereunder shall be applied
first to the payment of any expense or charges payable hereunder or under any
other loan documents executed in connection with this Note, then to interest due
and payable, with the balance applied to principal, or in such other order as
Bank shall determine at its option. Principal shall be paid in full in a single
payment on the earlier to occur of: (i) December 31, 1999; (ii) the consummation
of a registered public offering of common stock of Borrower; or (iii) the
twenty-fifth (25th) business day following Bank's request that Borrower
refinance this Note or draw down on that certain Debenture Purchase Agreement
between Borrower and Noro-Moseley Partners IV, L.P. in the event that the
initial public offering of Borrower's common stock does not occur within 90 days
of the date hereof. Interest thereon shall be paid monthly commencing on July
15, 1999, and continuing on the same day of each successive month thereafter,
with a final payment of all unpaid interest at the maturity of this Note.
5. REVOLVING FEATURE. Borrower may borrow, repay and reborrow hereunder at
any time, up to a maximum aggregate amount outstanding at any one time equal to
the principal amount of this Note, provided that Borrower is not in default
under any provision of this Note, any other documents executed in connection
with this Note, or any other note or other loan documents now or hereafter
executed in connection with any other obligation of Borrower to Bank, and
provided that the borrowings hereunder do not exceed any limitation on
borrowings by Borrower contained in the Loan Agreement of even date herewith
between Borrower and the Bank. Bank shall incur no liability for its refusal to
advance funds based upon its determination that any conditions of such further
advances have not been met. Bank records of the amounts borrowed from time to
time shall be conclusive proof thereof, in the absence of proof to the contrary.
6. [RESERVED]
7. FEES. Borrower agrees to pay a loan fee in the amount of $12,500. This
fee is due on or before the date of this Note. The Borrower also agrees to pay a
fee on any difference between the amount of this note and the amount of credit
it actually uses, determined by the weighted average credit outstanding during
the year. The fee will be calculated at 0.25% per year. This fee is due at the
earlier of maturity or December 31, 1999 and is prorated when calculated for any
period of less than a full year.
8. WAIVERS, CONSENTS AND COVENANTS. Borrower, any indorser or guarantor
hereof, or any other party hereto (individually an "Obligor" and collectively
"Obligors") and each of them jointly and severally: (a) waive presentment,
demand, protest, notice of demand, notice of intent to accelerate, notice of
acceleration of maturity, notice of protest, notice of nonpayment, notice of
dishonor, and any other notice required to be given under the law to any Obligor
in connection with the delivery, acceptance, performance, default or enforcement
of this Note, any indorsement or guaranty of this Note, or any other documents
executed in connection with this Note or any other note or other loan documents
now or hereafter executed in connection with any obligation of Borrower to Bank
(the "Loan Documents"); (b) consent to all delays, extensions, renewals or other
modifications of this Note or the Loan Documents, or waivers of any term hereof
or of the Loan Documents, or release or discharge by Bank of any of Obligors, or
release, substitution or exchange of any security for the payment hereof, or the
failure to act on the part of Bank, or any indulgence shown by Bank (without
notice to or further assent from any of Obligors), and agree that no such
action, failure to act or failure to exercise any right or remedy by Bank shall
in any way affect or impair the obligations of any Obligors or be construed as a
waiver by Bank of, or otherwise affect, any of Bank's rights under this Note,
under any indorsement or guaranty of this Note or under any of the Loan
Documents; and (c) agree to pay, on demand, all costs and expenses of collection
or defense of this Note or of any indorsement or guaranty hereof and/or the
enforcement or defense of Bank's rights with respect to, or the administration,
supervision, preservation, or protection of, or realization upon, any property
securing payment hereof, including, without limitation, reasonable attorney's
fees, including fees related to
-1-
<PAGE> 2
any suit, mediation or arbitration proceeding, out of court payment agreement,
trial, appeal, bankruptcy proceedings or other proceeding, in such amount as may
be determined reasonable by any arbitrator or court, whichever is applicable.
9. "INTEREST" LIMITED. As used in this Note and for the purposes of
Section 7-4-2 of the Official Code of Georgia Annotated, or any successor
thereto, the term "interest" does not include any fees (including, but not
limited to, the Loan Fee) or other charges imposed on Borrower in connection
with the indebtedness evidenced by this Note, other than the interest described
above.
10. PREPAYMENTS. Prepayments may be made in whole or in part at any time.
All prepayments of principal shall be applied in the inverse order of maturity,
or in such other order as Bank shall determine in its sole discretion.
11. DELINQUENCY CHARGE. To the extent permitted by law, a delinquency
charge may be imposed in an amount not to exceed four percent (4%) of any
payment that is more than fifteen days late.
12. EVENTS OF DEFAULT. The following are events of default hereunder: (a)
the failure to pay (after written notice to Obligor of such failure and
a five (5) day opportunity to cure) any obligation, liability or
indebtedness of any Obligor to Bank, or to any affiliate or subsidiary
of NationsBank Corporation, whether under this Note or any Loan
Documents, as and when due (whether upon demand, at maturity or by
acceleration); (b) the failure to perform any obligation (other than an
obligation described in the immediately preceding subsection) of any
Obligor to Bank, or to any affiliate or subsidiary of NationsBank
Corporation, whether under this Note or any Loan Documents, after
written notice to Obligor of such failure and a thirty (30) day
opportunity to cure; (c) the failure to pay or perform any other
obligation, liability or indebtedness of any Obligor to any other
party, if such failure is not cured within thirty (30) days of Obligor
learning of such failure; (d) the death of any Obligor (if an
individual); (e) the resignation or withdrawal of any partner or a
material owner/guarantor of Borrower, as determined by Bank in its sole
discretion; (f) the commencement of a proceeding against any Obligor
for dissolution or liquidation, the voluntary or involuntary
termination or dissolution of any Obligor or the merger or
consolidation of any Obligor with or into another entity; (g) the
insolvency of, the business failure of, the appointment of a custodian,
trustee, liquidator or receiver for or for any of the property of, the
assignment for the benefit of creditors by, or the filing of a petition
under bankruptcy, insolvency or debtor's relief law or the filing of a
petition for any adjustment of indebtedness, composition or extension
by or against any Obligor; (h) the determination by Bank that any
material representation or warranty made to Bank by any Obligor in any
Loan Documents or otherwise is or was, when it was made, untrue or
materially misleading; (i) the failure of any Obligor to timely deliver
such financial statements, including tax returns, other statements of
condition or other information, as Bank shall reasonably request from
time to time; (j) the entry of a judgment against any Obligor which
Bank deems to be of a material nature, in Bank's sole discretion; (k)
the seizure or forfeiture of, or the issuance of any writ of
possession, garnishment or attachment, or any turnover order for any
property of any Obligor; (l) the determination by Bank that it is
insecure for any reason; (m) the determination by Bank that a material
adverse change has occurred in the financial condition of any Obligor;
or (n) the failure of Borrower's business to comply with any law or
regulation controlling its operation.
13. REMEDIES UPON DEFAULT. Whenever there is a default under this Note (a)
the entire balance outstanding hereunder and all other obligations of any
Obligor to Bank (however acquired or evidenced) shall, at the option of Bank,
become immediately due and payable and any obligation of Bank to permit further
borrowing under this Note shall immediately cease and terminate, and/or (b) to
the extent permitted by law, the Rate of interest on the unpaid principal shall
be increased at Bank's discretion up to 2% per annum above the then applicable
rate (the "Default Rate"). The provisions herein for a Default Rate shall not be
deemed to extend the time for any payment hereunder or to constitute a "grace
period" giving Obligors a right to cure any default. At Bank's option, any
accrued and unpaid interest, fees or charges may, for purposes of computing and
accruing interest on a daily basis after the due date of this Note or any
installment thereof, be deemed to be a part of the principal balance, and
interest shall accrue on a daily compounded basis after such date at the Default
Rate provided in this Note until the entire outstanding balance of principal and
interest is paid in full. Upon a default under this Note, Bank is hereby
authorized at any time, at its option and without notice or demand, to set off
and charge against any deposit accounts of any Obligor (as well as any money,
instruments, securities, documents, chattel paper, credits, claims, demands,
income and any other property, rights and interests of any Obligor), which at
any time shall come into the possession or custody or under the control of Bank
or any of its agents, affiliates or correspondents, any and all obligations due
hereunder. Additionally, Bank shall have all rights and remedies available under
each of the Loan Documents, as well as all rights and remedies available at law
or in equity.
14. NON-WAIVER. The failure at any time of Bank to exercise any of its
options or any other rights hereunder shall not constitute a waiver thereof, nor
shall it be a bar to the exercise of any of its options or rights at a later
date. All rights and remedies of Bank shall be cumulative and may be pursued
singly, successively or together, at the option of Bank. The acceptance by Bank
of any partial payment shall not constitute a waiver of any default or of any of
Bank's rights under this Note. No waiver of any of its rights hereunder, and no
modification or amendment of this Note, shall be deemed to be made by Bank
unless the same shall be in writing, duly signed on behalf of Bank; each such
waiver shall apply only with respect to the specific instance involved, and
shall in no way impair the rights of Bank or the obligations of Obligors to Bank
in any other respect at any other time.
15. APPLICABLE LAW, VENUE AND JURISDICTION. This Note and the rights and
obligations of Borrower and Bank shall be governed by and interpreted in
accordance with the law of the State of Georgia. In any litigation in connection
with or to enforce this Note or any indorsement or guaranty of this Note or any
Loan Documents, Obligors, and each of them, irrevocably consent to and confer
personal jurisdiction on the courts of the State of Georgia or the United States
located within the State of Georgia and expressly waive any objections as to
venue in any such courts. Nothing contained herein shall, however, prevent Bank
from bringing any action or exercising any rights within any other state or
jurisdiction or from obtaining personal jurisdiction by any other means
available under applicable law.
16. PARTIAL INVALIDITY. The unenforceability or invalidity of any provision
of this Note shall not affect the enforceability or validity of any other
provision herein and the invalidity or unenforceability of any provision of this
Note or of the Loan Documents to any person or circumstance shall not affect the
enforceability or validity of such provision as it may apply to other persons or
circumstances.
17. BINDING EFFECT. This Note shall be binding upon and inure to the
benefit of Borrower, Obligors and Bank and their respective successors, assigns,
heirs and personal representatives, provided, however, that no obligations of
Borrower or Obligors hereunder can be assigned without prior written consent of
Bank.
18. CONTROLLING DOCUMENT. To the extent that this Note conflicts with or is
in any way incompatible with any other document related specifically to the loan
evidenced by this Note, this Note shall control over any other such document,
and if this Note does not address an issue, then each other such document shall
control to the extent that it deals most specifically with an issue.
19. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES
HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR
ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY
TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING AN ACTION, INCLUDING A
SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR
CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH
ACTION.
-2-
<PAGE> 3
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY OF ANY
BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS INSTRUMENT, AGREEMENT
OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF
J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN
THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL
BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE
ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL BE
DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS INSTRUMENT, AGREEMENT OR
DOCUMENT; OR (II) BE A WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY 12
U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE
RIGHT OF BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED
TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY
COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH
AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT
OF A RECEIVER. BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH
PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR
AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES
NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL
OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY,
INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
NOTICE OF FINAL AGREEMENT. THIS WRITTEN PROMISSORY NOTE REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
BORROWER:
NFRONT, INC.
BY: /s/ Robert L. Campbell
-----------------------------
TITLE: President
--------------------------
[CORPORATE SEAL]
ATTEST: Craig L. Benn
-------------------------
TITLE: Assistant Secretary
--------------------------
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<PAGE> 1
EXHIBIT 10.33
<TABLE>
<CAPTION>
NationsBank, N.A.
PROMISSORY NOTE
<S> <C> <C> <C>
Date June 17, 1999 [X] New [_] Renewal Amount $575,000.00 Maturity Date: August 15, 2001
=======================================================================================================================
Bank: Borrower:
NationsBank, N.A. nFront, Inc.
Banking Center: 520 Guthridge Court
P.O. Box 45247 Suite 100
Jacksonville, Fl. 32256 Norcross, Georgia 30092
Suite 100
Norcross, Georgia 30092
(Street address including county) (Name and street address, including county)
=======================================================================================================================
</TABLE>
FOR VALUE RECEIVED, the undersigned Borrower unconditionally (and jointly and
severally, if more than one) promises to pay to the order of Bank, its
successors and assigns, without setoff, at its offices indicated at the
beginning of this Note, or at such other place as may be designated by Bank, the
principal amount of $575,000.00 or so much thereof as may be advanced from time
to time in immediately available funds, together with interest computed daily on
the outstanding principal balance hereunder, at an annual interest rate, and in
accordance with the payment schedule, indicated below.
1. RATE.
PRIME RATE. The Rate shall be the Prime Rate, plus one percent, per annum. The
"Prime Rate" is the fluctuating rate of interest established by Bank from time
to time, at its discretion, whether or not such rate shall be otherwise
published. The Prime Rate is established by Bank as an index and may or may not
at any time be the best or lowest rate charged by Bank on any loan.
2. ACCRUAL METHOD. Unless otherwise indicated, interest at the Rate set forth
above will be calculated by the 365/360 day method (a daily amount of interest
is computed for a hypothetical year of 360 days; that amount is multiplied by
the actual number of days for which any principal is outstanding hereunder).
3. RATE CHANGE DATE. Any Rate based on a fluctuating index or base rate will
change, unless otherwise provided, each time and as of the date that the index
or base rate changes. In the event any index is discontinued, Bank shall
substitute an index determined by Bank to be comparable, in its sole discretion.
4. PAYMENT SCHEDULE. All payments received hereunder shall be applied first to
the payment of any expense or charges payable hereunder or under any other loan
documents executed in connection with this Note, then to interest due and
payable, with the balance applied to principal, or in such other order as Bank
shall determine at its option.
PRINCIPAL PLUS ACCRUED INTEREST. Principal shall be paid in consecutive equal
installments of $22,115.00, plus accrued interest, payable monthly commencing on
July 15, 1999, and continuing on the same day of each successive month
thereafter, with a final payment of all unpaid principal and accrued interest
due on August 15, 2001.
5. AUTOMATIC PAYMENT.
[_] Borrower has elected to authorize Bank to effect payment of sums due under
this Note by means of debiting Borrower's account number ______________________
______________________________________________. This authorization shall not
affect the obligation of Borrower to pay such sums when due, without notice, if
there are insufficient funds in such account to make such payment in full on the
due date thereof, or if Bank fails to debit the account.
6. WAIVERS, CONSENTS AND COVENANTS. Borrower, any indorser or guarantor hereof,
or any other party hereto (individually an "Obligor" and collectively
"Obligors") and each of them jointly and severally: (a) waive presentment,
demand, protest, notice of demand, notice of intent to accelerate, notice of
acceleration of maturity, notice of protest, notice of nonpayment, notice of
dishonor, and any other notice required to be given under the law to any Obligor
in connection with the delivery, acceptance, performance, default or enforcement
of this Note, any indorsement or guaranty of this Note, or any other documents
executed in connection with this Note or any other note or other loan documents
now or hereafter executed in connection with any obligation of Borrower to Bank
(the "Loan Documents"), other than any notice expressly required by the terms of
this Note or any Loan Documents; (b) consent to all delays, extensions, renewals
or other modifications of this Note or the Loan Documents, or waivers of any
term hereof or of the Loan Documents, or release or discharge by Bank of any of
Obligors, or release, substitution or exchange of any security for the payment
hereof, or the failure to act on the part of Bank, or any indulgence shown by
Bank (without notice to or further assent from any of Obligors), and agree that
no such action, failure to act or failure to exercise any right or remedy by
Bank shall in any way affect or impair the obligations of any Obligors or be
construed as a waiver by Bank of, or otherwise affect, any of Bank's rights
under this Note, under any indorsement or guaranty of this Note or under any of
the Loan Documents; and (c) agree to pay, on demand, all costs and expenses of
collection or defense of this Note or of any indorsement or guaranty hereof
and/or the enforcement or defense of Bank's rights with respect to, or the
administration, supervision, preservation, or protection of, or realization
upon, any property securing payment hereof, including, without limitation,
reasonable attorney's fees, including fees related to any suit, mediation or
arbitration proceeding, out of court payment agreement, trial, appeal,
bankruptcy proceedings or other proceeding, in such amount as may be determined
reasonable by any arbitrator or court, whichever is applicable.
7. "INTEREST" LIMITED. As used in this Note and for the purposes of Section
7-4-2 of the Official Code of Georgia Annotated, or any successor thereto, the
term "interest" does not include any fees (including, but not limited to, the
Loan Fee) or other charges imposed on Borrower in connection with the
indebtedness evidenced by this Note, other than the interest described above.
8. PREPAYMENTS. Prepayments may be made in whole or in part at any time.
9. DELINQUENCY CHARGE. To the extent permitted by law, a delinquency charge may
be imposed in an amount not to exceed four percent (4%) of any payment that is
more than fifteen days late.
10. EVENTS OF DEFAULT. The following are events of default hereunder: (a) the
failure to pay (after written notice to Obligor of such failure and a five (5)
day opportunity to cure) any obligation, liability or indebtedness of any
Obligor to Bank, or to any affiliate or subsidiary of NationsBank Corporation,
whether under this Note or any Loan Documents, as and when due (whether upon
demand, at maturity or by acceleration); (b) the failure to perform any
obligation
-1-
<PAGE> 2
(other than an obligation described in the immediately preceding subsection) of
any Obligor to Bank, or to any affiliate or subsidiary of NationsBank
Corporation, whether under this Note or any Loan Documents, after written notice
to Obligor of such failure and a thirty (30) day opportunity to cure; (c) the
failure to pay or perform any other obligation, liability or indebtedness of any
Obligor to any other party, if such failure is not cured within thirty (30) days
of Obligor learning of such failure; (d) the death of any Obligor (if an
individual); (e) the resignation or withdrawal of any partner or a material
owner/guarantor of Borrower, as determined by Bank in its sole discretion; (f)
the commencement of a proceeding against any Obligor for dissolution or
liquidation, the voluntary or involuntary termination or dissolution of any
Obligor or the merger or consolidation of any Obligor with or into another
entity; (g) the insolvency of, the business failure of, the appointment of a
custodian, trustee, liquidator or receiver for or for any of the property of,
the assignment for the benefit of creditors by, or the filing of a petition
under bankruptcy, insolvency or debtor's relief law or the filing of a petition
for any adjustment of indebtedness, composition or extension by or against any
Obligor; (h) the determination by Bank that any material representation or
warranty made to Bank by any Obligor in any Loan Documents or otherwise is or
was, when it was made, untrue or materially misleading; (i) the failure of any
Obligor to timely deliver such financial statements, including tax returns,
other statements of condition or other information, as Bank shall reasonably
request from time to time; (j) the entry of a judgment against any Obligor which
Bank deems to be of a material nature, in Bank's sole discretion; (k) the
seizure or forfeiture of, or the issuance of any writ of possession, garnishment
or attachment, or any turnover order for any property of any Obligor; (l) the
determination by Bank that it is insecure for any reason; (m) the determination
by Bank that a material adverse change has occurred in the financial condition
of any Obligor; or (n) the failure of Borrower's business to comply with any law
or regulation controlling its operation.
11. REMEDIES UPON DEFAULT. Whenever there is a default under this Note (a) the
entire balance outstanding hereunder and all other obligations of any Obligor to
Bank (however acquired or evidenced) shall, at the option of Bank, become
immediately due and payable and any obligation of Bank to permit further
borrowing under this Note shall immediately cease and terminate, and/or (b) to
the extent permitted by law, the Rate of interest on the unpaid principal shall
be increased at Bank's discretion up to 2% per annum above the then applicable
rate (the "Default Rate"). The provisions herein for a Default Rate shall not be
deemed to extend the time for any payment hereunder or to constitute a "grace
period" giving Obligors a right to cure any default. At Bank's option, any
accrued and unpaid interest, fees or charges may, for purposes of computing and
accruing interest on a daily basis after the due date of this Note or any
installment thereof, be deemed to be a part of the principal balance, and
interest shall accrue on a daily compounded basis after such date at the Default
Rate provided in this Note until the entire outstanding balance of principal and
interest is paid in full. Upon a default under this Note, Bank is hereby
authorized at any time, at its option and without notice or demand, to set off
and charge against any deposit accounts of any Obligor (as well as any money,
instruments, securities, documents, chattel paper, credits, claims, demands,
income and any other property, rights and interests of any Obligor), which at
any time shall come into the possession or custody or under the control of Bank
or any of its agents, affiliates or correspondents, any and all obligations due
hereunder. Additionally, Bank shall have all rights and remedies available under
each of the Loan Documents, as well as all rights and remedies available at law
or in equity.
12. NON-WAIVER. The failure at any time of Bank to exercise any of its options
or any other rights hereunder shall not constitute a waiver thereof, nor shall
it be a bar to the exercise of any of its options or rights at a later date. All
rights and remedies of Bank shall be cumulative and may be pursued singly,
successively or together, at the option of Bank. The acceptance by Bank of any
partial payment shall not constitute a waiver of any default or of any of Bank's
rights under this Note. No waiver of any of its rights hereunder, and no
modification or amendment of this Note, shall be deemed to be made by Bank
unless the same shall be in writing, duly signed on behalf of Bank; each such
waiver shall apply only with respect to the specific instance involved, and
shall in no way impair the rights of Bank or the obligations of Obligors to Bank
in any other respect at any other time.
13. APPLICABLE LAW, VENUE AND JURISDICTION. This Note and the rights and
obligations of Borrower and Bank shall be governed by and interpreted in
accordance with the law of the State of Georgia. In any litigation in connection
with or to enforce this Note or any indorsement or guaranty of this Note or any
Loan Documents, Obligors, and each of them, irrevocably consent to and confer
personal jurisdiction on the courts of the State of Georgia or the United States
located within the State of Georgia and expressly waive any objections as to
venue in any such courts. Nothing contained herein shall, however, prevent Bank
from bringing any action or exercising any rights within any other state or
jurisdiction or from obtaining personal jurisdiction by any other means
available under applicable law.
14. PARTIAL INVALIDITY. The unenforceability or invalidity of any provision of
this Note shall not affect the enforceability or validity of any other provision
herein and the invalidity or unenforceability of any provision of this Note or
of the Loan Documents to any person or circumstance shall not affect the
enforceability or validity of such provision as it may apply to other persons or
circumstances.
15. BINDING EFFECT. This Note shall be binding upon and inure to the benefit of
Borrower, Obligors and Bank and their respective successors, assigns, heirs and
personal representatives, provided, however, that no obligations of Borrower or
Obligors hereunder can be assigned without prior written consent of Bank.
16. CONTROLLING DOCUMENT. To the extent that this Note conflicts with or is in
any way incompatible with any other document related specifically to the loan
evidenced by this Note, this Note shall control over any other such document,
and if this Note does not address an issue, then each other such document shall
control to the extent that it deals most specifically with an issue.
17. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR
ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY
TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING AN ACTION, INCLUDING A
SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR
CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH
ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY OF ANY
BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS INSTRUMENT, AGREEMENT
OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF
J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN
THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL
BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE
ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL BE
DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS INSTRUMENT, AGREEMENT OR
DOCUMENT; OR (II) BE A WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY 12
U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE
RIGHT OF BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED
TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY
COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH
AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT
OF A RECEIVER. BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH
PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR
AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES
NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL
OR ANCILLARY REMEDIES SHALL CONSTITUTE A
-2-
<PAGE> 3
WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO
ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH
REMEDIES.
NOTICE OF FINAL AGREEMENT. THIS WRITTEN PROMISSORY NOTE REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
BORROWER:
nFront, Inc.
By: /s/ Robert L. Campbell
---------------------------------
Title: President
-------------------------------
[Corporate Seal]
Attest: /s/ Craig L. Benn
----------------------------
Title: Assistant Secretary
------------------------------
-3-
<PAGE> 1
EXHIBIT 10.34
SUBLEASE AGREEMENT
This Sublease Agreement is made between GULLIVER RITCHIE ASSOCIATES,
INC. (hereinafter referred to as "SUBLESSOR"), and NFRONT, INC. (hereinafter
referred to as "SUBLESSEE");
WITNESSETH:
WHEREAS, SUBLESSOR has heretofore entered into that certain Lease dated
July 3, 1996 attached hereto as Exhibit "B", (hereinafter referred to as the
"Lease") with 40 Tech Park, L.P., successor in interest to The First National
Bank of Chicago, as Trustee for New England Mutual Life Insurance Company
Mortgage Pass Through Certificates, Series 1993-1, (hereinafter referred to as
"Landlord"), on certain Premises described as 40 Technology Park, Suite 100,
Norcross, Georgia 30092 (hereinafter called "Lease"); and
WHEREAS, SUBLESSOR and SUBLESSEE mutually desire that SUBLESSEE
sublease the entire Premises covered by the Lease from SUBLESSOR; and
WHEREAS, the Lease requires that the Landlord under said Lease consents
to and approves said Sublease;
NOW, THEREFORE, subject to the said consent of the Landlord under the
Lease, SUBLESSOR hereby subleases under the Lease to SUBLESSEE on an "as is"
basis, the entire Premises, covered by the Lease totaling approximately 8,484
rentable square feet as shown on Exhibit "A", attached hereto and by this
reference incorporated herein, for a term commencing on June 1, 1999 and
extending through and including November 30, 1999 at an Annual Base Rental of
$101,808.00 payable $8,484.00 (inclusive of all rent, taxes and other operating
costs) monthly on the first of each month.
In addition, SUBLESSOR and SUBLESSEE agree further as follows:
1. Said rent shall be paid by SUBLESSEE to SUBLESSOR in advance, not later than
the first day of each month, and the first month's rent shall be paid upon
execution of this Sublease. Thereafter, rent shall be forwarded to SUBLESSOR not
later than the first day of the month for which the rent is paid at the
following address:
Gulliver Ritchie Associates, Inc.
303 Research Drive
Suite 200
Norcross, GA 30092
2. Each party represents that it has not had dealings with any real estate
broker, finder or other person, with respect to this Sublease and transaction in
any manner except Wm. Leonard & Co. Wm. Leonard & Co. has represented the
SUBLESSEE in this transaction and SUBLESSOR shall pay Wm. Leonard & Co. a
commission pursuant to a separate agreement and shall hold SUBLESSEE harmless
from all costs and damages resulting from any claims that may be asserted
against SUBLESSEE by any broker, finder or other person with whom SUBLESSOR has
dealt.
3. SUBLESSEE agrees to fully perform unto SUBLESSOR and Landlord severally, all
of the obligations of SUBLESSOR (except SUBLESSOR'S obligations to pay rent
including all taxes and other
<PAGE> 2
operating costs and any escalations thereto to Landlord) under Lease with
respect to the subleased Premises and to accord SUBLESSOR all of the rights,
privileges and indemnities with respect to the subleased Premises which the
Landlord has with respect to and from SUBLESSOR under the Lease.
4. SUBLESSOR and SUBLESSEE agree to perform and comply with all of the terms,
provisions, covenants and conditions of the Lease Agreement and not to do or
suffer anything which would result in a default under or cause the Lease
Agreement to be terminated or forfeited.
5. Any notice or demand which must or may be given or made by a party hereto
shall be in writing signed by an authorized representative of such party given
by certified or registered mail sent,
In the case of SUBLESSOR to: In the case of SUBLESSEE to:
Gulliver Ritchie Associates, Inc. nFront, Inc.
303 Research Drive 520 Guthridge Court
Suite 200 Suite 100
Norcross, GA 30092 Norcross, Georgia 30092
6. This Sublease shall be upon all of the terms, covenants, conditions and
provisions as provided in the Lease Agreement as applicable to the Premises
demised hereunder except such (a) as because of the passage of time now are
inapplicable to this Sublease; or (b) are by this Sublease specified to be of no
effect; or (c) are inconsistent with the express provisions set forth herein;
and the provisions of which Lease Agreement are deemed included herein and made
a part hereof as if herein at length set forth.
7. SUBLESSOR represents to SUBLESSEE that the copy of said Lease Agreement and
Amendments thereto, which is attached hereto, is a true copy thereof, as the
same now exists; that the Lease Agreement is in full force and effect, and has
not been modified or canceled; that SUBLESSOR has no knowledge of any material
default by Landlord or SUBLESSOR thereunder; and that SUBLESSOR has received no
notices of SUBLESSOR'S default thereunder from Landlord.
8. SUBLESSEE shall take the Premises on an "as is" basis. SUBLESSEE shall obtain
approval of SUBLESSOR and if necessary, Landlord, on any additional changes
which SUBLESSEE wishes to make to the Premises, provided that SUBLESSOR shall
cooperate with SUBLESSEE in obtaining approval of Landlord.
9. It is understood and agreed by SUBLESSOR and SUBLESSEE that nothing herein
nor the approval and consent of the Landlord shall release the SUBLESSOR from
the full and faithful performance of all of its obligations to Landlord under
the herein referenced Lease Agreement.
10. Time is of the essence of this Sublease. This Sublease and the rights and
obligation of the parties hereto shall be interpreted, construed and enforced in
accordance with the laws of the State of Georgia.
11. This Sublease contains the entire agreement of the parties hereto and no
representations inducements, promises or agreements, oral or otherwise, between
the parties not embodied herein, shall be of any force or effect. The failure of
either party to insist in any instance on strict performance of any covenant or
condition hereof, or to exercise any option herein contained, shall not be
construed as a waiver of such covenant, condition or option in any other
instance. This sublease can not be modified or terminated orally.
12. Upon execution of this Sublease, SUBLESSEE shall pay a security deposit in
the amount of
<PAGE> 3
Two Thousand and no/100 dollars ($2,000.00) to SUBLESSOR. Upon termination of
this Sublease and surrender of the Premises by SUBLESSEE, the security deposit
shall be returned to SUBLESSEE, provided that SUBLESSOR may hold said security
deposit for a period of fifteen (15) days following surrender of possession and
may deduct from the amount refunded any rental due and payable, the costs of
repairing any damage or replacing any damaged portion of the Premises and costs
of cleaning the Premises if SUBLESSEE fails to do so prior to surrender of
possession.
13. SUBLESSEE may utilize the network panel and cabling presently located in the
Premises at no charge to SUBLESSEE, provided however, SUBLESSEE shall not
relocate any of the cabling or the network panel.
IN WITNESS WHEREOF, the undersigned parties have executed this Sublease
Agreement by and through their duly authorized representatives on the 1st day of
June, 1999 subject to the approval of Landlord under said Lease.
SUBLESSEE: SUBLESSOR:
NFRONT, INC. GULLIVER RITCHIE ASSOCIATES, INC.
By: /s/ Jeffrey W. Hodges By: /s/ Gulliver Ritchie Associates, Inc.
-------------------------- --------------------------------------
Title: CFO Title: By its President & COO
---------------------- -----------------------------------
<PAGE> 4
EXHIBIT A
[Description of the Premises]
<PAGE> 5
EXHIBIT B
40 TECHNOLOGY PARKWAY
OFFICE BUILDING LEASE AGREEMENT
This Lease Agreement (the "Lease") is entered into as of the 3rd day of
July, 1996, by and between The First National Bank of Chicago, as Trustee for
New England Mutual Life Insurance Company Mortgage Pass Through Certificates,
Series 1993-1 ("Landlord") and Gulliver Ritchie Associates, Inc. ("Tenant").
WITNESSETH:
1. Definitions and Basic Provisions. Certain definitions and provisions
(the "Basic Lease Information") of this Lease are:
Lease Date: June 1, 1996
Tenant: Gulliver Ritchie Associates, Inc.
Tenant's Address: Suite 100
40 Technology Parkway
Norcross, Georgia 30092
Contact: Guy E. Diedrich
Telephone: 770/242-0292
Landlord: The First National Bank of Chicago, as Trustee for New
England Mutual Life Insurance Company Commercial Mortgage
Pass Through Certificates, Series 1993-1
Landlord's Address: Koll Management, Inc.
Suite 1900
3399 Peachtree Road
Atlanta, Georgia 30326
Copy to: Lennar Partners, Inc.
Suite 3500
600 Peachtree Street
Atlanta, Georgia 30308
1.2 Premises: Suite No. 100 in the office building located at
40 Technology Parkway, South (the "Building"), known as 40 Technology Park. The
Building and the land upon which it is situated, which land is more particularly
described in Exhibit "A" hereto are herein sometimes collectively called the
"Project".
1.3 Lease Term. The period commencing on August 1, 1996 (or
the earlier date Tenant occupies the Premises, subject to adjustment provided in
the Lease (the "Commencement Date"), and continuing for Sixty-One (61) months
thereafter. If the Commencement Date is a date other than the first day of a
month, the Lease Term shall consist of said number of months in addition to the
remainder of the days in the month in which the Commencement Date occurs.
<PAGE> 6
Base Rental Schedule; Additional Rent.
Throughout the term of this Lease, Tenant hereby agrees to pay a base
rental in accordance with the following Schedule for each year of the term of
this lease:
<TABLE>
<CAPTION>
Annual Monthly
Year Base Rental Rate Rental
---- ---------------- ---------
<S> <C> <C>
1 $106,050.00 $ 8,837.50
2 $114,534.00 $ 9,544.50
3 $120,897.00 $10,074.75
4 $125,139.00 $10,428.25
5 $131,502.00 $10,958.50
</TABLE>
Tenant also agrees to pay Additional Rent in accordance with Section
3.2 attached hereto.
1.4 Security Deposit: $8,837.50
Tenant's Share: The percentage that expresses the ratio between the
number of rentable square feet comprising the Premises (8,434), and the number
of rentable square feet of the Building (37,136), which, for the purposes of the
Lease, shall be 22.85%.
1.5 Permitted Use: General office purposes.
1.6 Lease Year: The period of twelve (12) months or less
commencing with the Commencement Date and ending at midnight on the following
December 31, each successive period of twelve (12) months thereafter during the
Lease Term, and the final period of twelve (12) months or less commencing on
January 1 of the year in which the Lease Term expires. During any Lease Year
within the Lease Term that is less than twelve (12) full months, any amount to
be paid for such period shall be prorated, based on the actual number of months
and the actual number of days of any partial month assuming each month to have
thirty (30) days.
2. Lease Grant.
2.1 In consideration of rent to be paid and the other
covenants and agreements to be performed by Tenant, Landlord does hereby lease,
demise and let unto Tenant the Premises, shown in the plan attached hereto as
Exhibit "A-1", commencing on the Commencement Date and ending on the last day of
the Lease Term, unless sooner terminated as herein provided. No easement for
light, air or view is granted, given or implied herein.
2.2 From and after the date hereof, Landlord shall construct
the Premises in accordance with the Final Plans (the "Plans") described in
Exhibit "G" attached hereto, and any changes or amendment thereto which are
properly authorized by Landlord and Tenant, and shall proceed with due diligence
with such construction so that construction is completed on or before August 30,
1996. When the Premises have been substantially completed in accordance with the
Plans (subject to normal minor "punch-list" items which do not materially
interfere with Tenant's intended use and occupancy of the Premises) and Landlord
has obtained a certificate of occupancy entitling Tenant to occupy the Premises,
Landlord shall notify Tenant that the Premises are ready for occupancy.
<PAGE> 7
Landlord shall diligently complete as soon as reasonably possible any items of
work not completed when the Premises are ready for occupancy. Landlord shall
assign to Tenant all applicable third party warranties and guaranties obtained
by Landlord in connection with the construction of such improvements. As used
herein, the term "Commencement Date" shall mean that date which is the earlier
to occur of (i) the issuance of a Certificate of Occupancy establishing that the
Premises are ready for occupancy by Tenant or (ii) Tenant's actual occupancy of
a majority of the Premises. Notwithstanding anything contained herein or in
Section 29 to the contrary, in the event that the Commencement Date does not
occur prior to September 30, 1996 through no fault of Tenant, Tenant shall have
the right to terminate this Lease by written notice to Landlord, whereupon all
security deposit, advance rent and other deposit paid by Tenant to Landlord
shall be promptly refunded by Landlord whereupon neither party shall have any
further rights or obligations hereunder. If this Lease is executed before the
Premises become vacant, or otherwise available for occupancy, or if any tenant
or occupant of the Premises holds over, and Landlord cannot acquire possession
of the Premises prior to the Commencement Date, Landlord shall not be in default
hereunder, and Tenant shall accept possession of the Premises when Landlord is
able to tender the same. Within ten (10) days after request of Landlord, Tenant
shall give Landlord a document confirming the Commencement Date, and certifying
that Tenant has accepted delivery of the Premises and that the condition of the
Premises complies with Landlord's obligations hereunder subject to such matters
as may be described therein. Such document shall be in the form attached hereto
as Exhibit "B", and by this reference incorporated herein.
3. Rent.
3.1 Base Rent. Tenant agrees to pay to Landlord in advance on
or before the first day of each month the Base Rent, subject to adjustment as
hereinafter provided, without deduction or set off except as may be provided
herein, for each month of the entire Lease Term. The first such monthly
installment together with the Security Deposit shall be due and payable by
Tenant to Landlord upon execution of this lease, and a like monthly installment
shall be due and payable without demand on or before the first day of each
calendar month succeeding the Commencement Date during the Lease Term. Rent for
any period of less than a full month shall be prorated, based on one thirtieth
(1/30) of the current monthly rent for each day of the partial month this Lease
is in effect. Landlord and Tenant acknowledge and agree that notwithstanding any
provision herein to the contrary, the base Monthly Rent payable during the first
month of the Lease term shall be $0.00, with the full base Monthly Rent set
forth in the Schedule in Paragraph 1.3 hereinabove commencing on the second
month after the Commencement Date and continuing thereafter throughout the Lease
Term.
3.2 Payment of Operating Costs by Tenant. In addition to the
Base Rent, Tenant agrees to pay as Additional Rent to Landlord, Tenant's Share
of estimated "Operating Costs" (as hereinafter defined in Paragraph 3.2.3
hereof) in excess of the Operating Costs for the Building for calendar year 1996
(the "Initial Operating Costs"), on a per square foot per annum basis and
adjusted as required herein, which Additional Rent shall be due in twelve (12)
equal installments in each Lease Year. All payments of Tenant's Share of
Operating Costs shall be due and payable without demand, deduction or set off in
advance on or before the first day of each month of the Lease Term beginning
January 1997. During any Lease Year within the Lease Term that is less than
twelve (12) full months, any amount to be paid with respect to such period shall
be proportionately adjusted based on that portion of the Lease Year that this
Lease is in effect.
3.2.1 Calculation of Operating Costs. On or
before December 15 of each Lease Year, Landlord shall provide Tenant with
Landlord's estimate of Tenant's Share of Operating Costs in excess of the
Initial Operating Costs for the following Lease Year (the "Estimated Operating
Costs"). Beginning on the January 1 of each Lease Year the amount of Tenant's
Share of Estimated Operating Costs shall be adjusted to the amount set forth in
Landlord's notice. As promptly as practical after the end of each Lease Year,
Landlord shall compute the actual Operating Costs for the such previous
<PAGE> 8
Lease Year. If Tenant's Share of the actual Operating Costs in excess of the
Initial Operating Costs is greater than the amount Tenant paid to Landlord as
Tenant's Share of the Estimated Operating Costs for the previous Lease Year,
Tenant shall, within fifteen (15) days after receipt of notice of Tenant's Share
of actual Operating Costs, pay to Landlord as Additional Rent an amount equal to
the difference between Tenant's Share of actual Operating Costs and Tenant's
Share of Estimated Operating Costs. If Tenant's Share of the actual Operating
Costs for any Lease Year is less than the amount Tenant paid to Landlord as
Tenant's Share of Estimated Operating Costs for such Lease Year, such excess
amount shall be applied against the installment of Additional Rent next coming
due until the same has been fully applied, provided however that any such excess
amount paid in the final Lease Year shall be promptly refunded by Landlord to
Tenant.
3.2.2 Adjustments to Operating Costs.
Notwithstanding anything to the contrary contained herein, if the Building is
not fully occupied during any calendar year, appropriate adjustments shall be
made to determine Operating Costs as though the Building has been fully occupied
in such calendar year.
3.2.3 Definitions. The definitions set forth in
this Section 3.2.3 shall be applied whenever any of the following terms are used
in Section 3.2.
3.2.3.1 Operating Costs: shall mean all costs paid
by Landlord or its representatives in connection with the ownership, management,
maintenance, operation, leasing, insuring, repairing, redecorating, cleaning and
securing of the Building, as determined by Landlord to be necessary or
appropriate, including, without limitation, all of the following costs:
(a) All wages, salaries, and related
expenses of all on-site and off-site agents, employees and contractors engaged
in the management, operation, maintenance, repair, redecoration, cleaning, and
security of the Building, plus the costs of all management, maintenance, and
security offices in the Building.
(b) All supplies and materials used and
labor charges incurred in the management, operation, maintenance, repair,
redecoration, cleaning and security of the Building.
(c) All equipment purchased or leased
for the performance of Landlord's obligations hereunder and used solely for the
Project.
(d) All management, maintenance,
cleaning, security and other service agreements for the Building and the
equipment therein, including, without limitation, alarm service, security
service, window cleaning, and elevator and escalator maintenance.
(e) All accounting and engineering fees
and expenses, including, without limitation, the cost of audits by certified
public accountants.
(f) All insurance premiums, including,
without limitation, fire, casualty, extended coverage, public liability, rent
abatement, boiler, and worker's compensation insurance applicable to the
Building, Landlord's employees and Landlord's personal property used in
connection therewith.
(g) All common area redecorating
(including painting, wallpapering and floor covering), maintaining and repairing
of the Building, structural or non-structural, including, without limitation,
the mechanical, electrical, heating, ventilating and air conditioning equipment,
landscape maintenance and the replacement of trees and shrubbery.
<PAGE> 9
(h) All removing of trash, rubbish,
garbage and other refuse from the Building, as well as removal of ice and snow
from the sidewalks, driveways and parking lots.
(i) All amortization of capital
improvements (including accounting, legal, architectural and engineering fees
incurred in connection therewith) made to the Building subsequent to the
Commencement Date which (i) will improve operating efficiencies; (ii) may be
required by any law; or (iii) improve or enhance the health of persons in the
Building or safety of the Building.
(j) All charges for electricity, gas,
water, sewer, and other utilities furnished to or services or privileges made
available to users of the Building.
(k) All ad valorem property taxes
covering all real and personal property constituting a part of the Building,
including, but not limited to, all general and special assessments of every
kind, but not including the personal property of any other tenant.
(l) All other expenses of owning,
maintaining, operating, insuring, securing, managing, cleaning, redecorating or
repairing the Building.
3.2.3.2 Notwithstanding any of the foregoing to the
contrary, Operating Costs shall not include:
(a) Costs which are required to be reimbursed
to Landlord by other tenants, directly or indirectly;
(b) Costs of leasehold improvements;
(c) Payment of any return on equity to any owner
of the Building;
(d) Costs reimbursed by proceeds of insurance;
(e) Costs of the initial of the Building or any
depreciation thereof;
(f) Payments of claims, damages or expenses
resulting from any grossly negligent or willful misconduct of Landlord or any of
its authorized representatives;
(g) Commissions payable to any real estate
broker(s) for the leasing of space in the Building;
(h) The cost of any work done by Landlord for
and at the expense of any particular tenant(s) in the Building or for which
Landlord is entitled to reimbursement from a third party;
(i) Legal fees, auditing fees, or other
professional fees and expenses paid by Landlord to enforce the obligations of
any other actual or prospective tenant in the Building;
(j) Interest or penalties resulting from
Landlord's negligent failure to pay applicable real property taxes on the
Project in a timely manner;
<PAGE> 10
(k) Costs to Landlord for repairs or work
required to be made or done on the Project as the result of fire, windstorm, or
other insurable casualty or by the exercise of eminent domain;
(l) Mortgage financing including any interest or
debt or amortization payments on any mortgages and/or under any ground lease or
underlying leases on the Project;
(m) Compensation paid by Landlord to persons
engaged in commercial concessions operated by Landlord (and not by a third
party) on the Project (e.g. newspaper stand, shoeshine service, valet parking
service);
(n) Expenses paid by Landlord for the
advertising and promotion of space for rent in the Building;
(o) Salaries, wages and benefits of Landlord's
employees above the level of "Property Manager";
(p) Painting or repainting any portion of the
Building other that general exterior painting not paid for by any tenant; and
(q) Costs incurred by Landlord resulting from
the purchase of art objects decorations for the Building.
3.3 If any installment of the Base Rent, Additional Rent or
any other sums owed by Tenant to Landlord under this Lease, is not received
within five (5) days after the due date thereof, without implying Landlord's
consent to such late payment, Tenant, to the extent permitted by law, agrees to
pay, in addition to said installment of the Base Rent or such other sum owed, a
late payment charge equal to five percent (5%) of the installment of the Base
Rent or such other sums owed. Said late payments charge shall constitute
liquidated damages and shall be for the purpose of reimbursing Landlord for
additional costs and expenses which Landlord expects to incur in connection with
the handling and processing of late installment payments of the Base Rent and
such other sums owed by Tenant to Landlord hereunder. If there is a late payment
by Tenant, the damages resulting to Landlord will be difficult to ascertain
precisely, and the foregoing charge constitutes a reasonable and good faith
estimate by the parties of the extent of such damages and does not constitute
interest. Notwithstanding the foregoing, such late charges shall not apply to
any sums which may have been advanced by Landlord to or for the benefit of
Tenant to this Lease.
3.4 The Security Deposit shall be held by Landlord as security
for the performance by Tenant of Tenant's covenants and obligations under this
Lease. Such deposit shall not considered an advance payment of rent or a measure
of Landlord's damages in a default by Tenant. Upon any event of default by
Tenant, Landlord may (but shall not be obligated to), with prejudice to any
other remedy, use the Security Deposit to the extent necessary to fund any
arrearage of Rent and any other damage, injury, expense or liability caused to
Landlord by such event of default. Following such application of the Security
Deposit, Tenant shall pay to Landlord on demand the amount so applied to restore
the Security Deposit to its original amount. If there is not then an event of
default, any remaining balance of the Security Deposit shall be returned by
Landlord to Tenant upon termination of this Lease. If Landlord transfers its
interest in the Premises during the Lease Term, Landlord may assign the Security
Deposit to the transferee and following such assignment and written assumption
by such Transferee, Landlord shall have no further liability for the return of
the Security Deposit.
3.5 All sums other than Base Rent payable by Tenant to
Landlord under this Lease shall constitute Additional Rent. Base Rent and
Additional Rent are herein referred to collectively as "Rent". All Rent due
hereunder shall bear interest from the date until paid in full at a rate equal
to the
<PAGE> 11
lesser of: (a) the prime interest rate in effect from day to day at NationsBank
of Georgia, plus three (3) percentage points; or (b) the maximum legal rate
allowed by law (the "Default Rate"). If more than the maximum legal rate of
interest should ever be collected with regard to any sum due hereunder, said
excess amount shall be credited against future payments of Rent accruing
thereafter. If no such further Rent accrues hereunder, said excess sums shall be
promptly refunded by Landlord to Tenant upon demand by Tenant.
3.6 No payment by Tenant or receipt by Landlord of a lesser
amount than the correct Rent shall be deemed to be other than a payment on
account, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment be deemed an accord and satisfaction. Landlord
may accept such check or payment without prejudice to Landlord's right to
recover the balance or to pursue any other remedy.
3.7 Tenant shall have the right, at its sole cost and expense,
and subject to the provisions of this Paragraph 3.7, to review and audit
Landlord's records relating to actual Operating Costs for the preceding Lease
Year, which records Landlord agrees to keep at its principal office or at the
office of Landlord's property manager. In the event that Tenant desires to so
review and audit Landlord's records, such audit and review shall occur within
ninety (90) days of the expiration of the Lease Year to be reviewed and not less
than fifteen (15) business days from the date Landlord receives advance written
notice of same from Tenant. Any such audit shall be conducted by a Certified
Public Accountant in accordance with Generally Accepted Accounting Principles
consistently applied, shall be conducted at the office where such records are
kept during normal business hours, shall not unreasonably interfere with such
office's operations, shall be performed at Tenant's sole cost and expense, shall
not be made more than once during any Lease Year, and shall be limited to the
actual operating Costs for the immediately preceding Lease Year. In the event
that such audit shows that the actual Operating Costs for the Lease Year
reviewed were overstated, Landlord shall have the right at its own expense and
within sixty (60) days of receiving a written copy of Tenant's audit, to perform
its own audit. In the event that Landlord's audit confirms overstatement of
actual Operating Costs, Landlord shall apply Tenant's Share of any such overage
against the next installment of Additional Rent next coming due until the same
has been fully applied, provided however that any such excess amount paid in the
final Lease Year shall be promptly refunded by Landlord to Tenant. In the event
that Tenant's audit reveals that the actual Operating Costs were understated,
Tenant shall promptly pay to Landlord Tenant's Share of the amount understated.
4. Intentionally Omitted.
5. Landlord's Obligations.
5.1 Subject to the limitations hereinafter set forth, Landlord
shall furnish Tenant while occupying the Premises and while Tenant is not in
default under this Lease facilities to provide (a) water at those points of
supply provided for general use of tenants of the Building; (b) heat and air
conditioning in season, from 8:00 a.m. to 6:00 p.m. Monday through Friday and
from 9:00 a.m. to 1:00 p.m. on Saturdays, except for holidays, at temperatures
and amounts reasonably considered by Landlord to be standard, such service at
night and on Saturday afternoons, Sundays and holidays to be furnished only at
the written request of Tenant, who shall pay upon demand Landlord's customary
charges for such services; (c) janitorial services to the Premises on weekdays
other than holidays and window washing as may, in Landlord's judgment, be
reasonably required; and (d) elevators for ingress and egress to the floor on
which the Premises are located, in common with other tenants, provided that
Landlord may limit the number of elevators to be in operation at times other
than during customary business hours for the Building and on holidays. Landlord
also agrees to maintain the public and common areas (the "Common Facilities") of
the Building such as lobbies, stairs, corridors and restrooms in reasonably good
order and condition, except for damage caused by Tenant or its employees, agents
or invitees. If Tenant desires services specified in this
<PAGE> 12
Section at any time other than times herein designated, such service shall be
supplied to Tenant only at the request of Tenant delivered to Landlord before
3:00 p.m. on the business days preceding such extra usage. Tenant shall pay to
Landlord as Additional Rent the cost of such service upon receipt of a bill
therefor.
5.2 Without additional cost to Tenant, Landlord shall provide
standard electric lighting and current for Tenant's use of the Premises and
shall make available electric lighting and current for the common areas of the
Building in the manner and to the extent deemed by Landlord to be standard. If
Tenant's use of electric current (a) exceeds 110 volt power, or (b) exceeds that
required for routine lighting and operation of general office machines (such as
typewriters, desktop computers, dictating equipment, desk model adding machines
and the like) which use 110 volt electrical power, then the Tenant shall pay on
demand the cost (as determined by Landlord) of any such excess. Without
Landlord's prior consent, Tenant shall not install any data processing or
computer equipment in the Premises or any other equipment which it shall require
for its use other than the normal electrical current or other utility service.
Whenever heat generating machines or equipment (other than general office
machines described above) are used in the Premises by Tenant which affect the
temperature otherwise maintained by the air conditioning system or otherwise
overload any utility, Landlord shall have the right to install supplemental air
conditioning units or other supplemental equipment in the Premises, and the cost
thereof (as determined by Landlord), including without limitation, the cost of
installation, separate metering, operation, use and maintenance, shall be paid
by Tenant to Landlord on demand. The rate charged by Landlord shall not exceed
the rate prevailing for Tenant as a user as established by the applicable rate
classification published from time to time by the local electric power company
or other utility supplier. The obligation of the Landlord to make available such
public utilities shall be subject to the rules and regulations of the supplier
of such utilities and of any municipal or other governmental authority
regulating the business providing such utility service. Tenant will be billed
monthly for such additional utility service and all such charges shall be
considered due upon delivery of such bill and be deemed Additional Rent due from
Tenant.
5.3 Landlord shall not be liable or responsible to Tenant for
loss, damages or expense Tenant sustains or incurs if either the quantity or
character of any utility service is changed by the service provider or is no
longer available from a public service provider. Tenant covenants and agrees
that its use of a electric current shall never exceed the capacity of existing
feeders to the Building or the risers or wiring installations. Any riser or
risers or wiring required or necessary to meet Tenant's excess electrical
requirements upon written request of Tenant will be installed by Landlord at the
sole cost and expense of Tenant, if, in Landlord's sole judgment, the same are
necessary and will not cause permanent damage or injury to the Building or the
Premises or cause or create a dangerous or hazardous condition or entail
excessive or unreasonable alterations, repairs or expense or interfere with or
disturb other tenants). If Landlord gives any such notice of discontinuance,
Landlord shall make all the necessary arrangements with the public utility
supplying the utilities to the Premises with respect to obtaining such
additional utility service to the Premises, but Tenant will contract directly
with such public utility for the supplying of such additional utility service to
the Premises).
5.4 Failure to any extent to make available, or any slow-down,
stoppage or interruption of, these defined services resulting from any cause
(including, but not limited to, Landlord's compliance with (a) any voluntary or
similar governmental or business guideline now or hereafter published or (b) any
requirements now or hereafter established by any governmental agency, board or
bureau having jurisdiction over the operation and maintenance of the Building)
shall not render Landlord liable for damages to person, property, or business
(except in the case of Landlord's gross negligence or willful misconduct), nor
be construed as an eviction of Tenant or work an abatement of Rent, nor relieve
Tenant from fulfillment of any covenant or agreement hereof. If any equipment or
machinery furnished by Landlord break down or for any cause cease to function
properly, Landlord shall use reasonable diligence to repair same promptly, but
Tenant shall have no claim for abatement of rent or damages for any
interruptions in service occasioned thereby or resulting therefrom (except in
the case of Landlord's gross negligence or willful misconduct).
<PAGE> 13
5.5 Tenant's obligations to pay Additional Rent pursuant to
this Article 5 shall constitute to the actual date of expiration or termination
of this Lease. If Landlord terminates this Lease without waiving Landlord's
right to seek damages against Tenant, Tenant's obligation to pay any and all
Additional Rent pursuant to this Article 5 shall not terminate as a result
thereof.
6. Tenant Improvements. The Landlord has agreed to make improvements to
the Premises. The provisions governing the planning, construction, scope of work
and terms of payment shall be set forth in Exhibit "G", which, if attached
hereto, is incorporated herein by this reference.
7. Permitted Use. Tenant shall use the Premises only for the Permitted
Use. Tenant will not occupy or use the Premises, or permit any portion of the
Premises to be occupied or used, for any business or purpose other than the
Permitted Use or for any use or purpose which is unlawful in part or in whole or
deemed to be disreputable in any manner or extra hazardous on account of fire,
nor shall Tenant use, store, discharge any "Hazardous Material" as defined in
Section 45 hereof, nor permit anything to be done which will in any way increase
the rate of insurance on the Building or contents; and if, by act of and to the
extent caused by Tenant, there is any increase in the rate of insurance on the
Building or contents created by Tenant's acts or conduct, then Tenant shall pay
to Landlord the amount of such increase on demand. Acceptance of such payment
shall not constitute a waiver of any of Landlord's other rights provided herein.
Tenant will conduct its business and control its agents, employees and invitees
to not create any nuisance, nor interfere with, annoy or disturb other tenants
or Landlord in the management of the Building. Tenant will maintain the Premises
in a clean, healthful and safe condition and will comply with all laws,
ordinances, orders, rules and regulations (state, federal, municipal and other
agencies of bodies having jurisdiction thereof) with reference to the use,
condition or occupancy of the Premises. Tenant will not, without the prior
consent of Landlord, paint, install lighting or install any signs, window or
door lettering or advertising media of any type on or about the Premises except
as set forth on the Plans and Specifications described on Exhibit "G" attached
hereto. The foregoing notwithstanding, Landlord agrees that Tenant shall have
the right to utilize a portion of the available space on the sign marquis
located or to be located at the entrance driveway for the Property in the area
marked as "sign location" on the plat of survey attached hereto as Exhibit I and
made a part hereof, upon which to place Tenant's sign. The size of such sign
shall not exceed Tenant's Share of the available space on the marquis (after
deducting the area of the Building identification sign), and the design of such
sign shall be subject to Landlord's approval, such approval not to be
unreasonably withheld. Landlord shall not obstruct the view of such sign from
adjoining accessways and rights-of-ways.
8. Tenant's Repairs and Alterations. (a) Tenant will not deface or
injure the Building, and will pay the cost of repairing any damage or injury
done to the Building or any part thereof by Tenant or Tenant's agents, employees
or invitees. Tenant shall take good care of the Premises and keep them from
waste and nuisance of any kind. Tenant shall keep the Premises, including all
fixtures installed by Tenant, in good condition, and to make all necessary
non-structural repairs except those caused by fire, casualty or acts of God
covered by Landlord's insurance policy covering the Building, if any. The
performance by Tenant of its obligations to maintain and make repairs shall be
conducted only by contractors and subcontractors reasonably consented to by
Landlord, and Tenant shall procure and maintain and shall cause such contractors
and subcontractors engaged by or on behalf of Tenant to procure and maintain
insurance coverage against such risks, in such amounts and with such companies
as Landlord requires in connection with such maintenance and repair. Tenant
shall prohibit any contractor it engages or subcontractor or material suppliers
engaged through such contractor from filing from any notice or notices of
commencement of public record as a part of or in connection with work on the
Premises. Tenant hereby further covenants and agrees to provide Landlord with
copies of any notices Tenant receives in connection with such work.
<PAGE> 14
(b) If Tenant fails to make the repairs described above within fifteen
(15) days after the occurrence of the damage or injury, Landlord may at its
option make such repairs, and Tenant shall, upon demand therefor, pay Landlord
for the cost thereof. At the end or termination of this Lease, Tenant shall
deliver the Premises with all improvements located thereon (except as otherwise
herein provided) in good repair and condition, reasonable wear and tear and
casualty and condemnation excepted; and shall deliver to Landlord all keys to
the Premises. Tenant will not make or allow to be made any alterations or
physical additions in or to the Premises without the prior written consent of
Landlord. All alterations, additions or improvements (whether temporary or
permanent in character) made in or upon the Premises by Landlord or Tenant shall
be Landlord's property on termination or expiration of this Lease and shall
remain on the Premises without compensation to Tenant, provided that Landlord,
at its option, may by notice to Tenant, require Tenant to remove any such
alterations, additions or improvements at Tenant's cost and restore the Premises
to the condition of the Premises at the Commencement Date, normal wear and tear
and condemnation and casualty excepted. All furniture, movable trade fixtures
and equipment installed by Tenant may be removed by Tenant at the termination of
this Lease if Tenant elects, and shall be removed if required by Landlord, or if
not removed shall, at the option of Landlord, become the property of Landlord.
All such installations, removals and restoration shall be accomplished in a good
workmanlike manner so as not to damage the Premises or the structure of the
Building or the plumbing, electrical or other utilities.
9. Subletting and Assigning.
9.1.1 Tenant shall not assign, mortgage or encumber this
Lease, nor sublet, suffer or permit the Premises or any part thereof to be used
by others, without the prior written consent of Landlord. Which consent shall
not be unreasonably withheld. If this Lease is assigned, or if the Premises or
any part hereof be sublet or occupied by anyone other than Tenant, without
Landlord's prior written consent, Landlord may collect from the assignee,
subtenant or occupant, and apply the net amount collected to the Rent, but no
such assignment, subletting, occupancy or collection shall be a waiver of this
covenant, or the acceptance of the assignee, subtenant or tenant, or a release
of Tenant from the further performance of its covenants herein contained. The
consent by Landlord to an assignment or subletting shall not be construed to
relieve Tenant from obtaining landlord's consent to any further assignment or
subletting.
9.1.2 For the purposes of this Lease, an "assignment"
prohibited by this Article 9 shall be deemed to include the following: if Tenant
is a partnership, a withdrawal or change (voluntary, involuntary, by operation
of law) of any one or more of the partners thereof, or the dissolution of the
partnership; or, if Tenant consists of more than one person, a purported
assignment, transfer, mortgage of encumbrance (voluntary, involuntary, by
operation of law or otherwise) from one thereof to the other or other thereof,
or to any third party; or, if Tenant is a corporation, any dissolution, merger,
consolidation or other reorganization of Tenant, or any change in the ownership
(voluntary, involuntary, by operation of law, creation of new stock or
otherwise) of fifty percent (50%) or more of its capital stock from the
ownership existing on the date of execution hereof, or, the sale of fifty
percent (50%) of the value of the assets of Tenant.
9.1.3 Notwithstanding the foregoing, without Landlord's
consent, but upon ten (10) days' notice to Landlord, this Lease may be assigned,
or the Premises may be sublet, to any corporation which is a parent, subsidiary
or affiliate of Tenant. For the purpose of this Section a "parent" shall mean a
corporation which owns one hundred percent (100%) of the outstanding stock of
Tenant, a "subsidiary" shall mean any corporation one hundred percent (100%) of
whose outstanding stock shall be owned by Tenant, and an "affiliate" shall mean
any corporation one hundred percent (100%) of whose outstanding stock shall be
owned by Tenant's parent.
<PAGE> 15
9.2 No less than twenty (20) days prior to the effective date
of a proposed assignment or sublease (other than one made pursuant to Subsection
9.1.3), Tenant shall offer to reconvey to landlord, as of said effective date,
that portion of the Premises which Tenant is seeking to assign or sublet, which
offer shall contain an undertaking by Tenant to accept as full and adequate
consideration for the reconveyance. Landlord's release of Tenant from all future
Rent and other obligations under this Lease for the Premises or portion thereof
so reconveyed. Landlord, in its absolute discretion, shall accept or reject the
offered reconveyance within twenty (20) days of the offer. If Landlord accepts,
the reconveyance shall be evidenced by an agreement acceptable to Landlord in
form and substance. If Landlord fails to accept or reject the offer within the
twenty (20) day period, Landlord shall have rejected the offer.
9.3 If Landlord rejects or is deemed to have rejected Tenant's
offer of reconveyance and if Landlord gives its consent to any assignment of
this lease or to any sublease, or if Tenant is otherwise permitted to make any
assignment or sublease pursuant to this Lease, Tenant shall in consideration
therefore, pay to Landlord, as Additional Rent:
9.3.1 For an assignment, an amount equal to all
sums and consideration paid to Tenant by the assignee for or by reason of such
assignment (including any sums paid for the sale, rental, or use of Tenant's
Property in excess of the then unamoritized value of Tenant's Property as
reflected in Tenant's federal income tax returns) less the reasonable brokerage
commissions, alteration costs and legal fees, if any, actually paid by Tenant in
connection with such assignment; and
9.3.2 For a sublease, any rents, additional charge
or other consideration payable under the sublease to Tenant by the subtenant
(including any sums paid for the sale, rental or use of Tenant's Property in
excess of the then unamoritized value of Tenant's Property as reflected in
Tenant's federal income tax returns) that are in excess of the Rent during the
term of the sublease with respect to the subleased space, less the reasonable
brokerage commissions, alteration costs, and legal fees, if any, actually paid
by Tenant in connection with such subletting.
The sums payable hereunder shall be paid to Landlord as and when
payable by the assignee or subtenant to Tenant.
9.4 Tenant shall reimburse Landlord on demand for any reasonable costs
that Landlord may incur in connection with said assignment or sublease,
including the reasonable costs of investigating the acceptability of the
proposed assignee or subtenant, and reasonable legal costs incurred in
connection with the granting of any requested consent.
9.5 No assignment or subletting shall affect the continuing primary
liability of Tenant (which, following assignment, shall be joint and several
with the assignee), and Tenant shall not be released from performing any of its
obligations hereunder.
10. Indemnity. Landlord shall not be liable for and Tenant will
indemnify and save harmless Landlord of and from all fines, suits, demands,
losses and actions (including attorneys' fees) for any injury to person(s) or
damage to or loss of property in or about the Premises caused in whole or in
part by the negligence or misconduct of, or breach of the Lease by Tenant, its
employees, subtenants, invitees or by any other person entering the Premises or
the Building under express or implied invitation of Tenant, or arising out of
Tenant's use of the Premises. Landlord shall not be liable or responsible for
any loss or damage to any property or death or injury to any person occasioned
by theft, fire, act of god, public enemy, criminal conduct of third parties,
injunction, riot, strike, insurrection, war, court order, requisition of other
governmental body or authority, by other tenants of the Building or any other
matter, or for any injury or damage or inconvenience which may arise through
repair or alteration of any party of the Building, or failure to make repairs,
or from any cause whatever except Landlord's grossly negligent or willful
misconduct. Landlord shall and does hereby indemnify and hold Tenant harmless
from and against any and
<PAGE> 16
all loss, damage, claim, demand, liability, or expense (including court costs
and attorney's fees, including without limitation, any damage or injury to
person or property arising out of, as a result of, or in connection with the
willful misconduct or gross negligence of Landlord hereunder.
11. Subordination. This lease and all rights of Tenant hereunder are
subject and subordinate to any deeds to secure debt, mortgages or any other
instruments of security, as well as to any ground leases, that now or hereafter
cover all or any part of the Building, the land situated beneath the Building or
any interest of Landlord therein, and to any and all advances made on the
security thereof, and to any and all increases, renewals, modifications,
consolidations, replacements and extensions of any such instruments, so long as
the holder of any such security instrument agrees in writing not to disturb
Tenant's possession and rights hereunder, unless Tenant is in default hereunder,
after the expiration of any applicable grace, notice and/or cure period. This
provision shall be self-operative and no further instrument shall be required to
effect such subordination of this Lease except for such non-disturbance
agreement. Tenant shall, however upon demand execute, acknowledge and deliver to
Landlord any and all instruments and certificates that in the reasonable
judgment of Landlord may be necessary or proper to confirm or evidence such
subordination. Notwithstanding the generality of the foregoing provisions of
this Section, Tenant agrees that any such mortgagee shall have the right at any
time to subordinate any such instruments to this Lease on such terms and subject
to such conditions as such mortgagee may deem appropriate. Tenant further
covenants and agrees upon demand by Landlord's mortgagee at any time, before or
after the institution of any proceedings for the foreclosure of any such
instruments, or sale of the Building pursuant to any such instruments, to attorn
to such purchaser upon any such sale and to recognize such purchaser as Landlord
under this Lease. The agreement of Tenant to attorn upon demand of Landlord's
mortgagee contained in the immediately preceding sentence shall survive any such
foreclosure sale. Tenant shall upon demand at any time or times before or after
any such foreclosure sale, execute, acknowledge and deliver to Landlord's
mortgagee any and all instruments and certificates that in the reasonable
judgment of Landlord's mortgagee may be necessary or proper to confirm or
evidence such attornment. Tenant hereby irrevocably appoints Landlord's
mortgagee as Tenant's agent and attorney-in-fact for the purpose of executing,
acknowledging and delivering any such instruments and certificates.
12. Rules and Regulations. Tenant and Tenant's agents, employees and
invitees will comply with all the rules and regulations of the Building which
are attached hereto as Exhibit "C", and made a part hereof. Landlord in its sole
judgment shall have the right to change such rules and regulations or to
promulgate other rules and regulations in a manner deemed advisable for safety,
care, or cleanliness of the Building and related facilities or premises, and for
preservation of good order therein, all of which rules and regulations, changes
and amendments will be forwarded to Tenant in writing and shall be carried out
and observed by Tenant. Tenant shall further be responsible for the compliance
with such rules and regulations by the employees, servants, agents, visitors and
invitees of Tenant.
13. Inspection. Landlord or its officers, agents, and representatives
shall have the right to enter into and upon any and all parts of the Premises at
all reasonable hours after providing reasonable advance notice (or, in any
emergency, at any hour without notice) to (a) inspect same or clean or make
repairs or alternations or additions as Landlord may deem necessary (but without
any obligation to do so, except as expressly provided for herein) or (b) show
the Premises to prospective tenants, purchasers or lenders; and Tenant shall not
be entitled to any abatement or reduction of Rent by reason thereof, nor shall
such be deemed to be an actual or constructive eviction.
14. Condemnation. If the Premises, or any part thereof, or if the
Building or any portion of the Building, leaving the remainder of the Building
unsuitable for use as an office building comparable to its use on the
Commencement Date of this Lease or the Property or any portion of the property
leaving less than ______ parking spaces on the Property, shall be taken or
condemned in whole or in part for public purposes, or sold in lieu of
condemnation, then the Lease Term shall, at the sole option of Landlord,
forthwith cease
<PAGE> 17
and terminate. All compensation awarded for any taking (or sale proceeds in lieu
thereof) shall be the property of Landlord, and Tenant shall have no claim
thereto, the same being hereby expressly waived by Tenant; provided, however,
that Tenant shall have the right to apply for and collect the value of its trade
fixtures and special equipment installed by it on the Premises and any other
compensable damages resulting from such condemnation not affecting Landlord's
settlement with the condemning authority. If this Lease is not terminated,
Landlord may repair the damage to the Premises caused by the condemnation,
except that Landlord shall not be obligated to repair any damage for which
Tenant has been reimbursed by the condemning authority. If the severance damages
received by Landlord are not sufficient to pay for such repair, Landlord shall
have the right to either terminate this Lease or make such repair at landlord's
expense unless Tenant agrees to fund the shortfall pursuant to disbursement
procedures reasonably acceptable to Landlord.
15. Casualty. If the Building is totally destroyed by fire, tornado, or
other casualty or if the Premises or Building is so damaged that rebuilding or
repairs cannot be completed within one hundred eighty (180) days after the date
of such damage, Landlord or Tenant may at its option terminate this Lease, in
which event the Rent shall be abated during the unexpired portion of this Lease
effective from the date of such damage. If the Building or the Premises are
damaged by fire, tornado or other casualty covered by Landlord's insurance, but
only to such extent that rebuilding or repairs can be completed within one
hundred eighty (180) days after the date of such damage, or if the damage should
be more serious but neither Landlord nor Tenant elects to terminate this Lease,
Landlord shall within ninety (90) days after the date of such damage commence to
rebuild or repair the Building and/or Premises and proceed with reasonable
diligence to restore the Building and/or Premises to not less than substantially
the same condition in which it was immediately prior to the casualty, except
Landlord shall not be required to rebuild, repair or replace any part of the
furniture, equipment, fixtures and other improvements which may have been placed
by Tenant in the Premises. There shall be a fair diminution of Rent during the
time the Premises are unsuitable for occupancy and Landlord is unable to move
Tenant to a substitute space in the Building. If any mortgagee under a deed to
secure debt, security agreement or mortgage requires the insurance proceeds be
applied against the mortgage debt, Landlord shall have no obligation to [Missing
page from original] continue for a period of thirty (30) days following Tenant's
receipt of written notice to cure from Landlord; provided, however, if such
failure is not capable of cure within said thirty (30) day period, but is
capable of cure, Tenant shall not be deemed in default, if Tenant commences to
cure within said thirty (30) day period and diligently and in good faith
prosecutes such cure to completion.
18.3 Tenant or any guarantor of Tenant's obligations hereunder
shall make an assignment for the benefit of creditors.
18.4 Any petition shall be filed by or against Tenant or any
guarantor of Tenant's obligations hereunder under any section or chapter of the
Federal Bankruptcy Act, as amended from time to time, or under any similar law
or statute of the United States or any State thereof and filed against Tenant,
is not dismissed within sixty (60) days from the date of filing; or Tenant or
any guarantor of Tenant's obligations hereunder shall be adjudged bankrupt or
insolvent in proceedings filed thereunder.
18.5 A receiver or trustee shall be appointed for all or
substantially all of the assets of Tenant or any guarantor of Tenant's
obligations hereunder and such receiver or trustee is not dismissed within sixty
(60) days of its appointment.
18.6 Any writ of execution, attachment, or garnishment shall
be levied against any interest of Tenant in this Lease, the Premises, or any
property located in the Premises.
19. Remedies. If Tenant defaults under this Lease, then without any
notice or demand to Tenant whatsoever, Landlord shall have the right (but not
any duty) to exercise, on a cumulative basis, any or all of the following
remedies:
<PAGE> 18
19.1 Landlord may continue this Lease in full force and
effect, and proceed to collect all Rent when due.
19.2 Landlord may continue this Lease in full force and
effect and may enter the Premises and relet all or any portion thereof to other
parties for Tenant's account. Tenant shall pay to Landlord on demand all costs
Landlord incurs in entering the Premises and reletting them, including, without
limitation, brokers' commissions, expenses of repairs and remodeling, attorneys'
fees, and all other actual costs. Reletting may be for a period shorter or
longer than the remaining term of this Lease. During the term of any reletting,
Tenant shall pay to Landlord the Rent due under this Lease on the dates due,
less any net rents Landlord receives from any reletting.
19.3 Landlord may, without any notice or demand whatsoever,
terminate Tenant's rights under this Lease at any time. From and after any such
termination, Landlord shall have the right to recover from Tenant all costs,
expenses, losses and damages caused by, resulting from or incurred in connection
with said default and/or termination, including, but not limited to:
19.3.1 An amount equal to all unpaid Rent that had
accrued prior to the time of
termination of this Lease;
19.3.2 An amount equal to (a) the amount of Rent
that would have accrued under this Lease between (i) the date of termination of
this Lease, and (ii) the date the calculation is made under this subsection
19.3.2 if this Lease had not been so terminated; less (b) any net amounts of
rent actually received by Landlord with respect to such time period; plus
19.3.3 An amount equal to (a) the present value of
all Rent (assuming that the Additional Rent payable hereunder for the future
will be the same as for the most recent Lease Year) which would have accrued
under this Lease had this Lease not been terminated, for the period of time
between (i) the date of calculation of the amounts due under subsection 19.3.2,
and (ii) the date the Lease Term would have expired if this Lease had not been
so terminated; less (b) the present value of rent at that time being actually
collected for comparable leases in the immediate geographic area of the Project;
and
19.3.4 An amount equal to (a) all actual costs and
expenses, including but not limited to attorneys' fees, that have been incurred
by Landlord prior to the date the calculation of said amounts if made, plus (b)
the present value of all costs and expense, including but not limited to
attorneys' fees, that with reasonable certainty are likely to be incurred
thereafter by Landlord, which are reasonably necessary to compensate Landlord
for all economic losses proximately caused by Tenant's default.
In computing the present value of amounts for purposes of this
subsection 19.3, a capitalization rate of eight percent (8%) per annum shall be
used.
19.4 Without any showing of need or the presence of any
statutory or common law grounds, all of which requirements are hereby expressly
waived, Landlord may have a receiver appointed to take possession of and relet
the Premises, in accordance with subsection 19.2. Tenant shall pay to Landlord
on demand all costs Landlord incurs in connection therewith.
19.5 Landlord may cure any default at Tenant's cost. If
Landlord at any time, by reason of Tenant's default, pays any sum to cure any
default, the sum so paid by Landlord shall be immediately due from Tenant to
Landlord on demand, and shall bear interest at the Default Rate from the date
paid by Landlord until Landlord shall have been reimbursed by Tenant. Said sum,
together with interest thereon, shall be Additional Rent.
<PAGE> 19
19.6 Landlord may apply all or part of the Security Deposit,
as provided in Section 3.3.
19.7 Landlord may exercise any or all other rights or remedies
available at law or equity, including, without limitation, the right to obtain
restraining orders, injunctions and decrees of specific performance.
19.8 Landlord shall not be in default unless Landlord fails to
perform obligations required of Landlord hereunder within a reasonable time
depending upon the nature thereof (e.g., promptly in the event of imminent
danger to person or property), but in no event later than thirty (30) days after
Landlord's receipt of written notice from Tenant specifying wherein Landlord has
failed to perform such obligation; provided, however, that if the nature of
Landlord's obligations is such that more than thirty (30) days are reasonably
required for its cure then Landlord shall not be in default if Landlord
commences to cure within such thirty (30) day period and thereafter diligently
and in good faith prosecutes such cure to completion. In the event that Landlord
fails to so cure any such default following notice as aforesaid, Tenant may cure
such default and thereafter make demand upon Landlord for the reasonable cost of
such cure.
20. Attorneys' Fees. If Landlord or Tenant brings any action under this
Lease or consults or places said Lease, or any amount payable by the other party
hereunder, with an attorney concerning or for the enforcement of such party's
rights hereunder, each party agrees in each and any such case to pay to the
prevailing party all costs, including, but not limited to, court costs and
attorneys' fees in connection therewith.
21. INTENTIONALLY OMITTED
22. Mechanic's Lien. Tenant will not permit any mechanic's lien to be
placed upon the Premises, the Building or any improvements thereon during the
Lease Term caused by or resulting from any work performed, materials furnished
or obligation incurred by or at the request of Tenant, and in the case of the
filing of any such lien, Tenant will promptly pay, bond, or otherwise discharge
the same. If default in payment, bond, or discharge thereof shall continue for
thirty (30) days after notice thereto from Landlord to Tenant, Landlord shall
have the right at Landlord's option of paying the same without inquiry as to the
validity thereof, and any amounts so paid, including expenses and interest,
shall be so much Additional Rent hereunder due from Tenant to Landlord and shall
be repaid to Landlord immediately on demand.
23. Waiver of Subrogation. Each party to this Lease (the "Waiving
Party") hereby waives any cause of action it might have against the other party
hereto on account of any loss or damage that is covered by any insurance policy
that covers the Premises, Tenant's fixtures, personal property, leasehold
improvements or business and which names Tenant as a party insured, it being
understood and agreed that this provision is cumulative of Section 10 hereof.
Tenant shall require its insurance carrier to endorse all applicable policies
waiving the carrier's rights of recovery under subrogation or otherwise against
Landlord.
24. Tenant's Insurance.
Tenant shall carry (at its sole expense during the Term):
(i) all-risk property insurance, insuring Tenant's interest in
its improvements to the Premises and any and all furniture, fixtures, equipment,
supplies, inventory, contents and other property owned leased, held or possessed
by Tenant and contained therein, such insurance coverage to include business
interruption insurance for one hundred percent (100%) of Tenant's gross revenues
for a period of
<PAGE> 20
twelve (12) months. Such insurance shall be in an amount equal to the full
replacement cost of such improvements and property, as such may increase from
time to time, without deduction for depreciation, providing protection against
all perils included within the classification of fire, extended coverage,
vandalism, malicious mischief, special extended peril (all risk), boiler and
machinery, flood, glass breakage and sprinkler leakage, and naming Landlord as
loss payee as its interest may appear;
(ii) worker's compensation insurance required by applicable
law;
(iii) comprehensive or commercial general liability insurance
on an occurrence basis for injury to or death of a person or persons and for
damage to property occasioned by or arising out of any construction work being
done on the Premises by Tenant or Tenant's contractors, or arising out of the
condition, use, or occupancy of the Premises, or other portions of the Building
or Property, and covering Tenant's indemnification obligations imposed by
Paragraph 15 of this Lease, the limits of such policy or policies to be in
amounts not less than One Million and No/100 Dollars ($1,000,000) in primary
liability coverage and Two Million and No/100 Dollars ($2,000,000) in excess
liability coverage; and
(iv) primary automobile liability insurance with limits of
not less than One Million and No/100 Dollars ($1,000,000) per occurrence,
covering owned and non-owned vehicles used by Tenant.
Landlord retains the right, in its sole discretion, to increase the
amount of insurance required to be carried by Tenant not more frequently than
annually based on such factors as inflation, Tenant's insurance claims history,
the advice of Landlord's insurance advisors and any other relevant factors.
Landlord and Tenant shall each have included in all policies of insurance
respectively obtained by them with respect to the Building or Premises a waiver
by the insurer of all right of subrogation against the other (and, with respect
to Tenant's insurance, against Landlord's property manager) in connection with
any loss or damage insured against. To the full extent permitted by law,
Landlord and Tenant each waives all right of recovery against the other (and,
with respect to Tenant, against Landlord's property manager), and agrees to
release the other from liability for loss or damage to the extent such loss or
damage is covered by valid and collectible insurance in effect at the time of
such loss or damage. All said insurance policies shall be carried with companies
licensed to do business in the state reasonable satisfactory to Landlord and
shall be noncancellable except after thirty (30) days written notice to
Landlord. Each policy shall name Landlord, Landlord's property manager and any
other person designated by Landlord as additional insured and provide that it is
primary to, and not contributing with, any policy carried by Landlord,
Landlord's property manager, or other designated person covering the same loss.
Tenant shall deliver duly executed certificates of such insurance to Landlord
prior to the Commencement Date and at least twenty (20) days prior to the
expiration of each prospective policy term. No insurance policy or policies
required to be carried by Tenant will be subject to more than a $25,000.00
deductible limit without Landlord's prior written consent. Landlord reserves the
right to require Tenant to carry such other insurance (including, without
limitation and as applicable, plate glass insurance, automobile liability
insurance, builder's risk insurance and liquor liability insurance) and
endorsements in such amounts as Landlord in its sole but reasonable discretion
may deem necessary or appropriate. If Tenant fails to take out of or keep in
force any insurance required to be carried by Tenant, or to provide evidence of
the same, Landlord shall have the right, but shall not be obligated, to obtain
such insurance at the sole cost and expense of Tenant, and Tenant shall
reimburse Landlord for the cost thereof upon demand.
25. Brokerage. KOLL MANAGEMENT SERVICES, INC. ("KOLL") HAS REPRESENTED
LANDLORD IN THIS TRANSACTION. CB COMMERCIAL, INC. ("CB COMMERCIAL") HAS
REPRESENTED TENANT IN THIS TRANSACTION. BOTH KOLL AND CB COMMERCIAL SHALL BE
PAID A COMMISSION BY LANDLORD IN CONNECTION WITH THIS LEASE, UNDER A SEPARATE
AGREEMENT. Tenant warrants that it has had no dealings with any broker or agent
in connection with the negotiation or execution of this Lease other than with
the brokers
<PAGE> 21
specifically identified above, and Tenant agrees to indemnify Landlord against
all costs, expenses, attorneys' fees or other liability for commissions or other
compensation or charges claimed by any broker or agent claiming the same by,
through or under Tenant, other than with the brokers specifically identified
above. Tenant shall cause the broker representing Tenant to execute a lien
waiver to and for the benefit of Landlord, waiving all lien rights with respect
to the Building or Project such broker has or might have.
26. Change of Building Name. Landlord reserves the right to change the
name by which the Building is designated.
27. Estoppel Certificates. Tenant shall furnish from time to time when
requested by Landlord or the holder of any deed to secure debt or mortgage
covering the Building, the Premises, or any interest of Landlord therein, a
certificate signed by Tenant confirming and containing such certifications and
representations deemed appropriate by Landlord or the holder of any deed to
secure debt or mortgage covering the Building, the Premises or any interest of
Landlord therein, and Tenant shall, within ten (10) days following receipt of
said certificate from Landlord, return a fully executed copy of said certificate
to Landlord. If Tenant fails to return a fully executed copy of such certificate
with appropriate modification to Landlord within said period, Tenant shall have
approved and confirmed all of the provisions contained in such certificate.
28. Notices. Each provision of this Lease or of any applicable laws,
ordinances, regulations, and other requirements with reference to the sending,
mailing or delivery of any notice, or with reference to the making of any
payment by Tenant to Landlord, shall be deemed to be complied with when and if
the following steps are taken:
28.1 All Rent and other payments required to be made by Tenant
to Landlord hereunder shall be payable to Landlord at Landlord's Address set
forth in Section 1.5 or at such other address as Landlord may specify from time
to time by written notice delivered in accordance herewith, and
28.2 Any notice or document required to be delivered hereunder
shall be deemed to be delivered if actually received and whether or not received
when deposited in the United States mail, postage prepaid, certified or
registered mail (with or without return receipt requested), addressed to the
parties hereto at the respective addresses set forth in Article 1 or at such
other address as either of said parties shall have theretofore specified by
written notice delivered in accordance herewith.
29. Force Majeure. When a period of time is prescribed for any action
to be taken by Landlord, Landlord shall not be liable or responsible for and
there shall be excluded from the computation for any such period of time, any
delays due to strikes, riots, acts of God, shortages of labor or materials, war,
laws, regulations or restrictions or any other causes of any kind whatsoever
which are beyond the control of Landlord but in no event shall such delay exceed
thirty (30) days.
30. Severability. If any clause or provision of this Lease is illegal,
invalid or unenforceable under present or future laws effective during the Lease
Term, then and in that event, it is the intention of the parties hereto that the
remainder of this Lease shall not be affected thereby, and it is also the
intention of the parties to this Lease that in lieu of each clause or provision
of this Lease that is illegal, invalid or unenforceable, there be added as a
part of this Lease a clause or provision as similar in terms to such illegal,
invalid or unenforceable clause or provision as may be possible and be legal,
valid and enforceable.
31. Amendments; Binding Effect. This Lease may not be altered, changed
or amended, except by instrument in writing signed by both parties hereto. No
provision of this Lease shall be deemed to have been waived by Landlord unless
such waiver be in writing signed by Landlord and addressed to
<PAGE> 22
Tenant, nor shall any custom or practice which may evolve between the parties in
the administration of the terms hereof be construed to waive or lessen the right
of Landlord to insist upon the performance by Tenant in strict accordance with
the terms hereof. The terms and conditions contained in this Lease shall apply
to, inure to the benefit of, and be binding upon the parties hereto, and upon
their respective successors in interest and legal representatives, except as
otherwise herein expressly provided.
32. Quiet Enjoyment. Provided Tenant has performed all of the terms and
conditions of this Lease, including the payment of Rent, to be performed by
Tenant, Tenant shall peaceably and quietly hold and enjoy the Premises for the
Lease Term, without hindrance from Landlord, subject to the terms and conditions
of this Lease.
33. Gender. Words of any gender used in this Lease shall be held and
construed to include any other gender, and words in the singular number shall be
held to include the plural, unless the context otherwise requires.
34. Joint and Several Liability. If there is more than one Tenant, the
obligations hereunder imposed upon Tenant shall be joint and several. If there
is a guarantor of Tenant's obligations hereunder, the obligations hereunder
imposed upon Tenant shall be joint and several obligations of Tenant and such
guarantor and Landlord need not first proceed against Tenant before proceeding
against such guarantor nor shall any such guarantor be released from its
guaranty for any reason whatsoever, including without limitation, in case of any
amendments hereto, waivers hereof or failure to give such guarantor any notices
hereunder.
35. Captions. The captions contained in this Lease are for convenience
of reference only, and in no way limit or enlarge the terms and conditions of
this Lease.
36. Exhibits and Attachments. All exhibits, attachments, riders and
addenda referred to in this Lease are incorporated into this Lease and made a
part hereof for all intents and purposes.
37. No Joint Venture. Landlord and Tenant are not and shall not be
deemed to be partners or joint venturers with each other.
38. Time of the Essence. Time is of the essence with regard to each
provision of this Lease.
39. Evidence of Authority. If Tenant is other than a natural person,
Tenant shall deliver to Landlord such legal documentation as Landlord may
request to evidence the authority of those signing this Lease to bind the
Tenant.
40. Governing Law. This Lease shall be construed and interpreted in
accordance with and governed by the laws of Georgia.
41. Entire Agreement. This Lease constitutes the entire agreement
between the parties, and there is no other agreement between the parties
relating in any manner to the Project.
42. Exculpation. The term Landlord as used in this Lease so far as
covenants or obligations on the part of Landlord are concerned shall be limited
to mean and include only the owner or owners at the time in question of the
Landlord's interest in the Building. Tenant acknowledges and agrees, for itself
and its successors and assigns, that no trustee, director, officer, employee or
agent of Landlord shall be personally liable for any of the terms, covenants or
obligations of Landlord hereunder, and Tenant shall look solely to Landlord's
interest in the Building for the collection of any judgment (or enforcement or
any other
<PAGE> 23
judicial process) requiring the payment of money by Landlord with respect to any
of the terms, covenants and conditions of this Lease to be observed or performed
by Landlord and no other property or assets of Landlord shall be subject to
levy, execution or other enforcement procedures for the satisfaction of any
obligation due Tenant or its successors or assigns.
43. Covenants are Independent. Each covenant of Landlord and Tenant
under this Lease is independent of each other covenant under this Lease, and no
default by either party in performance of any covenant shall excuse the other
party from the performance of any other covenant.
44. Intentionally Deleted.
45. Hazardous Materials.
45.1 Tenant shall not cause or permit any Hazardous Material
(as defined in Section 45.3 below) to be brought, kept or used in or about the
Building by Tenant, its agents, employees, contractors or invitees. Tenant
hereby indemnifies Landlord from and against any breach by Tenant of the
obligations stated in the preceding sentence, and agrees to defend and hold
Landlord harmless from and against any and all loss, damage, cost and/or
expenses (including, without limitation, diminution in value of the Building,
damages for the loss or restriction on use of rentable or usable space or of any
amenity of the Building, damages arising from any adverse impact on marketing of
space in the Building, and sums paid in settlement of claims, attorneys' fees,
consultant fees, and expert fees) which arise during or after the terms of this
Lease as a result of such breach. This indemnification of Landlord by Tenant
includes, without limitation, costs incurred in connection with any
investigation of site conditions or any cleanup, remedial, removal, or
restoration work required by any federal, state, or local governmental agency or
political subdivision because of Hazardous Material present in the soil or
ground water on or under the Building which results from such a breach. Without
limiting the foregoing, if the presence of any Hazardous Material in the
Building caused or permitted by Tenant results in any contamination of the
Building, Tenant shall promptly take all actions at its sole expense as are
necessary to return the Building to the conditions existing prior to the
introduction of such Hazardous Materials to the Building; provided that the
Landlord's approval of such actions, and the contractors to be used by Tenant in
connection therewith, shall first be obtained.
45.2 Notwithstanding any provision in this Lease to the contrary,
it shall not be unreasonable for Landlord to withhold its consent to any
proposed transfer, assignment, or subletting of the Premises if (i) the proposed
transferee's anticipated use of the Premises involves the generation, storage,
use, treatment, or disposal of Hazardous Material; (ii) the proposed transferee
has been required by any prior landlord, lender, or governmental authority to
take remedial action in connection with Hazardous Material contaminating a
property if the contamination resulted from such transferee's actions or use of
the property in question; or (iii) the proposed transferee is subject to an
enforcement order issued by any governmental authority in connection with the
use, disposal, or storage of a Hazardous Material.
45.3 As used herein, the term "Hazardous Material" means any
hazardous or toxic substance, material, or waste which is or becomes regulated
by any local governmental authority or the United States Government. The term
"Hazardous Material" includes, without limitation, any material or substance
which is (i) defined as a "hazardous waste," "extremely hazardous waste," or
"restricted hazardous waste" or similar term under the law of the jurisdiction
where the property is located, or (ii) designated as a "hazardous substance"
pursuant to Section 311 of the Federal Water Pollution Control Act (33 U.S.C.
ss. 1317), (iii) defined as a "hazardous waste" pursuant to Section 1004 of the
Federal Resource Conservation and Recovery Act, 47 U.S.S. ss. 6901 et seq. (42
U.S.C. ss. 6903), or (iv) defined as a "hazardous substance" pursuant to Section
101 of the Comprehensive Environmental response, Compensation and Liability Act,
42 U.S.C. ss. 9601 et seq. (42 U.S.C. ss. 9601).
<PAGE> 24
45.4 As used herein, the term "Laws" means any applicable
federal, state or local laws, ordinances or regulation relating to any Hazardous
Material affecting the Building, including, without limitation, the laws,
ordinances, and regulations referred to in Section 45.3 above.
45.5 Landlord and its employees, representatives and agents
shall have access to the Building during reasonable hours and upon reasonable
notice to Tenant in order to conduct periodic environmental inspections and
tests of Hazardous Material contamination of the Building.
Special Provisions. The special provisions set forth in Exhibits "D" and "E"
hereto are made a part hereof.
<PAGE> 25
SIGNED, SEALED AND DELIVERED as of the date first above written.
TENANT:
Gulliver Ritchie Associates, Inc.
/s/ Gulliver Ritchie Associates, Inc.(SEAL)
By:
----------------------------------------
Its: President
Attest:
- ----------------------------
Date Executed -----------------------------------------
Its:
------------------------------------
Tenant Employee Identification Number
By execution and delivery of this Lease, Tenant has made and shall be
deemed to have made a continuous and irrevocable offer to lease the Premises, on
the terms contained in this Lease, subject only to acceptance by Landlord (as
evidenced by Landlord's signature hereon), which Landlord may accept in its sole
and absolute discretion.
LANDLORD:
The First National Bank of Chicago, as
Trustee for New England Mutual Life
Insurance Company Commercial Mortgage
Pass Through Certificates, Series 1993-1
By: Lennar Partners, Inc., a Florida
corporation
By: /s/ Jeffrey P. Krasnoff
----------------------------------------
Jeffrey P. Krasnoff
<PAGE> 26
EXHIBIT "A"
[Legal Description of Space]
<PAGE> 27
EXHIBIT "B"
MEMORANDUM CONFIRMING TERM
THIS MEMORANDUM ("Memorandum") is made as of _________________, 19__
between The First National Bank of Chicago, as Trustee for New England Mutual
Life Insurance Company Mortgage Pass Through Certificates, Series 1993-1
("Landlord") and Gulliver Ritchie Associates, Inc., a ______________ corporation
("Tenant"), pursuant to that certain Lease Agreement between Landlord and Tenant
dated as of June 1, 1996 (the "Lease") for the premises located at 40 Technology
Parkway, Suite 100, Atlanta, Georgia (the "Premises") and more particularly
described in the Lease. All initial capitalized terms used in this Memorandum
have the meanings ascribed to them in the Lease.
1. Landlord and Tenant hereby confirm that:
(a) The Commencement Date of the Term is _______________, 19__.
(b) The Expiration Date of the Term is ______________, 19__.
(c) The date rental commences under the Lease is ___________, 19__.
2. Tenant hereby confirms that:
(a) All commitments, arrangements or understandings made to
induce tenant to enter into the Lease have been satisfied;
(b All space and improvement have been completed and furnished in
accordance with the provisions of the Lease; and
(c) Tenant has accepted and is in full and complete possession of
the Premises.
This Memorandum shall be binding upon and inure to the benefit of the
parties and their permitted successors and assigns.
<PAGE> 28
IN WITNESS WHEREOF, the parties have executed this Memorandum as of the
date first set forth above.
LANDLORD: TENANT:
The First National Bank of Chicago, Gulliver Ritchie Associates, Inc.
as Trustee for New England Mutual
Life Insurance Company Commercial -------------------------------------
Mortgage Pass Through Certificates, By:
Series 1993-1 ----------------------------------
Its:
---------------------------------
By: Lennar Partners, Inc., a Attest:
Florida corporation ------------------------------
Its:
---------------------------------
By:
-------------------------
Jeffrey P. Krasnoff
<PAGE> 29
EXHIBIT "C"
Attached to and made part of
Lease Agreement dated July 3, 1996
Landlord: The First National Bank of Chicago, as Trustee for New England Mutual
Life Insurance Company Mortgage Pass Through Certificates, Series
1993-1
Tenant: Gulliver Ritchie Associates, Inc.
The following rules and regulations shall apply, where applicable, to
the Premises, the Building, the parking garage associated therewith, the land
situated beneath the Building and the appurtenances thereto:
Sidewalks, doorways, vestibules, halls, stairways and other similar
areas shall not be obstructed by tenants or used by any tenant for any purpose
other than ingress and egress to and from the leased premises and for going from
one to another part of the Building.
Plumbing, fixtures and appliances shall be used only for the purpose
for which designed, and no sweepings, rubbish, rages, Hazardous Material as
defined herein, or other unsuitable material shall be thrown or placed therein.
Damage resulting to any such fixtures or appliances from misuse by a tenant or
such tenant's agents, employees or invitees, shall be paid by such tenant, and
Landlord shall not in any case be responsible therefore.
No signs, advertisements or notices shall be painted or affixed on or
to any windows or doors or other part of the Building except of such color, size
and style and in such places as shall be first approved in writing by Landlord.
No nails, hooks, or screws shall be driven or inserted in any part of the
Building except as a part of the hanging of normal office art, and except by the
building maintenance personnel nor shall any part of the Building be defaced by
tenants. No curtains or other window treatments shall be placed between the
glass and the Building standard window treatments.
Landlord will provide and maintain an alphabetical directory board for
all tenants in the main lobby of the Building, and no other directory shall be
permitted unless previously consented to by Landlord in writing.
Landlord shall provide all locks for doors in each tenant's leased
premises, at the cost of such tenant, and no tenant shall place any additional
lock or locks on any door in its leased area without Landlord's prior written
consent. A reasonable number of keys to the locks on the doors in each tenant's
leased premises shall be furnished by Landlord to each tenant, at the cost of
such tenant, and the tenants shall not have any duplicate keys made.
Tenants will refer all contractors, contractors' representatives and
installation technicians rendering any service to them to Landlord for
Landlord's supervision, approval and control before the performance of any
contractual services. This provision shall apply to all work performed in the
Building, including, but not limited to, installations of telephones, telegraph
equipment, electrical devices and attachments, and any and all installations of
every nature affecting floors, walls, woodwork, trim, windows, ceilings,
equipment and any other physical portion of the Building.
Movement in or out of the Building of furniture or office equipment, or
dispatch or receipt by tenants of any bulky material, merchandise or materials
which requires the use of elevators or stairways, or
<PAGE> 30
movement through the Building entrances or lobby shall be restricted to such
hours as Landlord shall designate. All such movement shall be under the
supervision of Landlord and in the manner agreed between the tenants and
Landlord by prearrangement before performance. Such prearrangement initiated by
a tenant will include determination by Landlord, and subject to it decision and
control, as to the time, method, and routing of movement and as to limitations
for safety or other concern which may prohibit any article, equipment or any
other item from being brought into the Building. Tenant assumes all risks as to
the damage to articles moved and injury to persons or public engaged or not
engaged in such movement, including equipment, property and personnel of
Landlord if damaged or injured as result of acts in connection with carrying out
this service for a tenant from the time of entering the Project to completion of
work; and Landlord shall not be liable for acts of any person engaged in, or any
damage or loss to any of said property or persons resulting from, and act in
connection with such service performed for a tenant.
Landlord shall have the power to prescribe the weight and position of
safes and other heavy equipment or items, which shall, in all cases, to
distribute weight, stand on supporting devices approved by Landlord. All damages
done to the Building by the installation or removal of any property of a tenant,
or done by a tenant's property while in the Building, shall be repaired at the
expense of such tenant.
A tenant shall notify the Building manager when safes or other heavy
equipment are to be taken in or out of the Building, and the moving shall be
done under the supervision of the Building manager, after written permission
from Landlord. Persons employed to move such property must be acceptable to
Landlord.
Corridor doors, when not in use, shall be kept closed.
Each tenant shall cooperate with Landlord's employees in keeping its
leased premises neat and clean. Tenants shall not employ any person for the
purposes of such cleaning other than the Building's cleaning and maintenance
personnel. Landlord shall be in no way responsible to the tenants, their agents,
employees, or invitees for any loss of property from the leased premises or
public areas or for any damages to any property thereon from any cause
whatsoever.
Should a tenant require telegraphic, telephone, enunciator or other
communication service, Landlord will direct the electrician where and how wires
are to be introduced and placed and none shall be introduced or placed except as
Landlord shall direct. Electric current shall not be used for power of heating
without Landlord's prior written permission.
Tenants shall not make or permit any improper, objectionable or
unpleasant noises or odors in the Building or otherwise interfere in any way
with other tenants or persons having business with them.
Nothing shall be swept or thrown into the corridors, halls, elevator
shafts or stairway. No animals shall be brought into or kept in, on or about the
Building.
No machinery of any kind other than ordinary and necessary office
equipment shall be operated by any tenant in its leased premises without the
prior written consent of Landlord, nor shall any tenant use or keep in the
Building any inflammable or explosive fluid or any other Hazardous Material.
No portion of any tenant's leased premises shall at any time be used or
occupied as sleeping or lodging quarters.
Landlord will not be responsible for lost or stolen personal property,
money or jewelry from tenant's leased premises or public or common areas
regardless of whether such loss occurs when the area is locked against entry or
not.
<PAGE> 31
Smoking is prohibited in all areas of the Building except where
expressly permitted by Landlord (if any such area is permitted). Landlord
reserves the right to relocate or eliminate any such areas where smoking is
permitted, at any time.
Any additional services not required by lease to be performed by
Landlord, which Tenant requests Landlord to perform and which are performed by
Landlord shall be billed to Tenant at Landlord's cost plus twenty percent (20%).
Landlord reserves the right to rescind any of these rules and
regulations and to make such other and further rules and regulations as in its
sole judgment shall from time to time be deemed appropriate for the safety,
protection, care and cleanliness of the Building, the operation thereof, the
preservation of good order therein and the protection and comfort of the tenants
and their agents, employees and invitees, which rules and regulations, when made
and written notice thereof is given to tenant, shall be binding upon it in like
manner as if originally prescribed.
<PAGE> 32
EXHIBIT "D"
Attached to and made part of
Lease Agreement dated July 3, 1996.
Landlord: The First National Bank of Chicago, as Trustee for New England Mutual
Life Insurance Company Mortgage Pass Through Certificates, Series
1993-1
Tenant: Gulliver Ritchie Associates, Inc.
(SPECIAL STIPULATIONS)
Parking. Landlord and Tenant agree that Tenant shall have the right to
use Tenant's Share of the parking spaces in the parking lot serving the
Building. Tenant agrees that Tenant shall not utilize, nor shall it permit its
employees or invitees to utilize, parking spaces in excess of the allotment set
forth above.
Expansion. In the event that, following the second (2nd) anniversary
of the Commencement Date, Tenant should desire to lease additional space (the
"Expiration Space") in the Building and Landlord is unable to offer such space
to Tenant for occupancy within six (6) months following written notice from
Tenant of Tenant's bona fide offer to lease such additional space, then tenant
shall have the one-time right to terminate the Lease by written notice
delivered to Landlord not less than 180 days prior to the third
(3rd)anniversary of the Commence Date, which notice shall be accompanied by
payment of a termination fee (the "Termination Fee") in the amount of
$73,500.00. The effective date of cancellation shall be the third (3rd)
anniversary of the Commencement Date. Notwithstanding the foregoing, Tenant
shall have no right of termination with respect to any offer by Tenant to lease
less than 2,000 square fee nor more than 3,500 square feet of space in the
Building. The Expansion Space need not be contiguous with the premises. The
rental rate for the Expansion Space shall be Landlord's reasonable discretion.
The term for the Premises and Expansion Premises shall be 5 years. If, within
six (6) months following the date of cancellation, Tenant shall not have
entered into a new lease for space in a building of comparable equality with
the Building, in the metropolitan Atlanta, Georgia area, for not less than
12,000 rentable square feet and a term of not less than 36 months, then Tenant
shall be in default under this Lease and shall be liable for all damages
hereunder in addition to payment of the Termination Fee.
If at any time after the Commencement Date the Landlord shall receive a
bona fide offer (the "Offer") for the lease of all or any contiguous portion of
the space adjacent to the Premises depicted on Exhibit "J" attached hereto and
made a part hereof (the "Option Space"), Landlord shall promptly notify Tenant
in writing of such Offer. Tenant shall thereafter have four (4) business days
from the receipt of such notice to notify Landlord that Tenant desires to lease
such portion of the Option Space. If Tenant shall so notify Landlord in writing
within said four (4) business days period, then such portion of the Option Space
shall be leased by Tenant for the rental rate contained in such Offer, and with
allowances as provided for tenant improvements as set forth in said Offer. The
term of any such lease of Option Space shall be for the term contained in the
Offer, or such longer period of time as necessary to make such lease coterminous
with the term hereof. Landlord shall thereafter prepare an amendment to this
Lease expanding the Premises to include such portion of the Option Space for the
remaining term of this Lease. If Tenant fails to so notify Landlord within such
four (4) business day period, or if Tenant notifies Landlord in writing that
Tenant does not elect to lease such portion of the Option Space, then Landlord
may lease such portion of the Option Space, then Landlord may lease such portion
of the Option Space to such offer or at any time thereafter. If such transaction
is not consummated with such third-party for any reason, such portion of the
Option Space shall again be subject to the terms of this Section. If such
transaction with such third-party is consummated,
<PAGE> 33
the terms of this Section shall automatically terminate and be null and void and
of no further force and effect and be not binding on any subsequent Landlord.
<PAGE> 34
EXHIBIT "E"
INTENTIONALLY OMITTED.
<PAGE> 35
EXHIBIT "G"
WORK LETTER
This Work Letter is part of the Lease dated July 3, 1996, between The First
National Bank of Chicago, as Trustee for New England Mutual Life Insurance
Company Mortgage Pass Through Certificates, Series 1993-1, as Landlord and
Gulliver Ritchie Associates, Inc., as Tenant, and shall be subject to all of the
same terms, definitions and conditions of the Lease. It is agreed that Landlord
and Tenant will complete construction of the Premises in accordance with the
following:
A. IMPROVEMENTS TO THE PREMISES
1. Tenant Allowance and Credits. Tenant shall bear costs of any and all
improvements to Tenant's Premises including all costs for architectural and
engineering fees and costs for construction management fees payable to
Landlord's construction manager. Tenant shall receive an allowance (the "Base
Allowance") of $67,872.00 (or $8.00) per rental square foot). Landlord shall
fund an additional allowance (the "Additional Allowance") of up to $33,936.00
(or $4.00 per rentable square foot) in addition to the Base Allowance, which
sum, together with interest at the rate of 10% per annum, shall be paid as
Additional Interest in sixty (60) equal monthly installments on the same date as
Base Rent is due. Tenant shall be responsible for all costs and expenses of
designing and constructing the Premises, if any, in excess of Base Allowance and
the Additional Allowance, provided however, that Landlord shall be responsible
for payment of all fees associated with the preliminary design of the Premises.
B. PLANS AND SPECIFICATIONS.
1. Tenant's plans and specifications shall be in such form and detail
as Landlord may reasonably require in order to determine (a) if the materials to
be used by the Tenant meet the quality standard prescribed by the Landlord for
all improvements in the Building; and (b) the effect of Tenant's Work on the
structural components and service systems and facilities of the Building.
Tenant's plans and specifications shall include the following:
a. Space Plans: The "Space Plans" shall be a schematic plan of
the Premises indicating the location of all partitions and doors, and shall
include the locations and structural, mechanical, electrical or plumbing
requirements of any equipment or usage which may affect the structural
components and service systems of the Building.
b. Final Plans: The "Final Plans" shall consist of all plans
and specifications necessary to construct the Tenant's Work, including all
mechanical and electrical working drawings.
The Space Plans and the Final Plans (collectively, the "Plans") shall be
prepared by a certified architect and shall be submitted to Landlord on or
before July 3, 1996. If available at the time of the execution of this Lease,
the Plans shall be attached hereto as Exhibit H. The Final Plans shall be in a
form in which building permits can be readily obtained and shall comply with all
applicable local laws, ordinances, codes and regulations. The architect shall
certify to Landlord and Tenant that the Plans comply with the ADA, as that term
is defined in the Lease, and all other pursuant City and County, State and
Federal rules, laws and regulations. The architect shall issue a certificate
with respect to the Plans in the form attached hereto as Exhibit G.
2. Tenant's Space Plans and Final Plans shall be subject to Landlord's
prior written approval, which approval shall not be unreasonably withheld or
delayed. If Landlord disapproves of any of Tenant's
<PAGE> 36
Space Plans, Landlord shall advise Tenant of the detailed reason(s) for
withholding approval. After being so advised by Landlord, Tenant shall submit
revised Tenant's Space Plans incorporating the reasonably required revisions for
Landlord's approval. All submissions and resubmissions by Tenant of Tenant's
Space Plans shall be made in accordance with section C, of this Work Letter (the
"Schedule"). Approval by Landlord shall not be deemed to be a representation or
warranty by Landlord with respect to the safety, adequacy, correctness,
efficiency or compliance with the law of Tenant's Plans.
3. Tenant's Final Plans shall contain all mechanical and electrical
working drawings.
C. SCHEDULE
1. Activities. The schedule is based upon and shall include but not be
limited to the following list of activities:
a. Tenant's architect shall prepare the Plans. The Landlord shall
review the Tenant's Plans. The Landlord shall note any areas requiring
additional information for the purpose of implementing the Construction
Drawings, or approve the plans as submitted.
b. Finalization of Construction Drawings. The Tenant shall furnish
the Landlord with all required information describing modifications to the Space
Plans along with any revision of specification or requirements within three days
of execution of the Lease Agreement.
c. Landlord shall approve Tenant's revised Space Plans, if
modified as requested, within ten (10) days of receipt.
D. CONTRACTORS
In connection with the selection of the general contractor, Landlord
shall seek at least two (2) competitive bids. Landlord and Tenant shall jointly
review all competitive bids received, and the decision as to the final accepted
bid shall be made by Landlord with the reasonable approval of Tenant.
E. CERTIFICATE OF OCCUPANCY
Landlord and Tenant shall cooperate with each other in the construction
of the improvements to the Premises and shall endeavor to have a Certificate of
Occupancy issued by the appropriate municipality (but Landlord shall have no
liability for its failure to secure such Certificate of Occupancy).
<PAGE> 1
EXHIBIT 10.35
FORM OF
nFRONT, INC.
DIRECTOR STOCK OPTION PLAN
STOCK OPTION GRANT CERTIFICATE
nFRONT, INC., a Georgia corporation (the "Company"), hereby grants to the
optionee named below ("Optionee") an option (this "Option") to purchase the
total number of shares shown below of Common Stock of the Company (the "Shares")
at the exercise price per share set forth below (the "Exercise Price"), subject
to all of the terms and conditions on the reverse side of this Stock Option
Grant Certificate and the nFront, Inc. Director Stock Option Plan (the "Plan").
Unless otherwise defined herein, capitalized terms used herein shall have the
meanings ascribed to them in the Plan. The terms and conditions set forth on the
reverse side hereof and the terms and conditions of the Plan are incorporated
herein by reference.
In witness whereof, this Stock Option Grant has been executed by the Company by
a duly authorized officer as of the date specified hereon.
nFRONT, INC.
By:
-------------------------------------
Title:
---------------------------------
Date of Grant:
-------------------------
Shares Subject to Option:
---------------
Exercise Price Per Share: $
-------------
Term of Option: 10 Years
Optionee hereby acknowledges receipt of a copy of the Plan, represents that
Optionee has read and understands the terms and provisions of the Plan, and
accepts this Option subject to all the terms and conditions of the Plan and this
Stock Option Grant Certificate. Optionee acknowledges that there may be adverse
tax consequences upon exercise of this Option or disposition of the Shares and
that Optionee should consult a tax adviser prior to such exercise or
disposition.
- ---------------------------------
Signature of Optionee
- ---------------------------------
Name of Optionee
<PAGE> 2
1. EXERCISE PERIOD OF OPTION. Subject to the terms and conditions of this
Option and the Plan, and unless otherwise modified by a written modification
signed by the Company and Optionee, this Option may be exercised with respect to
the Shares after the Date of Grant.
2. RESTRICTIONS ON EXERCISE. This Option may not be exercised unless such
exercise is in compliance with the Securities Act of 1933 and all applicable
state securities laws, as they are in effect on the date of exercise, and the
requirements of any stock exchange or national market system on which the
Company's Common Stock may be listed at the time of exercise. Optionee
understands that the Company is under no obligation to register, qualify or list
the Shares with the Securities and Exchange Commission ("SEC"), any state
securities commission or any stock exchange to effect such compliance.
3. TERMINATION OF OPTION.
(a) Termination Generally. If Optionee's status as a director of the
Company terminates, except for death or disability (within the meaning of Code
Section 22(e)(3)), this Option shall immediately be forfeited, along with any
and all rights or subsequent rights attached thereto, three (3) months following
the Termination Date, but in no event later than the Expiration Date.
(b) Death or Disability. If Optionee's status as a director of the
Company terminates, as a result of the death or disability of Optionee (as
determined by the Board in its sole discretion), this Option, to the extent (and
only to the extent) that it would have been exercisable by Optionee on the
Termination Date, may be exercised by Optionee (or, in the event of Optionee's
death, by Optionee's legal representative) within twelve (12) months after the
Termination Date, but in no event later than the Expiration Date.
(c) No Right to Continue as a Director. Nothing in the Plan or this
Stock Option Grant Certificate shall confer on Optionee any right to continue in
any relationship with the Company, or limit in any way the right of the Company
to terminate Optionee as a director in accordance with the Bylaws of the
Company.
4. MANNER OF EXERCISE.
(a) Exercise Agreement. This Option shall be exercisable by delivery to
the Company of an executed Exercise Agreement ("Exercise Agreement") in the form
of the Exercise Agreement delivered to Optionee, if applicable, or in such other
form as may be approved or accepted by the Company, which shall set forth
Optionee's election to exercise this Option with respect to some or all of the
Shares, the number of Shares being purchased, any restrictions imposed on the
Shares, and such other representations and agreements as may be required by the
Company to comply with applicable securities laws.
(b) Exercise Price. Such notice shall be accompanied by full payment of
the Exercise Price for the Shares being purchased. Payment for the Shares may be
made in U.S. dollars in cash or by check.
(c) Withholding Taxes. Prior to the issuance of Shares upon exercise of
this Option, Optionee must pay, or make adequate provision for, any applicable
federal or state withholding obligations of the Company. Where approved by the
Board, Optionee may provide for payment of withholding taxes upon exercise of
the Option by requesting that the Company retain Shares with a Fair Market Value
equal to the minimum amount of taxes required to be withheld. In such case, the
Company shall issue the net number of Shares to Optionee by deducting the Shares
retained from the Shares exercised.
(d) Issuance of Shares. Provided that such notice and payment are in
form and substance satisfactory to counsel for the Company, the Company shall
cause the Shares to be issued in the name of Optionee or Optionee's legal
representative.
<PAGE> 3
5. NONTRANSFERABILITY OF OPTION. Other than as provided in the Plan, this
Option may not be transferred in any manner, other than by will or by the laws
of descent and distribution, and may be exercised during Optionee's lifetime
only by Optionee. The terms of this Option shall be binding upon the executor,
administrators, successors and assigns of Optionee.
6. TAX CONSEQUENCES. OPTIONEE UNDERSTANDS THAT THE GRANT AND EXERCISE OF
THIS OPTION, AND THE SALE OF SHARES OBTAINED THROUGH THE EXERCISE OF THIS
OPTION, MAY HAVE TAX IMPLICATIONS THAT COULD RESULT IN ADVERSE TAX CONSEQUENCES
TO OPTIONEE. OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH, OR WILL
CONSULT WITH, HIS OR HER TAX ADVISOR AND OPTIONEE FURTHER ACKNOWLEDGES THAT
OPTIONEE IS NOT RELYING ON THE COMPANY FOR ANY TAX, FINANCIAL OR LEGAL ADVICE.
7. INTERPRETATION. Any dispute regarding the interpretation of this Stock
Option Grant Certificate shall be submitted by Optionee or the Company to the
Board or the Committee, which shall review such dispute at its next regular
meeting. The resolution of such a dispute by the Board or Committee shall be
final and binding on the Company and Optionee.
8. ENTIRE AGREEMENT. The Plan and the Exercise Agreement are incorporated
herein by this reference. Optionee acknowledges and agrees that the granting of
this Option constitutes a full accord, satisfaction and release of all
obligations or commitments made to Optionee by the Company or any of its
officers, directors, shareholders or affiliates with respect to the issuance of
any securities, or rights to acquire securities, of the Company or any of its
affiliates. This Stock Option Grant Certificate, the Plan and the Exercise
Agreement constitute the entire agreement of the parties hereto, and supersede
all prior undertakings and agreements with respect to the subject matter hereof.
<PAGE> 1
CONFIDENTIAL TREATMENT*. EXHIBIT 10.36
*Confidential Portions of this Exhibit have been omitted Pursuant
to the Rules and Regulations of the Securities and Exchange Commission.
Brackets and "+" have been used to identify information which is the
subject of a Confidential Treatment Request.
MARKETING AGREEMENT
THIS MARKETING AGREEMENT (the "Agreement") is made this 22nd day of
July, 1997 by and between NFRONT, INC. ("nFront"), a Georgia corporation having
its principal offices at 1551 Jennings Mill Road, Suite 800A, Bogart, Georgia
30622 and FIRST COMMERCE TECHNOLOGIES ("Reseller"), a Nebraska corporation
having its principal offices at P.O. Box 82408, Lincoln, Nebraska 68501-2408.
W I T N E S S E T H:
WHEREAS, nFront is in the business of providing home banking and bill
payment services through the Internet to customers of banks and other financial
institutions;
WHEREAS, Reseller is in the business of providing transaction
processing and other administrative and computer processing services to banks
and financial institutions;
WHEREAS, Reseller desires to offer to its Customer Base (as hereinafter
defined) and potential customers Internet home banking capabilities;
WHEREAS, nFront desires Reseller to offer nFront's proprietary Internet
home banking system as more fully described in Exhibit A attached hereto (the
"nHome System") to Reseller's Customer Base and to potential Bank customers of
Reseller.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, agreements and conditions set forth herein, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
Definitions
As used in this Agreement, each of the following terms has the meaning
set forth thereafter, such meaning to be equally applicable both to the singular
and plural forms of the terms herein defined:
(a) "Agreement" means this agreement, together with all exhibits and
schedules hereto now or hereafter signed by Reseller and nFront (all of which
are herein incorporated by reference), as the same may be modified, amended or
supplemented from time to time.
(b) "Bank" means banks and other financial institutions that offer
banking services to the general public.
(c) "Customer Base" means those customers listed on Exhibit B attached
hereto and any other Banks who become customers of Reseller during the Term.
<PAGE> 2
(d) "Documentation" means that portion of the nHome System that
provides installation and operating instructions for use of the nHome System.
(e) "End-User" means the ultimate user of the nHome System.
(f) "Generic Hardware" means computer equipment and configurations
thereof that meets the specifications provided by nFront for use with the nHome
System.
(g) "nHome System" shall have the meaning set forth in the fourth
recital hereof and shall also include all future improvements, enhancements and
modifications thereof, and all releases and upgrades related thereto.
(h) The terms "sale" and "resale" and any grammatical variant thereof
shall include, without limitation, sales, contracts for sale, conditional sales,
installment sales, rentals, leases or licenses of software to Banks, and any
other arrangement whereby the nHome System is placed at the disposal of the
Banks.
(j) "Software" means that portion of the nHome System that is comprised
of computer applications programs intended to be installed on the central
processing unit of Generic Hardware.
(k) "Term" shall have the meaning set forth in Section 8.1 hereof.
ARTICLE II
Reseller Appointment
2.1 Appointment. During the Term, nFront hereby grants to Reseller the
non-exclusive right to market the nHome System to its Customer Base and
potential Bank customers of Reseller, and Reseller hereby accepts such
appointment. There are no geographic restrictions on where Reseller may market
the nHome System. Reseller understands, acknowledges and agrees that this
appointment is non-exclusive as to both the nHome System and geographic area and
that nFront may appoint more than one reseller in any given geographic area to
sell and market the same nHome System as any other reseller. nFront expressly
reserves the right to sell and deliver the nHome System to any other entity,
including Banks. Notwithstanding the immediately preceding sentence, for so long
as Reseller is actively marketing the nHome System to its Customer Base, nFront
agrees that it will not contact those Banks that are included in the Customer
Base as of the date hereof. nFront reserves the right to review the status of
Reseller's marketing efforts to the Customer Base on an annual basis, and if it
determines, in the exercise of its reasonable discretion, that Reseller is not
making reasonable efforts to market the nHome System to the Customer Base, the
restrictions set forth in the immediately preceding sentence shall no longer
apply. Unless otherwise set forth on Exhibit C attached hereto or hereafter as
consented to in writing by nFront, Reseller shall sell the nHome System only to
Banks, and shall not sell the nHome System to other parties providing core
processing services to Banks, or to Bank service bureaus, software providers,
other resellers of automated bank services or to any other buyer who intends,
directly or indirectly, to resell the nHome System. Reseller has no authority to
appoint any associate resellers or subdealers of the nHome System without
nFront's consent.
2.2 Relationship between nFront and Reseller. Reseller shall conduct its
business in the purchase and resale of nHome System as a principal for its own
account and at its own expense and risk. This Agreement does not in any way
create the relationship of principal and agent, or any similar relationship
between nFront and Reseller, including, but not limited to that of joint
ventures, partners or associates. Reseller is granted no right or authority
hereunder to assume or create any obligation or responsibility for or on behalf
of nFront or otherwise to bind or to use the nFront's name other than as
may be expressly authorized by nFront.
<PAGE> 3
ARTICLE III
Sales, Service, and Training and Related Obligations
3.1 Selling and Promotion. Reseller shall use its best efforts to sell and
promote the sale of the nHome System within the Territory, which best efforts
shall include, but not be limited to, promotion of the nHome System to the
Customer Base and prompt performance of all of its obligations under this
Agreement.
3.2 Initial Training. nFront will at its cost provide onsite training and
initial sales efforts for up to 5 consecutive days after the execution of this
agreement.
3.3 Staffing and Training. Reseller shall appoint its suitable employees to
sell, install and support the nHome System. Reseller shall, at its sole cost and
expense, send the appropriate sales, technical and training personnel to such
training programs and other refresher and upgrade training as nFront may
provide. nFront shall provide periodic routine consultation and advice to
Reseller in connection with Reseller's sales and service hereunder and shall
provide (a) technical, specification and sales advice, (b) assistance and advice
concerning promotional and training programs, and (c) suggestions for new
applications for the nHome System at Reseller's cost. nFront shall furnish
Reseller with a reasonable supply of price lists, sales literature, catalogues,
specifications for Generic Hardware, Documentation and advisory assistance with
respect to installing the nHome System. All proprietary demonstration equipment,
manuals, instruction books, contract forms, sales and promotional materials,
Documentation and similar material furnished to Reseller by nFront, whether
furnished free of charge or not, shall remain the property of nFront and upon
request shall be returned to nFront by Reseller.
3.4 Installation and Training. Reseller acknowledges, understands and agrees
that the nHome System that it shall provide to Banks shall remain resident on
nFront's server, and that such Banks shall, through Reseller, gain access to the
nHome System upon execution of a contract with Reseller. nFront shall be
responsible for systems maintenance of the nHome system resident on its server.
Reseller hereby agrees that it shall provide installation, training, and
maintenance Bank and End-User support services to Banks and shall provide such
services in respect of the nHome System as used by any such Banks who receive
access to the nHome System from Reseller. Reseller may charge any such Bank a
reasonable fee for providing such services. Installation and training services
shall include, but not be limited to, setting up and installing nHome System
access on the Bank's Generic Hardware, providing Documentation as appropriate to
Bank personnel, giving operating and maintenance instructions to the Bank's
technical support staff, training the Bank's professional staff in the use of
the nHome System, and making necessary adjustments at the time of delivery and
installation and at such subsequent times as may be necessary to ensure proper
and efficient operation of the nHome System on the Bank's Generic Hardware.
Reseller shall use its best efforts to handle satisfactorily all maters related
to the installation and initial training of Bank personnel in the use of the
nHome System, and shall report promptly to nFront each complaint received by
Reseller relating to nHome System which the Reseller cannnot remedy. If the
Reseller's installation and training obligations hereunder are not discharged
properly by Reseller, nFront, in its sole discretion, may discharge such
obligations directly or through third-parties, and Reseller agrees to reimburse
nFront upon demand for all reasonable costs and expense incurred by nFront in
connection therewith.
3.5 Reseller Promotional Activity. nFront shall not share in the expense of any
advertising or promotional activities by Reseller or other sales promotion
projects except by express agreement in writing. All materials prepared by
Reseller that promote the nHome System, including, but not limited to, any
materials that include any trademark or trade name (or any mark or name closely
resembling the same) now or hereafter owned or licensed by nFront or any of its
affiliates shall be approved in writing by nFront prior to use.
3.6 Reseller Recordkeeping. Reseller shall keep records of its business relating
to the nHome System as may be reasonably required by nFront. nFront or its
authorized representative may, from time to time during regular business hours,
examine such records and Resellers accounts relating to the sale and servicing
of the nHome System.
<PAGE> 4
ARTICLE IV
Conditions of Sale
4.1 Pricing and Payment. The price for access to the nHome System to the Banks
and the processing fees for transactions thereunder shall be as set forth in
Exhibit D attached hereto. As compensation for its sales, marketing,
installation, training and support services provided hereunder, Reseller shall
be entitled to retain the percentage of such fees as set forth in Exhibit D
attached hereto. For any such sales as to which nFront does not require
prepayment, payment of nFront's portion of the initial access fee shall be due
net fifteen (15) days from the date of Reseller's invoice to the Bank, subject
to credit approval, payable to nFront at its principal place of business.
Payment of nFront's portion of any processing fees shall be paid within ten (10)
days following the end of each calendar month. A late payment charge equal to
one and one-half percent (1 1/2%) of the unpaid amount for each succeeding
thirty (30) day period or portion thereof in which fees remain unpaid.
4.2 Force Majeure. nFront shall not be liable for loss or damage due to
interruption of service or access to the nHome System resulting from any cause
beyond its reasonable control, including, but not limited to Internet systems or
network failure, capacity limitations, compliance with regulations, orders or
instructions of any federal, state or municipal government or any department or
agent thereof, acts of God, acts or omissions of Reseller, acts of civil or
military authority, fires, strikes, facilities shutdowns or alterations,
embargoes, war, riot, delays in transportation, or inability to obtain necessary
labor, facilities or materials from usual sources. IN NO EVENT SHALL NFRONT BE
LIABLE FOR CONSEQUENTIAL OR SPECIAL DAMAGES DUE TO ANY SUCH CAUSE.
4.3 Price and System Changes. nFront shall have the right to change the nHome
System without notice to Reseller, and shall have the right at any time to
discontinue the sale of any version of the nHome System, to make changes in
method of access or delivery, including interface procedures, and to add
improvements, all without incurring any liability whatever, including any
obligation to install or modify the same on the nHome System previously accessed
by the Customer Base. nFront may change its prices to Reseller for the nHome
System upon sixty (60) days' written notice to Reseller. Any contract between
Reseller and a Bank which includes the nHome System executed prior to the date
of any such notice with a scheduled delivery date after the effective date of
such price increase shall be sold to Reseller at the revised price for the nHome
System. Any nHome System scheduled for delivery to a Bank prior to the effective
date of any such price increase but delayed due to the fault of nFront or for
reasons beyond nFront's control shall be sold to Reseller at the price as in
effect on the date Reseller ordered the nHome System. The price protection
provisions contained in this Section 4.3 shall apply only to the initial access
fees listed on Exhibit D attached hereto, and shall not apply to any increase in
processing fees, which increase shall be effective as of the thirtieth day
following written notice of such increase to Reseller.
4.4 Taxes and Other Fees. Reseller shall pay all license fees, sales, use,
service use, occupation, personal property and excise taxes and any other fees,
assessments or taxes which may be assessed or levied by any federal, state or
local government and any departments and subdivisions thereof, against any of
the nHome System ordered by Reseller, or under Reseller's direct or indirect
control.
ARTICLE V
Warranties
5.1 THE NHOME SYSTEM IS PROVIDED "AS-IS", "WHERE-IS". NFRONT SPECIFICALLY
DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO,
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AS TO
THE NHOME SYSTEM PROVIDED UNDER THIS AGREEMENT.
<PAGE> 5
ARTICLE VI
Special Agreements Regarding Software and Other Intellectual Property
6.1 Limited License. In the performance of Reseller's obligations hereunder, it
shall be necessary for Reseller to demonstrate the nHome System. Accordingly,
subject to the terms and conditions contained herein, nFront hereby grants to
Reseller, and Reseller hereby accepts from nFront, a non-exclusive license (the
"License") of the Software solely for the purpose of demonstrating the nHome
System in operation to potential Bank customers of Reseller.
6.2 Software Covenants. Reseller agrees to comply with each of the following
requirements:
(a) Reseller shall not copy, alter, modify, translate, decompile,
disassemble, reverse engineer or otherwise attempt to derive source code, or
create derivative works of the Software, or any part thereof, or knowingly allow
others to do so, during or after the Term.
(b) Except as otherwise specifically provided in this Agreement,
Reseller shall not loan, rent, lease, give, sub-license, or otherwise transfer,
nor communicate or otherwise disclose, the Software, including any part or any
copy thereof, in whole or in part, to any person. Reseller agrees that except
for copies of the Software provided to Reseller pursuant to Section 6.1 hereof,
all such software provided to Reseller hereunder shall remain in its sealed
package, as provided by nFront to Reseller, until delivered to a Bank customer
of Reseller.
(c) Except with respect to providing access to the nHome System to Bank
customers as authorized and specifically provided in this Agreement, Reseller
shall not electronically transfer the Software, or any part thereof, from one
computer to another over a network, irrespective of how linked.
(d) The Software, including all parts thereof, and any copies, in whole
or in part, and any and all copyrights thereto, are and remain the property of
nFront, irrespective of the ownership of the media on which such Software and
any parts or copies thereof are contained.
(e) Each copy of the Software sold to Banks shall include a license
agreement, the form of which shall be as set forth in the Exhibit E, which
license shall be incorporated into any Reseller license given to Banks,
provided, however, that nFront shall approve in advance the form of any such
license. In addition to the license to be provided to Banks upon delivery of
access to the nHome System, Reseller shall include in each invoice for use with
such software a statement specifically referring to such license agreement and
stating that acceptance and/or any use constitutes an assent to all of the terms
and conditions of such license agreement, as limited by terms and conditions
included therein. To enable nFront to verify compliance herewith, Reseller shall
provide nFront with any form agreements and invoices which Reseller plans to use
in connection herewith at least thirty (30) days prior to such use.
(f) Reseller acknowledges that the laws and regulations of the United
States restrict the export and re-export of commodities and technical data of
United States origin, including the nHome System. Reseller agrees that it shall
not export or re-export such Software in any form without nFront's consent,
which consent shall, among other things be conditioned upon Reseller receiving
the appropriate United States and foreign government licenses and approvals.
(g) Reseller shall not, by any act or omission, impair or prejudice the
copyright or any other right of whatever nature of nFront in and to the nHome
System or any part thereof, and shall not deal with the same in any manner which
may allow any third party to obtain any rights in the same which are
inconsistent or which conflict with the rights of nFront.
<PAGE> 6
6.3 Notices; Markings; Trademarks; Tradenames. Reseller agrees to comply with
the following:
(a) Reseller shall not delete any trademarks, tradename or copyright
notice present in, on or displayed by the nHome System, or any part thereof.
(b) Reseller shall not add to any notice present in, on or displayed by
the nHome System its own copyright, trademark or other proprietary notices
unless such notices have been previously approved in writing by nFront.
(c) Except as already present in, on or displayed by the nHome System
software and/or accompanying packaging or Documentation provided by nFront,
Reseller shall not use any trademarks and/or tradenames of nFront without prior
written approval of nFront.
6.4 Documentation. Each nHome System sold by Reseller to a Bank shall include
one (1) set of accompanying Documentation. Reseller shall only distribute
complete and separate copies of the Documentation to Banks and shall not
reproduce, in whole or in part, or transfer in any manner to a third party other
than a Bank, such Documentation. Any and all copyrights to such Documentation
are and shall remain the property of nFront.
ARTICLE VII
Confidentiality and Non-Disclosure
7.1 Reseller Obligations.
(a) Reseller recognizes, acknowledges and agrees that during the Term,
nFront may furnish to Reseller certain technical and commercial information,
including but not limited to, designs, procedures, formulas, discoveries,
inventions, improvements, innovations, concepts and ideas, lists of customers,
computer programs, business methods, and plans for future developments
("nFront's Confidential Information") which is the confidential, proprietary
property of nFront. Reseller recognizes, acknowledges and agrees that nFront's
Confidential Information was not previously known to the Reseller and is to be
maintained in secrecy and confidence by Reseller and Reseller's employees,
agents or representatives to whom Reseller discloses any of nFront's
Confidential Information. Reseller agrees for itself and for each of its
employees, agents or representatives to whom Reseller discloses any of nFront's
Confidential Information that such information shall be used only in accordance
with the terms, covenants, conditions and limitations of this Agreement, and not
for the benefit of or for, directly or indirectly, Reseller or any of its
employees, agents or representatives. Information made available to the general
public by nFront and information obtained from third parties not associated with
nFront shall not be considered to be nFront's Confidential Information, except
for information received from third parties that Reseller knows or should have
known was obtained illegally or in violation of this Agreement. In the event
Reseller or a representative of Reseller is requested by law, order of court or
any agency to disclose any of nFront's Confidential Information, Reseller shall
give nFront prompt notice of such request so that nFront may seek an appropriate
protective order. If, in the absence of a protective order, Reseller or a
representative of Reseller is nonetheless compelled by law to disclose any of
nFront's Confidential Information, Reseller or a representative of Reseller, as
the case may be, may disclose such information in such proceeding without
liability hereunder; provided, however, that Reseller gives nFront written
notice of the information to be disclosed within seventy-two (72) hours after
receipt of such order by Reseller and, upon nFront's request and at its expense,
Reseller shall use its best efforts to obtain assurances that confidential
treatment shall be accorded to such information.
(b) In the event this Agreement is terminated for any reason, the
Reseller agrees to return promptly nFront's Confidential Information, including
all copies thereof, to nFront, or to deliver all such information promptly to
such party as may be designated by nFront. Reseller further agrees thereafter
not to use or disclose nFront's Confidential Information in any manner
whatsoever without the prior written approval of nFront unless and until such
information shall lawfully become generally known in the public domain through
no fault of the Reseller or breach by the Reseller of the covenants contained
herein.
<PAGE> 7
(c) Reseller shall disclose nFront's Confidential Information to Banks
only to the extent necessary to enable such customers to use the nHome System,
and only after any such Bank executes an agreement in form and substance
acceptable to nFront, acknowledging the confidential nature of such information
and setting forth the appropriate treatment of such information.
7.2 nFront's Obligations.
(a) nFront recognizes and agrees that, except as otherwise provided
herein, certain business information provided by the Reseller to nFront, not
related to nFront's ongoing business ("Reseller's Confidential Information"), is
the proprietary property of Reseller, is not previously known to nFront and is
to be maintained in secrecy and confidence, except as provided herein, and used
only in accordance with the terms, covenants, conditions and limitations of this
Agreement. Information made available to the general public and information
obtained from third parties not associated with Reseller shall not be considered
to be Reseller's Confidential Information, except for information received from
third parties that nFront knows or has known was obtained illegally or in
violation of this Agreement. In the event nFront or a representative of nFront
is requested by law, order of court or any agency to disclose any of Reseller's
Confidential Information, nFront shall give Reseller prompt notice of such
request so that Reseller may seek an appropriate protective order. If, in the
absence of a protective order, nFront or a representative of nFront is
nonetheless compelled by law to disclose any of Reseller's Confidential
Information, nFront or a representative of nFront, as the case may be, may
disclose such information in such proceeding without liability hereunder;
provided, however, that nFront gives Reseller written notice of the information
to be disclosed within seventy-two (72) hours after receipt of such order by
nFront and, upon Reseller's request and at its expense, nFront shall use its
best efforts to obtain assurances that confidential treatment shall be accorded
to such information.
(b) In the event this Agreement is terminated for any reason, nFront
agrees to return promptly Reseller's Confidential Information, including all
copies thereof, to Reseller or to deliver all such information promptly to such
party as may be designated by Reseller. nFront further agrees thereafter not to
use or disclose Reseller's Confidential Information in any manner whatsoever
without the prior written approval of Reseller unless and until such information
shall lawfully become generally known in the public domain through no fault of
nFront or breach by nFront of the covenants contained herein.
ARTICLE VIII
Term and Termination
8.1 Term. This Agreement shall commence as of the date hereof and shall remain
in effect (unless sooner terminated pursuant to Section 8.2 hereof) for five (5)
years (the "Term"). It shall be renewed automatically without interruption for
successive five-year terms, unless, not less than ninety (90) days before the
end of any Term, either nFront or Reseller notifies the other party in writing
of its election (at its sole option, for any reason or for no reason) not to
renew. Any such renewal periods shall be considered an extension of and part of
the Term.
8.2 Right to Terminate. Notwithstanding any other provision hereof, this
Agreement may be terminated either (i) by mutual agreement of the parties
hereto; (ii) by either party at any time if the other party has materially
breached any of the provisions hereof and, if the breach is curable, has failed
to cure such alleged breach within thirty (30) days after written notice thereof
in the case of failure to pay when due amounts owing to such party, and within
sixty (60) days in case of all other alleged curable breaches; or (iii) by
either party immediately and without the giving of notice, in the event that
either party shall become insolvent, or shall ask its creditors for a
moratorium, or shall file a voluntary petition in bankruptcy, or shall be
adjudicated as a bankrupt pursuant to an involuntary petition, or shall suffer
appointment of a temporary or permanent receiver, trustee, or custodian for all
or a substantial part of its assets which shall not be discharged within sixty
(60) days. In the event either party materially breaches any of the provisions
hereof, and such breach is not curable, this Agreement shall be immediately
terminable by the non-breaching party. Without limiting the foregoing, any
violation of Articles VI, VII and IX hereof shall constitute a noncurable breach
and if either party commits such a breach, this Agreement shall be terminable
immediately by the non-breaching party.
<PAGE> 8
8.3 Effect of Termination.
(a) Any termination of this Agreement shall not release Reseller from
paying any amount which may then be owing to nFront. In the event of any
termination of this Agreement, all obligations owed by Reseller to nFront shall
become immediately due and payable on the effective date of termination whether
otherwise then due or not (without presentation, demand, protest or notice of
any kind, all of which are hereby waived by Reseller); and nFront may offset and
deduct from any or all amounts owed to Reseller, if any, any or all amounts owed
by Reseller to nFront, rendering to Reseller the excess, if any.
(b) In the event of termination of this Agreement by either party or
automatically as provided herein, it is understood that nFront shall not have
obligation to provide further access to Reseller's Customer Base, however if
nFront continues to provide access to all or any part of Reseller's Customer
Base after termination of this Agreement, such continuation shall not be
construed as a renewal of this Agreement for any further term nor as a waiver of
such termination.
(c) Upon termination of this Agreement, Reseller shall return to
nFront, promptly and without charge to nFront, all Documentation, price lists,
maintenance and policy manuals, sales aids and other publications of nFront
relating to the nHome System which Reseller has on hand. Reseller shall
thereupon immediately cease using any trademarks, tradenames, service marks or
other identifying marks on any of its materials.
(e) Reseller shall be solely responsible for all commitments incurred
or assumed by it during the Term or thereafter, and nFront shall not be held
responsible in any manner therefor, irrespective of any suggestion or
recommendation with respect thereto by nFront or any of its employees or
representatives unless nFront has expressly agreed in writing to assume the
responsibility.
ARTICLE IX
Non-Competition Agreement
9.1 During the Term Reseller shall not, directly or indirectly, individually, on
behalf of or in conjunction with any other person or legal entity, or for or on
behalf of any person, corporation, partnership, company, trade association,
agent, agency or other entity, engage in the business of selling or distributing
within the Territory, any of the nHome System that Reseller purchase from any
source other than nFront.
ARTICLE X
Indemnification; Other Relief
10.1 Indemnification by Reseller. Reseller shall indemnify, defend and hold
harmless nFront, its officers, directors, shareholders, employees, agents and
affiliates from and against any claims, losses, damages, liabilities or expenses
(including, without limitation, reasonable attorneys' fees and expenses)
(collectively, "Claims") resulting from or arising out of Reseller's use or
misuse of the nHome System or any part thereof by Reseller or any Bank included
in the Customer Base, any misrepresentations made by Reseller with respect to
the nHome System or a breach of any of the provisions of this Agreement,
provided, however, that in respect of any Claims hereunder against Reseller that
arise out of or result from any alleged use or misuse of the nHome System or any
part thereof by Reseller or any Bank included in the Customer Base or any
alleged misrepresentation made by Reseller with respect to the nHome System,
Reseller shall be notified promptly of such Claim in writing and shall be given
authority, control and full and proper information and assistance in the defense
and settlement of such Claim. Notwithstanding the foregoing, Reseller shall not
have the authority to settle or compromise any Claim in a manner that indicates
that nFront contributed to or was responsible for the cause of any such Claim
unless nFront consents in writing to such settlement.
<PAGE> 9
10.2 Indemnification by nFront. Subject to the limitations set forth in Section
10.5 hereof, nFront shall indemnify, defend and hold harmless Reseller, its
officers, directors, shareholders, employees, agents and affiliates from and
against any claim, suit or proceeding based upon an allegation that the nHome
System (or any portion thereof) infringe upon or misappropriate any copyright,
patent, trademark or trade secret of any third party, provided that nFront is
notified promptly of such claim, suit or proceeding in writing and is given
authority, control and full and proper information and assistance in the defense
and settlement of such claim, suit or proceeding. If the nHome System is finally
determined by a court of competent jurisdiction to constitute an infringement of
any patent, copyright, trademark or other trade secret of a third party and its
use is enjoined, nFront shall either:
(a) procure the right for Reseller to continue to use the nHome System
under this Agreement; or
(b) replace or modify the nHome System with a version of the nHome
System that is not so infringing and that satisfies this provision of this
Agreement.
10.3 Arbitration. The parties to this Agreement agree that any controversies or
claims arising out of or relating to this Agreement (including, without
limitation, any alleged breach thereof or the termination or non-renewal
thereof) shall be settled by arbitration pursuant to the Federal Arbitration
Act, 9 U.S.C. ss. 1 et. seq., in accordance with the Commercial Arbitration
Rules of the American Arbitration Association. The parties hereto further agree
that the arbitrators in any such arbitration shall not be authorized to award
any punitive damages in connection with any controversy or a claim settled by
arbitration hereunder. The decision of the arbitrator in any such arbitration
shall be final and binding upon the parties and judgment upon the award may be
entered in any court having jurisdiction thereof. Any arbitration shall take
place in Atlanta, Georgia, and the expenses of the arbitrators shall be
allocated by such arbitrators. The arbitration shall be conducted before a panel
of three (3) arbitrators, one selected by Reseller, one selected by nFront, and
one selected by mutual agreement of the arbitrators selected by Reseller and
nFront.
10.4 Injunctive Relief. Notwithstanding the provisions of Section 10.3 hereof,
the parties acknowledge and agree that any breach of the provisions of Articles
VI, VII or XI of this Agreement shall result in irreparable harm to nFront for
which no adequate remedy at law exists. Accordingly, upon any such breach,
nFront shall be entitled to injunctive or other appropriate extraordinary
relief, such relief being in addition to, and not in lieu of, any other rights
and remedies, including the award of damages, available at law or in equity.
Reseller acknowledges and agrees that no serious harm to it shall result from
the entry of any such equitable relief against it, and therefore any bond
required of nFront in connection with such relief shall be set in an amount not
in excess of One Thousand Dollars ($1,000.00). Any violation of the restraints
set forth herein shall automatically extend the period of such restraints for
the amount of time such violation continues, provided nFront seeks enforcement
promptly after discovery of such violation. nFront shall not be required to
prove money damages to enforce any provision of this Agreement.
10.5 LIMITATION OF LIABILITY. IN NO EVENT SHALL NFRONT BE LIABLE FOR ANY LOSS OF
PROFIT OR ANY OTHER COMMERCIAL DAMAGE, INCLUDING BUT NOT LIMITED TO SPECIAL,
INCIDENTAL, CONSEQUENTIAL OR OTHER INDIRECT DAMAGES UNDER ANY CAUSE OF ACTION
ARISING OUT OF OR RELATING TO THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION,
CLAIMS ARISING FROM MALFUNCTION OR DEFECTS IN THE NHOME SYSTEM OR NON-DELIVERY
OF NHOME SYSTEM EVEN IF NFRONT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES. SUBJECT TO THE MAXIMUM LIABILITY SET FORTH IN THIS PARAGRAPH, IN NO
EVENT SHALL NFRONT'S LIABILITY FOR ANY CLAIM ARISING OUT OF THIS AGREEMENT
EXCEED THE AMOUNT PAID TO NFRONT BY RESELLER UNDER THIS AGREEMENT WITHIN THE
THREE (3) MONTH PERIOD IMMEDIATELY PRECEDING THE ACCRUAL OF SUCH CLAIM. IN NO
EVENT SHALL NFRONT'S MAXIMUM, CUMULATIVE LIABILITY FOR ALL CLAIMS UNDER THIS
AGREEMENT EXCEED $25,000 OR ALL AMOUNTS PAID BY RESELLER TO NFRONT HEREUNDER,
WHICHEVER IS LESS. NO CLAIM MAY BE BROUGHT BY RESELLER UNDER THIS AGREEMENT MORE
THAN TWO (2) YEARS AFTER ACCRUAL OF SUCH CLAIM.
<PAGE> 10
ARTICLE XI
Miscellaneous Provisions
11.1 Waiver. Any failure of a party to comply with any obligation, covenant,
agreement or condition herein may be expressly waived in writing by the other
party, but such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
11.2 Entire Agreement. This Agreement, the exhibits and schedules hereto
constitutes the entire understanding of the parties with respect to the subject
matter of this Agreement and are intended to supersede all prior understandings,
whether written or oral, between the parties with respect thereto.
11.3 No Third Party Beneficiary Rights. No provision of this Agreement is
intended or shall be construed to provide or create any third party beneficiary
right or any other right of any kind in any Bank or any client, customer,
affiliate, insurer, lender, shareholder, partner, officer, director, employee or
agent of any party hereto, or in any other person.
11.4 Amendment; Binding Effect; Assignment. No amendment, modification or
alteration of the terms of this Agreement shall be binding unless in writing and
executed by the parties hereto. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the parties hereto and their respective
successors, assigns, heirs, executors and administrators. Reseller may not
assign this Agreement, in whole or in part, or any of its rights or obligations
hereunder without the prior written consent of nFront, and any such attempted
assignment shall be void.
11.5 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Georgia, without giving
effect to the conflict-of-laws principles thereof.
11.6 Severability. If any provision of this Agreement is held to be illegal,
invalid or unenforceable under present or future laws effective during the Term,
such provision shall be fully severable. This Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part of this Agreement, and the remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance from this
Agreement.
11.7 Counterparts. This Agreement may be executed simultaneously or in two or
more counterparts, each of which together shall constitute one and the same
instrument and shall be deemed an original hereof.
11.8 Notices. All notices required or permitted under this Agreement shall be
made in writing and shall be deemed to have been duly given if delivered
personally or sent by registered or certified mail (return receipt requested),
U.S. mail or facsimile. All notices shall be addressed to the parties at the
respective addresses indicated above.
11.9 Survival. The provisions of Articles V, VI, VII, VIII, IX, X, and XI shall
survive any termination or expiration of this Agreement.
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
NFRONT, INC.
By: /s/ Tripp Rackley
------------------------------------------
Its: President
RESELLER
By: /s/ J. Michael Cullo
------------------------------------------
Its: Senior Vice President
<PAGE> 12
EXHIBIT A
Refer to the first column of Exhibit D
<PAGE> 13
EXHIBIT B
<PAGE> 14
EXHIBIT C
<PAGE> 15
EXHIBIT D
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Price Royalty*
$[++++] 28%
1) NHOME SYSTEM
a) Products and Services
i) Five Secure Product Applications (Select from the following)
(1) Checking
(2) Savings
(3) CD
(4) Mortgage
(5) Consumer Loan
(6) Overdraft Protection
(7) Equity Line
ii) Additional Secure Applications
(1) Quiz
(2) Survey
(3) Guest Book
(4) Bill Payment
iii)Secure Database Retrieval
b) Hot Product Link
c) Online Banking
i) View Account Balances and Histories
ii) Checking
iii) Savings
iv) CDs/IRA
v) Loans
vi) Transfer Between Checking and Savings Account
d) Online Banking Demo
e) Frequently Asked Questions
f) Marketing Section
g) What's New
h) Bank Information
i) Interactive Calculators
i) Loans (Payment and total Interest)
ii) Maximum Loan (Payment and total Interest)
iii) College Planning (Excess or deficiency, plus savings tips)
iv) Mortgage (Calculates principal and interest mortgages)
v) Retirement (Future value calculations)
j) Contact Us
k) Search Engine
l) Email
m) Bill Payment Interface
n) Administrative Site
o) Featured Banks Spotlight
2) SYSTEM SUPPORT (MONTHLY) $[+++] 0%
3) CUSTOMER FEES
a) Bill Payment Customer Set-up (per customer) $[+++] 28%
b) On-line Banking Customer Set-up (per customer) $[+++] 28%
</TABLE>
<PAGE> 16
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
c) Application (per application) $[+++] 0%
4) CUSTOMER SERVICE FEES ($[++++] MONTHLY MINIMUM)
a) Online Banking Customer Maintenance $[+++] 0%
b) Bill Payment Maintenance (up to 20, thereafter [++++]) $[+++] 0%
5) NHOME OPTIONS
a) nForm (10 Frames) $[++++] 28%
b) Site Map Construction $[++++] 28%
c) Management Reporting $[++++] 28%
d) Bank Specific Branding (Annually) $[++++] 28%
e) Bill Payment Initialization $[++++] 50%
f) Web TV Site Quote 28%
g) Telephone Bill Statement Quote 0%
*The royalty percentage is based upon the actual sales dollars
contracted by Reseller to Customer. Example: If Reseller charges
$[++++] for initial setup then nFront would receive $[++++] and
Reseller would receive $[++++]. The prices listed in Exhibit 4 are
nFront's minimum price level. All contracted sales dollars, on any 0%
royalty items, above nFront's minimum price will be due to Reseller in
its entirety.
</TABLE>
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected Financial
Data" and "Experts" and to the use of our report dated April 22, 1999, except
for Note 12, as to which the date is June 17, 1999, in Amendment No. 3 to the
Registration Statement (Form S-1 No. 333-76955) and related Prospectus of
nFront, Inc.
/s/ Ernst & Young LLP
Atlanta, Georgia
June 24, 1999
