<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 15, 1999
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
OPTIO SOFTWARE, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
GEORGIA 5045 58-1435435
(State or other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
Incorporation or Organization) Number)
</TABLE>
--------------------------
4800 RIVER GREEN PARKWAY
DULUTH, GEORGIA 30096
(770) 283-8500
(Address, Including Zip Code and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
--------------------------
C. WAYNE CAPE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
OPTIO SOFTWARE, INC.
4800 RIVER GREEN PARKWAY
DULUTH, GA 30096
770-283-8500
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
--------------------------
COPIES TO:
LARRY W. SHACKELFORD, ESQ. WILLIAM J. GRANT, JR., ESQ.
NEIL H. DICKSON, ESQ. WILLKIE FARR & GALLAGHER
MORRIS, MANNING & MARTIN, L.L.P. 787 SEVENTH AVENUE
1600 ATLANTA FINANCIAL CENTER NEW YORK, NEW YORK 10019
3343 PEACHTREE ROAD, N.E. (212) 728-8000
ATLANTA, GEORGIA 30326 (212) 728-8111 (FAX)
(404) 233-7000
(404) 365-9532 (FAX)
--------------------------
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. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AGGREGATE OFFERING REGISTRATION
SECURITIES REGISTERED PRICE (1) FEE
<S> <C> <C>
Common Stock, no par value per share $55,200,000 $15,346.00
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457 under the Securities Act of 1933, as amended.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(A), MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED , 1999
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.
<PAGE>
PROSPECTUS
SHARES
[LOGO]
COMMON STOCK
--------------
This is Optio Software, Inc.'s initial public offering of common stock.
We expect the public offering price to be between $ and $ per share.
Currently, no public market exists for the shares. After pricing the offering,
we expect that the common stock will be quoted on the NASDAQ National Market
System under the symbol "OPTO."
INVESTING IN THE COMMON STOCK INVOLVES RISKS WHICH ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE OF THIS PROSPECTUS.
-----------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- ---------
<S> <C> <C>
Public Offering Price........................................ $ $
Underwriting Discounts....................................... $ $
Proceeds, before expenses, to Optio.......................... $ $
</TABLE>
The underwriters may also purchase from Optio and some of our shareholders
up to an additional shares at the public offering price, less the
underwriting discount, within 30 days from the date of this prospectus to cover
over-allotments.
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.
We expect that the shares of common stock will be ready for delivery in New
York, New York on or about , 1999.
------------------
MERRILL LYNCH & CO.
BEAR, STEARNS & CO. INC.
THE ROBINSON-HUMPHREY COMPANY
------------------
The date of this prospectus is October , 1999
<PAGE>
DESCRIPTION OF GRAPHICS
OPTIO SOFTWARE, INC.
1) The Evolving Business Continuum
At the bottom center of the graphic is a circle that contains the Optio logo
that contains:
- The word "Optio" printed horizontally with the letters "O - P - T - O" in
plain black type and a stylized "I" that is rendered in red type.
- The word "Optio" is underlined and there is a thin vertical line extending
from the second "O" to the top of the letter.
- To the right of the vertical line is the word "Software" in red sans serif
type oriented vertically.
- Below the underline is the phrase "Optimizing Information" in black sans
serif type. The "I" in the word "Information" is formed by the lower
extension of the stylized "I" that forms the "I" in Optio.
Extending upward from the logo is a fan-shaped image that is made up of 5
smaller fan-shaped sections. There is a labeled arc that crosses the lower half
of the fan that contains the words "Paper-Intensive Commerce" on the left-hand
side and "e-business" on the right-hand side. Across the top of the fan-shaped
image is a second arc that is labeled to correspond with each of the fan-shaped
sections which reads from left to right: "Forms, Dynamic Documents, Process,
Internet, e-Commerce".
Each fan-shaped section has a graphic superimposed on a circle described as:
- Forms -- Stylized to represent two plain sheets of paper or letterhead
laid one over the other with the top sheet offset to the lower left.
- Dynamic Documents -- Stylized to represent three overlaid documents each
with different graphical layouts to represent customized content and
information.
- Process -- Stylized to represent a document with an arrow encircling it in
a counter-clockwise direction.
- Internet -- A stylized sphere with a horizontal ring around its
circumference at the midline. The globe is labeled with the letters "WWW".
- E-Commerce -- Stylized to represent a computer workstation with a monitor.
On the screen of the monitor is a lower case letter "e".
Across the top of the fan-shaped image and conforming to the radius of the
fan are the words "Evolving Business Continuum" in sans serif red type.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary......................................................................................... 1
Risk Factors............................................................................................... 5
Forward Looking Statements................................................................................. 14
Use of Proceeds............................................................................................ 14
Dividend Policy............................................................................................ 15
Capitalization............................................................................................. 16
Dilution................................................................................................... 17
Selected Financial Data.................................................................................... 18
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 19
Business................................................................................................... 31
Management................................................................................................. 45
Certain Transactions....................................................................................... 51
Principal Shareholders..................................................................................... 53
Description of Capital Stock............................................................................... 54
Shares Eligible for Future Sale............................................................................ 56
Underwriting............................................................................................... 58
Legal Matters.............................................................................................. 61
Experts.................................................................................................... 61
Additional Information..................................................................................... 61
Index to Financial Statements.............................................................................. F-1
</TABLE>
------------------
You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate only as of the date on
the front cover of this prospectus. Our business, financial condition, results
of operations and prospects may have changed after that date.
"Optio" and "MedForms" are registered trademarks of Optio Software, Inc.
This prospectus also contains trademarks and registered trademarks of companies
other than Optio Software, Inc.
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ii
<PAGE>
SUMMARY
This summary does not contain all of the information that you should
consider before investing in the common stock. You should read the entire
prospectus carefully, including the financial date and related notes, before
making an investment decision. The terms "Optio," "Optio Software" and "we" as
used in this prospectus refer to Optio Software, Inc. Any reference to a fiscal
year refers to our fiscal year ending on January 31 of that calendar year. For
example, "fiscal 1999" refers to our fiscal year ended January 31, 1999.
OPTIO
We are a leading provider of products and services that help organizations
make the transition from paper-intensive commerce to electronic business, or
e-business. Our products and services enhance the reliability and facilitate the
efficient utilization of information contained in our customers' e-business,
enterprise, legacy and custom applications. These products and services enable
the cost effective, efficient delivery of highly customized information to a
rapidly expanding audience including employees, customers, suppliers and
strategic partners. Our software is designed to directly access the information
generated by these applications, evaluate, transform, and then customize that
information according to specific business rules on a real-time basis. Once
converted to the desired format, this information can be delivered to both
people and systems over the Internet, e-mail, printers, faxes and other devices.
Organizations are constantly seeking ways to use information to operate more
productively and cost-effectively. To achieve these objectives, organizations
must provide focused, business ready information derived from a multitude of
sources to a rapidly expanding universe of users. Competitive pressures have
created a need for increasingly sophisticated and time-sensitive methods of
information delivery both inside and outside of the enterprise. A growing number
of organizations are using the Internet to compete more effectively and conduct
commerce electronically. As a result, e-business, has become critical for nearly
every organization seeking to establish and maintain a competitive advantage.
According to the International Data Corporation, or IDC, worldwide
Internet-based commerce or electronic commerce alone represented a $50 billion
market in 1998 and is expected to grow to $1.3 trillion by 2003. IDC estimates
the market for electronic commerce software applications will grow from $444
million in 1998 growing to $13 billion in 2003.
The effectiveness of an organization's use of information is dependent on
its ability to effectively meet the challenges of today's e-business
environment. The requirements of the e-business model have exposed the
shortcomings of relying on paper-intensive manual processes, ERP systems and
other traditional software applications to manage the organization and delivery
of customized information. This e-business environment has created the need for
a comprehensive solution that optimizes the use of business information and
maximizes the power of the Internet.
Our solutions benefit our customers by:
- EXTENDING THE REACH OF INFORMATION. Our products are designed to
empower users by providing relevant, flexible information, more quickly
and cost-effectively than previously possible.
- MAXIMIZING EXISTING AND NEW TECHNOLOGY INVESTMENTS. Our products and
services enable organizations to enhance the capabilities and leverage
the benefits of their investments in existing information technology
infrastructure.
- ENABLING RAPID DEPLOYMENT AND USE. Our products can be installed
quickly by our consultants or other integration partners without the
need for extended on-site visits.
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- OFFERING SCALABLE ARCHITECTURE. We design our products to scale
effectively when implemented in geographically disbursed
enterprise-wide deployments while maintaining system performance and
availability.
Our objective is to be the leading provider of products and services that
help transition organizations from paper-intensive commerce to e-business. Key
elements of our strategy include enhancing our product offerings, expanding our
customer awareness through increased marketing, extending our network of
strategic relationships, expanding our worldwide sales, leveraging our
significant customer base, pursuing strategic acquisitions and extending our
technological leadership.
We market and sell our software products primarily through our direct sales
force and a network of certified resellers. As of July 31, 1999, we employed 46
direct sales personnel and provided distribution through approximately 100
resellers. We also offer consulting services that provide our customers with
implementation assistance and training. Our customers are representative of a
wide variety of industries including manufacturing, retail, technology and
healthcare. As of July 31, 1999, we had over 2,500 customers worldwide using our
products and services including Home Depot, JFK Medical Center, Reynolds Metals
Company and Telxon Corporation. Moreover, we have strategic relationships with
six major ERP and healthcare vendors, including Baan Company, N.V., J.D.
Edwards, McKesson HBOC, Oracle Corporation, QAD Inc., and SAP AG, whereby we
have demonstrated that our solutions are interoperable with and complementary to
their applications.
Optio was incorporated in Georgia in 1981 under the name Technology
Marketing, Inc., changed its name to Xpoint Corporation in 1982, and further
changed its name to Optio Software, Inc. in 1997. Our principal executive office
is located at 4800 River Green Parkway, Duluth, GA 30096. Our telephone number
is (770) 283-8500. Our web site is located at WWW.OPTIOSOFTWARE.COM. Information
contained on our web site does not constitute a part of this prospectus.
2
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THE OFFERING
<TABLE>
<S> <C>
Common stock offered by Optio..... shares
Shares outstanding after the shares
Offering........................
Use of proceeds................... We expect that the net proceeds from this offering
(without exercise of the over-allotment option) will be
approximately $ million. We intend to use these
net proceeds for:
- expansion of our business, including sales and
marketing expenditures;
- product development;
- potential future acquisitions;
- repayment of debt; and
- for general corporate purposes, including working
capital.
Risk Factors...................... See "Risk Factors" and the other information included in
this prospectus for a discussion of factors you should
carefully consider before deciding to invest in shares
of the common stock.
Nasdaq National Market Symbol..... "OPTO"
</TABLE>
Unless otherwise noted, all information in the prospectus, including share
and per share information, gives effect to a 5-for-1 split of the common stock
on October 15, 1999, assumes no exercise of the underwriters' overallotment
option and excludes up to 12,500,000 shares reserved for issuance under our
stock incentive plan.
3
<PAGE>
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table presents table summarizes our financial data for the
periods indicated. Our balance sheet data is presented on an actual basis and on
an as adjusted basis giving effect to the sale of the common stock in this
offering and the application of the proceeds from the sale.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
JANUARY 31, JULY 31,
------------------------------- --------------------
1997 1998 1999 1998 1999
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
License fees........................................... $ 5,802 $ 9,150 $ 12,014 $ 5,234 $ 7,709
Services, maintenance and other........................ 3,200 4,419 7,525 2,886 6,848
--------- --------- --------- --------- ---------
Total revenue........................................ 9,002 13,569 19,539 8,120 14,557
Gross profit............................................. 6,546 10,267 14,537 6,004 10,581
Total operating expenses................................. 5,852 10,144 13,923 5,666 9,239
Income from operations................................... 694 123 614 338 1,342
Net income............................................... $ 419 $ 22 $ 316 $ 263 $ 751
Net income per share--basic.............................. $ 0.03 $ 0.00 $ 0.03 $ 0.02 $ 0.06
Net income per share--diluted............................ $ 0.03 $ 0.00 $ 0.02 $ 0.02 $ 0.05
Weighted average shares outstanding--basic............... 12,380 12,891 12,825 12,893 11,919
Weighted average shares outstanding--diluted............. 14,301 15,081 15,602 15,264 16,124
</TABLE>
<TABLE>
<CAPTION>
AS OF JULY 31, 1999
----------------------
ACTUAL AS ADJUSTED
--------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................................... $ 1,489 $
Working capital (deficiency)............................................................ (1,357)
Total assets............................................................................ 10,842
Long-term debt, net of current portion.................................................. 835
Total shareholders' equity.............................................................. 725
</TABLE>
4
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors before making an
investment decision. Our business, operating results or financial condition
could be harmed by any of the following risks. The trading price of our common
stock could decline due to any of these risks, and you may lose all or part of
your investment. You should also refer to the other information set forth in
this prospectus, including our financial statements and the related notes.
RISKS RELATED TO OUR BUSINESS
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE IN FUTURE PERIODS, AND AS A RESULT
WE MAY FAIL TO MEET EXPECTATIONS OF INVESTORS AND ANALYSTS.
Our revenue and operating results may vary from quarter to quarter due to a
number of factors, including the following:
- variations in market acceptance of and demand for our products;
- the size and timing of our customer orders;
- increased expenses, whether related to sales and marketing, product
development or administration;
- delays in introducing new products or product enhancements;
- new product introductions or changes in pricing policies by our
competitors;
- costs related to acquisitions of technologies or businesses;
- the timing of releases of new versions of third-party software products
that our products support; and
- the amount and timing of expenditures related to expansion of our
operations.
The purchase decision relating to our products is typically made by the
senior management of our prospective customers. The purchase of our products
involves a commitment of resources and recurring expenses and the attendant
delays frequently associated with approving capital expenditures and reviewing
new technologies that affect key operations. Our customers' decision-making
processes require us to provide a significant level of training 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
consummate the sale. Accordingly, our results of operations for a particular
period may suffer if the sales forecasted for a particular period are delayed or
do not otherwise occur.
WE RELY IN PART ON OUR STRATEGIC ALLIANCES AND THIRD PARTY DISTRIBUTION
RELATIONSHIPS TO GENERATE CUSTOMERS AND REVENUE; IF WE DO NOT SUCCESSFULLY
DEVELOP AND MAINTAIN THESE RELATIONSHIPS OUR REVENUE WILL DECREASE.
Our sales depend, in part, on strategic marketing alliances. We expect that
revenue from sales of our products and services based on leads generated through
these alliances will continue to account for a significant portion of our
revenue. We have several types of strategic marketing alliances. First, large
software manufacturers, such as Baan, J.D. Edwards, McKesson HBOC, Oracle,
PeopleSoft, Inc., QAD and SAP, often recommend our products to their customers
or provide us with sales leads. Second, consulting firms, such as Deloitte
Consulting, may recommend our products to their customers. Third, we have
relationships with other third parties, such as Whitman Hart and Lexmark
Solution Services, who recommend our products to their clients. Some of these
strategic alliance partners receive commissions on these sales and others do
not. We expect that a limited number of our strategic marketing relationships,
such as those with McKesson HBOC, will account for a substantial portion of
5
<PAGE>
our client leads and, therefore, revenue over time. Our strategic relationships
are generally terminable by either party upon 30 to 90 days notice. Therefore,
the continuation of these relationships is uncertain. The large software
manufacturers may decide to promote technologies and standards that are not
compatible with our technology, or they may lose market share for their
products. The loss of a significant number of these relationships or a decline
in the performance of our alliance partners would cause our revenues to
decrease.
We intend to augment our indirect sales channel through additional
third-party distribution arrangements. As a result, we will likely become more
dependent on this type of relationship. We may not be able to successfully
augment these arrangements, and the expansion of indirect sales distribution
methods, even if successful, may not increase revenue.
WE INTEND TO MAKE ACQUISITIONS IN ORDER TO REMAIN COMPETITIVE IN OUR MARKETS;
OUR BUSINESS COULD SUFFER AS A RESULT OF ANY OF THESE FUTURE ACQUISITIONS.
Though we have not yet entered into negotiations on any potential
acquisitions, 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 technology 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;
- the diversion of our management's attention from other business
concerns;
- the impairment of relationships with our employees, affiliates and
strategic marketing alliances;
- difficulties maintaining uniform standards, controls, procedures and
policies;
- our lack of direct prior experience in the markets of the acquired
company; and
- the loss of key employees of the acquired company.
Some or all of these risks, if they materialize, could cause our business to
suffer. In addition, we may not 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. In addition, we may not be able to arrange adequate financing for
any acquisitions on acceptable terms.
OUR FUTURE SUCCESS DEPENDS ON THE CONTINUED SERVICE OF OUR KEY PERSONNEL AND
ATTRACTING ADDITIONAL KEY PERSONNEL.
Our future performance depends on the continued service of our senior
management, product development and sales personnel. In particular we rely on
the experience and knowledge of our founder and Chief Executive Officer, C.
Wayne Cape. None of these persons, including Mr. Cape, is bound by an employment
agreement. We maintain "key person" life insurance in the amount of $1 million
on Mr. Cape, but this amount likely would be inadequate to compensate us for the
loss of his services. The loss of the services of one or more of our key
personnel could seriously harm our business.
6
<PAGE>
Our future success also depends on our continuing ability to attract, hire,
train and retain a substantial number of highly skilled managerial, technical,
sales, marketing and customer support personnel. We are particularly dependent
on hiring additional personnel to increase our direct sales and research and
development organizations. In addition, new hires frequently require extensive
training before they achieve desired levels of productivity. For example, our
e-business software products and services were introduced in May 1999, and our
sales force has limited experience selling them. We estimate that new
salespeople will require at least three months to become effective at selling
our e-business products and services. Competition for qualified personnel is
intense and we may fail to retain our key employees or to attract or retain
other highly qualified personnel. If we fail to attract and retain these
personnel, our business will be harmed.
WE FACE INTENSE COMPETITION IN OUR INDUSTRY; IF WE ARE UNABLE TO COMPETE
SUCCESSFULLY, OUR BUSINESS WILL BE HARMED.
The market for our products and services is intensely competitive,
fragmented and constantly changing. Our customers' requirements and the
technology available to satisfy those requirements continually change. We expect
competition to persist and intensify in the future.
We see our competitors fitting into these segments: custom software
developers, point solutions from customization focused companies such as AFP
Technology Ltd., Create!print International, Inc. and StreamServe, Inc.; and
delivery focused organizations such as Cypress Corporation, Dazel Corporation,
which is owned by Hewlett-Packard, New Dimension Software Ltd., which is owned
by BMC Software, Inc. and Tivoli, which is owned by IBM Corporation. We expect
to face increased competition from our current competitors. In addition, new
competitors, alliances among existing and future competitors, or acquisitions by
or consolidations of our competitors may emerge and rapidly gain significant
market share.
Many of these companies, as well as some other competitors, have longer
operating histories and significantly greater financial, marketing and other
resources than we do. Many of these companies can also leverage extensive
customer bases and adopt aggressive pricing policies to gain market share. In
addition, it is possible that new competitors or alliances among competitors may
emerge and rapidly acquire significant market share.
Competitive pressures may make it difficult to acquire and retain clients
and may require us to reduce the price of our software. We cannot be certain
that we will be able to compete successfully with existing or new competitors.
If we fail to compete successfully, our business will be harmed. See
"Business--Competition."
WE ARE CURRENTLY EXPANDING OUR INTERNATIONAL OPERATIONS AND WILL THEREFORE
ENCOUNTER RISKS ASSOCIATED WITH OPERATING AN INTERNATIONAL BUSINESS.
Substantially all of our current international revenue is derived from the
operations of our two wholly-owned subsidiaries in France and Australia. Revenue
from license and services to customers outside of North America were $986,000 in
the year ended January 31, 1999, representing 5% of total revenue, and
approximately $2.0 million in the six months ended July 31, 1999, representing
14% of total revenue. As a result, we face increasing risks from doing business
on an international basis, including, among others:
- difficulties in staffing and managing foreign operations;
- potential losses or gains from currency fluctuation as a result of
transactions and expenses being denominated in foreign currencies;
- seasonal reductions in business activity in Europe;
7
<PAGE>
- increased financial accounting and reporting burdens and complexities
and potentially adverse tax consequences;
- delays in delivering language-specific versions of our products due to
our limited experience in creating these versions;
- compliance with a wide variety of complex foreign laws and treaties;
- reduced protection for intellectual property rights in some countries;
and
- licenses, tariffs and other trade barriers.
We plan to expand our international operations as part of our business
strategy. The expansion of our existing international operations and entry into
additional international markets will require significant management attention
and financial resources and will place additional burdens on our management,
administrative, operational and financial infrastructure. We cannot be certain
that our operations in other countries will produce desired levels of revenue or
profitability.
OUR PRODUCTS AND THE PRODUCTS WE RELY ON MAY SUFFER FROM DEFECTS OR ERRORS,
WHICH MAY HARM THE REPUTATION OF OUR PRODUCTS OR SUBJECT US TO PRODUCT LIABILITY
CLAIMS.
The software products we offer are inherently complex. Despite testing and
quality control, current versions, new versions or enhancements of our products
may contain errors after commencement of commercial shipments. Significant
technical challenges also arise with our products because our customers purchase
and deploy our products across a variety of computer platforms and integrate
them with a number of third-party software applications and databases. If new or
existing customers have difficulty deploying our products or require significant
amounts of customer support, our operating margins could be harmed. Moreover, we
could face significant product liability claims and higher development costs if
our software contains undetected errors, if we fail to meet our customers'
expectations or if a customer's system experiences failures following the
implementation of our software, regardless of our responsibility for the
failure. Although we maintain general liability insurance coverage, this
coverage may not continue to be available on reasonable terms or at all, or may
be insufficient to cover one or more large claims. In addition, a product
liability claim, whether or not successful, could harm our business by
increasing our costs and distracting our management.
Our products contain components developed and maintained by third-party
software vendors, and we expect that we will incorporate software from
third-party vendors in our future products. We may not be able to replace the
functionality provided by the third-party software currently offered with our
products if that software becomes obsolete, defective or incompatible with
future versions of our products or is not adequately maintained or updated. Any
significant interruption in the availability of these third-party software
products or defects in these products could harm our sales unless and until we
can secure an alternative source. In addition, we have entered into and plan to
continue to enter into agreements with strategic alliance partners whereby we
license our software products for integration with the alliance partners'
software. If an alliance partner's software fails to meet customer expectations
or causes a failure in its customer's systems, the reputation of our software
products could be harmed, even if our software products perform in accordance
with their functional specifications.
WE MAY EXPERIENCE DELAYS IN ENHANCING EXISTING PRODUCTS AND DEVELOPING NEW
PRODUCTS; THESE DELAYS MAY AFFECT OUR COMPETITIVENESS.
Our future success will depend, in part, on our ability to develop, test,
sell and support enhancements of our current and new products on a timely basis
in response to changing customer needs, competition, technological developments
and emerging industry standards. The software 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
8
<PAGE>
our products and services and could render our products and services obsolete.
We may not successfully identify new product opportunities or develop and bring
new and enhanced products and services to the market in a cost effective and
timely manner. If we fail to release new products and upgrades on time or they
fail to achieve market acceptance, we may experience customer dissatisfaction,
cancellation of orders and license agreements and loss of revenue.
Our failure to successfully adapt our products and services to this rapidly
changing market could reduce our revenue and our operating results may suffer.
WE RELY ON THIRD PARTIES TO PROVIDE PART OF OUR CONSULTING SERVICES; IF THESE
THIRD PARTIES DO NOT PROVIDE SATISFACTORY SERVICE, OUR BUSINESS COULD BE HARMED.
We now contract with, and may increasingly contract with, third party
providers to assist in providing our consulting services. Services provided by
these third parties may include providing assistance to our customers in
installing and implementing our software products. If we are unable to continue
contracting with such third parties for these services, or if these third
parties do not meet the needs or expectations of our customers, our business and
reputation may be harmed and we will have to perform these functions ourselves.
Providing these services could place a significant strain on our internal
consulting resources, and we may not be able to successfully perform these
services on a timely and cost-effective basis.
WE ARE CURRENTLY EXPERIENCING A PERIOD OF SIGNIFICANT GROWTH THAT IS PLACING A
STRAIN ON OUR RESOURCES.
We have recently experienced significant growth in our operations and
anticipate that additional expansion may be required in order to continue our
growth. This expansion has placed, and is expected to continue to place, a
significant strain on our managerial, operational and financial resources. To
manage this growth we must continue improving or replacing existing operational,
accounting and information systems, procedures and controls. Our failure to
manage growth effectively could harm our business.
THE RECENT EXPANSION OF OUR OFFERINGS TO INCLUDE E-BUSINESS PRODUCTS AND
SERVICES, ALONG WITH UNCERTAINTIES ABOUT THE USE OF E-BUSINESS, MAKE IT
DIFFICULT TO EVALUATE OUR PROSPECTS IN THIS AREA.
We are currently developing software products to assist companies in
business to business transactions over the Internet. To date, our revenue from
this business has not been significant. Our limited operating history in the
e-business market makes it difficult for us to evaluate our future prospects. We
may encounter risks and difficulties associated with our new e-business
initiatives as often is the case with companies that introduce new products and
services into rapidly evolving markets. Internet usage for e-business, and
therefore the acceptance and adoption of our e-business products and services,
may be inhibited for a number of reasons, including:
- inadequate network infrastructure;
- security concerns;
- inconsistent quality of service;
- unavailability of cost effective, high-speed access to the Internet;
and
- changes in government regulation of the Internet.
We also believe that awareness of our products and capabilities within this
evolving market is still developing. While we have devoted significant resources
to promoting awareness of our products and the problems these products address,
these efforts may not be sufficient to build market awareness for our products.
9
<PAGE>
If a significant market for e-business products and services fails to
develop, or if we are unable to develop broad market acceptance for our
e-business products, our business in this area may not grow as rapidly as we
anticipate.
DISPUTES REGARDING OUR INTELLECTUAL PROPERTY 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 trademarks for "Optio" and "MedForms."
We have also registered the domain name "optiosoftware.com." We have not filed
any copyrights for our software products.
The steps we have taken to protect our proprietary rights may not be
adequate, we may not be able to secure trademark or service mark registrations
for our marks in the United States or in foreign countries and third parties may
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.
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. In addition, litigation may be necessary to enforce and
protect our trade secrets, copyrights and other intellectual property rights.
Any such litigation would divert management resources, be expensive and may not
effectively protect our intellectual property. Our inability to protect our
marks adequately could harm our business.
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. Furthermore, 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 (which we may not be able to
obtain on commercially reasonable terms), or prevent us from selling our
services. Any of these results could reduce the acceptance of the Optio brand,
which would cause our business to suffer.
RISKS RELATED TO OUR INDUSTRY
YEAR 2000 ISSUES PRESENT TECHNOLOGICAL RISKS AND COULD CAUSE DISRUPTION TO OUR
BUSINESS.
Software that records only the last two digits of the calendar year may not
be able to distinguish whether "00" means 1900 or 2000. This may result in
software failures or the creation of erroneous results. Year 2000-related errors
or defects that affect the operation of our software could result in:
- delay or loss of revenue;
- cancellation of customer contracts;
- diversion of development resources;
- damage to our reputation;
- increased customer support and warranty costs; and
- litigation costs.
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. However,
our products are generally used with enterprise systems and third party
applications which may not comply with Year 2000 requirements. As a result,
demand for our products may decrease. We also face risks relating to the
potential year 2000 non-compliance of 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.
10
<PAGE>
We cannot assure you that Year 2000 issues will not be discovered in our
products or internal software systems or in enterprise systems or third-party
applications with which our products are used. If Year 2000 issues are
discovered, we cannot assure you that our contingency plan will be adequate to
deal with them effectively, or that the costs of making the products and systems
Year 2000 ready will not harm our business. In addition, if Year 2000 issues
arise, we may be subject to complaints by customers, and our reputation and
revenue may suffer. We may also be required to defend our products or services
in litigation or arbitration proceedings, or to negotiate resolutions of claims,
based on Year 2000 issues. The costs of defending and resolving Year
2000-related disputes, regardless of the merits of such disputes, could harm our
business. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Impact of Year 2000 Computer Issues."
CUSTOMER FOCUS AND SPENDING ON YEAR 2000 REMEDIATION MAKES IT DIFFICULT TO
PREDICT THE BUYING PATTERNS OF OUR CUSTOMERS DURING THE THIRD AND FOURTH
QUARTERS OF 1999.
The purchasing patterns of our customers and potential customers based on
Year 2000 issues make it difficult to predict future sales of our products, in
the third and fourth quarters of 1999. Many customers may spend their limited
financial and personnel resources remediating Year 2000 problems, thereby
delaying or foregoing purchases of other software products such as ours. This
trend could reduce our revenue in 1999 and 2000.
WE OPERATE IN AN UNCERTAIN REGULATORY AND LEGAL ENVIRONMENT AND NEW LAWS AND
REGULATIONS RELATING TO THE INTERNET COULD HARM OUR BUSINESS.
Laws and regulations directly applicable to Internet business transactions
are becoming more prevalent. We cannot predict the impact that any of these laws
will have on our business. If the current approach to, and level of, regulation
of the Internet is materially altered, we may need to adapt our technology
accordingly. Any required adaptation could cause us to spend significant amounts
of time or money, which could be detrimental to our business.
11
<PAGE>
RISKS RELATED TO OUR OFFERING
THERE HAS BEEN NO PRIOR MARKET FOR OUR COMMON STOCK, AND THE PRICE OF OUR COMMON
STOCK MAY BE VOLATILE.
Prior to this offering, you could not buy or sell our common stock publicly.
An active public market for our common stock may not develop or be sustained
after the offering, and the market price might fall below the initial public
offering price. The initial public offering price may bear no relationship to
the price at which the common stock will trade upon completion of this offering.
The initial public offering price will be determined based on negotiations
between us and the representatives of the underwriters, based on factors that
may not be indicative of future market performance. The market price of the
common stock may fluctuate significantly in response to a number of factors,
some of which are beyond our control, including:
- quarterly variations in our operating results;
- changes in financial estimates by securities analysts or any shortfall
in revenue or net income or any increase in losses from levels expected
by these analysts;
- changes in market valuation of software and Internet companies;
- announcements by us of significant contracts, acquisitions or capital
commitments;
- our failure to complete significant license transactions;
- additions or departures of key personnel; and
- future sales of common stock.
In addition, the market for 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 harm our stock price, regardless of our operating performance. The
trading prices of the stocks of many 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 HAS BROAD DISCRETION AS TO THE 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. A failure by our management to apply these proceeds effectively would
cause our financial condition to suffer and could cause the market price of our
common stock to decline. See "Use of Proceeds."
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, 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 Optio 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
12
<PAGE>
result of securities laws or lock-up agreements signed by the holder and will be
available for sale in the public market as follows:
- restricted shares are not eligible for sale as of the date of
this prospectus, but will become eligible for sale thereafter at
various times in accordance with the provisions of Rule 144;
- approximately 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 restricted shares are eligible for sale as of
the date of this prospectus in accordance with the provisions of Rule
144.
OUR MANAGEMENT AND AFFILIATES CONTROL MORE THAN 61% 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 11,946,950 shares of our common stock (including
4,301,300 shares subject to acquisition upon the exercise of options exercisable
within 60 days), or shares if the underwriters exercise their
over-allotment option in full and sell stock of certain officers, directors or
affiliated partners. C. Wayne Cape, our Chief Executive Officer, will
beneficially own following this offering approximately 9,636,950 shares of our
common stock (including 2,256,300 shares subject to acquisition upon the
exercise of options exercisable within 60 days), or shares if the
underwriters exercise their over-allotment option in full and sell a portion of
his stock. 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 Optio, which in turn
could reduce our stock price or prevent our shareholders from realizing a
premium over our stock price.
INVESTORS IN THIS OFFERING WILL SUFFER IMMEDIATE DILUTION.
The initial public offering price is 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 $ in
net tangible book value per share, or approximately % of the offering
price of $ per share. In contrast, existing shareholders paid an average
price of $ 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 Amended and Restated Articles of Incorporation, Amended and Restated
Bylaws, other agreements and Georgia law could make it more difficult for a
third party to acquire us, even if a
13
<PAGE>
change in control would be beneficial to our shareholders. For example, our
Amended and Restated Articles of Incorporation and Amended and Restated 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 Amended and Restated 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 50% of
the votes entitled to be cast on each issue to be considered at the
special meeting.
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 Optio. See "Description of Capital Stock--Antitakeover Provisions of
Our Articles of Incorporation, Bylaws and Georgia Law."
FORWARD LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties, and assumptions about us, including, among other things:
- our limited operating history in the e-business market and the
uncertainty of our prospects in this area;
- fluctuations in our quarterly operating results;
- delays or losses of sales due to long sales and implementation cycles
for our products;
- the possibility of lower prices, reduced gross margins and loss of
market share due to increased competition; and
- increased demands on our resources due to continued growth.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties, and assumptions, the forward-looking
events discussed in this prospectus might not occur. You should not place undue
reliance on forward-looking statements.
USE OF PROCEEDS
The net proceeds to Optio from the sale of the shares of common
stock offered by us in this offering, after deducting offering expenses of
approximately $ and the underwriting discounts and commissions, will be
approximately $ million. 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 $1,198,863 of all
net proceeds to repay indebtedness to three former shareholders incurred in
connection with the repurchase of their common stock on December 23, 1999. This
indebtedness bears interest at 7% per annum and matures on July 1, 2001; we must
repay this indebtedness pursuant to its terms and prepayment following the
closing of this offering is mandatory in accordance with the promissory notes.
See "Certain Transactions." As of
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<PAGE>
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, if 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 our 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
Optio 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.
15
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of July 31, 1999. Our
capitalization is presented on an actual basis and on an adjusted basis to
reflect the sale of the shares in this offering.
<TABLE>
<CAPTION>
JULY 31, 1999,
--------------------------
AS
ACTUAL ADJUSTED
------------ ------------
<S> <C> <C>
Current portion of notes payable to related parties................................... $ 861,000 $ --
Notes payable to related parties, less current portion................................ 777,000 --
Capital lease obligations, current and long-term...................................... 107,000 107,000
Shareholders' equity:
Preferred stock, no par value; 20,000,000 shares authorized, none issued or
outstanding....................................................................... -- --
Common stock, no par value; 100,000,000 shares authorized; 11,918,640 shares issued
and outstanding; shares issued and outstanding as adjusted.................. 1,310,000
Accumulated deficit................................................................. (354,000) (354,000)
Accumulated other comprehensive income.............................................. 26,000 26,000
Unamortized stock compensation...................................................... (257,000) (257,000)
------------ ------------
Total shareholders' equity............................................................ 725,000
------------ ------------
Total capitalization.................................................................. $ 2,470,000 $
------------ ------------
------------ ------------
</TABLE>
Upon the closing of the offering, our authorized capital will consist of
100,000,000 shares of common stock and 20,000,000 shares of preferred stock. We
expect there to be shares of common stock outstanding after the
offering, which includes the adjustments described above. The outstanding shares
as of July 31, 1999 exclude 9,587,480 shares of common stock issuable upon the
exercise of outstanding stock options at a weighted average exercise price of
$0.68, and approximately 12,500 shares of common stock issuable upon the
exercise of options granted since July 31, 1999.
You should 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.
16
<PAGE>
DILUTION
As of July 31, 1999, Optio had a net tangible book value of approximately
$186,000, or $0.02 per share of common stock. Net tangible book value per share
represents the amount of total tangible assets of Optio reduced by its total
liabilities, divided by the number of shares of common stock outstanding as of
July 31, 1999. Assuming an initial public offering price of $ per share,
after giving effect to the receipt by Optio of the estimated net proceeds from
the sale of the shares of common stock offered by Optio hereby, the
as adjusted net tangible book value of Optio as of July 31, 1999 would have been
approximately $ million, or $ per share. This represents an immediate
increase in net tangible book value of $ per share to existing shareholders
and an immediate dilution of $ per share to new investors. The following
table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Initial public offering price per share....................... $
Net tangible book value per share as of July 31, 1999..... $ 0.02
Increase per share attributable to new investors..........
---------
As adjusted net tangible book value per share after this
offering....................................................
---------
Dilution per share to new investors........................... $
---------
---------
</TABLE>
The following table sets forth as of July 31, 1999 the differences between
existing shareholders and new investors with respect to the number of shares of
common stock purchased from Optio, 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............. 11,918,640 % $ 717,000 % $ 0.06
New investors..................... % %
------------ --- ---------- --- -----
Total........................... 100% $ 100% $
------------ --- ---------- --- -----
------------ --- ---------- --- -----
</TABLE>
Other than as noted above, the foregoing computations assume no exercise of
stock options after July 31, 1999. As of July 31, 1999, options to purchase
9,587,480 shares of common stock were outstanding, with a weighted average
exercise price of $0.68 per share. To the extent that the outstanding options to
purchase common stock, or any options issued after July 31, 1999, are exercised,
there will be further dilution to new investors.
17
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The following table sets forth our selected financial data. 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." The selected
financial data as of and for the years ended January 31, 1995, 1996, 1997, 1998
and 1999 have been derived from the audited financial statements of the Company.
The statement of operations and per share data for the six months ended July 31,
1998 and 1999 and as of July 31, 1999 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.
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
FISCAL YEAR ENDED JANUARY 31, JULY 31,
----------------------------------------------------- ---------
1995 1996 1997 1998 1999 1998
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
License fees.......................................... $ 3,367 $ 4,806 $ 5,802 $ 9,150 $ 12,014 $ 5,234
Services, maintenance and other....................... 1,638 1984 3,200 4,419 7,525 2,886
--------- --------- --------- --------- --------- ---------
Total revenue....................................... 5,005 6,790 9,002 13,569 19,539 8,120
Costs of revenue:
License fees.......................................... 469 589 642 1,088 913 426
Services, maintenance and other....................... 815 981 1,814 2,214 4,089 1,690
--------- --------- --------- --------- --------- ---------
Total cost of revenue............................... 1,284 1,570 2,456 3,302 5,002 2,116
--------- --------- --------- --------- --------- ---------
Gross profit............................................ 3,721 5,220 6,546 10,267 14,537 6,004
Operating expenses:
Sales and marketing................................... 2,067 2,470 3,674 5,901 7,534 3,114
Research and development.............................. 586 790 891 1,551 2,530 1,017
General and administrative............................ 727 1,175 1,143 1,886 2,884 1,118
Depreciation and amortization......................... 715 761 144 806 975 417
--------- --------- --------- --------- --------- ---------
Total operating expenses............................ 4,095 5,196 5,852 10,144 13,923 5,666
--------- --------- --------- --------- --------- ---------
Income (loss) from operations........................... (374) 24 694 123 614 338
Other income (expense):
Interest income....................................... 24 76 71 32 104 38
Interest expense...................................... (44) (42) (42) (77) (257) (36)
Other................................................. -- -- -- 8 (46) 6
--------- --------- --------- --------- --------- ---------
20 34 29 (37) (199) 8
--------- --------- --------- --------- --------- ---------
Income (loss) before income taxes....................... (394) 58 723 86 415 346
Income tax expense (benefit)............................ (203) 48 304 64 99 83
--------- --------- --------- --------- --------- ---------
Net income (loss)....................................... $ (191) $ 10 $ 419 $ 22 $ 316 $ 263
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Net income (loss) per share--basic...................... $ (0.02) $ 0.00 $ 0.03 $ 0.00 $ 0.03 $ 0.02
Net income (loss) per share--diluted.................... $ (0.02) $ 0.00 $ 0.03 $ 0.00 $ 0.02 $ 0.02
Weighted average shares outstanding--basic.............. 12,095 12,095 12,380 12,891 12,825 12,893
Weighted average shares outstanding--diluted............ 12,095 13,891 14,301 15,081 15,602 15,264
<CAPTION>
1999
---------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
License fees.......................................... $ 7,709
Services, maintenance and other....................... 6,848
---------
Total revenue....................................... 14,557
Costs of revenue:
License fees.......................................... 456
Services, maintenance and other....................... 3,520
---------
Total cost of revenue............................... 3,976
---------
Gross profit............................................ 10,581
Operating expenses:
Sales and marketing................................... 5,243
Research and development.............................. 1,645
General and administrative............................ 1,745
Depreciation and amortization......................... 606
---------
Total operating expenses............................ 9,239
---------
Income (loss) from operations........................... 1,342
Other income (expense):
Interest income....................................... 59
Interest expense...................................... (67)
Other................................................. (7)
---------
(15)
---------
Income (loss) before income taxes....................... 1,327
Income tax expense (benefit)............................ 576
---------
Net income (loss)....................................... $ 751
---------
---------
Net income (loss) per share--basic...................... $ 0.06
Net income (loss) per share--diluted.................... $ 0.05
Weighted average shares outstanding--basic.............. 11,919
Weighted average shares outstanding--diluted............ 16,124
</TABLE>
<TABLE>
<CAPTION>
AS OF JULY
AS OF JANUARY 31, 31,
----------------------------------------------------- -------------
1995 1996 1997 1998 1999 1999
--------- --------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................... $ 421 $ 1,751 $ 1,646 $ 1,507 $ 1,129 $ 1,489
Working capital (deficiency)........................ 609 645 880 (152) (1,650) (1,357)
Total assets........................................ 2,623 4,226 4,905 6,978 10,704 10,842
Long-term debt, net of current portion.............. 364 254 292 246 1,208 835
Total shareholders' equity (deficit)................ 692 702 1,320 1,624 (25) 725
</TABLE>
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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
We were incorporated in Georgia in 1981 as Technology Marketing, Inc., and
changed our name to Xpoint Corporation in 1982. For most of our operating
history, our primary business consisted of providing software and services that
addressed organizations' need for customized information delivered via print,
fax and e-mail to users of enterprise and healthcare applications. We have been
profitable since 1996. We changed our name to Optio Software, Inc. in 1997. Over
the past year, we have invested in all areas of our business with a particular
emphasis on sales, marketing and research and development. From March to May
1999, we began expanding our business plan to develop new products and services
that would help our customers move from paper-intensive commerce to e-business,
and in June 1999, we introduced our first e-business product, Optio
e.ComPresent.
We market and sell our software products primarily through our direct sales
force and certified resellers. As of September 30, 1999, we had 46 direct sales
personnel and approximately 100 resellers. We also offer consulting services
which provide our customers with implementation assistance and training. In
order to better service our customers and support the growth of our consulting
business, we have established the Optio Alliance Program. This program certifies
independent consulting companies that help deliver our consulting services to
our customer base. As of July 31, 1999, we had over 2,500 customers worldwide
using our products and services. No single customer accounted for 10% or more of
our revenue for the six months ended July 31, 1999, or for the years ended
January 31, 1999, 1998 or 1997. Our revenue was $14.6 million for the six months
ended July 31, 1999, and $19.5 million, $13.6 million and $9.0 million for the
years ended January 31, 1999, 1998 and 1997, respectively.
Our growth has, in part, been supplemented by acquisitions. On February 28,
1997 we acquired the assets of Devcom Mid-America, Inc. This acquisition
strengthened our product offerings by providing us with a server-based fax
solution. On August 26, 1998 we acquired the stock of Competence Software Europe
S.A., which prior to the acquisition was a distributor of our products. This
acquisition provided us entry into European markets. Both acquisitions were
accounted for using the purchase method of accounting and the associated
goodwill from these acquisitions is being amortized over three years. In May
1999 we entered the Asia Pacific market by establishing a subsidiary in
Australia. By opening this office and acquiring Competence Software Europe,
S.A., we further enhanced our presence in the worldwide marketplace.
REVENUE RECOGNITION. We derive our revenue from the sales of software
licenses, services and maintenance. We typically recognize license fee revenue
on delivery of our products when:
- we have a signed, noncancellable license agreement with the customer;
- the license fee is fixed and determinable;
- we can objectively allocate the total fee among all elements of the
arrangement; and
- the collection of the license fee is probable.
Revenue from services, maintenance and other includes fees for consulting,
implementation, training and technical support. We recognize revenue from
services as they are performed. We
19
<PAGE>
recognize revenue from maintenance ratably over the term of our contract with
the customer, typically one year.
COSTS OF REVENUE. Costs of revenue from license fees consist of costs
relating to the manufacturing, packaging and distribution of products and
related documentation and third party license and referral fees. Costs of
revenue from services, maintenance and other consists of personnel and direct
expenses relating to the cost of providing consulting, implementation, training,
technical support and allocable overhead. Costs of revenue from services,
maintenance and other will vary depending on the mix of services we provide
among consulting, implementation, training and support.
SALES AND MARKETING. Sales and marketing expenses consist primarily of
sales and marketing personnel compensation and benefits, direct expenditures
such as travel, trade shows, direct mail, online marketing, advertising and
promotion, and allocable overhead.
RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of salaries, benefits, equipment and allocable overhead for software
engineers, quality assurance personnel, program managers and technical writers.
Research and development expenses also include expenses associated with
independent contractors we use to augment our research and development efforts.
To date we have not capitalized any development costs.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of salaries, benefits and related costs for executive, finance,
administrative and human resource functions. General and administrative expenses
also include legal, other professional fees and allocable overhead.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
consist of depreciation of our property and equipment and amortization of
goodwill related to acquisitions.
AMORTIZATION OF DEFERRED STOCK COMPENSATION. We recorded deferred
compensation of $277,000 during the six months ended July 31, 1999 and $129,000
during August 1999 in connection with grants of employee share purchase options
with exercise prices lower than the deemed fair market value of our common
shares on the date of grant. We are amortizing this amount over the period in
which the options vest, generally three to four years. We recognized $20,000 in
compensation expense in the six months ended July 31, 1999 and currently expect
to recognize $86,000, $125,000, $125,000, $65,000 and $5,000 in the years ending
January 31, 2000, 2001, 2002, 2003 and 2004, respectively.
20
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain items from our statements of
operations as a percentage of total revenue for the periods indicated.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JANUARY 31, JULY 31,
------------------------------------- ------------------------
1997 1998 1999 1998 1999
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenue:
License fees................................................ 64% 67% 61% 64% 53%
Services, maintenance and other............................. 36 33 39 36 47
--- --- --- --- ---
Total revenue........................................... 100 100 100 100 100
Costs of revenue:
License fees................................................ 7 8 5 5 3
Services, maintenance and other............................. 20 16 21 21 24
--- --- --- --- ---
Total cost of revenue................................... 27 24 26 26 27
--- --- --- --- ---
Gross profit.................................................... 73 76 74 74 73
Operating expenses:
Sales and marketing......................................... 41 44 38 38 36
Research and development.................................... 10 11 13 13 12
General and administrative.................................. 13 14 15 14 12
Depreciation and amortization............................... 1 6 5 5 4
--- --- --- --- ---
Total operating expenses................................ 65 75 71 70 64
--- --- --- --- ---
Income from operations.......................................... 8 1 3 4 9
Interest and other income....................................... -- -- (1) -- --
--- --- --- --- ---
Income before income taxes...................................... 8 1 2 4 9
Income taxes.................................................... 3 1 -- 1 4
--- --- --- --- ---
Net income...................................................... 5% --% 2% 3% 5%
--- --- --- --- ---
--- --- --- --- ---
</TABLE>
SIX MONTHS ENDED JULY 31, 1999 AND 1998
REVENUE
Total revenue increased 79% to $14.6 million for the six months ended July
31, 1999 from $8.1 million for the six months ended July 31, 1998.
License fee revenue increased 47% to $7.7 million for the six months ended
July 31, 1999 from $5.2 million for the six months ended July 31, 1998. The
increase in license fee revenue was due primarily to growing market acceptance
of our software products and also to our continued expansion into foreign
markets. Revenue from international operations was $2.0 million and
approximately $347,000 for the six months ended July 31, 1999 and 1998,
respectively. License fee revenue represented 53% and 64% of total revenue for
the six months ended July 31, 1999 and 1998, respectively.
Revenue from services, maintenance and other increased 137% to $6.8 million
for the six months ended July 31, 1999 from $2.9 million for the six months
ended July 31, 1998. This increase was due to an increase of $3.2 million in
revenue from service engagements and an increase of $795,000 in revenue from
maintenance contracts. The increase in services and maintenance is primarily due
to increased sales of software licenses to our customers. Revenue from services
and maintenance represented 47% and 36% of total revenue from the six months
ended July 31, 1999 and 1998, respectively.
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<PAGE>
COSTS OF REVENUE
Total costs of revenue increased 88% to $4.0 million for the six months
ended July 31, 1999 from $2.1 million for the six months ended July 31, 1998.
Total costs of revenue was 27% and 26% of total revenue for the six months ended
July 31, 1999 and 1998, respectively.
Costs of revenue from license fees increased 7% to $456,000 for the six
months ended July 31, 1999 from $426,000 for the six months ended July 31, 1998.
This increase was primarily due to referral fees paid to third party vendors who
promote our products and services. Costs of revenue from license fees decreased
as a percentage of revenue from license fees to 6% for the six months ended July
31, 1999 from 8% for the six months ended July 31, 1998.
Costs of revenue from services and maintenance increased 108% to $3.5
million for the six months July 31, 1999 from $1.7 million for the six months
ended July 31, 1998. The increase in cost of service, maintenance and other
revenue was primarily due to an increase in the number of personnel providing
consulting, implementation, training and technical support to customers, as well
as the cost of outsourcing a portion of our implementation and consulting
services. Costs of revenue from services and maintenance decreased as a
percentage of revenue from services and maintenance to 51% for the six months
ended July 31, 1999 from 59% for the six months ended July 31, 1998.
OPERATING EXPENSES
SALES AND MARKETING. Sales and marketing expenses increased 68% to $5.2
million for the six months ended July 31, 1999 from $3.1 million for the six
months ended July 31, 1998. The growth in sales and marketing expenses was due
to increased staffing as we expanded both our North American and international
operations. Sales and marketing expenses decreased as a percentage of revenue to
36% for the six months ended July 31, 1999 from 38% for the six months ended
July 31, 1998. We expect that sales and marketing expenses will continue to
increase in absolute dollars as we continue to expand these operations.
RESEARCH AND DEVELOPMENT. Research and development expenses increased 62%
to $1.6 million for the six months ended July 31, 1999 from $1.0 million for the
six months ended July 31, 1998. The growth in research and development expenses
was primarily due to additional hiring of research and development personnel.
Research and development expenses decreased as a percentage of total revenue to
12% for the six months ended July 31, 1999 from 13% for the six months ended
July 31, 1998. We expect to continue to significantly increase research and
development expenditures with a particular emphasis on projects related to
expanding our e-business effort.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
56% to $1.7 million from $1.1 million for the years ended July 31, 1999 and
1998, respectively. The growth in general and administrative expenses was
primarily the result of increased staffing levels and costs associated with the
growth of our business. General and administrative expenses decreased as a
percentage of total revenue to 12% for the six months ended July 31, 1999 from
14% for the six months ended July 31, 1998. We expect general and administrative
expenses will increase in absolute dollars as we continue to expand our business
and begin to increase our administrative capability domestically as well as
internationally.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
increased 45% to $606,000 for the six months ended July 31, 1999 from $417,000
for the six months ended July 31, 1998. Depreciation and amortization expenses
increased due to the additional goodwill amortization from the acquisition of
Competence Software, S.A. and depreciation from capital expenditures.
Depreciation and amortization decreased as a percentage of total revenue to 4%
for the six months ended July 31, 1999 from 5% for the six months ended July 31,
1998.
22
<PAGE>
INTEREST AND OTHER INCOME (LOSS)
Interest and other income (loss) consists of earnings on cash and cash
equivalents net of interest expense, foreign exchange gains and losses, and
gains and losses on sale of property and equipment. Interest and other income
(loss) declined to a loss of $15,000 for the six months ended July 31, 1999 from
income of $8,000 for the six months ended July 31, 1998. This decline was due
primarily to interest expense related to debt financing of $3.3 million on a
stock repurchase in December 1998. We paid $1.7 million on January 5, 1999 and
with a remaining balance to be paid over ten quarters beginning April 1999. The
balance of this indebtedness will be repaid with a portion of the proceeds of
this offering. See "Use of Proceeds."
INCOME TAXES
Income tax expense increased to $576,000 for the six months ended July 31,
1999 from $83,000 for the six months ended July 31, 1998. The effective tax
rates for the six months ended July 31, 1999 and 1998 were 43% and 24%,
respectively. Income taxes for the six months ended July 31, 1999 have been
calculated at the estimated effective tax rate for the year ending January 31,
2000. The 24% effective tax rate for the six months ended July 31, 1998 is
principally the result of the benefit of a relatively high level of research and
development credits compared to the level of pretax income.
COMPARISON OF FISCAL YEARS ENDED JANUARY 31, 1999, 1998 AND 1997
REVENUE
Total revenue increased 44% to $19.5 million in 1999 from $13.6 million in
1998, and 51% to $13.6 million in 1998 from $9.0 million in 1997.
License fee revenue increased 31% to $12.0 million in 1999 from $9.2 million
in 1998, and 58% to $9.2 million in 1998 from $5.8 million in 1997. License fee
revenue grew significantly due to growing market acceptance of our software
products, continued expansion of our sales and marketing organization, the
introduction of our fax service product and our expansion into international
markets through acquisitions. License fee revenue constituted 61%, 67% and 64%
of total revenue in 1999, 1998, and 1997, respectively.
Revenue from services, maintenance and other increased 70% to $7.5 million
in 1999 from $4.4 million in 1998, and 38% to $4.4 million in 1998 from $3.2
million in 1997. The increase in revenues from service, maintenance and other is
due to increased sales of software licenses to our customers. Services
constituted 19%, 16% and 15% of total revenue in 1999, 1998 and 1997,
respectively. Maintenance revenue constituted 19%, 15% and 17% of total revenue
in 1999, 1998, and 1997, respectively.
COSTS OF REVENUE
Costs of revenue from license fees decreased 16% to $913,000 in 1999 from
$1.1 million in 1998, and increased 70% to $1.1 million in 1998 from $642,000 in
1997. The growth in costs of revenue from license fees during 1998 is primarily
attributable to increases in license fee revenue and referral fees paid to third
party vendors who promote our products and services. Costs of revenue from
license fees represented 8% of total license revenue in 1999, 12% in 1998 and
11% in 1997.
Costs of revenue from services and maintenance increased 85% to $4.1 million
in 1999 from $2.2 million in 1998, and increased 22% to $2.2 million in 1998
from $1.8 million in 1997. The increase was primarily due to the increase in the
number of personnel providing consulting, training and technical support to
customers, as well as the cost of outsourcing a portion of our implementation
and consulting services. Costs of revenue from services and maintenance
represented 54%, 50% and 57% of total service and maintenance revenue in 1999,
1998 and 1997, respectively.
23
<PAGE>
OPERATING EXPENSES
SALES AND MARKETING. Sales and marketing expenses increased 28% to $7.5
million in 1999 from $5.9 million in 1998, and increased 61% to $5.9 million in
1998 from $3.7 million in 1997. This increase in sales and marketing expenses
was primarily due to increased staffing as we expanded both our North American
and international operations. Sales and marketing expenses represented 38% of
total revenue in 1999, 44% in 1998 and 41% in 1997.
RESEARCH AND DEVELOPMENT. Research and development expenses increased 63%
to $2.5 million in 1999 from $1.6 million in 1998, and increased 74% to $1.6
million in 1998 from $891,000 in 1997. The growth in research and development
expenses was primarily due to additional hiring of research and development
personnel. Research and development expenses represented 13%, 11% and 10% of
total revenue in 1999, 1998 and 1997, respectively.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
53% to $2.9 million in 1999 from $1.9 million in 1998, and increased 65% to $1.9
million in 1998 from $1.1 million in 1997. The increase in general and
administrative expenses was primarily the result of increased staff levels and
related costs associated with the growth of our business during these periods,
as well as a $700,000 non-recurring charge in 1999 due to a stock repurchase.
General and administrative expenses represented 15%, 14% and 13% of total
revenue in 1999, 1998 and 1997, respectively.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
increased 21% to $975,000 in 1999 from $806,000 in 1998, and increased 460% to
$806,000 in 1998 from $144,000 in 1997. The increase was due to goodwill from
acquisitions being amortized and depreciation from increased capital
expenditures. Depreciation and amortization expenses represented 5%, 6% and 1%
of total revenue in 1999, 1998 and 1997, respectively.
INTEREST AND OTHER INCOME (LOSS)
Interest and other income declined to a loss of $199,000 in 1999 from a loss
of $37,000 in 1998 which declined from a net gain of $29,000 in 1997. The
biggest reason for the decline is interest expense associated with indebtedness
relating to our stock repurchase in January 1999.
INCOME TAXES
Income tax expense increased 55% to $99,000 in 1999 from $64,000 in 1998,
and decreased 79% to $64,000 in 1998 from $304,000 in 1997. The effective tax
rates for the years ended 1999, 1998 and 1997 were 24%, 74% and 42%,
respectively. The 24% effective tax rate for fiscal 1999 is principally the
result of the benefit of a relatively high level of research and development
credits compared to the level of pretax income. The 73% effective tax rate for
fiscal 1998 is principally the result of the impact of non-deductible expenses
in relation to the low level of pretax income.
24
<PAGE>
QUARTERLY FINANCIAL RESULTS
The following tables set forth the unaudited consolidated statements of
operations data for the six quarters ended July 31, 1999, as well as such data
expressed as a percentage of total revenue for the periods indicated. This data
has been derived from unaudited interim consolidated financial statements that,
in our opinion, have been prepared on a basis consistent with the Consolidated
Financial Statements contained elsewhere in this prospectus. We believe that
these statements include all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of such information when read in
conjunction with the Consolidated Financial Statements and Notes thereto. The
operating results for any quarter are not necessarily indicative of results for
any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------------
APRIL 30, JULY 31, OCTOBER 31, JANUARY 31, APRIL 30, JULY 31,
1998 1998 1998 1999 1999 1999
----------- --------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Revenue:
License fees.......................................... $ 2,409 $ 2,825 $ 2,847 $ 3,933 $ 3,358 $ 4,351
Services, maintenance and other....................... 1,279 1,607 2,113 2,526 3,026 3,822
----------- --------- ----------- ----------- ----------- ---------
Total revenue....................................... 3,688 4,432 4,960 6,459 6,384 8,173
----------- --------- ----------- ----------- ----------- ---------
Costs of revenue:
License fees.......................................... 204 222 148 339 195 261
Services, maintenance and other....................... 821 869 1,029 1,370 1,524 1,996
----------- --------- ----------- ----------- ----------- ---------
Total cost of revenue................................... 1,025 1,091 1,177 1,709 1,719 2,257
----------- --------- ----------- ----------- ----------- ---------
Gross profit............................................ 2,663 3,341 3,783 4,750 4,665 5,916
----------- --------- ----------- ----------- ----------- ---------
Operating expenses:
Sales and marketing................................... 1,511 1,603 1,890 2,530 2,465 2,778
Research and development.............................. 497 520 696 817 826 819
General and administrative............................ 545 573 536 1,230 900 845
Depreciation and Amortization......................... 208 209 271 287 298 308
----------- --------- ----------- ----------- ----------- ---------
Total operating expenses............................ 2,761 2,905 3,393 4,864 4,489 4,750
----------- --------- ----------- ----------- ----------- ---------
Income (loss) from operations........................... (98) 436 390 (114) 176 1,166
Other income (expense), net............................. 8 -- 20 (227) (6) (9)
Income tax expense (benefit)............................ (22) 105 98 (82) 68 508
----------- --------- ----------- ----------- ----------- ---------
Net income (loss)....................................... $ (68) $ 331 $ 312 $ (259) $ 102 $ 649
----------- --------- ----------- ----------- ----------- ---------
----------- --------- ----------- ----------- ----------- ---------
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------------
APRIL 30, JULY 31, OCTOBER 31, JANUARY 31, APRIL 30, JULY 31,
1998 1998 1998 1999 1999 1999
----------- --------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
PERCENTAGE OF TOTAL REVENUE:
Revenue:
License fees.......................................... 65% 64% 57% 61% 53% 53%
Services, maintenance and Other....................... 35 36 43 39 47 47
----------- --------- ----------- ----------- ----------- ---------
Total revenue....................................... 100 100 100 100 100 100
Costs of revenue:
License fees.......................................... 6 5 3 5 3 3
Services, maintenance and Other....................... 22 20 21 21 24 25
----------- --------- ----------- ----------- ----------- ---------
Total cost of revenue................................... 28 25 24 26 27 28
----------- --------- ----------- ----------- ----------- ---------
Gross profit............................................ 72 75 76 74 73 72
Operating expenses:
Sales and marketing................................... 41 36 38 39 38 34
Research and development.............................. 13 11 14 13 13 10
General and administrative............................ 15 13 11 19 14 10
Depreciation and Amortization......................... 6 5 6 5 5 4
----------- --------- ----------- ----------- ----------- ---------
Total operating expenses............................ 75 65 69 76 70 58
----------- --------- ----------- ----------- ----------- ---------
Income (loss) from operations........................... (3) 10 7 (2) 3 14
Other income (expense), net............................. -- -- -- (3) -- --
Income tax expense (benefit)............................ (1) 2 2 (1) 1 6
----------- --------- ----------- ----------- ----------- ---------
Net income (loss)....................................... (2)% 8% 5% (4)% 2% 8%
----------- --------- ----------- ----------- ----------- ---------
----------- --------- ----------- ----------- ----------- ---------
</TABLE>
We have experienced year to year revenue growth with seasonal fluctuations
in quarterly revenue. During our fourth fiscal quarter ended January 31, our
revenue has typically increased as customers on a calendar fiscal year complete
their capital spending plans and as our sales personnel pursue their annual
revenue quotas. As a result of this seasonal peak in revenues in our fourth
quarter, our revenues generally decline in the subsequent quarter ended April
30.
Our quarterly operating results have fluctuated in the past, and will
continue to fluctuate in the future, as a result of a number of factors, many of
which are outside our control. Some of these factors include:
- variations in market acceptance of and demand for our products;
- the size and timing of our customer orders;
- increased expenses, whether related to sales and marketing, product
development or administration;
- delays in introducing new products or product enhancements;
- new product introductions or changes in pricing policies by our
competitors;
- costs related to acquisitions of technologies or businesses;
- the timing of releases of new versions of third-party software products
that our products support; and
- the amount and timing of expenditures related to expansion of our
operations.
26
<PAGE>
We expect that the quarterly fluctuations we have experienced in the past
will continue in the future. See "Risk Factors--Quarterly operating results may
fluctuate in future periods, and as a result we may fail to meet expectations of
investors and analysts."
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have primarily financed our operations and met our
capital expenditure requirements through cash flows from operations and short
and long-term borrowings. At July 31, 1999 and 1998 we had $1.5 million and $2.0
million, respectively, of cash and cash equivalents. For the years ended January
31, 1999, 1998 and 1997 the cash and cash equivalents were $1.1 million, $1.5
million and $1.6 million.
Cash flows provided by operating activities were $1.2 million and $880,000
for the six months ended July 31, 1999 and 1998, respectively and $3.1 million,
$1.1 million and $209,000 for the years ended January 31, 1999, 1998 and 1997,
respectively.
Cash flows used in investing activities for the six months ended July 31,
1999 and 1998 were $506,000 and $202,000, respectively. Cash flows used in
investing activities for the fiscal years ended January 31, 1999, 1998 and 1997
were $1.5 million, $578,000 and $419,000, respectively. The capital expenditures
related primarily to the acquisition of computer software and equipment as well
as furniture and fixtures used to support our growing employee base and the
purchase and sale of marketable securities.
For the six months ended July 31, 1999 and 1998, the net cash used in
financing activities was $418,000 and $137,000 respectively. Net cash used in
financing activities for the years ended January 31, 1999 and 1998 was $2.0
million and $710,000, respectively, principally to repurchase stock and repay
indebtedness. In the year ended January 31, 1997, net cash provided from
financing activities was $105,000.
We have a $2,000,000 line of credit from Premier Lending Corporation at a
rate of prime plus 1% if the average daily loan balance during the month is
greater than $1 million, and prime plus 2% if the average daily loan balance
during the month is less than $1 million. As of the date of this prospectus,
there was an outstanding balance of $200,000 under this line of credit.
We believe that our existing liquidity and capital resources, including the
proceeds resulting from the sale of our common stock in this offering, together
with cash generated from operations during fiscal 1999, will be sufficient to
satisfy our cash requirements for at least the next twelve months. To the extent
that such amounts are insufficient, we will be required to raise additional
funds through equity or debt financing. There can be no assurance that we will
be able to raise such funds on favorable terms, or at all.
RECENT ACCOUNTING PRONOUNCEMENTS
Prior to February 1, 1998, the Company recognized revenue in accordance with
the American Institute of Certified Public Accountants ("AICPA") Statement of
Position 91-1, SOFTWARE REVENUE RECOGNITION ("SOP 91-1"). In October 1997 the
AICPA issued Statement of Position 97-2, SOFTWARE REVENUE RECOGNITION ("SOP
97-2"), which superseded SOP 91-1, to clarify guidance on applying generally
accepted accounting principles to software transactions and to provide guidance
on when revenue should be recognized and in what amounts for licensing, selling,
leasing, or otherwise marketing computer software. The Company adopted SOP 97-2
effective February 1, 1998. Such adoption did not have a material effect on the
Company's methods of recognizing revenue.
As of February 1, 1998, the Company adopted SFAS No. 130, REPORTING
COMPREHENSIVE INCOME ("SFAS 130"). SFAS 130 establishes new rules for the
reporting and display of comprehensive income and its components; however, the
adoption of this statement had no impact on the Company's net
27
<PAGE>
income or shareholders' equity (deficit). SFAS 130 requires unrealized gains or
losses on the Company's available-for-sale securities and the foreign currency
translation adjustments, which prior to adoption were reported separately in
shareholders' equity (deficit), to be included in other comprehensive income.
The consolidated financial statements for the years ended January 31, 1997 and
1998 have been reclassified to conform to the requirements of SFAS 130.
In 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 February 1, 1998. The Company has
made the financial statement disclosures necessary to conform to SFAS 131, which
has had no impact on the Company's financial position or results of operations.
In 1998, the AICPA issued Statement of Position 98-1, ACCOUNTING FOR THE
COSTS OF COMPUTER SOFTWARE DEVELOPMENT OR OBTAINED FOR INTERNAL USE ("SOP
98-1"). The Company adopted SOP 98-1 effective February 1, 1999. The adoption of
this standard did not have a material effect on the Company's financial position
or results of operations.
In 1998, the Financial Accounting Standards Board issued SFAS No. 133,
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES ("SFAS 133"), which
established accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure these instruments
at fair value. SFAS 133 is expected to be effective for the Company's fiscal
year beginning February 1, 2001. The Company is currently evaluating what
impact, if any, SFAS 133 may have on its future consolidated financial
statements.
IMPACT OF YEAR 2000 COMPUTER ISSUES
Software that records only the last two digits of the calendar year may not
be able to distinguish whether "00" means 1900 or 2000. This may result in
software failures or the creation of erroneous results. Year 2000-related errors
or defects that affect the operation of our software could result in:
- delay or loss of revenue;
- cancellation of customer contracts;
- diversion of development resources;
- damage to our reputation;
- increased customer support and warranty costs; and
- litigation costs.
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 Optio or third party hardware or
software that is used by Optio or in conjunction with our products to be year
2000 compliant could harm Optio's financial position and results of operations.
OPTIO PRODUCTS.
We designed our products to be year 2000 compliant. Year 2000 remediation
efforts to Optio's products were minor due to Optio's awareness of year 2000
issues when our products were updated in October 1998. 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
28
<PAGE>
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.
Success of our Year 2000 compliance efforts may also depend on the success
of our customers in dealing with their Year 2000 issues. Our products are
generally integrated into enterprise systems involving sophisticated hardware
and complex software products, which may not be Year 2000 compliant. In
addition, third party applications in which our products are embedded, or for
which our products are separately licensed, may not comply with Year 2000
requirements, which may have an adverse impact on demand for our products. In
some cases even earlier Year 2000 compliant versions of our software, while
compatible with earlier, non-Year 2000 compliant versions of other software
products with which our software is integrated, are not compatible with more
recent Year 2000 compliant versions of other software products with which our
software is integrated. While we do not believe we have any obligation under
these circumstances because the older versions of our software were Year 2000
compliant, given that these customers are using older versions of our software
products, we can not assure you that we will not be subject to claims or
complaints by our customers.
YEAR 2000 INTERNAL EFFORTS AND ISSUES.
Our year 2000 project team has completed corporate-wide inventory of Optio
internal applications and system software and of our computers. We have 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 successful continuance of core business activities. We have not
incurred significant incremental costs in order to comply with Year 2000
requirements for our products or internal systems, and we do not believe that we
will incur significant incremental costs in the foreseeable future.
We expect to identify and resolve all year 2000 problems that could
materially adversely affect our business, financial condition or operating
results. However we believe that it is not possible to determine with complete
certainty that all year 2000 problems will occur or the severity, duration or
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 Optio, our services and our clients 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.
We have identified the mission critical functions for our internal systems
and have completed a contingency plan for unanticipated Year 2000 problems that
arise with respect to those functions. This contingency plan includes the
following components.
- Our internal information technology staff will be on alert during the
critical period of December 1999 and January 2000 to address any Year
2000 issues we encounter.
- We intend to coordinate with our principal hardware and software
vendors so we will know where to get help if our internal systems
experience Year 2000 problems we cannot handle ourselves.
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- We plan to be prepared to shift to manual processing if key automated
systems, such as our financial and accounting systems, should fail.
- We will be continuing to test our internal systems for Year 2000 issues
and expect to update our contingency plan to reflect the results of
these tests.
Despite the measures we are taking, we cannot assure you that Year 2000
issues will not be discovered in our products or internal software systems. If
Year 2000 issues are discovered, we cannot assure you that our contingency plan
will be adequate to deal with them effectively, or that the costs of making the
products and systems Year 2000 ready will not have a material adverse effect on
our business, operating results and financial condition. Although we have not
been a party to any litigation or arbitration proceeding to date involving our
products or services and related to Year 2000 compliance issues, there can be no
assurance that we will not in the future be required to defend our products or
services in such proceedings, or to negotiate resolutions of claims based on
Year 2000 issues. The costs of defending and resolving Year 2000-related
disputes, regardless of the merits of such disputes, would harm our business.
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
We provide our services to customers primarily in the United States and, to
a lesser extent, in Europe and elsewhere throughout the world. As a result, our
financial results could be affected by factors, such as changes in foreign
currency exchange rates or weak economic conditions in foreign markets. All
sales are currently made in both U.S. dollars and local currencies. A
strengthening of the U.S. dollar or the weakening of these local currencies
could make our products less competitive in foreign markets. Our interest income
and expense is sensitive to changes in the general level of U.S. interest rates.
Based on our cash equivalents balance and the nature of our outstanding debt, we
believe our exposure to interest rate risk is not material. The Company's
available for sale marketable securities are carried at fair value and subject
to the risks of general market fluctuations.
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BUSINESS
OVERVIEW
OPTIO
We are a leading provider of products and services that help organizations
make the transition from paper-intensive commerce to electronic business, or
e-business. Our products and services enhance the reliability and facilitate the
efficient utilization of information contained in our customers' e-business,
enterprise, legacy and custom applications. These products and services enable
the cost effective, efficient delivery of highly customized information to a
rapidly expanding audience including employees, customers, suppliers and
strategic partners. Our software is designed to directly access the information
generated by these applications, evaluate, transform, and then customize that
information according to specific business rules on a real-time basis. Once
converted to the desired format, this information can be delivered to both
people and systems over the Internet, e-mail, printers, faxes and other devices.
INDUSTRY BACKGROUND
GROWTH OF THE INTERNET AND ELECTRONIC BUSINESS
Organizations are constantly seeking ways to use information to operate more
productively and cost-effectively. To achieve these objectives, organizations
must deliver focused, business ready information derived from a multitude of
sources across the extended enterprise which includes employees, customers,
suppliers and strategic partners. Competitive pressures have created a need for
increasingly sophisticated and time-sensitive methods of information delivery
both inside and outside of the enterprise. A growing number of organizations are
using the Internet to compete more effectively and conduct business
electronically. As a result, electronic business, or e-business, has become
critical for nearly every organization seeking to establish and maintain a
competitive advantage.
In embracing e-business, organizations are attempting to maximize the value
of their business processes by using the Internet to conduct business
electronically and reach a large number of geographically dispersed users across
the extended enterprise. Some examples of e-business applications include supply
chain management, online bill presentment and payment, report distribution,
browser-based information access both inside and outside the organization,
order-entry systems, and Internet-based commerce, or e-commerce. According to
the International Data Corporation, or IDC, worldwide e-commerce alone
represented a $50 billion market in 1998 and is expected to grow to $1.3
trillion by 2003. IDC estimates the market for e-commerce applications will grow
from $444 million in 1998 to $13 billion in 2003.
The growing business use of the Internet has provided enterprises with new
opportunities and expanded requirements to move beyond the limitations of
current paper-intensive processes. With the emergence of e-business, enterprises
can leverage the convenience and economy of the Internet to achieve substantial
efficiencies in their operations. At the same time, they are challenged to
manage their transition from a paper-based to an e-business environment.
Information now needs to be aggregated from a greater number of disparate
sources, customized to satisfy a richer set of business objectives and delivered
to a broader array of destinations through a variety of media. Sources of
information include e-business applications, enterprise, legacy and custom
applications, external databases and files; destinations include all members of
the extended enterprise; and delivery media alternatives include the Internet,
e-mail, printers, faxes and other devices.
TRADITIONAL APPROACHES TO MANAGING BUSINESS INFORMATION
Over the past few decades, organizations have made significant investments
in information systems to automate their business processes and efficiently
manage information. Many organizations have
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invested in solutions like enterprise resource planning, or ERP, systems to
provide consistent data and information throughout the organization. For
example, ERP applications from vendors such as J.D. Edwards, Oracle, SAP and
others now automate the financial, manufacturing and human resource functions of
enterprises. ERP installations require significant investments to license and
maintain the software, install the appropriate infrastructure, re-engineer core
business processes, transition legacy data, train employees and make necessary
adjustments to the system to attain acceptable levels of operating efficiency.
According to AMR Research, total ERP application expenditures were $16.6 billion
in 1998 and are expected to grow at a compounded annual growth rate of 32%,
totaling $66.7 billion by 2003.
These applications generate substantial amounts of information created by
ongoing business transactions. As the volume of this information grows,
organizations are challenged by the need to consolidate, customize and deliver
this information to their employees, customers, suppliers and strategic partners
in a timely fashion to drive revenue growth and profitability. When coupled with
the challenge of leveraging the Internet as a medium for information delivery
and supporting new e-business initiatives, organizations will require
increasingly sophisticated and comprehensive solutions to meet their needs.
CURRENT METHODS FOR ACCESSING, CUSTOMIZING AND DELIVERING BUSINESS INFORMATION
Currently, businesses address their increasingly complex information
customization and delivery requirements primarily through the following
solutions:
- Custom software development, which provides a targeted solution, but
requires significant investments of capital, time and human resources.
This approach tends to focus on an organization's existing needs and,
therefore, is highly inflexible and does not readily adapt to changes
in the application, technology infrastructure or business processes.
- Focused software applications, or point solutions, which generally
address the delivery of documents or allow for a limited amount of
customization, but fail to adequately leverage the connective power and
universal access provided by the Internet.
- Internet-based solutions, which take advantage of the e-business
platform provided by the Internet and generate information in
Internet-ready formats but often fail to address the ongoing needs of
the enterprise for customized information delivered through traditional
media like print, fax and e-mail. In addition, these solutions may not
integrate information from legacy, custom or ERP applications. They may
also require costly modifications to core business processes and
retraining of employees. This approach perpetuates the existence of two
separate systems by failing to leverage an enterprise's ERP investment,
thereby reducing the overall return on investment of both systems.
OPPORTUNITY FOR AN INTERNET-ENABLED INFORMATION ACCESS, CUSTOMIZATION AND
DELIVERY SOLUTION
The effectiveness of an organization's use of information is dependent on
its ability to effectively meet the challenges of today's e-business
environment. The requirements of the e-business model have exposed the
shortcomings of relying on paper-intensive manual processes, ERP systems and
other traditional software applications to manage the organization and delivery
of customized information. This e-business environment has created the need for
a comprehensive solution that maximizes the power of the Internet and
- gathers information on a real-time basis from multiple sources,
including e-business, enterprise, legacy and custom applications,
external databases and files;
- evaluates the information to determine its suitability for business
purposes;
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- customizes and formats the information to meet business objectives; and
- provides timely delivery of the information to the appropriate
destination.
THE OPTIO SOLUTION
We are a leading provider of products and services that help organizations
make the transition from paper-intensive commerce to e-business. Our products
and services enhance the reliability and facilitate the utilization of
information contained in our customers' e-business, enterprise, legacy and
custom applications. These products and services enables the cost effective,
efficient delivery of highly customized information across the extended
enterprise. Our software is designed to directly access the information
generated by these applications, evaluate, transform, and then customize that
information according to specific business rules on a real-time basis. Once
converted to the desired format, this information can be delivered to both
people and systems over the Internet, e-mail, printers, faxes and other devices.
Our solutions benefit our customers by:
EXTENDING THE REACH OF INFORMATION. Our products are designed to empower
users by providing relevant, flexible information, more quickly and
cost-effectively than previously possible. For example, with our solution an
enterprise can aggregate real-time billing information from separate ERP and
legacy systems in a single business process. This information can then be
delivered in traditional printed formats, by high volume fax, as Electronic Data
Interchange, or EDI, input or as Extensible Markup Language, or XML, input to
other enterprise applications and systems. Information is delivered to
enterprise information portals where people can securely view summary reports
over the Internet and receive e-mail notifications of significant transactions.
Our products also support delivery to emerging media, such as handheld
electronic devices, including alphanumeric pagers and, in the future, personal
digital assistance, or PDAs.
MAXIMIZING EXISTING AND NEW TECHNOLOGY INVESTMENTS. Our products and
services enable organizations to leverage the benefits of their investments in
existing information technology infrastructure. By using our products,
organizations are able to utilize information from existing enterprise and
legacy applications throughout the extended enterprise without requiring
extensive re-engineering. By leveraging these existing applications, our
products offer an attractive value proposition. We believe that as enterprises
increasingly embrace e-business initiatives and applications, our products will
facilitate and optimize their efforts.
ENABLING RAPID DEPLOYMENT AND USE. Our products can be installed quickly by
our consultants or other integration partners without the need for extended
on-site visits. The implementation time for our products at a customer site is
typically two weeks. The design of our software enables our products to
recognize, interpret and utilize information from many applications including
Baan, J.D. Edwards, McKesson HBOC, Oracle, PeopleSoft, QAD and SAP. This
interoperability enables rapid deployment in these environments and reduces
ongoing maintenance and training costs.
OFFERING SCALABLE ARCHITECTURE. We design our products to scale effectively
when implemented in geographically disbursed enterprise-wide deployments while
maintaining system performance and availability. Our products support networks
composed of multiple operating systems including Windows NT, UNIX, OS/400 and a
variety of applications, databases and services. Our products manage large
quantities of information and support thousands of users while at the same time
minimizing the usage of network and computing resources. Our browser and Java
user interfaces effectively leverage the power of the Internet, significantly
reducing the need for client-side management and administration.
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GRAPHIC: The Optio Solution
In the lower left hand corner and lower right hand corner of the image are
rectangles that contain the words "B2B transactions". Above the left hand
rectangle are the words "Sellside" and above the right hand rectangles are the
words "Buyside". The rectangles are connected by a horizontal line that passes
through a third rectangle with an arrow extending upwards. This rectangle is
labeled "Information Tap". The arrow points up towards a cylinder that is
labeled "Application Server". To the right of the cylinder is a bulleted list
containing four items:
- Information Tap
- Business Rule Repository
- Customization Engine
- Routing and Delivery Engine
On each side of the cylinder are smaller cylinders that are labeled, from
left to right "Databases" and "Files". The smaller cylinders each have a line
with an arrowhead pointing towards the large cylinder.
There is a horizontal line extending from each side of the cylinder towards
the edges of the graphic. Extending vertically from the horizontal line are six
lines with arrowheads. These lines pass across a dotted line that is labeled
"Domain Specific" below the line and "Domain Independent" above the line.
Four of the six vertical lines are connected to a horizontal row of four
rectangles that are labeled from left to right "Tailored e-Mail", "High Volume
Fax", "Printed Documents", and "Pagers PDA's Other Devices".
Two of the six vertical lines are connected to a horizontal row of two
rectangles that are positioned above the other four rectangles. The rectangle on
the left is labeled "Presentment via Browsers." To the right of the rectangle is
a bulleted list containing four items:
- Self-Service Applications
- Portal Content
- EBPP
- Report Distribution
The rectangle on the right is labeled "Other Systems EDI/XML." To the right
of the rectangle is a bulleted list containing four items:
- E-Commerce
- Financial Transactions
- Traditional EDI
- Communities
Above the two rectangles, centered on the page are the words, "The Optio
Solution."
STRATEGY
Our objective is to be the leading provider of products and services that
help transition organizations from paper-intensive commerce to e-business. To
achieve our objective, we intend to:
ENHANCE PRODUCT OFFERINGS. We will continue to invest in research and
development to improve and enhance our existing software offerings and introduce
new software products designed to solve a greater range of problems for our
customers. In particular, we intend to enhance and expand our software offerings
to address the challenges and needs of e-business and to develop new software
that solves problems associated with gathering, customizing, delivering and
exchanging business information.
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We believe that maintaining and enhancing our products is important to our
ability to expand our market share, retain existing customers and acquire new
customers.
EXPAND CUSTOMER AWARENESS THROUGH INCREASED MARKETING. We intend to devote
significant resources to marketing efforts to increase customer and industry
awareness of our products and services. These increased marketing efforts will
include hiring additional marketing personnel, increasing brand awareness
through advertising, launching a focused press and industry analyst campaign and
expanding participation in related industry events. Through our marketing
efforts, we intend to demonstrate the value of our software and services to
enterprises and thereby increase our market share.
EXTEND NETWORK OF STRATEGIC RELATIONSHIPS. We plan to extend our existing
strategic relationships and develop new partnerships with leading global systems
integrators who specialize in implementing software solutions that support
e-business, ERP and healthcare applications. We currently have over 20 strategic
partners. These partners include organizations that install the software
purchased by our customers and provide services that address specific customer
needs. Our relationships with our partners have allowed us to focus on our core
competencies while leveraging their strengths to provide our customers with a
complete information customization and delivery solution. We believe that these
relationships will also continue to generate additional product sales
opportunities.
EXPAND WORLDWIDE SALES. We believe that international markets represent a
significant growth opportunity as organizations seek global e-business
solutions. We currently have a direct sales presence in North America, the
United Kingdom, France, Australia and Singapore. We plan to continue to invest
in our worldwide distribution capacity to increase market share and penetration.
This investment will include expanding our direct sales force and establishing
sales offices in other countries in Europe. In addition, we plan to engage local
resellers, system integrators and joint marketing partners in Japan and the
balance of the Asia Pacific region.
LEVERAGE OUR SIGNIFICANT CUSTOMER BASE. We believe our base of over 2,500
customers provides us with a significant opportunity for additional sales of
current and future products, as well as ongoing maintenance revenue. A majority
of our customers have not yet purchased our full suite of products or currently
only use our products in specific business units or locations. We believe that
we can sell more deeply into this customer base by expanding these partial
deployments into enterprise-wide implementations as well as by cross-selling
additional products and services.
PURSUE STRATEGIC ACQUISITIONS. Our previous acquisitions have enhanced our
business by expanding our product offerings and international presence. We
intend to continue pursuing strategic acquisitions that would provide additional
product or service offerings, additional industry expertise, a broader customer
base or an expanded geographic presence. We currently have no definitive plans
for any acquisition.
EXTEND TECHNOLOGICAL LEADERSHIP. Optio's product architecture provides the
foundation for us to develop new and innovative products and allows our
applications to be easily adapted to new standards, protocols and platforms.
This architecture enables us to interface with multiple operating systems,
applications, business processes and data sources in a non-disruptive manner. We
believe that our product capabilities significantly differentiate us from our
competitors. We intend to advance our technological leadership by investing
significantly in research and development and by acquiring and integrating
complementary products and technologies.
PRODUCTS
We are a leading provider of products and services that help organizations
make the transition from paper-intensive commerce to e-business. We provide
extensive suites of software products that enhance the performance and
reliability of our customers e-business, enterprise, legacy and custom
applications. Our products are divided into two suites: the Optio Enterprise
Suite and the Optio Healthcare Suite. Our software products enable the
cost-effective, efficient delivery of highly customized information across the
extended enterprise.
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<TABLE>
<CAPTION>
<S> <C>
THE OPTIO ENTERPRISE SUITE
- -------------------------------------------------------------------------------------------
OPTIODCS OptioDCS is a high performance application server that is
the foundation of the Optio Enterprise Suite. It captures
information from enterprise, legacy and other
applications, performs calculations and other data
transformations, formats business information or
e-commerce transactions and delivers them to printers, fax
servers, e-mail servers, web servers, document archives
and e-commerce servers.
OPTIO E.COMPRESENT A web enabled server application providing secure,
browser-based presentation of customized information.
Information can be grouped in pre-defined or
user-specified folders for easy access. All information is
fully indexed and supports familiar Internet search
techniques. Users are alerted to the publication of new or
updated information with subscription-based notifications
that arrive via e-mail, pager, fax or printer.
e.ComPresent facilitates the delivery of customized
information to support e-business initiatives like report
distribution, information portals, online bill presentment
and self-service applications.
OPTIO DESIGNSTUDIO A Windows-based, visual design tool that maps the
information from applications, databases and files,
creates business rules and conditional logic to automate
processing of the information and models the network of
destinations to which the information is delivered. The
design files it creates are then processed, in real time,
by OptioDCS.
OPTIOFAX A comprehensive server-based fax transmission and
reception product designed to automate enterprise-wide
faxing to support business requirements for distributing
enterprise information.
OPTIO CHECKBOOK An application targeted to the financial payment needs of
the enterprise. Optio Checkbook facilitates the layout of
laser
checks, eliminates the need for pre-printed check stock,
provides positive pay reports to improve accuracy and
reduce fraud.
OPTIO ENTERPRISE PROCESSPACKS Prepackaged templates facilitating the design of the
information customization and delivery requirements for
popular ERP applications like Baan, J.D. Edwards, Oracle,
QAD and SAP.
</TABLE>
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<TABLE>
<CAPTION>
THE OPTIO HEALTHCARE SUITE
- -------------------------------------------------------------------------------------------
<S> <C>
OPTIO MEDFORMS Optio MedForms is targeted to meet the specialized
requirements of healthcare enterprises.
OPTIO MEDFORMSDR A companion application to Optio MedForms, Optio
MedFormsDR provides routing, reorganization and
reproduction of healthcare information on demand, allowing
users throughout an enterprise to quickly and easily
generate patient documents without expensive embossers or
preprinted labels. Optio MedFormsDR's temporary data store
provides access to vital patient information if the
primary server is interrupted, which protects data
integrity.
OPTIO HL7/CONNECT Optio MedForms HL7/Connect enhances Optio MedForms by
adding the capability to detect, process, and customize
HL7 messages and rich-content output streams. HL7/Connect
provides intelligent support for healthcare organizations
that have implemented the global HL7 industry standard for
interoperability between Healthcare information systems.
OPTIO E.COMPRESENT, OPTIOFAX, Equivalent in functionality to that listed for the Optio
OPTIO CHECKBOOK Enterprise Suite but targeted for the healthcare market.
OPTIO HEALTHCARE PROCESSPACKS Prepackaged templates facilitating the design of the
information customization and delivery requirements for
specific areas of healthcare operations such as
Admissions, Discharge and Transfer, Patient Accounting and
Business Office and
Diagnostic Clinic.
</TABLE>
SERVICES
CONSULTING. Our consulting services provide our customers with expertise
and assistance in evaluating, planning and implementing our solutions. To ensure
a successful product implementation, consultants assist customers with the
evaluation, planning and design process, the initial installation of a system,
the integration of our software with the customer's existing enterprise
computing applications and ongoing training and upgrades. We believe that our
consulting services enable rapid implementation of our software, ensure success
with our solution, strengthen the customer relationship and add to our
industry-specific knowledge base.
While our consulting services are optional, substantially all of our
customers utilize these services to facilitate the rapid implementation of our
software products. These services are billed on an hourly basis that varies
based on the type of service provided. We plan to continue to increase the
number of consultants to support anticipated growth in product implementations
and upgrades.
As of July 31, 1999, our consulting services group consists of 35 employees
comprised of business consultants, systems analysts and technical personnel
devoted to assisting customers in all phases of systems implementation including
evaluation, planning and design, customer-specific configuring of modules and
on-site implementation or conversion from existing systems. We may increasingly
use third party consultants, such as those from major systems integrators, to
assist in certain implementations.
MAINTENANCE. We offer a comprehensive maintenance program which provides
our customers with timely software upgrades offering increased functionality and
technology advances that incorporate
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emerging e-business and other industry initiatives. We offer customer telephone
support during normal business hours for 18% of the current software license fee
per annum and 24 hour maintenance for 25% percent of the current software
license fee per annum. As of July 31, 1999, a majority of our customers had
subscribed to our comprehensive maintenance support program.
TECHNOLOGY
Optio's product architecture provides the foundation for us to develop new
and innovative products and allows our applications to be easily adapted to new
standards, protocols and platforms. This architecture enables us to interface
with multiple operating systems, applications, business processes and data
sources in a non-disruptive manner. Our architecture also maximizes the benefit
of today's complex enterprise networking environments, including the Internet
and e-business applications.
Our products utilize visual design features that enable our customers to
specify business rules that capture and manipulate information from their
applications, create documents from that information and distribute these
documents to the desired destinations. These capabilities provide our customers
with the ability to deploy these and associated business rules to multiple
application servers across their internal networks or to remote sites across the
Internet.
Business rules are specified in our Optio Document Customization Language, a
special purpose programming language designed to solve the unique problem of
information gathering and document customization and delivery. Our OptioDCS
software is highly optimized to execute programs written using these business
rules, giving it the ability to process large volumes of information. Its
advanced design allows these business rules to control not only the flow of
information through the system but to dynamically change which business rules
are executed based on the information itself. This provides users with a high
degree of control over the automatic creation, formatting and delivery of
documents on a global basis.
The application server contains components for:
- communicating with our visual design product;
- collecting information from other enterprise application programs or
databases;
- performing calculations and other types of data transformations;
- formatting the information into human-readable documents, e-business
documents or database transactions;
- distributing information to a wide variety of digital destinations
including web servers, fax servers, e-mail servers, alphanumeric
pagers, printers, document archives and e-commerce application servers;
- maintaining and executing recipient specified rules for information
notification and document delivery; and
- securely controlling the distribution and processing of information
between multiple computers within the same network and over the
Internet.
The flexible design of our data collection components allows our application
server to interface with many diverse sources of business information. Our
products support many industry standards for document formats, document delivery
and data access from enterprise databases and other data sources. Our products
also support many of the proprietary formats of documents and information
produced by the software of our business partners and other enterprise
application software vendors.
The application server generates human-readable documents that include a
variety of graphical design elements. E-business documents are generated as
Electronic Data Interchange files or as any of
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the commercial document standard formats that use XML. Our XML support enables
our products to work with existing or future e-business applications.
TECHNICAL ADVANTAGES
Optio's technology provides our users with the following advantages:
- TRANSPARENCY. Optio's technology works with the existing business
processes of an enterprise and is completely transparent to the user.
- PRESERVATION OF APPLICATION BUSINESS LOGIC. Enterprise applications use
many business rules to validate and control business information. Our
products work directly with the information produced by the execution
of these business rules, which preserves the value and integrity of the
original application business logic and security and maintains the
consistency of the information.
- ABILITY TO WORK WITH TIME SENSITIVE DATA. Our products work with
business data as it is generated, not only after it has been stored in
a data warehouse. Applications can therefore process time sensitive
information much more effectively, getting the right information to the
right person at the right time.
- POWERFUL LANGUAGE. Optio's Document Customization Language enables our
products to address many complicated business information processing
problems requiring large volumes of data. This same language allows our
products to address many problems in the areas of e-business and
information delivery that other programming languages and application
servers cannot.
- EASE OF USE. The visual design approach used by Optio DesignStudio
harnesses the power of Optio's Document Customization Language and puts
it into the hands of less technical users without limiting access to
the power of our technology.
- SCOPE OF SOLUTION. The ability of our products to handle the wide
variety of information sources, document formats and digital
destinations, without requiring third party products, is unique to
Optio technology.
- SECURE INTERNET ARCHITECTURE. Our products utilize a proprietary
technology built on industry standards which allow our products to
securely distribute and control the processing of information on the
Internet.
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SALES AND MARKETING
To date, approximately 80% of our revenue has been generated through our
direct sales force. As of July 31, 1999 we had 39 domestic sales representatives
that are divided into teams that: (a) directly market to potential customers
based on the ERP system that they are implementing or have implemented; (b)
directly market to potential customers in the healthcare industry; and (c) sell
to resellers and distributors. The domestic sales force is split between our
East Coast and West Coast offices. As of July 31, 1999 our international sales
organization, focused on Europe and the Asia Pacific region, was comprised of
seven sales representatives. Important resellers or distributors of our products
include Epicor Software Corporation, NxTrend Technology, Inc. and Ross Systems
Inc. We also benefit from sales referred to us under commercial relationships
with Baan and McKesson HBOC. We plan to continue to invest significantly in
expanding our sales, support, services and marketing organizations.
The sales cycle typically begins with the generation of a sales lead or the
receipt of a request for proposal from a prospective customer. The sales lead or
request for proposal is followed by the qualification of the lead or prospect,
an assessment of the customer's requirements, a formal response to any request
for proposal, presentations and product demonstrations and contract negotiation.
The sales cycle can vary substantially from customer to customer but can require
as few as 30 to 40 days with customers that are currently implementing ERP
systems or as long as 90 to 120 days with customers that have existing ERP
systems that are looking to customize and optimize their information.
Our marketing programs are focused on creating awareness as well as lead
generation and customer references for our products. We conduct a comprehensive
marketing program that includes advertising, public relations and direct
marketing efforts focused on key executives, decision-makers and influencers,
industry analysts and users. We regularly participate in joint marketing
programs with partners, vendors and consultants such as trade shows, user
groups, newsletters and industry publications. We seek to jointly educate and
inform the customers and sales forces of our partners and leverage these
relationships with new customers through partner logo programs. We intend to
continue to pursue additional strategic marketing programs.
STRATEGIC RELATIONSHIPS
We have relationships with a series of third parties that help us market,
sell, implement, support and enhance our solutions that include:
RESELLERS AND DISTRIBUTORS. We have relationships with approximately 100
resellers and distributors and grant them the right to market and resell our
products as a component of their own solutions and to provide product related
education, implementation and customization services as well. These resellers
and distributors have their own software solutions that typically address a
specific market sector and they utilize our products to enhance the
functionality of their own solution. Our products may be sold along with their
own solutions under the original Optio brand name or embedded within the
reseller's or distributor's solution and relabeled with their own name.
IMPLEMENTATION PARTNERS. We have relationships with 15 consulting
organizations to provide value added services that assist our customers in
implementing our software. These partners are certified in the use of our
products and have demonstrated their ability to deliver complete solutions to
meet the needs of our customers. Once the solution is implemented they will also
train their customers in the proper use of the solution.
REFERRAL PARTNERS. We have relationships with Baan and McKesson HBOC to
refer prospects to us that may have an interest in licensing our solution. As
part of a defined process, we validate that we are not currently working with
that prospect and if we secure a licensing agreement with that prospect within a
fixed period of time, we will pay a referral fee to the Partner as compensation.
Referral fees are typically in the range of 10-20% of the license fee.
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VENDOR PARTNERSHIPS. We have relationships with six major ERP and
healthcare vendors including Baan, J.D. Edwards, McKesson HBOC, Oracle, QAD and
SAP, whereby we have demonstrated that our solutions are compatible with their
applications and provide complimentary functionality. As a result, our
solutions' key features and benefits are listed in their certified partner
directories and on their web sites. We can also feature their logos in our
advertising and promotional materials, participate in vendor sponsored trade
shows, marketing programs and other events that feature certified partners.
CUSTOMERS
Our customers consist of enterprises across a broad spectrum of industries,
and include a number of organizations focused on the medical and healthcare
industry. As of July 31, 1999, we licensed our products for use by more than
2,500 customers.
The following table sets forth a representative list of our customers that
purchased at least $70,000 in products and services from us since July 1, 1996:
____ENTERPRISE____
American Management Association
American Red Cross
Cam Car Textron Corporation
Champion International
Cummins Engine
Dekalb Genetics
Dresser Rand
Florida Rock
Fore Systems
Hoechst Celanese
Home Depot
Indianapolis Power & Light
Matsushita Avionics
Mylex
QAD
Reynolds Metals
Schlumberger
SCO
Sealand Services
TCI Cable Management Corporation
Tyson Foods
____HEALTHCARE____
Bethania Regional Health Care
Carolinas Healthcare System
Citizens Medical Center
John F Kennedy Medical Center
Lourdes Hospital
Medical College of Ohio
Mercer Medical Center
Merit Care Health Systems
New Britain General Hospital
O'Conner Hospital
Somerset Medical Center
Spartanburg County Health
St. Peters University Hospital
Tallahassee Memorial Medical
Texas Childrens' Hospital
Unity Health Systems
University of Pittsburgh Medical Center
West Tennessee Healthcare
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No single customer accounted for 10% or more of our total revenue during the
six months ended July 31, 1999 or any of the fiscal years in the three year
period ended January 31, 1999. Our top five customers in the aggregate accounted
for 9.9%, 12.7% and 17.1% of our total revenue in the six months ended July 31,
1999 and each of fiscal years ended January 31, 1999 and 1998, respectively.
The following case study illustrates how customers may use our products and
services to address their information access, customization and delivery
requirements.
PORT HURON HOSPITAL. With approximately 1,200 employees and 173,000
outpatient visits annually, Port Huron Hospital, a 186-bed hospital with four
off-campus community centers in St. Clair county Michigan, required the use of
several forms and documents to operate the facility and record patient
information. The hospital implemented our healthcare solution to ensure
enterprise-wide document standardization; lower costs by eliminating pre-printed
forms; and increase flexibility to respond to constantly changing requirements
for patient information. Equally important to them was Optio's seamless
integration to their McKesson HBO & Company STAR applications and their need for
a solution that automatically distributed information throughout the facility.
Within the first year of using our software, the hospital has realized a savings
in excess of $80,000 by automating their accounting department to create
customized AP and payroll checks, payroll advices and other documents. Due to
the savings, the hospital will be implementing our solution in several other
departments and projects annual savings as much as $250,000.
COMPETITION
The market for our products and services is intensely competitive, quickly
evolving and subject to rapid technological change. We expect competition to
intensify in the future. Our potential competitors
vary in size and in the scope and breadth of the products and services offered.
We see our competitors fitting into these segments: custom software development,
point solutions from customization focused companies such as AFP Technology,
Create!Print and StreamServe; and delivery focused companies such as Cypress
Corporation, Dazel, which is owned by Hewlett-Packard Company, New Dimension,
which is owned by BMC and Tivoli, which is owned by IBM. In the future we may
face competition from e-business enablement companies, such as Actuate Software
Corporation, BlueGill Technologies Inc., Brio Technology Inc., BottomLine
Technologies (de) Inc. and Quest Software. Lastly, some of the companies with
which we currently have strategic relationships could become competitors in the
future, such as J.D. Edwards, McKesson HBOC, Oracle and SAP.
We believe that the principal competitive factors affecting our market
include:
- a significant base of reference customers;
- a breadth and depth of product functionality;
- cost of solution;
- product quality; and
- performance, customer service, core technology, product features, ease
of implementation and extent of value derived from solution.
Although we believe that our products and services currently compete
favorably with respect to each of these factors, our market is evolving rapidly.
We may not be able to maintain our competitive position against current and
potential competitors.
Many of our competitors and potential competitors have longer operating
histories, significantly greater financial, technical, marketing and other
resources than us, significantly greater name recognition and a larger current
base of customers. In addition, many of our competitors have well-established
relationships with our current and potential customers and have extensive
knowledge of
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our industry. In the past, we have lost potential customers to competitors for
various reasons, including price and related discounts. In addition, current and
potential competitors have established or may establish cooperative
relationships among themselves or with third parties to increase the ability of
their products to address customer needs. Accordingly, it is possible that new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share.
We may not be able to compete successfully against our current and future
competitors. For more information on Competition, see "Risk Factors--Risks
Related to Our Business--We face intense competition in our industry; if we are
unable to compete successfully, our business will be harmed."
INTELLECTUAL PROPERTY
We distribute our products under software license agreements, which
generally grant our clients perpetual licenses to use, rather than own, our
products. These licenses contain various provisions protecting our ownership and
the confidentiality of the underlying technology. The software is protected from
unauthorized use through electronic activation keys tied to the system on which
the software is licensed to operate. The source code of our products is
protected as a trade secret and as unpublished copyrighted work. We have
registered "Optio" and "MedForms" as trademarks in the United States.
We protect our proprietary rights by relying on copyright, trade secret,
trademark, confidentiality procedures and contractual provisions. Some of our
software, documentation and other written materials are protected under the
federal copyright law. We also rely on trade secret laws of the State of Georgia
and the states in which we do business to protect our software designs and other
proprietary information. In addition, non-disclosure agreements contained in our
employment contracts protect our proprietary information from disclosure by
current and former employees.
We have not applied for any U.S. patents. It is possible that any patent
applications we file in the future will not result in the issuance of patents
and that any patents issued may later be successfully challenged. It is also
possible that we may not develop proprietary products or technologies that are
patentable, that any patent issued to us may not provide us with any competitive
advantages, or that the patents of others will seriously harm our ability to do
business.
Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our products or to obtain and use information
that we regard as proprietary. Policing unauthorized use of our products is
difficult, and while we are unable to determine the extent to which piracy of
our software products exists, software piracy can be expected to be a persistent
problem. In addition, the laws of some foreign countries do not protect our
proprietary rights to as great an extent as do the laws of the United States.
Our means of protecting our proprietary rights may not be adequate and our
competitors may independently develop similar technology, duplicate our products
or design around patents issued to us or our other intellectual property.
There has been a substantial amount of litigation in the software and
Internet industries regarding intellectual property rights. It is possible that
in the future third parties may claim that we or our current or potential future
products infringe their intellectual property. We expect that software product
developers and providers of e-commerce solutions will increasingly be subject to
infringement claims as the number of products and competitors in our industry
segment grows and the functionality of products in different industry segments
overlaps. Any claims, with or without merit, could be time-consuming, result in
costly litigation, cause product shipment delays or require us to enter into
royalty or licensing agreements. Royalty or licensing agreements, if required,
may not be available on terms acceptable to us or at all, which could seriously
harm our business.
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EMPLOYEES
As of July 31, 1999, we had 175 employees, 32 in research and development,
63 in sales and marketing, 52 in consulting and other services, 15 in finance
and administration. We also have 10 employees in Europe and 3 in Australia. 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
We currently occupy 25,000 square feet of office space in our Duluth,
Georgia headquarters. The Company anticipates moving to a new 62,000 square feet
facility in Alpharetta, Georgia in November 1999 and terminating the lease for
the 25,000 square foot facility in December of 1999. Offices are also located in
California, France and the UK, providing us with an additional 11,000 square
feet.
LEGAL PROCEEDINGS
Optio is not a party to any material legal proceeding.
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MANAGEMENT
EXECUTIVE OFFICERS; DIRECTORS AND KEY PERSONNEL
The following table sets forth information about the executive officers and
directors of Optio:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- ---------------------------------------------------------------
<S> <C> <C>
C. Wayne Cape............................. 45 Chairman of the Board of Directors, Chief Executive Officer and
President
G. Robert Beck............................ 41 Senior Vice President, Sales and Client Services
F. Barron Hughes.......................... 41 Chief Financial Officer, Secretary and Treasurer
Daryl G. Hatton........................... 37 Chief Technology Officer
Steven E. Kaye............................ 47 Vice President, Strategic Marketing
John L. Kopcke............................ 44 Vice President, Development
Mark White................................ 38 Vice President, Information Systems
David Dunn-Rankin(1)(2)................... 41 Director
Mitchel J. Laskey(1)(2)................... 49 Director
</TABLE>
- ------------------------
(1) Member of Compensation Committee
(2) Member of Audit Committee
C. WAYNE CAPE, the founder of Optio, has served as Chief Executive Officer
and President of Optio since its inception in 1981. Mr. Cape became Chairman of
the Board on September 1999. Prior to launching Optio, Mr. Cape was an employee
at Digital Communication Associates from 1974 to 1981 where he served in a
variety of technical, sales and regional sales management positions.
G. ROBERT BECK has served as Senior Vice President, Sales and Client
Services of Optio since April 1996. From January 1996 to April 1996, Mr. Beck
worked as an independent consultant for Sales Builders, Inc., an Atlanta based
sales and consulting management organization. From 1992 to December 1995, Mr.
Beck also served as President of U.S. Operations for Cray Systems, a UK based
provider of application software for tour operators, and from 1989 to 1992, Mr.
Beck served as Vice President of Sales for Computron Technologies, Inc., a
leading provider of financial workflow solutions, which is now a publicly traded
company.
F. BARRON HUGHES has served as Chief Financial Officer and Secretary of
Optio since September 1994. Prior to joining Optio, Mr. Hughes served as Chief
Financial Officer of Millennium Healthcare, Inc. from 1991 to September 1994 and
served as Chief Financial Officer of HealthQuest, Inc., a subsidiary of HBO &
Co. which provides health information solutions, from 1985 to 1991.
DARYL G. HATTON has served as Chief Technology Officer for Optio since
February 1997. From October 1993 to February 1997, he served as Director of
Research for Optio. From 1988 through 1993, Mr. Hatton was the founder and
president of Pacific Genesys Development, Inc., a Canadian corporation in the
electronic forms software development industry, which was acquired by Optio in
1993. Prior to that, Mr. Hatton was Vice President of Product Development for
Modatech Systems, Inc., a publicly traded software developer of sales force
automation solutions.
STEVEN E. KAYE is Vice President of Strategic Marketing for Optio. Mr. Kaye
joined Optio in May 1999. Prior to joining Optio, Mr. Kaye served as Vice
President of Marketing at Softlab, Inc., a BMW company, from February 1998 to
April 1999. Softlab is a vendor of application development strategies and a
provider of knowledge based solutions. From June 1996 to February 1998, Mr. Kaye
served as Senior Vice President of Business Development for KnowledgeX, Inc., a
provider of knowledge management software solutions, which was acquired by IBM
in 1998. From December 1994 to April 1996, Mr. Kaye served as Vice President of
Products and Technology for Deloitte Consulting's SAP practice and was also Vice
President of ISV/OEM Sales for KnowledgeWare.
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JOHN L. KOPCKE is Vice President of Development for Optio. Mr. Kopcke joined
Optio in March 1999. Mr. Kopcke is responsible for our product development
organization, including managing and overseeing all future product development
for existing solutions and research and development for new product
introductions. Prior to joining Optio, Mr. Kopcke was Chief Technology Officer
at Softlab, Inc. from January 1996 to March 1999. Prior to that, Mr. Kopcke
served as Chief Technology Officer for Pilot Software from June 1991 to January
1996. From 1987 to 1991, Mr. Kopcke served as President and founder of Kopcke
and Associates, a software development company specializing in specification
implementation of software for software companies. Kopcke and Associates was
acquired by Pilot Software, Inc. in October 1996.
MARK WHITE has served as Vice President of Information Systems of Optio
since February 1998. From March 1993 to February 1998, Mr. White served as the
Director of Development for Optio. From September 1990 to March 1993, Mr. White
served as Vice President of Operations for Millard Wayne, a physician practice
software company.
DAVID DUNN-RANKIN has served as a Director and a member of the Compensation
and Audit Committees of Optio since October 1999. He has served as Chief
Executive Officer for the UniLink Group since 1997. From 1995 to
1997, he served as a partner at Bridges & Dunn-Rankin, a certified public
accounting and consulting firm.
MITCHEL J. LASKEY has served as a Director and a member of the Compensation
and Audit Committees of Optio since October 1999. He has served as President and
Chief Executive Officer of Dynamic Healthcare Technologies, Inc. since May 1996.
From August 1994 to May 1996, he served as President and Chief Operating Officer
of Dynamic Healthcare Technologies, Inc. From 1992 to 1994, he served as
Chairman and Chief Executive Officer of Dynamic Technical Resources, Inc., a
healthcare information services and consulting firm.
TERMS OF DIRECTORS AND EXECUTIVE OFFICERS
Our board of directors consists of three directors, C. Wayne Cape, David
Dunn-Rankin and Mitchel J. Laskey. At each annual meeting of shareholders,
directors will be elected for a three-year term to succeed the directors whose
terms are then expiring. There are no family relationships between any of our
directors or executive officers. The executive officers serve at the pleasure of
our board of directors.
COMMITTEES OF THE BOARD OF DIRECTORS
The members of the Audit Committee are David Dunn-Rankin and Mitchel J.
Laskey. 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 David Dunn-Rankin and Mitchel
J. Laskey. 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 Optio and makes recommendations
concerning these matters to our board of directors. The Compensation Committee
also administers our stock option plans.
COMPENSATION OF DIRECTORS
Non-employee directors receive a fee of $1,000 per meeting for their service
as directors. Employee directors are not compensated for their service as
directors. We reimburse each director for
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reasonable out-of-pocket expenses incurred in attending meetings of our board of
directors and any of our committees.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are no Compensation Committee interlocks.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE.
The following table sets forth for fiscal 1999 all compensation received for
services rendered to Optio in all capacities by our chief executive officer and
each of the other four most highly compensated executive officers whose salary
and bonus exceeded $100,000 in fiscal 1999. These officers are referred to in
this prospectus as the named executive officers. No individual who would
otherwise have been includable in such table on the basis of salary and bonus
earned during fiscal 1999 has resigned or otherwise terminated his employment
during fiscal 1999. The compensation table excludes other compensation in the
form of perquisites and other personal benefits that constitutes the lesser of
$50,000 or 10% of the total annual salary and bonus earned by each of the named
executive officers in fiscal 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------
OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION
- -------------------------------------------------------------------------- ---------- ---------- -------------
<S> <C> <C> <C>
C. Wayne Cape
Chairman of the Board, Chief Executive Officer and President............ $ 210,000 $ 36,750 $ 64,154
G. Robert Beck
Senior Vice-President, Sales and Client Services........................ 156,250 104,677 --
F. Barron Hughes
Chief Financial Officer, Secretary and Treasurer........................ 102,312 750 --
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth all individual grants of stock options during
the year ended January 31, 1999, to each of the named executive officers:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES PERCENT OF TOTAL EXERCISE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED OR BASE OPTION TERM(1)
OPTIONS TO EMPLOYEES IN PRICE PER EXPIRATION --------------------------
NAME GRANTED FISCAL YEAR SHARE DATE 5% 10%
- ----------------------- ---------- ------------------- ----------- ------------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
C. Wayne Cape.......... 2,000,000 26.0% $ .80 February 9, 2008 $ 1,104,339 $ 1,523,617
G. Robert Beck......... 500,000 13.0% $ .80 February 9, 2008 251,558 637,496
F. Barron Hughes....... 400,000 10.3% $ .80 February 9, 2008 201,246 509,998
</TABLE>
- ------------------------
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on the fair market value per share on the date of grant ($.80) and
assumed rates of stock price appreciation of 5% and 10% compounded annually
from the date the respective options were granted to their expiration date.
These assumptions are mandated by the rules of the Securities and Exchange
Commission and are not
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intended to forecast future appreciation of Optio's stock price. The
potential realizable value computation is net of the applicable exercise
price, but does not take into account federal or state income tax
consequences and other expenses of option exercises or sales of appreciated
stock. Actual gains, if any, are dependent upon the timing of such exercise
and the future performance of Optio's common stock. The rates of
appreciation in this table may not be achieved. This table does not take
into account any appreciation in the price of the common stock to date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
No named executive officer exercised any stock option during fiscal 1999.
The following table summarizes the value of the outstanding options held by the
named executive officers at January 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT FISCAL YEAR-
AT FISCAL YEAR-END END(1)
------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------- ---------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
C. Wayne Cape............................................. 2,000,000 1,000,000 $ 826,000 $ 800,000
G. Robert Beck............................................ 375,000 875,000 $ 225,000 $ 625,000
F. Barron Hughes.......................................... 400,000 500,000 $ 80,000 $ 340,000
</TABLE>
- ------------------------
(1) Based on the estimated fair market value of Optio's common stock as of
January 31, 1999 of $1.50 per share, less the exercise price payable upon
exercise of such options. The Board of Directors determined the fair market
value based on various factors including independent appraisals, the
illiquidity of the common stock representing a minority interest in Optio,
values of similarly situated companies and Optio's future prospects.
STOCK OPTION AND OTHER COMPENSATION PLANS
STOCK INCENTIVE PLAN. Our Stock Incentive Plan was adopted by our board of
directors on January 1, 1997 and approved by our shareholders on December 23,
1997. The aggregate number of shares of our common stock reserved for issuance
under the Stock Incentive Plan was increased effective November 17, 1997 and is
currently 12,500,000. The purpose of the Stock Incentive Plan is to provide
incentives for key employees, officers, consultants and directors to promote our
success and to enhance our ability to attract and retain the services of such
persons. Options granted under the Stock Incentive Plan may be either options
intended to qualify as "incentive stock options" under Section 422 of the
Internal Revenue Code of 1986, as amended, or nonqualified stock options. The
Stock Incentive Plan also provides for the grant of stock appreciation rights
and restricted stock awards.
The Stock Incentive Plan is administered by our board of directors, which
has the authority to interpret the Stock Incentive Plan and take such other
action as it deems equitable. Our board of directors has absolute discretion
under the Stock Incentive Plan to determine to which employees and key persons
stock incentives shall be granted, when such grants shall be made, and the
number of shares of common stock subject to such grants.
Our board of directors determines, at the time of the grant, when options
issued under the plan can be exercised. The board of directors also determines
the exercise price for options issued under the plan. Options issued under the
plan expire ten years after the date of grant, unless our board of directors
sets an earlier date.
Exercise prices for incentive stock options may not be less than the fair
market value per share of common stock on the date of grant, or 110% of the fair
market value in the case of incentive stock options granted to any person who
owns our stock possessing 10% or more of the total voting power of
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all of our capital stock. Exercise prices for non-qualified stock options may be
less than the fair market value per share, but must be at least $0.01 per share.
Until there is an established market for our common stock, the board of
directors, at its discretion, determines the fair market value of a share of
common stock.
In the event of change of control, our board of directors has absolute
discretion to accelerate the vesting of all options that have not vested as of
the date of change in control or to arrange for the successor entity to assume
all of the rights and obligations under the plan. If an option holder's
employment is terminated for cause following the exercise of his options, Optio
has the right to repurchase the shares at the exercise price for ninety days
following such termination.
As of July 31, 1999, options to purchase 9,587,465 shares of our common
stock were outstanding under the Stock Incentive Plan at a weighted average
exercise price of $0.68 per share. 500,000 shares of common stock have been
issued upon exercise of options granted under the Stock Incentive Plan.
DIRECTORS' STOCK OPTION PLAN. Our board of directors adopted our Directors'
Stock Option Plan on October 15, 1999. 300,000 shares of our common stock are
reserved for issuance pursuant to the Plan. Only members of our board of
directors who are not employees of Optio are eligible to receive option grants
under the Directors' Plan. The Directors' Plan only provides for the grant of
options which do not qualify under Section 422 of the Internal Revenue Code.
The Directors' Plan is administered by our board of directors, which has the
authority to interpret the Directors' Plan and to take such other actions in the
administration and operation of the Directors' Plan as it deems equitable. The
board of directors may delegate its authority under the Directors' Plan to a
committee appointed by the board consisting of not less than two directors.
Upon initially becoming an eligible director, a director is entitled to
receive an option to purchase 10,000 shares of our common stock. As of the end
of each completed fiscal year of service as an eligible director following
adoption of the Directors' Plan, a director shall be granted an option to
purchase 5,000 shares of our common stock. Each person who qualified as an
eligible director as of the effective date of the Directors' Plan received and
option to purchase 10,000 shares of our common stock as of the effective date of
the Directors' Plan.
All options granted under the Directors' Plan are fully vested as of the
date of grant and have an exercise price equivalent to the fair market value of
the underlying shares. Options granted under the Directors' Plan may not have
terms exceeding ten (10) years from the date of grant. Options granted under the
Directors' Plan are not transferable or assignable except by will or by the laws
of descent and distribution and are exercisable, during the optionee's lifetime,
only by the optionee.
As of October 15, 1999, options to purchase 20,000 shares of our common
stock were outstanding under the Directors' Plan at an exercise price equal to
the per-share price of our common stock being sold in this offering, and no
shares of our common stock have been issued upon exercise of options granted
under the Directors' Plan.
NON-PLAN OPTIONS. In addition to options granted under the Stock Incentive
Plan and the Directors' Plan, as of July 31, 1999, options to purchase an
aggregate of 3,767,500 shares of our common stock at a weighted average exercise
price of $0.27 were outstanding.
401(K) PROFIT SHARING PLAN. We maintain a 401(k) Profit Sharing Plan which
is intended to be a tax-qualified contribution plan under Section 401(k) of the
Internal Revenue Code of 1986, as amended. Pursuant to the 401(k) plan,
participants may contribute, subject to certain Internal Revenue Code
limitations, up to 15% of eligible compensation, as defined, to the 401(k) plan.
Employees are eligible for this arrangement upon completion of first three
calendar months of employment. We will match contributions made by employees
pursuant to the 401(k) plan at a rate of 75% of the participant's contributions,
up to 5% of the eligible compensation being contributed after the
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participant's first three months of employment, subject to certain Internal
Revenue Code limitations. All of our employees who have completed two years of
service with us consisting of at least 1,000 hours of employment are eligible
for the matching contribution. We may make an additional contribution to
participants' 401(k) plans each year at the discretion of our board of
directors. The portion of a participant's account attributable to his or her own
contributions is 100% vested. The portion of the account attributable to Company
contributions (including matching contributions) vests over 6 years of service
with us. Distributions from the 401(k) plan may be made in the form of a
lump-sum cash payment or in installment payments.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our 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 Optio or is serving, at the request of Optio, as a director, officer,
employee, agent or consultant of another entity. No indemnification will be
provided for any misappropriation of any Optio 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, Optio 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 Optio pursuant to the provisions of our charter
documents, Georgia law or the agreements described above, Optio 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.
We loaned $48,800 to C. Wayne Cape on a non interest basis in ten advances
from October 15, 1986 to May 9, 1995. This loan is due and payable upon demand
and is unsecured. Mr. Cape has made no payments on this loan.
On December 31, 1988, we loaned $30,000 to C. Wayne Cape, pursuant to a
promissory note. This note bears interest at 10% per annum and it is unsecured.
The principal and interest under the note were due and payable on December 30,
1990; however, we have not requested payment. To date, Mr. Cape has made no
payments pursuant to the note and the outstanding balance of principal plus
interest as of July 31, 1999 was $61,750.00.
Mr. Cape has agreed to repay each of these loans with the proceeds he
receives, if any, from selling shares of common stock pursuant to the
underwriters' over-allotment option or, if such proceeds are insufficient, then
within one year from the date of closing of this offering.
We loaned $600,000 to David Dunn-Rankin, a director of Optio, in six
advances from August 6, 1998 to February 19, 1999. This loan bears interest at
9% per annum. Mr. Dunn-Rankin is required to make annual interest payments on
October 13 of each year, and the principal is due and payable in full on October
13, 2001. This loan is secured by Mr. Dunn-Rankin's options to acquire 100,000
shares of Optio Common Stock (pre-split) at an exercise price of $3.00 per share
(pre-split). This loan was originally convertible into equity of The Unilink
Group, LLC, a technology company controlled by Mr. Dunn-Rankin; however, we did
not elect to convert in the time frame agreed with Mr. Dunn-Rankin.
We have a $2,000,000 line of credit from Premier Lending Corporation. As of
the date of this prospectus, there is no outstanding balance on this loan. Mr.
Cape has personally guaranteed this loan. We intend to refinance this loan after
completion of this offering and terminate Mr. Cape's personal guarantee.
On December 23, 1998, we repurchased 1,646,590 shares of our common stock
that were previously owned by Gordon Terris, Bonnie Malstrom and Clarence
Rydberg. These shareholders exercised dissenters' rights in connection with an
amendment to our Articles of Incorporation. At the time of the settlement, Mr.
Terris, Ms. Malstrom and Mr. Rydberg held approximately 6.1%, 5.6% and 3.6%,
respectively, of our outstanding capital stock. We agreed to pay Mr. Terris
$1,318,393, evidenced by a promissory note for the full amount, which is secured
by 500,000 shares of our common stock. Mr. Terris had been paid $807,198 in
principal and accrued interest as of July 31, 1999. We agreed to pay Ms.
Malstrom $1,161,884, evidenced by a promissory note for the full amount, which
is secured by 543,230 shares of our common stock. Ms. Malstrom had been paid
$687,961 in principal and accrued interest as of July 31, 1999. We agreed to pay
Mr. Rydberg $802,500, evidenced by a promissory note for the full amount, which
is secured by 500,000 shares of our common stock. Mr. Rydberg had been paid
$491,338 in principal and accrued interest as of July 31, 1999. All of these
promissory notes bear interest at 7% per annum and require equal quarterly
principal payments. All the common stock held as security for these promissory
notes is held in escrow and will be released after certain payments are made.
The notes will be required to be paid in full from the proceeds of this offering
and all common stock held in escrow will be released to us for cancellation.
We have agreed to provide indemnification to certain executive officers and
directors which may require us to indemnify officers and directors against
certain liabilities that may rise by reason of their status or service as
officers or directors, other than liabilities arising from willful misconduct of
a culpable nature, and to advance expenses incurred as a result of any
proceeding against them as to which they could be indemnified. See
"Management--Limitation of Liability and Indemnification of Officers and
Directors."
51
<PAGE>
All future transactions, including loans, if any, between us and our
officers, directors and principal shareholders and their affiliates and any
transactions between us and any entity with which our officers, directors or
principal shareholders are affiliated will be subject to the approval of a
majority of our board of directors, including the majority of the independent
and disinterested outside directors of the board of directors and must be on
terms no less favorable to us than could be obtained from unaffiliated third
parties.
52
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth information with respect to the beneficial
ownership of our common stock as of September 30, 1999 and as adjusted to
reflect the sale of the common stock being offered hereby with respect to:
- each named executive officer;
- each of our directors;
- 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 officers and directors as a group.
Unless otherwise indicated, the address of each person listed is c/o Optio
Software, Inc., 4800 River Green Parkway, Duluth, Georgia 30096.
<TABLE>
<CAPTION>
PERCENT BENEFICIALLY
OWNED(1)
------------------------
NAMED EXECUTIVE OFFICERS, DIRECTORS NUMBER OF BEFORE AFTER
AND 5% SHAREHOLDERS SHARES OFFERING OFFERING
- -------------------------------------------------------------------------------- ------------ ----------- -----------
<S> <C> <C> <C>
C. Wayne Cape (2)............................................................... 9,636,950 68.0%
G. Robert Beck (3).............................................................. 687,500 5.5%
F. Barron Hughes (4)............................................................ 540,000 4.3%
David Dunn-Rankin (5)........................................................... 510,000 4.1%
Mitchel J. Laskey (6)........................................................... 10,000 *
Charles Carey (7)............................................................... 2,188,770 18.0%
All directors and executive officers as a Group (9 persons)(8).................. 11,946,950 73.7%
</TABLE>
- ------------------------
* Less than 1% of the outstanding common stock.
(1) For purposes of calculating the percentage beneficially owned, the number of
shares of common stock deemed outstanding prior to the offering consists of
11,918,640 shares outstanding as of September 30, 1999 together with shares
underlying options that are exercisable by these shareholders within 60 days
of September 30, 1999. The number of shares of common stock deemed
outstanding after this offering includes an additional shares
that are being offered for sale by Optio 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 and includes shares subject to issuances upon the exercise of options
which may be exercised within 60 days following September 30, 1999.
(2) This number includes 89,130 shares and 6,300 shares subject to options
exercisable within 60 days following September 30, 1999 held by Mr. Cape's
wife and 2,250,000 shares subject to options exercisable within 60 days
following September 30, 1999.
(3) Includes 687,500 shares subject to options exercisable within 60 days
following September 30, 1999.
(4) Includes 500,000 shares subject to options exercisable within 60 days
following September 30, 1999.
(5) Includes 510,000 shares subject to options exercisable within 60 days
following September 30, 1999.
(6) Includes 10,000 shares subject to options exercisable within 60 days
following September 30, 1999.
(7) Includes 250,000 shares subject to options exercisable within 60 days
following September 30, 1999. Mr. Carey's address is 215 Bellamy Street,
Homer, Georgia 30547.
(8) Includes 4,301,300 shares subject to options exercisable within 60 days
following September 30, 1999.
53
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of Optio consists of 100,000,000 shares of
common stock, no par value per share, and 20,000,000 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 Optio's 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 September 30, 1999, there were 14,302,368 shares of Optio common stock
outstanding held of record by 24 shareholders. This number takes into account a
5-1 stock split on October 15, 1999. There will be shares of common stock
outstanding (assuming no exercise of outstanding options after September 30,
1999) after giving effect to the split and to the sale of common stock offered
to the public in this offering. 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 Optio, 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
As of October 15, 1999, there were no shares of Optio's preferred stock
outstanding. Pursuant to Optio's Amended and Restated Articles of Incorporation,
the board of directors is authorized (subject to certain limitations prescribed
by law), without further shareholder approval, to issue, from time to time, up
to an aggregate of 20,000,000 shares of preferred stock in one or more series,
and to fix or alter the designations, preferences, rights and any
qualifications, limitations or restrictions on the shares of each such series
thereof, including the dividend rights, dividend rates, conversion rights,
voting rights, terms of redemption (including sinking fund provisions),
redemption price or prices, liquidation preferences and the number of shares
constituting any series or designations of such series. The issuance of
preferred stock may have the effect of delaying, deferring or preventing a
change of control of Optio. There are no outstanding shares of preferred stock
and no series have been designated.
ANTITAKEOVER PROVISIONS OF OUR ARTICLES OF INCORPORATION, BYLAWS AND GEORGIA LAW
CLASSIFIED BOARD AND REMOVAL OF DIRECTORS. Optio's Amended and Restated
Articles of Incorporation provide for Optio's 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, which requires the affirmative vote of the holders of at least
66 2/3% of the outstanding shares of common stock of Optio entitled to vote at
an election of directors.
CONSIDERATION OF INTEREST OF NON-SHAREHOLDER CONSTITUENCIES. In discharging
the duties of their respective positions and in determining what is believed to
be in the Optio's best interest, the board of directors, and individual
directors, in addition to considering the effects of any action would have on
54
<PAGE>
Optio or its shareholders, may, to the extent permitted by applicable Georgia
law, consider the interests of the employees, customers, suppliers and creditors
of Optio and its subsidiaries, the communities in which offices or other
establishments of Optio and its subsidiaries are located, and all other factors
which our directors may consider pertinent. This provision of Optio's Amended
and Restated Articles of Incorporation solely grants discretionary authority to
the directors and does not give rights to any other constituency.
The preceding provisions of the Amended and Restated Articles of
Incorporation may be changed only upon the affirmative vote of holders of at
least a 66 2/3% of the outstanding shares of our common stock.
OPTIO'S AMENDED AND RESTATED BYLAWS
SHAREHOLDER MEETINGS. Under Optio's Amended and Restated Bylaws, the
shareholders may call a special meeting only upon the request of holders of at
least 50% 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 Optio may call
special meetings of shareholders.
REQUIREMENTS FOR ADVANCE NOTIFICATION OF SHAREHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. Optio's Amended and Restated Bylaws establish an advance notice
procedure for the nomination, other than by or at the direction of the board of
directors or a committee thereof, of candidates for election as directors, as
well as for other shareholder proposals to be considered at shareholders
meetings. Notice of shareholder proposals and directors nominations must be
given timely in writing to Optio's Secretary before the meeting at which such
matters are to be acted upon or directors are to be elected. Such notice, to be
timely, must be received at Optio's principal executive offices with respect to
shareholder proposals and elections to be held at the annual meeting not less
than 60 days before the date of the meeting at which the director(s) are to be
elected; however, if less than 70 days notice or prior public disclosure of the
date of the scheduled meeting is given or made, notice by the shareholder, to be
timely, must be delivered or received not later than the close of business on
the tenth day following the earlier of the day on which notice of the date of
the meeting is mailed to shareholders or public disclosure of the date of such
meeting is made.
Notice to Optio from a shareholder who intends to present a proposal or to
nominate a person for election as a director at a shareholders' meeting must
contain certain information about the shareholder giving such notice and, in the
case of director nominations, all information that would be required to be
included in a proxy statement soliciting proxies for the election of the
proposed nominee (including such person's written consent to serve as a director
if so elected). If the presiding officer at the meeting determines that a
shareholder's proposal or nomination is not made in accordance with the
procedures set forth in the Amended and Restated Articles of Incorporation, such
proposal or nomination, at the direction of such presiding officer, may be
disregarded. The notice requirement for shareholder proposals contained in the
Amended and Restated Articles of Incorporation does not restrict a shareholder's
right to include proposals in Optio's annual proxy materials pursuant to rules
promulgated under the Securities Exchange Act of 1934, as amended. In addition,
the Amended and Restated Articles of Incorporation provide that upon
consummation of this offering, shareholders may take action only at a duly
called and held meeting and may not take action by written consent.
PROVISIONS OF GEORGIA LAW
GEORGIA BUSINESS COMBINATION STATUTE. Optio has elected in its Amended and
Restated Bylaws to be subject to provisions of Georgia law prohibiting various
business combinations involving shareholders that own 10% or more of the
outstanding shares of Optio for a period of five years after the shareholder
acquired such shares. Notwithstanding the statute's restrictions, the business
55
<PAGE>
combination may proceed if it is approved by Optio's board of directors or
results in the shareholder owning 90% or more of Optio's outstanding shares,
excluding shares held by directors and executive officers. A "business
combination" includes, among other things, a merger or consolidation involving
Optio and the shareholder and the sale of 10% or more of Optio's assets.
GEORGIA FAIR PRICE STATUTE. Optio has elected in its Amended and Restated
Bylaws to be subject to provisions of Georgia law which require that business
combinations with shareholders that own 10% or more of the outstanding shares of
Optio which do not meet certain pricing criteria must be approved by the
directors and shareholders of Optio who are not affiliated or associated with
the shareholder. The fair price statute does not require this approval of a
business combination if the cash, stock and other property received by Optio's
shareholders in the transaction is the same for all shareholders and is not less
than the highest of a number of values assigned to the shares of Optio based on
trading prices and liquidation values.
The provisions of the Amended and Restated Articles of Incorporation, the
Amended and Restated Bylaws and the Georgia Business Corporations Code described
above contain provisions that may have the effect of delaying, deferring or
preventing a non-negotiated merger or other business combination involving
Optio. These provisions are intended to encourage any person interested in
acquiring Optio to negotiate with and obtain the approval of the board of
directors in connection with the transaction. Certain of these provisions may,
however, discourage a future acquisition of Optio not approved by the board of
directors in which shareholders might receive an attractive value for their
shares or that a substantial number or even a majority of Optio's shareholders
might believe to be in their best interest. As a result, shareholders who desire
to participate in such a transaction may not have the opportunity to do so. Such
provisions could also discourage bids for the common stock at a premium, as well
as create a depressive effect on the market price of the common stock.
These charter provisions and provisions of Georgia law may have the effect
of delaying, deterring or preventing a change of control of Optio.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is SunTrust Bank,
Atlanta.
NASDAQ NATIONAL MARKET LISTING
Optio's common stock is approved for listing on the Nasdaq National Market
under the symbol "OPTO."
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for Optio'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 Optio to raise
capital through an offering of equity securities.
After this offering, Optio will have outstanding an aggregate of
shares of common stock. Of these shares, the 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 Optio,
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
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 Optio in
private transactions in reliance upon exemptions from registration under the
Securities Act. Restricted securities may be
56
<PAGE>
sold in the public market only if they are registered or if they qualify for an
exemption from registration, such as Rules 144, 144(k) or 701 under the
Securities Act, which are summarized below.
All of the executive officers, directors, selling shareholders and certain
management shareholders of Optio, who collectively hold an aggregate of
restricted shares of Optio, have entered into "lock-up" agreements with Merrill
Lynch in which they have agreed not to offer, pledge, sell, contract to sell,
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 of these shares for a period of 180 days from the date of this
prospectus. We have also entered into an agreement with Merrill Lynch that Optio
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 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 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.
Following the expiration of the lock-up periods and subject to applicable
vesting periods, shares issued upon exercise of options granted by Optio 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 Optio 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 Optio) 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 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 Optio.
Under Rule 144(k), a person who is not deemed to have been an affiliate of Optio
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 Optio) is entitled to sell
the shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
Optio intends to file, after the effective date of this offering, a
registration statement on Form S-8 to register approximately shares
of common stock issuable upon the exercise of outstanding stock options or
reserved for issuance under the Optio Software, Inc. Stock Option 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 Optio.
57
<PAGE>
UNDERWRITING
GENERAL
We intend to offer our common stock through a number of underwriters.
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Bear, Stearns & Co., Inc.,
and The Robinson-Humphrey Company, LLC are acting as representatives of each of
the underwriters named below. Subject to the terms and conditions set forth in a
purchase agreement among our company, the selling shareholders and the
underwriters, we have agreed to sell to the underwriters, and each of the
underwriters severally and not jointly has agreed to purchase from our company,
the number of shares of common stock set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ---------------------------------------------------------------------------------- -----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................................................
Bear, Stearns & Co., Inc..........................................................
The Robinson-Humphrey Company, LLC................................................
-----
Total.......................................................................
-----
-----
</TABLE>
In the purchase agreement, the several underwriters have agreed, subject to
the terms and conditions set forth in that agreement, to purchase all of the
shares of common stock being sold under the terms of the agreement if any of the
shares of common stock being sold under the terms of the agreement are
purchased. In the event of a default by an underwriter, the purchase agreement
provides that, in certain circumstances, the purchase commitments of the
nondefaulting underwriters may be increased or the purchase agreement may be
terminated.
We and the selling shareholders have agreed to indemnify the underwriters
against some liabilities, including some liabilities under the Securities Act of
1933, as amended, or to contribute to payments the underwriters may be required
to make in respect of those liabilities.
The shares of common stock are being offered by the several underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of certain legal matters by counsel for the underwriters and certain
other conditions. The underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part.
COMMISSIONS AND DISCOUNTS
The representatives have advised us and the selling shareholders that the
underwriters propose initially to offer the shares of common stock to the public
at the initial public offering price set forth on the cover page of this
prospectus, and to certain dealers at such price less a concession not in excess
of $ per share of common stock. The underwriters may allow, and
such dealers may
58
<PAGE>
reallow, a discount not in excess of $ per share of common stock to
certain other dealers. After the initial public offering, the public offering
price, concession and discount may change.
The following table shows the per share and total public offering price, the
underwriting discount to be paid by us and the selling shareholders to the
underwriters and the proceeds before expenses to us and the selling
shareholders. This information is presented assuming either no exercise or full
exercise by the underwriters of their over-allotment option.
<TABLE>
<CAPTION>
WITHOUT
PER SHARE OPTION
----------------- -------
<S> <C> <C>
Public Offering Price...............................................................
Underwriting Discount...............................................................
Proceeds, before expenses, to Optio.................................................
Proceeds, before expenses, to the selling shareholders..............................
<CAPTION>
WITH
OPTION
-------
<S> <C>
Public Offering Price...............................................................
Underwriting Discount...............................................................
Proceeds, before expenses, to Optio.................................................
Proceeds, before expenses, to the selling shareholders..............................
</TABLE>
The expenses of the offering, exclusive of the underwriting discount, are
estimated at $ and are payable by us.
OVER-ALLOTMENT OPTION
We and the selling shareholders have granted an option to the underwriters,
exercisable for 30 days after the date of this prospectus, to purchase up to an
aggregate of additional shares of our common stock at the public offering
price set forth on the cover page of this prospectus, less the underwriting
discount. The underwriters may exercise this option solely to cover
over-allotments, if any, made on the sale of our common stock offered hereby. To
the extent that the underwriters exercise this option, each underwriter will be
obligated, subject to certain conditions, to purchase a number of additional
shares of our common stock proportionate to such underwriter's initial amount
reflected in the foregoing table.
RESERVED SHARES
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to ( %) of the shares offered
hereby to be sold to some of our directors, officers, employees, distributors,
dealers, business associates and related persons. The number of shares of our
common stock available for sale to the general public will be reduced to the
extent that those persons purchase the reserved shares. Any reserved shares
which are not orally confirmed for purchase within one day of the pricing of the
offering will be offered by the underwriters to the general public on the same
terms as the other shares offered by this prospectus.
NO SALES OF SIMILAR SECURITIES
We, our executive officers and directors, all of the selling shareholders
and certain management shareholders prior to this offering have agreed, with
certain exceptions, without the prior written consent of Merrill Lynch on behalf
of the underwriters for a period of 180 days after the date of this prospectus,
not to directly or indirectly:
- offer, pledge, sell, contract to sell, 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
our common stock or securities convertible into or exchangeable or
exercisable for or repayable with our common stock, whether now owned or
later acquired by the person executing the agreement or with respect to
which the person executing the agreement later acquires the power of
disposition, or file a registration statement under the Securities Act
relating to any shares of our common stock; or
59
<PAGE>
- enter into any swap or other agreement that transfers, in whole or in
part, the economic consequence of ownership of our common stock whether
any such swap or transaction is to be settled by delivery of our common
stock or other securities, in cash or otherwise.
QUOTATION OF THE NASDAQ NATIONAL MARKET
We expect our common stock to be approved for quotation on the Nasdaq
National Market, subject to official notice of issuance, under the symbol
"OPTO."
Before this offering, there has been no public market for our common stock.
The initial public offering price will be determined through negotiations among
us and the representatives and the lead managers. The factors to be considered
in determining the initial public offering price, in addition to prevailing
market conditions, are the valuation multiples of publicly traded companies that
the representatives and the lead managers believe to be comparable to us,
certain of our financial information, the history of, and the prospects for, our
company and the industry in which we compete, and an assessment of our
management, its past and present operations, the prospects for, and timing of,
future revenue of our company, the present state of our development, and the
above factors in relation to market values and various valuation measures of
other companies engaged in activities similar to ours. An active trading market
may not develop for our common stock, and our common stock may not trade in the
public market subsequent to the offering at or above the initial public offering
price.
The underwriters do not expect sales of the common stock to any accounts
over which they exercise discretionary authority to exceed 5% of the number of
shares being offered in this offering.
PRICE STABILIZATION, SHORT POSITIONS AND PENALTY BIDS
Until the distribution of our common stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the underwriters and
certain selling group members to bid for and purchase our common stock. As an
exception to these rules, the representatives are permitted to engage in
transactions that stabilize the price of our common stock. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of our common stock.
If the underwriters create a short position in our common stock in
connection with the offering, i.e., if they sell more shares of our common stock
than are set forth on the cover page of this prospectus, the representatives may
reduce that short position by purchasing our common stock in the open market.
The representatives may also elect to reduce any short position by exercising
all or part of the over-allotment option described above.
The representatives may also impose a penalty bid on underwriters and
selling group members. This means that if the representatives purchase shares of
our common stock in the open market to reduce the underwriters' short position
or to stabilize the price of our common stock, they may reclaim the amount of
the selling concession from the underwriters and selling group members who sold
those shares.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of our common stock to the extent that it
discourages resales of our common stock.
Neither our company nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of our common stock. In addition, neither
our company nor any of the underwriters makes any representation that the
representatives or the lead managers will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
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<PAGE>
LEGAL MATTERS
The validity of our common stock offered hereby will be passed upon for us
by Morris, Manning & Martin LLP, Atlanta, Georgia. Certain legal matters
relating to our common stock will be passed upon for the underwriters by Willkie
Farr & Gallagher, New York, New York.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at January 31, 1998 and 1999, and for each of the three
years in the period ended January 31, 1999, as set forth in their report. We
have included our financial statements in the prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the 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 Optio 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 Securities and Exchange
Commission in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the following regional offices of the Securities and Exchange 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
Securities and Exchange 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 Securities and Exchange Commission's public reference room by
calling the Securities and Exchange Commission at 1-800-SEC-0330. In addition,
Optio is required to file electronic versions of these documents with the
Securities and Exchange Commission through the Securities and Exchange
Commission's Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system.
The Securities and Exchange 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
Securities and Exchange Commission. Information concerning Optio 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 Securities and Exchange Commission.
Such periodic reports, proxy statements and other information will be available
for inspection and copying at the Securities and Exchange Commission's public
reference rooms and the Securities and Exchange Commission's web site, which is
described above.
61
<PAGE>
OPTIO SOFTWARE, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
-----------
<S> <C>
Report of Independent Auditors.......................................................................... F-2
Consolidated Balance Sheets as of January 31, 1998 and 1999 and July 31, 1999 (unaudited)............... F-3
Consolidated Statements of Income for the years ended January 31, 1997, 1998, and 1999 and the six-month
periods ended July 31, 1998 and 1999 (unaudited)...................................................... F-4
Consolidated Statements of Shareholders' Equity (Deficit) for the years ended January 31, 1997, 1998,
and 1999 and the six-month period ended July 31, 1999 (unaudited)..................................... F-5
Consolidated Statements of Cash Flows for the years ended January 31, 1997, 1998 and 1999 and the
six-month periods ended July 31, 1998 and 1999 (unaudited)............................................ F-6
Notes to Consolidated Financial Statements.............................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Optio Software, Inc.
We have audited the accompanying consolidated balance sheets of Optio
Software, Inc. as of January 31, 1998 and 1999, and the related consolidated
statements of income, shareholders' equity (deficit), and cash flows for each of
the three years in the period ended January 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 consolidated financial position of Optio Software,
Inc. at January 31, 1998 and 1999, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
January 31, 1999 in conformity with generally accepted accounting principles.
Ernst & Young LLP
March 19, 1999, except for
Note 15, as to which the date is
October 15, 1999
Atlanta, Georgia
F-2
<PAGE>
OPTIO SOFTWARE, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 31,
------------------------- JULY 31,
1998 1999 1999
----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................. $ 1,507,000 $ 1,129,000 $ 1,489,000
Marketable securities..................................................... 74,000 372,000 314,000
Accounts receivable, less allowance for doubtful accounts of $89,000,
$118,000, and $159,000 (unaudited), respectively........................ 3,066,000 5,691,000 5,550,000
Prepaid expenses and other current assets................................. 123,000 239,000 323,000
Income tax receivable..................................................... -- 171,000 10,000
Deferred income taxes..................................................... 150,000 175,000 160,000
----------- ------------ ------------
Total current assets........................................................ 4,920,000 7,777,000 7,846,000
Property and equipment:
Furniture and equipment................................................... 1,266,000 1,886,000 2,370,000
Accumulated depreciation.................................................. (378,000) (833,000) (1,203,000)
----------- ------------ ------------
888,000 1,053,000 1,167,000
Other assets:
Notes receivable from related party....................................... -- 525,000 600,000
Note receivable and advances to shareholders.............................. 120,000 116,000 118,000
Deferred income taxes..................................................... 151,000 297,000 429,000
Goodwill, net of accumulated amortization of $435,000, $953,000, and
$1,251,000 (unaudited), respectively.................................... 869,000 838,000 539,000
Other..................................................................... 30,000 98,000 143,000
----------- ------------ ------------
Total assets................................................................ $ 6,978,000 $ 10,704,000 $ 10,842,000
----------- ------------ ------------
----------- ------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................................... $ 707,000 $ 696,000 $ 1,180,000
Accrued expenses.......................................................... 1,063,000 1,860,000 1,107,000
Income taxes payable...................................................... 229,000 -- --
Current portion of notes payable to related parties....................... 170,000 913,000 861,000
Current portion of capital lease obligations and note payable to bank..... 176,000 45,000 49,000
Deferred revenue.......................................................... 2,727,000 5,913,000 6,006,000
----------- ------------ ------------
Total current liabilities................................................... 5,072,000 9,427,000 9,203,000
Notes payable to related parties, less current portion...................... 140,000 1,124,000 777,000
Capital lease obligations and note payable to bank, less current portion.... 106,000 84,000 58,000
Deferred revenue............................................................ 36,000 94,000 79,000
Shareholders' equity (deficit):
Preferred stock, no par value; 20,000,000 shares authorized, none
issued or outstanding................................................... -- -- --
Common stock, no par value:
100,000,000 shares authorized; 12,930,230, 11,918,640 and 11,918,640
(unaudited) shares issued and outstanding, respectively................. 704,000 1,033,000 1,310,000
Retained earnings (accumulated deficit)................................... 953,000 (1,105,000) (354,000)
Accumulated other comprehensive (loss) income............................. (33,000) 47,000 26,000
Unamortized stock compensation............................................ -- -- (257,000)
----------- ------------ ------------
Total shareholders' equity (deficit)........................................ 1,624,000 (25,000) 725,000
----------- ------------ ------------
Total liabilities and shareholders' equity (deficit)........................ $ 6,978,000 $ 10,704,000 $ 10,842,000
----------- ------------ ------------
----------- ------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-3
<PAGE>
OPTIO SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
SIX-MONTH PERIOD
YEAR ENDED JANUARY 31, ENDED JULY 31,
---------------------------------------- -------------------------
1997 1998 1999 1998 1999
------------ ------------ ------------ ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
License fees.................................... $ 5,802,000 $ 9,150,000 $ 12,014,000 $ 5,234,000 $ 7,709,000
Services, maintenance, and other................ 3,200,000 4,419,000 7,525,000 2,886,000 6,848,000
------------ ------------ ------------ ----------- ------------
9,002,000 13,569,000 19,539,000 8,120,000 14,557,000
Costs of revenue:
License fees.................................... 642,000 1,088,000 913,000 426,000 456,000
Services, maintenance, and other................ 1,814,000 2,214,000 4,089,000 1,690,000 3,520,000
------------ ------------ ------------ ----------- ------------
2,456,000 3,302,000 5,002,000 2,116,000 3,976,000
------------ ------------ ------------ ----------- ------------
6,546,000 10,267,000 14,537,000 6,004,000 10,581,000
Operating expenses:
Sales and marketing............................. 3,674,000 5,901,000 7,534,000 3,114,000 5,243,000
Research and development........................ 891,000 1,551,000 2,530,000 1,017,000 1,645,000
General and administrative...................... 1,143,000 1,886,000 2,884,000 1,118,000 1,745,000
Depreciation and amortization................... 144,000 806,000 975,000 417,000 606,000
------------ ------------ ------------ ----------- ------------
5,852,000 10,144,000 13,923,000 5,666,000 9,239,000
------------ ------------ ------------ ----------- ------------
Income from operations............................ 694,000 123,000 614,000 338,000 1,342,000
Other income (expense):
Interest income................................. 71,000 32,000 104,000 38,000 59,000
Interest expense................................ (42,000) (77,000) (257,000) (36,000) (67,000)
Other........................................... -- 8,000 (46,000) 6,000 (7,000)
------------ ------------ ------------ ----------- ------------
29,000 (37,000) (199,000) 8,000 (15,000)
------------ ------------ ------------ ----------- ------------
Income before income taxes........................ 723,000 86,000 415,000 346,000 1,327,000
Income tax expense................................ 304,000 64,000 99,000 83,000 576,000
------------ ------------ ------------ ----------- ------------
Net income........................................ $ 419,000 $ 22,000 $ 316,000 $ 263,000 $ 751,000
------------ ------------ ------------ ----------- ------------
------------ ------------ ------------ ----------- ------------
Net income per share-basic........................ $ 0.03 $ 0.00 $ 0.03 $ 0.02 $ 0.06
------------ ------------ ------------ ----------- ------------
------------ ------------ ------------ ----------- ------------
Net income per share-diluted...................... $ 0.03 $ 0.00 $ 0.02 $ 0.02 $ 0.05
------------ ------------ ------------ ----------- ------------
------------ ------------ ------------ ----------- ------------
Weighted average shares outstanding--basic........ 12,380,356 12,890,904 12,824,532 12,892,730 11,918,640
------------ ------------ ------------ ----------- ------------
------------ ------------ ------------ ----------- ------------
Weighted average shares outstanding--diluted...... 14,300,620 15,081,394 15,602,316 15,264,323 16,123,536
------------ ------------ ------------ ----------- ------------
------------ ------------ ------------ ----------- ------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-4
<PAGE>
OPTIO SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
ACCUMULATED
RETAINED OTHER TOTAL
COMMON STOCK EARNINGS COMPREHENSIVE UNAMORTIZED SHAREHOLDERS'
------------------------ (ACCUMULATED INCOME STOCK EQUITY
SHARES AMOUNT DEFICIT) (LOSS) COMPENSATION (DEFICIT)
----------- ----------- ------------ -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at February 1, 1996........... 12,095,230 $ 190,000 $ 512,000 $ -- $ -- $ 702,000
Comprehensive income (loss), net of
tax:
Net income........................ -- -- 419,000 -- -- 419,000
Unrealized loss on marketable
securities available for sale... -- -- -- (15,000) -- (15,000)
-------------
Comprehensive income................ 404,000
Issuance of common stock............ 335,000 214,000 -- -- -- 214,000
----------- ----------- ------------ -------------- ------------- -------------
Balance at January 31, 1997........... 12,430,230 404,000 931,000 (15,000) -- 1,320,000
Comprehensive income (loss), net of
tax:
Net income........................ -- -- 22,000 -- -- 22,000
Unrealized loss on marketable
securities available for sale... -- -- -- (18,000) -- (18,000)
-------------
Comprehensive income................ 4,000
Issuance of common stock............ 500,000 300,000 -- -- -- 300,000
----------- ----------- ------------ -------------- ------------- -------------
Balance at January 31, 1998........... 12,930,230 704,000 953,000 (33,000) -- 1,624,000
Comprehensive income, net of tax:
Net income........................ -- -- 316,000 -- -- 316,000
Foreign currency translation
adjustment...................... -- -- -- 1,000 -- 1,000
Unrealized gain on marketable
securities available for sale... -- -- -- 79,000 -- 79,000
-------------
Comprehensive income................ 396,000
Issuance of common stock:
Acquisition of business........... 200,000 160,000 -- -- -- 160,000
Exercise of stock options and
related
tax benefit..................... 500,000 301,000 -- -- -- 301,000
Issuance to employee.............. 10,000 15,000 -- -- -- 15,000
Purchase and retirement of common
stock............................. (1,721,590) (147,000) (2,374,000) -- -- (2,521,000)
----------- ----------- ------------ -------------- ------------- -------------
Balance at January 31, 1999........... 11,918,640 1,033,000 (1,105,000) 47,000 -- (25,000)
Comprehensive income (loss), net of
tax:
Net income........................ -- -- 751,000 -- -- 751,000
Foreign currency translation
adjustment...................... -- -- -- 2,000 -- 2,000
Unrealized loss on marketable
securities available for sale... -- -- -- (23,000) -- (23,000)
-------------
Comprehensive income................ 730,000
Compensation related to stock option
grants............................ -- 277,000 -- -- (257,000) 20,000
----------- ----------- ------------ -------------- ------------- -------------
Balance at July 31, 1999 (unaudited).. 11,918,640 $ 1,310,000 $ (354,000) $ 26,000 $ (257,000) $ 725,000
----------- ----------- ------------ -------------- ------------- -------------
----------- ----------- ------------ -------------- ------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-5
<PAGE>
OPTIO SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX-MONTH PERIOD ENDED
YEAR ENDED JANUARY 31, JULY 31,
------------------------------------- ------------------------
1997 1998 1999 1998 1999
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
OPERATING ACTIVITIES
Net income............................................ $ 419,000 $ 22,000 $ 316,000 $ 263,000 $ 751,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation........................................ 144,000 366,000 457,000 198,000 308,000
Amortization of goodwill............................ -- 440,000 518,000 219,000 299,000
Provision for doubtful accounts..................... 67,000 (37,000) 27,000 19,000 40,000
Gain on sale of marketable securities............... -- -- (55,000) -- --
Non-cash compensation and interest.................. -- -- 888,000 -- 20,000
Deferred income taxes............................... 1,000 (225,000) (199,000) (83,000) (101,000)
Change in assets and liabilities:
Accounts receivable............................... (399,000) (618,000) (2,381,000) (312,000) 71,000
Prepaid expenses and other assets................. (5,000) 67,000 (116,000) (12,000) (158,000)
Accounts payable.................................. 200,000 (36,000) (156,000) (385,000) 489,000
Accrued expenses.................................. (554,000) 125,000 742,000 12,000 (734,000)
Income taxes payable.............................. (89,000) 252,000 (115,000) (136,000) 163,000
Deferred revenue.................................. 425,000 793,000 3,136,000 1,097,000 93,000
----------- ----------- ----------- ----------- -----------
Net cash provided by operating activities............. 209,000 1,149,000 3,062,000 880,000 1,241,000
INVESTING ACTIVITIES
Purchase of marketable securities..................... (79,000) (27,000) (302,000) (30,000) (95,000)
Proceeds from sale of marketable securities........... -- -- 166,000 -- 115,000
Purchases of property and equipment................... (340,000) (544,000) (571,000) (174,000) (449,000)
Advances to shareholders.............................. -- (7,000) 4,000 2,000 (2,000)
Advances to related party............................. -- -- (525,000) -- (75,000)
Acquisition of business, net of cash acquired......... -- -- (223,000) -- --
----------- ----------- ----------- ----------- -----------
Net cash used in investing activities................. (419,000) (578,000) (1,451,000) (202,000) (506,000)
FINANCING ACTIVITIES
Payments of notes payable to related parties, capital
lease obligations, and note payable to bank......... (109,000) (710,000) (2,028,000) (137,000) (418,000)
Proceeds from exercise of stock options............... -- -- 1,000 -- --
Issuance of common stock.............................. 214,000 -- -- -- --
Other................................................. -- -- 5,000 -- --
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in) financing activities... 105,000 (710,000) (2,022,000) (137,000) (418,000)
Impact of foreign currency rate fluctuations on cash.. -- -- 33,000 -- 43,000
Net increase (decrease) in cash and cash equivalents.. (105,000) (139,000) (378,000) 541,000 360,000
Cash and cash equivalents at beginning of year........ 1,751,000 1,646,000 1,507,000 1,507,000 1,129,000
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of year.............. $ 1,646,000 $ 1,507,000 $ 1,129,000 $ 2,048,000 $ 1,489,000
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest.............................. $ 30,000 $ 48,000 $ 221,000 $ 36,000 $ 39,000
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Cash paid for income taxes.......................... $ 392,000 $ 127,000 $ 416,000 $ 255,000 $ 394,000
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES.
F-6
<PAGE>
OPTIO SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1999 AND JULY 31, 1999 (UNAUDITED)
1. DESCRIPTION OF BUSINESS
Optio Software, Inc. (the "Company") is engaged primarily in the
development, sale and support of document customization software to companies
located principally in the United States and Europe. The industry in which the
Company operates is subject to rapid change due to development of new
technologies and products. Effective March 11, 1997 the Company changed its name
from XPoint Corporation to Optio Software, Inc.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The financial statements include the accounts of the Company and its
wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
FOREIGN CURRENCY TRANSLATION
The financial statements of the Company's French subsidiary have been
translated into United States dollars in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 52, FOREIGN CURRENCY TRANSLATION, which
generally provides for the use of current exchange rates in translating
financial statements. The foreign currency translation adjustment is included in
shareholders' equity (deficit).
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
REVENUE RECOGNITION
The Company typically recognizes software license fee revenue upon delivery
when there is persuasive evidence of an arrangement, the fee is fixed and
determinable and collection of the license fee is probable. When contracts
requiring significant production, modification or customization are entered
into, contract revenue is recognized on a percentage of completion basis using
actual costs incurred as a percentage of expected total costs. Revenue from
maintenance contracts is recognized on a pro-rata basis over the term of each
contract, and revenue from other services, principally training, is recognized
as the services are performed. Deferred revenue represents payments received in
advance of recognizing the related revenue.
Prior to February 1, 1998, the Company recognized revenue in accordance with
the American Institute of Certified Public Accountants ("AICPA") Statement of
Position 91-1, SOFTWARE REVENUE RECOGNITION ("SOP 91-1"). In October 1997 the
AICPA issued Statement of Position 97-2, SOFTWARE REVENUE RECOGNITION ("SOP
97-2"), which superseded SOP 91-1, to clarify guidance on applying generally
accepted accounting principles to software transactions and to provide guidance
on when revenue should be recognized and in what amounts for licensing, selling,
leasing, or otherwise marketing computer software. The Company adopted SOP 97-2
effective February 1, 1998. Such adoption did not have a material effect on the
Company's methods of recognizing revenue.
F-7
<PAGE>
OPTIO SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1999 AND JULY 31, 1999 (UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING COSTS
Advertising costs are expensed in the period incurred. Total advertising
expense amounted to approximately $447,000, $887,000, and $1,147,000 during the
years ended January 31, 1997, 1998 and 1999, and $695,000 (unaudited) and
$590,000 (unaudited), for the six-month periods ended July 31, 1998 and 1999,
respectively.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
MARKETABLE SECURITIES
The Company's investments in marketable securities are classified as
available-for-sale and are carried at fair value. Unrealized holding gains and
losses on these investments are reported as a separate component of accumulated
other comprehensive income, which is included in shareholders' equity (deficit),
and are not reported in earnings until realized or until a decline in fair value
below cost is deemed to be other than temporary. The aggregate costs of
marketable securities held as of January 31, 1998 and 1999 and July 31, 1999 are
$107,000, $297,000, and $272,000 (unaudited), respectively.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation expense is
calculated over the estimated useful lives of the related assets (generally
three to five years) using the straight-line method for financial reporting
purposes and accelerated methods for income tax purposes. Amortization of assets
recorded under capital leases is included with depreciation expense.
GOODWILL
Goodwill represents the excess of cost over the fair value of net tangible
assets acquired and is being amortized using the straight-line method over three
years.
INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for tax purposes. Such amounts are measured using
enacted tax rates and laws that are expected to be in effect when the
differences reverse.
EMPLOYEE STOCK OPTIONS
The Company accounts for stock based awards using the intrinsic value method
under Accounting Principles Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES ("APB 25") and related interpretations. The pro forma effect on the
accompanying statements of income of applying the fair value method under SFAS
No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, is presented in Note 8.
F-8
<PAGE>
OPTIO SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1999 AND JULY 31, 1999 (UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
COMPREHENSIVE INCOME
As of February 1, 1998, the Company adopted SFAS No. 130, REPORTING
COMPREHENSIVE INCOME ("SFAS 130"). SFAS 130 establishes new rules for the
reporting and display of comprehensive income and its components; however, the
adoption of this statement had no impact on the Company's net income or
shareholders' equity (deficit). SFAS 130 requires unrealized gains or losses on
the Company's available-for-sale securities and the foreign currency translation
adjustments, which prior to adoption were reported separately in shareholders'
equity (deficit), to be included in other comprehensive income. The consolidated
financial statements for the years ended January 31, 1997 and 1998 have been
reclassified to conform to the requirements of SFAS 130. Unrealized gains on
marketable securities as of January 31, 1999 and July 31, 1999 are net of income
taxes of $28,000 and $16,000 (unaudited), respectively.
NEW ACCOUNTING PRONOUNCEMENTS
In 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 February 1, 1998. The Company has
made the financial statement disclosures necessary to conform to SFAS 131, which
has had no impact on the Company's financial position or results of operations.
In 1998, the AICPA issued Statement of Position 98-1, ACCOUNTING FOR THE
COSTS OF COMPUTER SOFTWARE DEVELOPMENT OR OBTAINED FOR INTERNAL USE ("SOP
98-1"). The Company adopted SOP 98-1 effective February 1, 1999. The adoption of
this standard did not have a material effect on the Company's financial position
or results of operations.
In 1998, the Financial Accounting Standards Board issued SFAS No. 133,
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES ("SFAS 133"), which
established accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure these instruments
at fair value. SFAS 133 is expected to be effective for the Company's fiscal
year beginning February 1, 2001. The Company is currently evaluating what
impact, if any, SFAS 133 may have on its consolidated financial statements.
UNAUDITED FINANCIAL STATEMENTS
The accompanying unaudited financial statements for the six-month periods
ended July 31, 1998 and 1999 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.
3. FINANCIAL INSTRUMENTS
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and cash equivalents,
marketable securities, trade accounts receivable, and receivables from related
parties.
F-9
<PAGE>
OPTIO SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1999 AND JULY 31, 1999 (UNAUDITED)
3. FINANCIAL INSTRUMENTS (CONTINUED)
The Company maintains cash and cash equivalents at various financial
institutions. Company policy is designed to limit exposure at any one
institution. The Company performs periodic evaluations of the relative credit
standing of those financial institutions which are considered in the Company's
investment strategy.
Concentrations of credit risk with respect to trade accounts receivable are
limited due to the large number of entities comprising the Company's customer
base. The Company performs periodic credit evaluations of its customers'
financial condition and generally does not require collateral. Receivables
generally are due within 30 days, and management records estimates of expected
credit losses and returns of products sold. Bad debt expense for the years ended
January 31, 1997, 1998 and 1999 and for the six-month periods ended July 31,
1998 and 1999 amounted to $72,000, $373,000, $227,000, $91,000, and $383,000,
respectively. Credit risk with respect to the note receivable from related party
is limited as the note is secured by options to purchase 500,000 shares of the
Company's common stock.
The carrying amounts reported in the consolidated balance sheets for cash
and cash equivalents, accounts receivable, receivables from related parties,
accounts payable and long-term debt approximate their fair value. The fair
values of marketable equity securities are based on quoted market prices.
4. NOTES PAYABLE TO RELATED PARTIES
Notes payable to related parties consisted of the following:
<TABLE>
<CAPTION>
JANUARY 31, JULY 31,
------------------------ ------------
1998 1999 1999
---------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Note payable to a shareholder, in the original amount of $379,000 due in
monthly installments of $11,000 including interest at 10%, through
February 2000........................................................... $ 257,000 $ 141,000 $ 77,000
Notes payable to a shareholder and employee in the original amount of
$150,000 due in two annual payments of $75,000 and accruing interest at
5%...................................................................... -- 150,000 150,000
Notes payable to three former shareholders and employees, in the original
amount of $3,342,000, of which $1,680,000 was paid in January 1999, with
the remaining balance due in quarterly installments of $183,000
including interest at 7%, through July 2001............................. -- 1,671,000 1,358,000
Other notes payable to related parties.................................... 53,000 75,000 53,000
---------- ------------ ------------
310,000 2,037,000 1,638,000
Less current portion...................................................... 170,000 913,000 861,000
---------- ------------ ------------
$ 140,000 $ 1,124,000 $ 777,000
---------- ------------ ------------
---------- ------------ ------------
</TABLE>
Aggregate future maturities of notes payable to related parties at January
31, 1999 are as follows:
<TABLE>
<S> <C>
2000............................................................ $ 913,000
2001............................................................ 767,000
2001............................................................ 357,000
---------
$2,037,000
---------
---------
</TABLE>
F-10
<PAGE>
OPTIO SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1999 AND JULY 31, 1999 (UNAUDITED)
5. NOTE PAYABLE TO BANK, CAPITAL LEASES, AND LINES OF CREDIT
The Company had a note payable to a bank in the original amount of $550,000
due in monthly installments of $11,000 including interest at prime plus .75%
(9.0% at January 31, 1998), which became fully paid in November 1998. The note
was secured by substantially all assets, and personally guaranteed by the
majority shareholder. The outstanding balance of this note was $144,000 as of
January 31, 1998.
The Company also leases telecommunications and computer equipment under
capital leases. Assets under capital leases included in property and equipment
are as follows:
<TABLE>
<CAPTION>
JANUARY 31, JULY 31,
---------------------- -----------
1998 1999 1999
---------- ---------- -----------
<S> <C> <C> <C>
(UNAUDITED)
Equipment............................................... $ 178,000 $ 215,000 $ 215,000
Less accumulated amortization........................... 39,000 85,000 105,000
---------- ---------- -----------
$ 139,000 $ 130,000 $ 110,000
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
Future minimum lease payments under capital leases consist of the following
at January 31, 1999:
<TABLE>
<S> <C>
2000............................................................... $ 63,000
2001............................................................... 53,000
2002............................................................... 38,000
---------
Total minimum lease payments....................................... 154,000
Less amounts representing interest................................. (25,000)
---------
Present value of net minimum lease payments........................ 129,000
Less current portion............................................... (45,000)
---------
$ 84,000
---------
---------
</TABLE>
On May 9, 1997, the Company entered into a line of credit with a bank under
which it could borrow up to $1,500,000 subject to certain limitations, through
May 11, 1998. The line bore interest at the prime rate (8.25% at January 31,
1998). As of January 31, 1998, there were no borrowings outstanding under the
line.
On January 31, 1999, the Company entered into a line of credit with a bank
under which it may borrow up to $2,000,000 subject to certain limitations,
through January 31, 2001. The line bears interest at the prime rate plus one to
two percent based on the balance outstanding under the line of credit (8.75% to
9.75% at January 31, 1999). Virtually all assets have been pledged as collateral
under the line of credit. As of January 31, 1999 and July 31, 1999, there were
no borrowings outstanding under the line.
6. OPERATING LEASES
The Company leases office and warehouse space under operating leases. Rent
expense under the Company's operating leases was approximately $168,000,
$253,000, and $314,000 during the years ended January 31, 1997, 1998, and 1999.
F-11
<PAGE>
OPTIO SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1999 AND JULY 31, 1999 (UNAUDITED)
6. OPERATING LEASES (CONTINUED)
Future minimum lease payments under noncancellable operating leases, with
initial terms of at least one year at the time of inception, are as follows at
January 31, 1999:
<TABLE>
<S> <C>
2000.............................................................. $ 504,000
2001.............................................................. 284,000
2002.............................................................. 176,000
2003.............................................................. 3,000
2004.............................................................. 1,000
---------
$ 968,000
---------
---------
</TABLE>
In March 1999, the Company entered into a new lease agreement which provides
office space for the Company over a 86 month period beginning November 1, 1999
in exchange for annual lease payments ranging from $1,115,000 to $1,230,000.
7. INCOME TAXES
The provisions for income taxes are summarized below:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
-------------------------------
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal..................................................... $ 210,000 $ 222,000 $ 120,000
State....................................................... 28,000 39,000 44,000
Foreign..................................................... 65,000 28,000 134,000
--------- --------- ---------
303,000 289,000 298,000
Deferred:
Federal..................................................... 1,000 (202,000) (178,000)
State....................................................... -- (23,000) (21,000)
--------- --------- ---------
1,000 (225,000) (199,000)
--------- --------- ---------
Total......................................................... $ 304,000 $ 64,000 $ 99,000
--------- --------- ---------
--------- --------- ---------
</TABLE>
Pre-tax income attributable to foreign and domestic operations is summarized
below:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
-------------------------------
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Canadian operations........................... $ 131,000 $ -- $ --
French operations............................. -- -- 337,000
U.S. operations............................... 592,000 86,000 78,000
--------- --------- ---------
$ 723,000 $ 86,000 $ 415,000
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-12
<PAGE>
OPTIO SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1999 AND JULY 31, 1999 (UNAUDITED)
7. INCOME TAXES (CONTINUED)
A reconciliation of the provision for income taxes to the statutory federal
income tax rate is as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
-------------------------------
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Statutory rate of 34% applied to pre-tax income.............. $ 246,000 $ 29,000 $ 158,000
State income taxes, net of Federal tax benefit............... 25,000 7,000 8,000
Foreign taxes................................................ 19,000 28,000 3,000
Research and development tax credits......................... (21,000) (56,000) (116,000)
Other, net................................................... 35,000 56,000 46,000
--------- --------- ---------
$ 304,000 $ 64,000 $ 99,000
--------- --------- ---------
--------- --------- ---------
</TABLE>
Deferred income taxes reflect the net 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 assets and liabilities are as follows:
<TABLE>
<CAPTION>
JANUARY 31
--------------------
1998 1999
--------- ---------
<S> <C> <C>
Deferred income tax assets:
Goodwill amortization................................................. $ 135,000 $ 289,000
Payroll related accruals.............................................. 89,000 104,000
Allowance for doubtful accounts....................................... 33,000 43,000
Deferred revenue...................................................... 14,000 36,000
Other, net............................................................ 39,000 28,000
--------- ---------
Total deferred income tax assets........................................ 310,000 500,000
Deferred income tax liabilities:
Tax over book depreciation............................................ 9,000 --
Unrealized changes in marketable securities........................... -- 28,000
--------- ---------
Total deferred income tax liabilities................................... 9,000 28,000
--------- ---------
Net deferred tax asset.................................................. $ 301,000 $ 472,000
--------- ---------
--------- ---------
</TABLE>
F-13
<PAGE>
OPTIO SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1999 AND JULY 31, 1999 (UNAUDITED)
8. STOCK OPTIONS
Effective January 1, 1997, the Company adopted a stock incentive plan (the
"Plan") for employees and key persons which provides for the issuance of stock
incentives covering up to 12,500,000 shares of common stock. The Plan provides
for the grant of incentive stock options, non-qualified stock options,
restricted stock awards and stock appreciation rights. The terms and conditions
of stock incentives granted under the Plan, including the number of shares, the
exercise price and the time at which such options become exercisable are
determined by the Board of Directors. The term of options granted under the Plan
may not exceed 10 years and generally vest over periods ranging from three to
five years. A summary of stock option activity is as follows:
<TABLE>
<CAPTION>
EXERCISE WEIGHTED
NUMBER PRICE AVERAGE
OF PER EXERCISE
SHARES OPTION PRICE
---------- -------------- -----------
<S> <C> <C> <C>
Outstanding options at February 1, 1996................................... 3,500,000 $0.002-$0.20 $ 0.07
Options granted......................................................... 2,192,500 $0.60-$0.64 $ 0.60
----------
Outstanding options at January 31, 1997................................... 5,692,500 $0.002-0.64 $ 0.27
Options granted......................................................... 975,000 $0.60-$0.80 $ 0.65
Options canceled........................................................ (375,000) $0.03-$0.60 $ 0.27
----------
Outstanding options at January 31, 1998................................... 6,292,500 $0.002-$0.80 $ 0.34
Options granted......................................................... 4,099,940 $0.80-$1.50 $ 0.80
Options exercised....................................................... (500,000) $0.002 $ 0.002
Options canceled........................................................ (790,040) $0.10-$0.80 $ 0.22
----------
Outstanding options at January 31, 1999................................... 9,102,400 $0.002-$1.50 $ 0.56
Options granted (unaudited)............................................. 1,308,095 $1.00-$1.70 $ 1.55
Options canceled (unaudited)............................................ (823,015) $0.60-$1.50 $ 0.75
----------
Outstanding options at July 31, 1999 (unaudited).......................... 9,587,480 $0.002-$1.70 $ 0.68
----------
----------
Exercisable options at January 31, 1998................................... 3,840,000 $0.002-$0.80 $ 0.22
----------
----------
Exercisable options at January 31, 1999................................... 4,625,000 $0.002-$0.80 $ 0.39
----------
----------
</TABLE>
The following table summarizes information concerning options outstanding
and exercisable as of January 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------- ------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- ---------- ----------- ----------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C>
$0.002-0.20 2,350,000 .77 $ 0.07 2,250,000 $ 0.07
$0.60-0.80 6,727,395 6.32 $ 0.73 2,375,000 $ 0.69
$0.80-1.50 25,000 .03 $ 1.50 -- --
----------- ---------
9,102,395 7.05 $ 0.56 4,625,000 $ 0.39
----------- ---------
----------- ---------
</TABLE>
F-14
<PAGE>
OPTIO SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1999 AND JULY 31, 1999 (UNAUDITED)
8. STOCK OPTIONS (CONTINUED)
The Company has reserved 12,500,000 shares of common stock for issuance upon
exercise of stock options.
The Company has elected to follow APB 25 in accounting for its stock options
because, as discussed below, the alternative fair value accounting provided for
under Statement 123 requires use of option valuation models that were not
developed for use in valuing employee stock options. Under APB 25, when the
exercise price of the Company's stock options equals or exceeds the market price
of the underlying stock on the date of grant, no compensation expense is
recorded.
Pro forma information regarding net income is required by Statement 123,
which also requires that the information be determined as if the Company has
accounted for its employee stock options granted subsequent to December 31, 1994
under the fair value method. The fair value for these options was estimated at
the date of grant using the minimum value method with the following
weighted-average assumptions for the years ended January 31, 1997, 1998 and
1999: risk-free interest rates of 6.71%, 6.28%, and 5.61%, respectively; no
dividend yield; volatility of .01; and an expected life of the options of 6
years.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting periods. The
weighted-average fair value of options granted during the year ended January 31,
1997 equaled $0.29 per share. The weighted-average fair value of options granted
during the year ended January 31, 1998 equaled $0.20 for options whose exercise
price equaled the estimated stock value on the grant date and $0.15 for options
whose exercise price exceeded the estimated stock value on the grant date. The
weighted average fair value of options granted during the year ended January 31,
1999 equaled $0.23 per share. The Company's pro forma information as determined
using the fair value method of accounting of Statement 123, was as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31
-------------------------------
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Pro forma net income (loss).................... $ 314,000 ($ 31,000) $ 89,000
Pro forma net income (loss) per share--basic... 0.03 0.00 0.01
Pro forma net income (loss) per
share--diluted............................... 0.02 0.00 0.01
</TABLE>
Since Statement 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until 2000.
The Company recorded deferred compensation of $277,000 during the six-month
period ended July 31, 1999 in connection with grants of employee share purchase
options with exercise prices lower than the deemed fair market value per share
of the Company's common stock on the date of grant. Such amounts are being
amortized over the period in which the options vest, generally three to four
years, and accordingly $20,000 in compensation expense was recognized in the
six-month period ended July 31, 1999.
9. SHAREHOLDERS' EQUITY (DEFICIT)
In December 1998, the Company entered into an agreement (the "Agreement")
with two of its former key employees and a former advisor (the "Former
Shareholders"), whereby the Company issued notes payable totaling $3,342,000 in
exchange for 1,646,590 shares of the Company's common stock, forfeiture of
options to purchase 500,000 shares of the Company's common stock, and accrued
interest of $173,000.
The Company recorded compensation expense of $700,000, which is included in
general and administrative expenses for the year ended January 31, 1999, as a
result of the $1.50 per share price paid to the
F-15
<PAGE>
OPTIO SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1999 AND JULY 31, 1999 (UNAUDITED)
9. SHAREHOLDERS' EQUITY (DEFICIT) (CONTINUED)
Former Employees for the options to purchase 500,000 shares of the Company's
common stock less the $0.10 per share exercise price of these options.
During the year ended January 31, 1999, the holder of certain non-qualified
options covering 500,000 shares of the Company's common stock exercised such
options in exchange for the exercise price of $0.002 per share. As a result the
Company recorded a tax benefit of $300,000 in common stock relative to the
difference between the estimated fair value of the Company's common stock on the
exercise date of $1.50 per share and the exercise price paid of $0.002 per
share.
In connection with the Agreement, the Company executed an escrow agreement
between the Former Employees and a bank whereby the shares of common stock
purchased by the Company shall be held in escrow as security for the repayment
of the issued promissory notes. The escrowed shares shall be released from
escrow as payments are made on the notes. Such escrowed shares remaining in
escrow at January 31, 1999 are not included as outstanding shares of common
stock.
10. ACQUISITIONS
On February 28, 1997 the Company acquired all the assets and assumed all the
liabilities of Devcom Mid-America, Inc. ("Devcom"). The purchase price amounted
to $1,671,000 consisting of 500,000 shares of the Company's common stock valued
at $300,000 and assumed liabilities of $1,371,000. The transaction was accounted
for using the purchase method of accounting and all assets and liabilities were
recorded at fair value. The excess of purchase price over the assets acquired is
recorded as goodwill of approximately $1,285,000. The results of operations of
Devcom have been included in the Company's income statement since the effective
date of the transaction.
The following represents the unaudited pro forma consolidated results of
operations for the year ended January 31, 1997, assuming the above acquisition
of Devcom had occurred at the beginning of the year immediately preceding the
year of acquisition:
<TABLE>
<CAPTION>
YEAR-ENDED
JANUARY 31
1997
-------------
<S> <C>
Net revenue.................................................................... $ 10,624,000
Net loss....................................................................... (137,000)
Pro forma net loss per share--basic and diluted................................ (0.01)
</TABLE>
The pro forma consolidated results of operations for the year ended January
31, 1998 was not materially different from the Company's consolidated results of
operations for the year ended January 31, 1998.
These unaudited pro forma consolidated results do not purport to be
indicative of the results or trends that actually would have been obtained if
the operations were combined during the period presented, and is not intended to
be a projection of future results or trends.
On August 26, 1998, the Company acquired all the outstanding shares of
Competence Software Europe, S.A ("Competence"), a software product distributor
in Europe for consideration valued at approximately $730,000 consisting of notes
payable of $150,000, 200,000 shares of the Company's common stock valued at
$160,000 and cash and related acquisition costs of approximately $351,000 and
$69,000 respectively. In accordance with the purchase agreement, the Company may
have to pay additional amounts of up to $100,000 as part of the purchase price,
if certain aggregate gross revenue thresholds are
F-16
<PAGE>
OPTIO SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1999 AND JULY 31, 1999 (UNAUDITED)
10. ACQUISITIONS (CONTINUED)
achieved during the twenty-two month period ending January 31, 2000. If the
revenue thresholds are met, payment will be due in February 2000. In connection
with the transaction, the Company and the seller (the "Seller") entered into a
shareholder agreement whereby the Seller, who received 200,000 shares of the
Company's common stock as part of the purchase price, is subject to certain
restrictions on the transfer or sale of shares, including the Company's right of
first refusal to purchase shares to be sold. In addition, the shareholder
agreement provides that the Company shall purchase the Sellers' shares from the
Seller at the then current fair value of the shares upon termination of the
Sellers' employment with the Company.
The transaction was accounted for using the purchase method of accounting
and its results have been included in the Company's income statement since the
effective date of the acquisition. The Company recorded goodwill of
approximately $487,000 which represents the excess of the purchase price over
the fair value of assets acquired.
The following represents the unaudited pro forma consolidated results of
operations for the years ended January 31, 1998 and 1999, assuming the above
acquisition of Competence had occurred at the beginning of the year of
acquisition and the beginning of the year for the immediately preceding period:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31
----------------------
1998 1999
---------- ----------
<S> <C> <C>
Net revenue........................................................ $14,167,000 $19,899,000
Net income......................................................... (115,000) 262,000
Pro forma net (loss) income per share--basic and diluted........... (0.01) 0.02
</TABLE>
These unaudited pro forma consolidated results do not purport to be
indicative of the results or trends that actually would have been obtained if
the operations were combined during the periods presented, and is not intended
to be a projection of future results or trends.
11. EMPLOYEE BENEFIT PLAN
The Company has a combined profit sharing and 401(k) plan (the "Plan") which
covers substantially all employees meeting specified age and length-of-service
requirements. The Company may make a discretionary matching contribution each
year. The Company recognized expense related to the Plan of approximately
$82,000, $136,000 and $127,000 during the years ended January 31, 1997, 1998 and
1999 respectively.
12. RELATED PARTY TRANSACTIONS
The Company has notes receivable and advances to shareholders of $120,000,
$116,000, and $118,000 (unaudited) at January 31, 1998 and 1999 and July 31,
1999, respectively. Included in this amount are notes amounting to $40,000 which
bear interest between 9.5% and 10% with the principal and interest thereon due
upon demand. The remaining advances do not accrue interest and are due upon
demand. The advances and note receivable are classified as long-term as the
shareholders do not intend to repay the balances within the next fiscal year.
During the year ended January 31, 1999, the Company advanced $525,000 to an
individual who is a director of the Company and who holds options to purchase
100,000 shares of the Company's common stock. At January 31, 1999 and July 31,
1999, $525,000 and $600,000 (unaudited), respectively, was owed to the Company
from this individual as a result of these advances. Such advances are secured by
the options held by the individual.
F-17
<PAGE>
OPTIO SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1999 AND JULY 31, 1999 (UNAUDITED)
13. NET INCOME PER SHARE
Net income 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 stock options. Diluted earnings per share
includes the impact of potentially dilutive securities.
The following table sets forth the computation of basic and diluted net
income per share:
<TABLE>
<CAPTION>
SIX-MONTH PERIOD
YEAR ENDED JANUARY 31 ENDED JULY 31
------------------------------------------- ----------------------------
1997 1998 1999 1998 1999
------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net income............................ $ 419,000 $ 22,000 $ 316,000 $ 263,000 $ 751,000
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Weighted average shares
outstanding--basic.................. 12,380,356 12,890,904 12,824,532 12,892,730 11,918,640
Effect of dilutive stock options...... 1,920,264 2,190,490 2,777,784 2,371,593 4,204,896
------------- ------------- ------------- ------------- -------------
Weighted average shares
outstanding--diluted................ 14,300,620 15,081,394 15,602,316 15,264,323 16,123,536
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Net income per share--basic........... $ 0.03 $ 0.00 $ 0.03 $ 0.02 $ 0.06
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Net income per share--diluted......... $ 0.03 $ 0.00 $ 0.02 $ 0.02 $ 0.05
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>
14. GEOGRAPHIC INFORMATION
Revenues and long-lived assets by geographic areas are as follows:
<TABLE>
<CAPTION>
SIX-MONTH PERIOD
YEAR ENDED JANUARY 31 ENDED JULY 31
------------------------------------------ ---------------------------
1997 1998 1999 1998 1999
------------ ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
REVENUES
United States.......................... $ 9,002,000 $ 13,569,000 $ 18,553,000 $ 8,120,000 $ 12,561,000
France................................. -- -- 986,000 -- 1,473,000
Other.................................. -- -- -- -- 523,000
------------ ------------- ------------- ------------ -------------
Total.................................. $ 9,002,000 $ 13,569,000 $ 19,539,000 $ 8,120,000 $ 14,557,000
------------ ------------- ------------- ------------ -------------
------------ ------------- ------------- ------------ -------------
LONG-LIVED ASSETS, AT PERIOD END
United States.......................... $ 1,757,000 $ 1,784,000 $ 1,632,000
France................................. -- 107,000 74,000
Other.................................. -- -- 5,000
------------- ------------- -------------
Total.................................. $ 1,757,000 $ 1,891,000 $ 1,706,000
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
Revenues are attributed to countries based on the location of the sales
office.
F-18
<PAGE>
OPTIO SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1999 AND JULY 31, 1999 (UNAUDITED)
15. SUBSEQUENT EVENTS
On August 2, 1999, the Company granted options to purchase 12,500 shares of
common stock at an exercise price of $8.50 per share. The Company will record
deferred compensation of $129,000 during August 1999 in connection with such
grant as such options were granted at exercise prices lower than the deemed fair
market value per share of the Company's common stock on the date of grant. Such
amount will be amortized over the period in which the options vest.
On October 8, 1999, the Company amended its articles of incorporation,
increasing the number of authorized shares of common stock from 10,000,000 to
100,000,000 shares and authorizing 20,000,000 shares of no par value preferred
stock, the terms and preferences of which may be designated without further
shareholder approval upon future issuance. These changes have been reflected in
these financial statements.
On October 15, 1999, the Company's Board of Directors declared a 5-for-1
common stock split. All common stock and option information, weighted average
shares and net income per share information has been retroactively restated to
reflect the stock split.
On October 15, 1999, the Company adopted a Directors' Stock Option Plan for
directors of the Company who are not officers or employees of the Company. The
Plan provides for issuance of options to purchase the Company's common stock at
an exercise price equal to the fair market value on the date of grant and
expiring 10 years after issuance. The options will become fully vested as of the
date of issuance. The Company has reserved 300,000 shares of the Company's
common stock for issuance under the plan.
F-19
<PAGE>
DESCRIPTION OF GRAPHICS
OPTIO SOFTWARE, INC.
2) The Information Value Chain
At the bottom of the graphic are three nested rectangles. The outermost
rectangle is labeled "e-Commerce", the middle rectangle is labeled "Verticals"
and the innermost rectangle is labeled "ERP."
Within the innermost rectangle is an aligned group of five arrow-shaped
polygons oriented to point from left to right and labeled "Front Office, CRM,
Manufacturing, Supply Chain, Back Office."
Extending upward from the outermost rectangle are three arrows oriented
lower-left to upper right at an approximate 45 degree angle. They point to an
image superimposed on an ellipse that depicts a grouping of various different
documents which is labeled "Customized Business to Business Information."
Extending upward from the image of the documents are three arrows oriented
lower-left to upper right at an approximate 45 degree angle. Above the arrows is
a group of six aligned, labeled images that, from left to right, depict the
following;
- A graphic of a printer that is labeled "Printers"
- A graphic of a fax machine that is labeled 'Fax"
- A graphic of the reverse side of an envelope with a lower-case sans serif
letter "e" superimposed on it that is labeled "E-Mail"
- A graphic of a stylized sphere (or globe) with a horizontal ring around
its circumference at the midline. The globe is labeled with the letters
"WWW" and the entire graphic is labeled "Browsers"
- A graphic of a computer workstation with a monitor. On the screen of the
monitor is a lower case sans serif letter "e" that is labeled "External
Systems EDI/XML"
- A graphic of a stylized alphanumeric pager that is labeled "Other Devices
(Pagers, PDA, etc.).
Extending upward from the image of the documents are three arrows oriented
lower-left to upper right at an approximate 45 degree angle. Above the arrows is
a group of five aligned, circular images that depict different persons
performing business related task that are labeled "Staff, Customer, Supplier,
Partner, Investor."
Above the five images in red, sans serif type are the words, "The
Information Value Chain."
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Through and including (the 25(th) day after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealers' obligation to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
SHARES
[LOGO]
COMMON STOCK
-------------
P R O S P E C T U S
------------------
MERRILL LYNCH & CO.
BEAR, STEARNS & CO. INC.
THE ROBINSON-HUMPHREY COMPANY
OCTOBER , 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................ $ 15,346
National Association of Securities Dealers, Inc. fee............... $ 6,020
Nasdaq Stock Market listing fee.................................... $ 5,000
Accountants' fees and expenses..................................... $ *
Legal fees and expenses............................................ $ *
Blue Sky fees and expenses......................................... $ *
Transfer Agent's fees and expenses................................. $ *
Printing and engraving expenses.................................... $ *
Miscellaneous...................................................... $ *
---------
Total Expenses............................................... $ *
---------
---------
</TABLE>
- ------------------------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Amended and Restated Articles of Incorporation and Amended and Restated
Bylaws limit personal liability for breach of the fiduciary duty of our
directors to the fullest extent provided by the General Corporation Law of the
State of Georgia. Such provisions provide that no director of Optio Software,
Inc. shall have personal liability to us or to our shareholders for monetary
damages for breach of fiduciary duty of care or other duty as a director.
However, such provisions shall not eliminate or limit the liability of a
director
- for any breach of the director's duty of loyalty to us or our
shareholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation or law;
- for voting or assenting to unlawful distributions; or
- for any transaction for which the director derived an improper personal
benefit.
Any amendment, modification or repeal of such provisions will not eliminate
or reduce the effect of such provisions in respect of any act or failure to act,
or any cause of action, suit or claim that would accrue or arise prior to any
amendment, repeal or adoption of such an inconsistent provision. If the General
corporation Law of the State of Georgia 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 Optio Software, Inc. will be so further limited to the
greatest extent permitted by the General corporation law of the State of
Georgia.
Section of the Underwriting Agreement filed as Exhibit 1.1 hereto also
contains certain provisions pursuant to which certain officers, directors and
controlling persons of the Company may be entitled to be indemnified by the
underwriters named therein.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On February 28, 1997, we issued 500,000 shares of our common stock to Devcom
Mid-America, Inc. in connection with the acquisition of all of its assets in a
transaction exempt from registration under Section 4(2) of the Securities Act.
On August 26, 1998, we issued 200,000 shares of our common stock to the sole
shareholder of Competence Software Europe, S.A. in connection with the
acquisition of all of the outstanding shares of Competence Software Europe, S.A.
II-1
<PAGE>
On November 1, 1998, we issued 10,000 shares of our common stock to an
employee in a transaction exempt from registration under Section 4(2) of the
Securities Act and Rule 701 under the Securities Act.
In January, 1999, we issued 500,000 shares of our common stock to a former
employee pursuant to the exercise of an option in a transaction exempt from
registration under Section 4(2) of the Securities Act and Rule 701 under the
Securities Act.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 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 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.
5.1* Opinion of Morris, Manning & Martin, Counsel to the Registrant, as to the legality of the shares being
registered.
10.1 Optio Software, Inc. Stock Incentive Plan dated as of January 1, 1997.
10.2 Optio Software, Inc. Outside Director Stock Option Plan dated as of October , 1999.
10.3 Lease Agreement by and between Weeks Realty, L.P. and X-Point Corporation dated March 18, 1996.
10.4 Sublease Agreement by and between HBO & Company and Optio Software, Inc. dated March 22, 1999.
10.5 Promissory note by and between Optio Software, Inc. and Premier Lending Corporation dated January 31,
1999.
10.6 Equipment Security Agreement by and between Optio Software, Inc. and Premier Lending Corporation dated
January 31, 1999.
10.7 Security Agreement by and between Optio Software, Inc. and Premier Lending Corporation dated January 31,
1999.
10.8 Guaranty Agreement by and between Optio Software, Inc. and Premier Lending Corporation dated January 31,
1999.
21.1 List of Subsidiaries.
23.1 Consent of Ernst & Young, LLP.
23.2* Consent of Morris, Manning & Martin (included in Exhibit 5.1).
24.1 Powers of Attorney (included on signature page).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment
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.
II-2
<PAGE>
(b) Insofar as indemnification for liabilities arising under the Securities
Act 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-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, 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 15th day of October, 1999.
<TABLE>
<S> <C> <C>
OPTIO SOFTWARE, INC.
BY: /S/ C. WAYNE CAPE
-----------------------------------------
C. Wayne Cape
President and Chief Executive Officer
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints C. Wayne Cape and F. Barron Hughes, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and any subsequent registration
statements pursuant to Rule 462 of the Securities Act and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that each of said attorney-in-fact
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
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>
President, Chief Executive
/s/ C. WAYNE CAPE Officer and Director
- ------------------------------ (Principal Executive October 15, 1999
C. Wayne Cape Officer)
Chief Financial Officer
/s/ F. BARRON HUGHES (Principal Financial and
- ------------------------------ Accounting Officer), October 15, 1999
F. Barron Hughes Secretary and Treasurer
/s/ DAVID DUNN-RANKIN Director
- ------------------------------ October 15, 1999
David Dunn-Rankin
/s/ MITCHEL J. LASKEY Director
- ------------------------------ October 15, 1999
Mitchel J. Laskey
</TABLE>
II-4
<PAGE>
OPTIO SOFTWARE, INC.
(a Georgia corporation)
____ Shares of Common Stock
PURCHASE AGREEMENT
Dated: ______________, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 1. Representations and Warranties........................................................................3
(A) REPRESENTATIONS AND WARRANTIES BY THE COMPANY....................................................3
(i) Compliance with Registration Requirements..............................................3
(ii) Independent Accountants................................................................4
(iii) Financial Statements...................................................................4
(iv) No Material Adverse Change in Business.................................................4
(v) Good Standing of the Company...........................................................5
(vi) Good Standing of Subsidiaries..........................................................5
(vii) Capitalization.........................................................................5
(viii) Authorization of Agreement.............................................................5
(ix) Authorization and Description of Securities............................................6
(x) Absence of Defaults and Conflicts......................................................6
(xi) Absence of Labor Dispute...............................................................6
(xii) Absence of Proceedings.................................................................7
(xiii) Accuracy of Exhibits...................................................................7
(xiv) Possession of Intellectual Property....................................................7
(xv) Absence of Further Requirements........................................................7
(xvi) Possession of Licenses and Permits.....................................................7
(xvii) Title to Property......................................................................8
(xviii) Compliance with Cuba Act...............................................................8
(xix) Investment Company Act.................................................................8
(xx) Environmental Laws.....................................................................8
(xxi) Registration Rights....................................................................9
(B) OFFICER'S CERTIFICATES...........................................................................9
(C) REPRESENTATIONS AND WARRANTIES BY THE SELLING SHAREHOLDERS.......................................9
(i) Accurate Disclosure....................................................................9
(ii) Authorization of Agreements............................................................9
(iii) Good and Marketable Title.............................................................10
(iv) Due Execution of Power of Attorney and Custody Agreement..............................10
(v) Absence of Manipulation...............................................................10
(vi) Absence of Further Requirements.......................................................11
(vii) Restriction on Sale of Securities.....................................................12
(viii) Certificates Suitable for Transfer....................................................12
(ix) No Association with NASD..............................................................12
(D) SELLING SHAREHOLDERS' CERTIFICATES..............................................................12
Section 2. Sale and Delivery to Underwriters; Closing...........................................................12
(A) INITIAL SECURITIES..............................................................................12
(B) OPTION SECURITIES...............................................................................12
(C) PAYMENT.........................................................................................12
(D) DENOMINATIONS; REGISTRATION.....................................................................13
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 3. Covenants of the Company.............................................................................13
(A) COMPLIANCE WITH SECURITIES REGULATIONS AND COMMISSION REQUESTS..................................13
(B) FILING OF AMENDMENTS............................................................................14
(C) DELIVERY OF REGISTRATION STATEMENTS.............................................................14
(D) DELIVERY OF PROSPECTUSES........................................................................14
(E) CONTINUED COMPLIANCE WITH SECURITIES LAWS.......................................................14
(F) BLUE SKY QUALIFICATIONS.........................................................................15
(G) RULE 158........................................................................................15
(H) USE OF PROCEEDS.................................................................................15
(I) LISTING.........................................................................................15
(J) RESTRICTION ON SALE OF SECURITIES...............................................................15
(K) REPORTING REQUIREMENTS..........................................................................16
(l) COMPLIANCE WITH NASD RULES......................................................................16
(m) COMPLIANCE WITH RULE 463........................................................................16
Section 4. Payment of Expenses..................................................................................16
(A) EXPENSES........................................................................................16
(B) EXPENSES OF THE SELLING SHAREHOLDERS............................................................17
(C) TERMINATION OF AGREEMENT........................................................................17
Section 5. Conditions of Underwriters' Obligations..............................................................17
(A) EFFECTIVENESS OF REGISTRATION STATEMENT.........................................................17
(B) OPINION OF COUNSEL FOR COMPANY..................................................................17
(C) OPINION OF COUNSEL FOR THE SELLING SHAREHOLDERS.................................................17
(D) OPINION OF COUNSEL FOR UNDERWRITERS.............................................................18
(E) OFFICERS' CERTIFICATE...........................................................................18
(F) CERTIFICATE OF SELLING SHAREHOLDERS.............................................................18
(G) ACCOUNTANT'S COMFORT LETTER.....................................................................18
(H) BRING-DOWN COMFORT LETTER.......................................................................18
(I) APPROVAL OF LISTING.............................................................................19
(j) NO OBJECTION....................................................................................19
(k) LOCK-UP AGREEMENTS..............................................................................19
(L) CONDITIONS TO PURCHASE OF OPTION SECURITIES.....................................................19
(i) Officers' Certificate.................................................................19
(ii) Certificate of Selling Shareholders...................................................19
(iii) Opinion of Counsel for Company........................................................19
(iv) Opinion of Counsel for Selling Shareholders...........................................19
(v) Opinion of Counsel for Underwriters...................................................19
(vi) Bring-down Comfort Letter.............................................................20
(M) ADDITIONAL DOCUMENTS............................................................................20
(N) TERMINATION OF AGREEMENT........................................................................20
Section 6. Indemnification......................................................................................20
(A) INDEMNIFICATION OF UNDERWRITERS.................................................................20
(B) INDEMNIFICATION OF COMPANY, DIRECTORS, OFFICERS AND SELLING SHAREHOLDERS........................21
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
(C) ACTIONS AGAINST PARTIES; NOTIFICATION...........................................................22
(D) SETTLEMENT WITHOUT CONSENT IF FAILURE TO REIMBURSE..............................................22
(E) INDEMNIFICATION FOR RESERVED SECURITIES.........................................................22
Section 7. Contribution.........................................................................................23
Section 8. Representations, Warranties and Agreements to Survive Delivery.......................................24
Section 9. Termination of Agreement.............................................................................24
(A) TERMINATION; GENERAL............................................................................24
(B) LIABILITIES.....................................................................................25
Section 10. Default by One or More of the Underwriters..........................................................25
Section 11. Notices.............................................................................................25
Section 12. Parties.............................................................................................26
Section 13. GOVERNING LAW AND TIME..............................................................................26
Section 14. Effect of Headings..................................................................................26
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
SCHEDULES
Schedule A - List of Underwriters.........................................................Sch A-1
Schedule B - Pricing Information..........................................................Sch B-1
Schedule C - List of Persons subject to Lock-up...........................................Sch C-1
Schedule D - List of Selling Shareholders ................................................Sch D-1
EXHIBITS
Exhibit A- Form of Opinion of Company's Counsel.............................................A-1
Exhibit B- Form of Lock-up Letter............................................................B-1
</TABLE>
iv
<PAGE>
OPTIO SOFTWARE, INC.
(a Georgia corporation)
____ Shares of Common Stock
(No Par Value Per Share)
PURCHASE AGREEMENT
____________, 1999
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Bear, Stearns & Co.
The Robinson-Humphrey Company, LLC
as Representative(s) of the several Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Optio Software, Inc., a Georgia corporation (the "Company") and the
persons listed in Schedule D hereto (the "Selling Shareholders") confirms its
agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") and each of the other Underwriters named in
Schedule A hereto (collectively, the "Underwriters", which term shall also
include any underwriter substituted as hereinafter provided in Section 10
hereof), for whom Merrill Lynch, Bear, Stearns & Co. and The Robinson-Humphrey
Company, LLC are acting as representatives (in such capacity, the
"Representatives"), with respect to the issue and sale by the Company and the
Selling Shareholders and the purchase by the Underwriters, acting severally and
not jointly, of the respective numbers of shares of Common Stock, no par value
per share, of the Company ("Common Stock") set forth in said Schedule A, and
with respect to the grant by the Company and the Selling Shareholders to the
Underwriters, acting severally and not jointly, of the option described in
Section 2(b) hereof to purchase all or any part of ____ additional shares of
Common Stock to cover over-allotments, if any. The aforesaid ____ shares of
Common Stock (the "Initial Securities") to be purchased by the Underwriters and
all or any part of the ____ shares of Common Stock subject to the option
described in Section 2(b) hereof (the "Option Securities") are hereinafter
called, collectively, the "Securities".
<PAGE>
The Company and the Selling Shareholders understand that the
Underwriters propose to make a public offering of the Securities as soon as the
Representatives deem advisable after this Agreement has been executed and
delivered.
The Company, the Selling Shareholders and the Underwriters agree that up to
_______ shares of the Securities to be purchased by the Underwriters (the
"Reserved Securities") shall be reserved for sale by the Underwriters to certain
eligible employees and persons having business relationships with the Company,
as part of the distribution of the Securities by the Underwriters, subject to
the terms of this Agreement, the applicable rules, regulations and
interpretations of the National Association of Securities Dealers, Inc. and all
other applicable laws, rules and regulations. To the extent that such Reserved
Securities are not orally confirmed for purchase by such eligible employees and
persons having business relationships with the Company by the end of the first
business day after the date of this Agreement, such Reserved Securities may be
offered to the public as part of the public offering contemplated hereby.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-_______) covering
the registration of the Securities under the Securities Act of 1933, as amended
(the "1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule
434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b). The
information included in such prospectus or in such Term Sheet, as the case may
be, that was omitted from such registration statement at the time it became
effective but that is deemed to be part of such registration statement at the
time it became effective (a) pursuant to paragraph (b) of Rule 430A is referred
to as "Rule 430A Information" or (b) pursuant to paragraph (d) of Rule 434 is
referred to as "Rule 434 Information." Each prospectus used before such
registration statement became effective, and any prospectus that omitted, as
applicable, the Rule 430A Information or the Rule 434 Information, that was used
after such effectiveness and prior to the execution and delivery of this
Agreement, is herein called a "preliminary prospectus." Such registration
statement, including the exhibits thereto and schedules thereto at the time it
became effective and including the Rule 430A Information and the Rule 434
Information, as applicable, is herein called the "Registration Statement." Any
registration statement filed pursuant to Rule 462(b) of the 1933 Act Regulations
is herein referred to as the "Rule 462(b) Registration Statement," and after
such filing the term "Registration Statement" shall include the Rule 462(b)
Registration Statement. The final prospectus in the form first furnished to the
Underwriters for use in connection with the offering of the Securities is herein
called the "Prospectus." If Rule 434 is relied on, the term "Prospectus" shall
refer to the preliminary prospectus dated _____, 1999 together with the Term
Sheet and all references in this Agreement to the date of the Prospectus shall
mean the date of the Term Sheet. For purposes of this Agreement, all references
to the Registration Statement, any preliminary prospectus, the Prospectus or any
Term Sheet or any amendment or supplement to any of the foregoing shall be
deemed to include the copy filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval system ("EDGAR").
2
<PAGE>
Section 1. Representations and Warranties.
(a) REPRESENTATIONS AND WARRANTIES BY THE COMPANY The Company
represents and warrants to each Underwriter as of the date hereof, as of the
Closing Time referred to in Section 2(c) hereof, and as of each Date of Delivery
(if any) referred to in Section 2(b) hereof, and agrees with each Underwriter,
as follows:
(i) COMPLIANCE WITH REGISTRATION REQUIREMENTS. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the Company, are contemplated by the Commission, and
any request on the part of the Commission for additional information
has been complied with.
At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments thereto
became effective and at the Closing Time (and, if any Option Securities
are purchased, at the Date of Delivery), the Registration Statement,
the Rule 462(b) Registration Statement and any amendments and
supplements thereto complied and will comply in all material respects
with the requirements of the 1933 Act and the 1933 Act Regulations and
did not and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the
Prospectus, any preliminary prospectus and any supplement thereto or
prospectus wrapper prepared in connection therewith, at their
respective times of issuance and at the Closing Time, complied and will
comply in all material respects with any applicable laws or regulations
of foreign jurisdictions in which the Prospectus and such preliminary
prospectus, as amended or supplemented, if applicable, are distributed
in connection with the offer and sale of Reserved Securities. Neither
the Prospectus nor any amendments or supplements thereto (including any
prospectus wrapper), at the time the Prospectus or any such amendment
or supplement was issued and at the Closing Time (and, if any Option
Securities are purchased, at the Date of Delivery), included or will
include an untrue statement of a material fact or omitted or will omit
to state 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 Rule 434 is used, the Company will comply with the
requirements of Rule 434 and the Prospectus shall not be "materially
different", as such term is used in Rule 434, from the prospectus
included in the Registration Statement at the time it became effective.
The representations and warranties in this subsection shall not apply
to statements in or omissions from the Registration Statement or
Prospectus made in reliance upon and in conformity with information
furnished to the Company in writing by any Underwriter through Merrill
Lynch expressly for use in the Registration Statement or Prospectus.
Each preliminary prospectus and the prospectus filed as part
of the Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424 under the 1933 Act,
complied when so filed in all material respects with the
3
<PAGE>
1933 Act Regulations and each preliminary prospectus and the Prospectus
delivered to the Underwriters for use in connection with this offering
was identical to the electronically transmitted copies thereof filed
with the Commission pursuant to EDGAR, except to the extent permitted
by Regulation S-T.
(ii) INDEPENDENT ACCOUNTANTS. The accountants who certified
the financial statements and supporting schedules included in the
Registration Statement are independent public accountants as required
by the 1933 Act and the 1933 Act Regulations.
(iii) FINANCIAL STATEMENTS. The financial statements included
in the Registration Statement and the Prospectus, together with the
related schedules and notes, present fairly the financial position of
the Company and its consolidated subsidiaries at the dates indicated
and the statement of operations, stockholders' equity and cash flows of
the Company and its consolidated subsidiaries for the periods
specified; said financial statements have been prepared in conformity
with generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved. The supporting
schedules included in the Registration Statement present fairly in
accordance with GAAP the information required to be stated therein. The
selected financial data and the summary financial information included
in the Prospectus present fairly the information shown therein and have
been compiled on a basis consistent with that of the audited financial
statements included in the Registration Statement.
(iv) NO MATERIAL ADVERSE CHANGE IN BUSINESS. Since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, except as otherwise stated therein, (A)
there has been no material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business
(a "Material Adverse Effect"), (B) there have been no transactions
entered into by the Company or any of its subsidiaries, other than
those in the ordinary course of business, which are material with
respect to the Company and its subsidiaries considered as one
enterprise, and (C) there has been no dividend or distribution of any
kind declared, paid or made by the Company on any class of its capital
stock.
(v) GOOD STANDING OF THE COMPANY. The Company has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of Georgia and has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and to enter into and perform
its obligations under this Agreement; and the Company is duly qualified
as a foreign corporation to transact business and is in good standing
in each other jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in
good standing would not result in a Material Adverse Effect.
4
<PAGE>
(vi) GOOD STANDING OF SUBSIDIARIES. Each "significant
subsidiary" of the Company (as such term is defined in Rule 1-02 of
Regulation S-X) and ________, ________ and ________ (each a
"Subsidiary" and, collectively, the "Subsidiaries") has been duly
organized and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has corporate
power and authority to own, lease and operate its properties and to
conduct its business as described in the Prospectus and is duly
qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in
good standing would not result in a Material Adverse Effect; except as
otherwise disclosed in the Registration Statement, all of the issued
and outstanding capital stock of each such Subsidiary has been duly
authorized and validly issued, is fully paid and non-assessable and is
owned by the Company, directly or through subsidiaries, free and clear
of any security interest, mortgage, pledge, lien, encumbrance, claim or
equity; none of the outstanding shares of capital stock of any
Subsidiary was issued in violation of the preemptive or similar rights
of any securityholder of such Subsidiary. The only subsidiaries of the
Company are (a) the subsidiaries listed on Exhibit 21 to the
Registration Statement and (b) certain other subsidiaries which,
considered in the aggregate as a single Subsidiary, do not constitute a
"significant subsidiary" as defined in Rule 1-02 of Regulation S-X.
(vii) CAPITALIZATION. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectus in the
column entitled "Actual" under the caption "Capitalization" (except for
subsequent issuances, if any, pursuant to this Agreement, pursuant to
reservations, agreements or employee benefit plans referred to in the
Prospectus or pursuant to the exercise of convertible securities or
options referred to in the Prospectus). The shares of issued and
outstanding capital stock of the Company, including the Securities to
be purchased by the Underwriters from the Selling Shareholders, have
been duly authorized and validly issued and are fully paid and
non-assessable; none of the outstanding shares of capital stock of the
Company, including the Securities to be purchased by the Underwriters
from the Selling Shareholders, was issued in violation of the
preemptive or other similar rights of any securityholder of the
Company.
(viii) AUTHORIZATION OF AGREEMENT. This Agreement has been
duly authorized, executed and delivered by the Company.
(ix) AUTHORIZATION AND DESCRIPTION OF SECURITIES. The
Securities have been duly authorized for issuance and sale to the
Underwriters pursuant to this Agreement and, when issued and delivered
by the Company pursuant to this Agreement against payment of the
consideration set forth herein, will be validly issued and fully paid
and non-assessable; the Common Stock conforms to all statements
relating thereto contained in the Prospectus and such description
conforms to the rights set forth in the instruments defining the same;
no holder of the Securities will be subject to personal liability by
reason of being such a holder; and the issuance of the Securities is
not subject to the preemptive or other similar rights of any
securityholder of the Company.
5
<PAGE>
(x) ABSENCE OF DEFAULTS AND CONFLICTS. Neither the Company nor
any of its subsidiaries is in violation of its charter or by-laws or in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage,
deed of trust, loan or credit agreement, note, lease or other agreement
or instrument to which the Company or any of its subsidiaries is a
party or by which it or any of them may be bound, or to which any of
the property or assets of the Company or any subsidiary is subject
(collectively, "Agreements and Instruments") except for such defaults
that would not result in a Material Adverse Effect; and the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated herein and in the Registration Statement
(including the issuance and sale of the Securities and the use of the
proceeds from the sale of the Securities as described in the Prospectus
under the caption "Use of Proceeds") and compliance by the Company with
its obligations hereunder have been duly authorized by all necessary
corporate action and do not and will not, whether with or without the
giving of notice or passage of time or both, conflict with or
constitute a breach of, or default or Repayment Event (as defined
below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any
subsidiary pursuant to, the Agreements and Instruments (except for such
conflicts, breaches or defaults or liens, charges or encumbrances that
would not result in a Material Adverse Effect), nor will such action
result in any violation of the provisions of the charter or by-laws of
the Company or any subsidiary or any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any subsidiary or any of their assets,
properties or operations. As used herein, a "Repayment Event" means any
event or condition which gives the holder of any note, debenture or
other evidence of indebtedness (or any person acting on such holder's
behalf) the right to require the repurchase, redemption or repayment of
all or a portion of such indebtedness by the Company or any subsidiary.
(xi) ABSENCE OF LABOR DISPUTE. No labor dispute with the
employees of the Company or any subsidiary exists or, to the knowledge
of the Company, is imminent, and the Company is not aware of any
existing or imminent labor disturbance by the employees of any of its
or any subsidiary's principal suppliers, manufacturers, customers or
contractors, which, in either case, may reasonably be expected to
result in a Material Adverse Effect.
(xii) ABSENCE OF PROCEEDINGS There is no action, suit,
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, threatened, against or affecting the
Company or any subsidiary, which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which
might reasonably be expected to result in a Material Adverse Effect, or
which might reasonably be expected to materially and adversely affect
the properties or assets thereof or the consummation of the
transactions contemplated in this Agreement or the performance by the
Company of its obligations hereunder; the aggregate of all pending
legal or governmental proceedings to which the Company or any
subsidiary is a party or of which any of their respective
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property or assets is the subject which are not described in the
Registration Statement, including ordinary routine litigation
incidental to the business, could not reasonably be expected to result
in a Material Adverse Effect.
(xiii) ACCURACY OF EXHIBITS. There are no contracts or
documents which are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits thereto which
have not been so described and filed as required.
(xiv) POSSESSION OF INTELLECTUAL PROPERTY. The Company and its
subsidiaries own or possess, or can acquire on reasonable terms,
adequate patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property") necessary
to carry on the business now operated by them, and neither the Company
nor any of its subsidiaries has received any notice or is otherwise
aware of any infringement of or conflict with asserted rights of others
with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Company or any of its
subsidiaries therein, and which infringement or conflict (if the
subject of any unfavorable decision, ruling or finding) or invalidity
or inadequacy, singly or in the aggregate, would result in a Material
Adverse Effect.
(xv) ABSENCE OF FURTHER REQUIREMENTS. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company of
its obligations hereunder, in connection with the offering, issuance or
sale of the Securities hereunder or the consummation of the
transactions contemplated by this Agreement, except (i) such as have
been already obtained or as may be required under the 1933 Act or the
1933 Act Regulations or state securities laws and (ii) such as have
been obtained under the laws and regulations of jurisdictions outside
the United States in which the Reserved Securities are offered.
(xvi) POSSESSION OF LICENSES AND PERMITS. The Company and its
subsidiaries possess such permits, licenses, approvals, consents and
other authorizations (collectively, "Governmental Licenses") issued by
the appropriate federal, state, local or foreign regulatory agencies or
bodies necessary to conduct the business now operated by them; the
Company and its subsidiaries are in compliance with the terms and
conditions of all such Governmental Licenses, except where the failure
so to comply would not, singly or in the aggregate, have a Material
Adverse Effect; all of the Governmental Licenses are valid and in full
force and effect, except when the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full
force and effect would not have a Material Adverse Effect; and neither
the Company nor any of its subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would result in a
Material Adverse Effect.
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(xvii) TITLE TO PROPERTY. The Company and its subsidiaries
have good and marketable title to all real property owned by the
Company and its subsidiaries and good title to all other properties
owned by them, in each case, free and clear of all mortgages, pledges,
liens, security interests, claims, restrictions or encumbrances of any
kind except such as (a) are described in the Prospectus or (b) do not,
singly or in the aggregate, materially affect the value of such
property and do not interfere with the use made and proposed to be made
of such property by the Company or any of its subsidiaries; and all of
the leases and subleases material to the business of the Company and
its subsidiaries, considered as one enterprise, and under which the
Company or any of its subsidiaries holds properties described in the
Prospectus, are in full force and effect, and neither the Company nor
any subsidiary has any notice of any material claim of any sort that
has been asserted by anyone adverse to the rights of the Company or any
subsidiary under any of the leases or subleases mentioned above, or
affecting or questioning the rights of the Company or such subsidiary
to the continued possession of the leased or subleased premises under
any such lease or sublease.
(xviii) COMPLIANCE WITH CUBA ACT. The Company has complied
with, and is and will be in compliance with, the provisions of that
certain Florida act relating to disclosure of doing business with Cuba,
codified as Section 517.075 of the Florida statutes, and the rules and
regulations thereunder (collectively, the "Cuba Act") or is exempt
therefrom.
(xix) INVESTMENT COMPANY ACT. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom 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 (the "1940 Act").
(xx) ENVIRONMENTAL LAWS. Except as described in the
Registration Statement and except as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the Company
nor any of its subsidiaries is in violation of any federal, state,
local or foreign statute, law, rule, regulation, ordinance, code,
policy or rule of common law or any judicial or administrative
interpretation thereof, including any judicial or administrative order,
consent, decree or judgment, relating to pollution or protection of
human health, the environment (including, without limitation, ambient
air, surface water, groundwater, land surface or subsurface strata) or
wildlife, including, without limitation, laws and regulations relating
to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum
or petroleum products (collectively, "Hazardous Materials") or to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws"), (B) the Company and its subsidiaries have all
permits, authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their requirements,
(C) there are no pending or threatened administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigation or proceedings
relating to any Environmental Law against the Company or any of its
subsidiaries and (D) there are no events or circumstances that might
reasonably be
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expected to form the basis of an order for clean-up or remediation, or
an action, suit or proceeding by any private party or governmental body
or agency, against or affecting the Company or any of its subsidiaries
relating to Hazardous Materials or any Environmental Laws.
(xxi) REGISTRATION RIGHTS. There are no persons with
registration rights or other similar rights to have any securities
registered pursuant to the Registration Statement or otherwise
registered by the Company under the 1933 Act.
(b) OFFICER'S CERTIFICATES. Any certificate signed by any officer of
the Company or any of its subsidiaries delivered to the Representatives or to
counsel for the Underwriters shall be deemed a representation and warranty by
the Company to each Underwriter as to the matters covered thereby.
(c) REPRESENTATIONS AND WARRANTIES BY THE SELLING SHAREHOLDERS. Each
Selling Shareholder severally represents and warrants to each Underwriter as of
the date hereof, as of the Closing Time, and, if the Selling Shareholder is
selling Option Securities on a Date of Delivery, as of each such Date of
Delivery, and agrees with each Underwriter, as follows:
(i) ACCURATE DISCLOSURE. To the best knowledge of the Selling
Shareholder, the representations and warranties of the Company
contained in Section 1(a) hereof are true and correct; such Selling
Shareholder has reviewed and is familiar with the Registration
Statement and the Prospectus and neither the Prospectus nor any
amendments or supplements thereto (including any prospectus wrapper)
includes any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
such Selling Shareholder is not prompted to sell the Securities to be
sold by such Selling Shareholder hereunder by any information
concerning the Company or any subsidiary of the Company which is not
set forth in the Prospectus.
(ii) AUTHORIZATION OF AGREEMENTS. Each Selling Shareholder has
the full right, power and authority to enter into this Agreement and a
Power of Attorney and Custody Agreement (the "Power of Attorney and
Custody Agreement") and to sell, transfer and deliver the Securities to
be sold by such Selling Shareholder hereunder. The execution and
delivery of this Agreement and the Power of Attorney and Custody
Agreement and the sale and delivery of the Securities to be sold by
such Selling Shareholder and the consummation of the transactions
contemplated herein and compliance by such Selling Shareholder with its
obligations hereunder have been duly authorized by such Selling
Shareholder and do not and will not, whether with or without the giving
of notice or passage of time or both, conflict with or constitute a
breach of, or default under, or result in the creation or imposition of
any tax, lien, charge or encumbrance upon the Securities to be sold by
such Selling Shareholder or any property or assets of such Selling
Shareholder pursuant to any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, license, lease or other
agreement or instrument to which such Selling Shareholder is a party or
by which such Selling Shareholder may be bound, or to which any of the
property or assets of such Selling Shareholder is subject, nor will
such action
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result in any violation of the provisions of the charter or by-laws or
other organizational instrument of such Selling Shareholder, if
applicable, or any applicable treaty, law, statute, rule, regulation,
judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over
such Selling Shareholder or any of its properties.
(iii) GOOD AND MARKETABLE TITLE. Such Selling Shareholder has
and will at the Closing Time and, if any Option Securities are
purchased, on the Date of Delivery have good and marketable title to
the Securities to be sold by such Selling Shareholder hereunder, free
and clear of any security interest, mortgage, pledge, lien, charge,
claim, equity or encumbrance of any kind, other than pursuant to this
Agreement; and upon delivery of such Securities and payment of the
purchase price therefor as herein contemplated, assuming each such
Underwriter has no notice of any adverse claim, each of the
Underwriters will receive good and marketable title to the Securities
purchased by it from such Selling Shareholder, free and clear of any
security interest, mortgage, pledge, lien, charge, claim, equity or
encumbrance of any kind.
(iv) DUE EXECUTION OF POWER OF ATTORNEY AND CUSTODY AGREEMENT.
Such Selling Shareholder has duly executed and delivered, in the form
heretofore furnished to the Representatives, the Power of Attorney and
Custody Agreement with ____________, as attorney-in-fact (the
"Attorney-in-Fact") and ___________, as custodian (the "Custodian");
the Custodian is authorized to deliver the Securities to be sold by
such Selling Shareholder hereunder and to accept payment therefor; and
the Attorney-in-Fact is authorized to execute and deliver this
Agreement and the certificate referred to in Section 5(f) or that may
be required pursuant to Sections 5(l) and 5(m) on behalf of such
Selling Shareholder, to sell, assign and transfer to the Underwriters
the Securities to be sold by such Selling Shareholder hereunder, to
determine the purchase price to be paid by the Underwriters to such
Selling Shareholder, as provided in Section 2(a) hereof, to authorize
the delivery of the Securities to be sold by such Selling Shareholder
hereunder, to accept payment therefor, and otherwise to act on behalf
of such Selling Shareholder in connection with this Agreement.
(v) ABSENCE OF MANIPULATION. Such Selling Shareholder has not
taken, and will not take, directly or indirectly, any action which is
designed to or which has constituted or which might reasonably be
expected to cause or result in stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale
of the Securities.
(vi) ABSENCE OF FURTHER REQUIREMENTS. No filing with, or
consent, approval, authorization, order, registration, qualification or
decree of, any court or governmental authority or agency, domestic or
foreign, is necessary or required for the performance by each Selling
Shareholder of its obligations hereunder or in the Power of Attorney
and Custody Agreement, or in connection with the sale and delivery of
the Securities hereunder or the consummation of the transactions
contemplated by this Agreement, except (i) such as may have previously
been made or obtained or as may be required under the 1933 Act or the
1933 Act Regulations or state securities laws and (ii) such as
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have been obtained under the laws and regulations of jurisdictions
outside the United States in which the Reserved Securities are offered.
(vii) RESTRICTION ON SALE OF SECURITIES. During a period of
180 days from the date of the Prospectus, such Selling Shareholder will
not, without the prior written consent of Merrill Lynch, (i) offer,
pledge, sell, contract to sell, 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,
directly or indirectly, any share of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or
file any registration statement under the 1933 Act with respect to any
of the foregoing or (ii) enter into any swap or any other agreement or
any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of the Common Stock,
whether any such swap or 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 the Securities to be sold hereunder.
(viii) CERTIFICATES SUITABLE FOR TRANSFER. Certificates for
all of the Securities to be sold by such Selling Shareholder pursuant
to this Agreement, in suitable form for transfer by delivery or
accompanied by duly executed instruments of transfer or assignment in
blank with signatures guaranteed, have been placed in custody with the
Custodian with irrevocable conditional instructions to deliver such
Securities to the Underwriters pursuant to this Agreement.
(ix) NO ASSOCIATION WITH NASD. Neither such Selling
Shareholder nor any affiliates of such Selling Shareholder directly, or
indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, or has any other
association with (within the meaning of Article I, Section 1(m) of the
By-laws of the National Association of Securities Dealers, Inc.), any
member firm of the National Association of Securities Dealers, Inc.
(d) SELLING SHAREHOLDERS' CERTIFICATES. Any certificate signed by or on
behalf of the Selling Shareholders as such and delivered to the Representatives
or to counsel for the Underwriters pursuant to the terms of this Agreement shall
be deemed a representation and warranty by such Selling Shareholder to the
Underwriters as to the matters covered thereby.
Section 2. Sale and Delivery to Underwriters; Closing.
(a) INITIAL SECURITIES. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to each Underwriter, severally and not
jointly, and each Underwriter, severally and not jointly, agrees to purchase
from the Company, at the price per share set forth in Schedule B, the number of
Initial Securities set forth in Schedule A opposite the name of such
Underwriter, plus any additional number of Initial Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof.
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(b) OPTION SECURITIES. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Company and the Selling Shareholders, acting severally and not
jointly, hereby grant an option to the Underwriters, severally and not jointly,
to purchase up to an additional _______ shares of Common Stock, as set forth in
Schedule D, at the price per share set forth in Schedule B, less an amount per
share equal to any dividends or distributions declared by the Company and
payable on the Initial Securities but not payable on the Option Securities. The
option hereby granted will expire 30 days after the date hereof and may be
exercised in whole or in part from time to time only for the purpose of covering
over-allotments which may be made in connection with the offering and
distribution of the Initial Securities upon notice by the Representatives to the
Company and the Selling Shareholders setting forth the number of Option
Securities as to which the several Underwriters are then exercising the option
and the time and date of payment and delivery for such Option Securities. Any
such time and date of delivery (a "Date of Delivery") shall be determined by the
Representatives, but shall not be later than seven full business days after the
exercise of said option, nor in any event prior to the Closing Time, as
hereinafter defined. If the option is exercised as to all or any portion of the
Option Securities, each of the Underwriters, acting severally and not jointly,
will purchase that proportion of the total number of Option Securities then
being purchased which the number of Initial Securities set forth in Schedule A
opposite the name of such Underwriter bears to the total number of Initial
Securities, subject in each case to such adjustments as the Representatives in
their discretion shall make to eliminate any sales or purchases of fractional
shares
(c) PAYMENT. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of Willkie
Farr & Gallagher, 787 Seventh Avenue, New York, New York 10019, or at such other
place as shall be agreed upon by the Representatives and the Company, at 9:00
A.M. (Eastern time) on the third (fourth, if the pricing occurs after 4:30 P.M.
(Eastern time) on any given day) business day after the date hereof (unless
postponed in accordance with the provisions of Section 10), or such other time
not later than ten business days after such date as shall be agreed upon by the
Representatives and the Company (such time and date of payment and delivery
being herein called "Closing Time").
In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the above-mentioned
offices, or at such other place as shall be agreed upon by the Representatives
and the Company, on each Date of Delivery as specified in the notice from the
Representatives to the Company and the Selling Shareholders.
Payment shall be made to the Company and the Selling Shareholders by
wire transfer of immediately available funds to bank accounts designated by the
Company and the Custodian pursuant to each Selling Shareholder's Power of
Attorney and Custody Agreement, against delivery to the Representatives for the
respective accounts of the Underwriters of certificates for the Securities to be
purchased by them. It is understood that each Underwriter has authorized the
Representatives, for its account, to accept delivery of, receipt for, and make
payment of the purchase price for, the Initial Securities and the Option
Securities, if any, which it has agreed to purchase. Merrill Lynch, individually
and not as representative of the Underwriters, may (but shall not be obligated
to) make payment of the purchase price for the Initial Securities or the
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Option Securities, if any, to be purchased by any Underwriter whose funds have
not been received by the Closing Time or the relevant Date of Delivery, as the
case may be, but such payment shall not relieve such Underwriter from its
obligations hereunder.
(d) DENOMINATIONS; REGISTRATION. Certificates for the Initial
Securities and the Option Securities, if any, shall be in such denominations and
registered in such names as the Representatives may request in writing at least
one full business day before the Closing Time or the relevant Date of Delivery,
as the case may be. The certificates for the Initial Securities and the Option
Securities, if any, will be made available for examination and packaging by the
Representatives in The City of New York not later than 10:00 A.M. (Eastern time)
on the business day prior to the Closing Time or the relevant Date of Delivery,
as the case may be.
Section 3.1 COVENANTS OF THE COMPANY. The Company covenants with each
Underwriter as follows:
(a) COMPLIANCE WITH SECURITIES REGULATIONS AND COMMISSION REQUESTS. The
Company, subject to Section 3(b), will comply with the requirements of Rule 430A
or Rule 434, as applicable, and will notify the Representatives immediately, and
confirm the notice in writing, (i) when any post-effective amendment to the
Registration Statement shall become effective, or any supplement to the
Prospectus or any amended Prospectus shall have been filed, (ii) of the receipt
of any comments from the Commission, (iii) of any request by the Commission for
any amendment to the Registration Statement or any amendment or supplement to
the Prospectus or for additional information, and (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of any order preventing or suspending the use of any preliminary
prospectus, or of the suspension of the qualification of the Securities for
offering or sale in any jurisdiction, or of the initiation or threatening of any
proceedings for any of such purposes. The Company will promptly effect the
filings necessary pursuant to Rule 424(b) and will take such steps as it deems
necessary to ascertain promptly whether the form of prospectus transmitted for
filing under Rule 424(b) was received for filing by the Commission and, in the
event that it was not, it will promptly file such prospectus. The Company will
make every reasonable effort to prevent the issuance of any stop order and, if
any stop order is issued, to obtain the lifting thereof at the earliest possible
moment.
(b) FILING OF AMENDMENTS. The Company will give the Representatives
notice of its intention to file or prepare any amendment to the Registration
Statement (including any filing under Rule 462(b)), any Term Sheet or any
amendment, supplement or revision to either the prospectus included in the
Registration Statement at the time it became effective or to the Prospectus will
furnish the Representatives with copies of any such documents a reasonable
amount of time prior to such proposed filing or use, as the case may be, and
will not file or use any such document to which the Representatives or counsel
for the Underwriters shall object.
(c) DELIVERY OF REGISTRATION STATEMENTS. The Company has furnished or
will deliver to the Representatives and counsel for the Underwriters, without
charge, signed copies of the Registration Statement as originally filed and of
each amendment thereto (including exhibits filed therewith or incorporated by
reference therein) and signed copies of all consents and certificates of
experts, and will also deliver to the Representatives, without charge, a
conformed
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copy of the Registration Statement as originally filed and of each amendment
thereto (without exhibits) for each of the Underwriters. The copies of the
Registration Statement and each amendment thereto furnished to the Underwriters
will be identical to the electronically transmitted copies thereof filed with
the Commission pursuant to EDGAR, except to the extent permitted by Regulation
S-T.
(d) DELIVERY OF PROSPECTUSES. The Company has delivered to each
Underwriter, without charge, as many copies of each preliminary prospectus as
such Underwriter reasonably requested, and the Company hereby consents to the
use of such copies for purposes permitted by the 1933 Act. The Company will
furnish to each Underwriter, without charge, during the period when the
Prospectus is required to be delivered under the 1933 Act or the Securities
Exchange Act of 1934 (the "1934 Act"), such number of copies of the Prospectus
(as amended or supplemented) as such Underwriter may reasonably request. The
Prospectus and any amendments or supplements thereto furnished to the
Underwriters will be identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(e) CONTINUED COMPLIANCE WITH SECURITIES LAWS. The Company will comply
with the 1933 Act and the 1933 Act Regulations so as to permit the completion of
the distribution of the Securities as contemplated in this Agreement and in the
Prospectus. If at any time when a prospectus is required by the 1933 Act to be
delivered in connection with sales of the Securities, any event shall occur or
condition shall exist as a result of which it is necessary, in the opinion of
counsel for the Underwriters or for the Company, to amend the Registration
Statement or amend or supplement the Prospectus in order that the Prospectus
will not include any untrue statements of a material fact or omit to state a
material fact necessary in order to make the statements therein not misleading
in the light of the circumstances existing at the time it is delivered to a
purchaser, or if it shall be necessary, in the opinion of such counsel, at any
such time to amend the Registration Statement or amend or supplement the
Prospectus in order to comply with the requirements of the 1933 Act or the 1933
Act Regulations, the Company will promptly prepare and file with the Commission,
subject to Section 3(b), such amendment or supplement as may be necessary to
correct such statement or omission or to make the Registration Statement or the
Prospectus comply with such requirements, and the Company will furnish to the
Underwriters such number of copies of such amendment or supplement as the
Underwriters may reasonably request.
(f) BLUE SKY QUALIFICATIONS. The Company will use its best efforts, in
cooperation with the Underwriters, to qualify the Securities for offering and
sale under the applicable securities laws of such states and other jurisdictions
(domestic or foreign) as the Representatives may designate and to maintain such
qualifications in effect for a period of not less than one year from the later
of the effective date of the Registration Statement and any Rule 462(b)
Registration Statement; 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 or as a dealer in securities in any jurisdiction in which it
is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject. In each
jurisdiction in which the Securities have been so qualified, the Company will
file such statements and reports as may be required by the laws of such
jurisdiction to continue such qualification in
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effect for a period of not less than one year from the effective date of the
Registration Statement and any Rule 462(b) Registration Statement.
(g) RULE 158. The Company will timely file such reports pursuant to the
1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of Section
11(a) of the 1933 Act.
(h) USE OF PROCEEDS. The Company will use the net proceeds received by
it from the sale of the Securities in the manner specified in the Prospectus
under "Use of Proceeds".
(i) LISTING. The Company will use its best efforts to effect and
maintain the quotation of the Securities on the Nasdaq National Market and will
file with the Nasdaq National Market all documents and notices required by the
Nasdaq National Market of companies that have securities that are traded in the
over-the-counter market and quotations for which are reported by the Nasdaq
National Market.
(j) RESTRICTION ON SALE OF SECURITIES. During a period of 180 days from
the date of the Prospectus, the Company will not, without the prior written
consent of Merrill Lynch, (i) directly or indirectly, offer, pledge, sell,
contract to sell, 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 share of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock or file any registration
statement under the 1933 Act with respect to any of the foregoing or (ii) enter
into any swap or any other agreement or any transaction that transfers, in whole
or in part, directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or 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 Securities to be sold hereunder, (B) any shares of Common Stock issued by
the Company upon the exercise of an option or warrant or the conversion of a
security outstanding on the date hereof and referred to in the Prospectus, (C)
any shares of Common Stock issued or options to purchase Common Stock granted
pursuant to existing employee benefit plans of the Company referred to in the
Prospectus or (D) any shares of Common Stock issued pursuant to any non-employee
director stock plan or dividend reinvestment plan.
(k) REPORTING REQUIREMENT. The Company, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act, will
file all documents required to be filed with the Commission pursuant to the 1934
Act within the time periods required by the 1934 Act and the rules and
regulations of the Commission thereunder.
(l) COMPLIANCE WITH NASD RULES. The Company hereby agrees that it will
ensure that the Reserved Securities will be restricted as required by the
National Association of Securities Dealers, Inc. (the "NASD") or the NASD rules
from sale, transfer, assignment, pledge or hypothecation for a period of three
months following the date of this Agreement. The Underwriters will notify the
Company as to which persons will need to be so restricted. At the request of the
Underwriters, the Company will direct the transfer agent to place a stop
transfer
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restriction upon such securities for such period of time. Should the Company
release, or seek to release, from such restrictions any of the Reserved
Securities, the Company agrees to reimburse the Underwriters for any reasonable
expenses (including, without limitation, legal expenses) they incur in
connection with such release.
(m) COMPLIANCE WITH RULE 463. The Company will file with the Commission
such reports as may be required pursuant to Rule 463 of the 1933 Act
Regulations.
SECTION 3.2. COVENANTS OF THE SELLING SHAREHOLDERS.
(A) REPAYMENT OF LOANS TO DIRECTOR. C. Wayne Cape hereby agrees and
covenants with each underwriter that he will pay in full to the company all
amounts outstanding, whether or not due, pursuant to all loans made by the
company to him at any time including, without limitation, (i) the loan in an
aggregate principal amount of $48,800 made in ten advances from October 15, 1986
to May 9, 1995 and (ii) the loan in an aggregate principal amount of $30,000
made on December 31, 1988, and that he will (x) make all or part of such payment
no later than 10 days after the date of delivery of the option securities, to
the full extent that proceeds received by him from the sale of option
securities, if any, provide sufficient funds to make all or part of such payment
and (y) will make the remainder of such payment, if any, no later than one year
after the closing time.
SECTION 4. PAYMENT OF EXPENSES.
(a) EXPENSES. The Company will pay all expenses incident to the
performance of their obligations under this Agreement, including (i) the
preparation, printing and filing of the Registration Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the preparation, printing and delivery to the Underwriters of this
Agreement, any Agreement among Underwriters and such other documents as may be
required in connection with the offering, purchase, sale, issuance or delivery
of the Securities, (iii) the preparation, issuance and delivery of the
certificates for the Securities to the Underwriters, including any stock or
other transfer taxes and any stamp or other duties payable upon the sale,
issuance or delivery of the Securities to the Underwriters, (iv) the fees and
disbursements of the Company's counsel, accountants and other advisors, (v) the
qualification of the Securities under securities laws in accordance with the
provisions of Section 3(f) hereof, including filing fees and the reasonable fees
and disbursements of counsel for the Underwriters in connection therewith and in
connection with the preparation of the Blue Sky Survey and any supplement
thereto, (vi) the printing and delivery to the Underwriters of copies of each
preliminary prospectus, any Term Sheets and of the Prospectus and any amendments
or supplements thereto, (vii) the preparation, printing and delivery to the
Underwriters of copies of the Blue Sky Survey and any supplement thereto, (viii)
the fees and expenses of any transfer agent or registrar for the Securities,
(ix) the filing fees incident to, and the reasonable fees and disbursements of
counsel to the Underwriters in connection with, the review by the NASD of the
terms of the sale of the Securities, (x) the fees and expenses incurred in
connection with the inclusion of the Securities in the Nasdaq National Market,
and (xi) all costs and expenses of the Underwriters, including the fees and
disbursements of counsel for the Underwriters, in connection with matters
related to the
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Reserved Securities which are designated by the Company for sale to employees
and others having a business relationship with the Company.
(b) EXPENSES OF THE SELLING SHAREHOLDERS. The Selling Shareholders,
jointly and severally, will pay all expenses incident to the performance of
their respective obligations under, and the consummation of the transactions
contemplated by, this Agreement, including (i) any stamp duties, capital duties
and stock transfer taxes, if any, payable upon the sale of the Securities to the
Underwriters, and their transfer between the Underwriters pursuant to an
agreement between such Underwriters, and (ii) the fees and disbursements of
their counsel and accountants.
(c) TERMINATION OF AGREEMENT. If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 5 or Section
9(a)(i) hereof, the Company shall reimburse the Underwriters for all of their
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Underwriters.
SECTION 5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of
the several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company and the Selling Shareholders
contained in Section 1 hereof or in certificates of any officer of the Company
or any subsidiary of the Company and any Selling Shareholder delivered pursuant
to the provisions hereof, to the performance by the Company and the Selling
Shareholders of the covenants and other obligations hereunder, and to the
following further conditions:
(a) EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the 1933 Act or proceedings
therefor initiated or threatened by the Commission, and any request on the part
of the Commission for additional information shall have been complied with to
the reasonable satisfaction of counsel to the Underwriters. A prospectus
containing the Rule 430A Information shall have been filed with the Commission
in accordance with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance with the
requirements of Rule 430A) or, if the Company has elected to rely upon Rule 434,
a Term Sheet shall have been filed with the Commission in accordance with Rule
424(b).
(b) OPINION OF COUNSEL FOR COMPANY. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of Closing
Time, of Morris, Manning & Martin LLP, counsel for the Company, in form and
substance satisfactory to counsel for the Underwriters, together with signed or
reproduced copies of such letter for each of the other Underwriters to the
effect set forth in Exhibit A hereto and to such further effect as counsel to
the Underwriters may reasonably request.
(c) OPINION OF COUNSEL FOR THE SELLING SHAREHOLDERS. At Closing Time,
the Representatives shall have received the favorable opinion, dated as of
Closing Time, of counsel for the Selling Shareholders, in form and substance
satisfactory to counsel for the Underwriters,
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together with signed or reproduced copies of such letter for each of the other
Underwriters to the effect set forth in Exhibit A hereto and to such further
effect as counsel to the Underwriters may reasonably request.
(d) OPINION OF COUNSEL FOR UNDERWRITERS. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of Closing
Time, of Willkie Farr & Gallagher, counsel for the Underwriters, together with
signed or reproduced copies of such letter for each of the other Underwriters
with respect to the matters set forth in clauses (i), (ii), (v), (vi) (solely as
to preemptive or other similar rights arising by operation of law or under the
charter or by-laws of the Company), (viii) through (x), inclusive, (xii), (xiv)
(solely as to the information in the Prospectus under "Description of Capital
Stock--Common Stock") and the penultimate paragraph of Exhibit A hereto. In
giving such opinion such counsel may rely, as to all matters governed by the
laws of jurisdictions other than the law of the State of New York and the
federal law of the United States, upon the opinions of counsel satisfactory to
the Representatives. Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Company and its subsidiaries and certificates of
public officials.
(e) OFFICERS' CERTIFICATE. At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Prospectus, any material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, and the Representatives shall have
received a certificate of the President or a Vice President of the Company and
of the chief financial or chief accounting officer of the Company, dated as of
Closing Time, to the effect that (i) there has been no such material adverse
change, (ii) the representations and warranties in Section 1(a) hereof are true
and correct with the same force and effect as though expressly made at and as of
Closing Time, (iii) the Company has complied with all agreements and satisfied
all conditions on its part to be performed or satisfied at or prior to Closing
Time, and (iv) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or are contemplated by the Commission.
(f) CERTIFICATE OF SELLING SHAREHOLDERS. At Closing Time, the
Representatives shall have received a certificate of an Attorney-in-Fact on
behalf of each Selling Shareholder, dated as of Closing Time, to the effect that
(i) the representations and warranties of each Selling Shareholder contained in
Section 1(c) hereof are true and correct in all respects with the same force and
effect as though expressly made at and as of Closing Time and (ii) each Selling
Shareholder has complied in all material respects with all agreements and all
conditions on its part to be performed under this Agreement at or prior to
Closing Time.
(g) ACCOUNTANT'S COMFORT LETTER. At the time of the execution of this
Agreement, the Representatives shall have received from Ernst & Young LLP a
letter dated such date, in form and substance satisfactory to the
Representatives, together with signed or reproduced copies of such letter for
each of the other Underwriters containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial
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statements and certain financial information contained in the Registration
Statement and the Prospectus.
(h) BRING-DOWN COMFORT LETTER. At Closing Time, the Representatives
shall have received from Ernst & Young LLP a letter, dated as of Closing Time,
to the effect that they reaffirm the statements made in the letter furnished
pursuant to subsection (e) of this Section, except that the specified date
referred to shall be a date not more than three business days prior to Closing
Time.
(i) APPROVAL OF LISTING. At Closing Time, the Securities shall have
been approved for inclusion in the Nasdaq National Market, subject only to
official notice of issuance.
(j) NO OBJECTION. The NASD has confirmed that it has not raised any
objection with respect to the fairness and reasonableness of the underwriting
terms and arrangements.
(k) LOCK-UP AGREEMENTS. At the date of this Agreement, the
Representatives shall have received an agreement substantially in the form of
Exhibit B hereto signed by the persons listed on Schedule C hereto.
(l) CONDITIONS TO PURCHASE OF OPTION SECURITIES. In the event that the
Underwriters exercise their option provided in Section 2(b) hereof to purchase
all or any portion of the Option Securities, the representations and warranties
of the Company and the Selling Shareholders contained herein and the statements
in any certificates furnished by the Company, any Selling Shareholder or any
subsidiary of the Company hereunder shall be true and correct as of each Date of
Delivery and, at the relevant Date of Delivery, the Representatives shall have
received:
(i) OFFICERS' CERTIFICATE A certificate, dated such Date of
Delivery, of the President or a Vice President of the Company and of
the chief financial or chief accounting officer of the Company
confirming that the certificate delivered at the Closing Time pursuant
to Section 5(e) hereof remains true and correct as of such Date of
Delivery.
(ii) CERTIFICATE OF SELLING SHAREHOLDERS. A certificate, dated
such Date of Delivery, of an Attorney-in-Fact on behalf of each Selling
Shareholder confirming that the certificate delivered at Closing Time
pursuant to Section 5(f) remains true and correct as of such Date of
Delivery.
(iii) OPINION OF COUNSEL FOR COMPANY. The favorable opinion of
Morris, Manning & Martin LLP, counsel for the Company, in form and
substance satisfactory to counsel for the Underwriters, dated such Date
of Delivery, relating to the Option Securities to be purchased on such
Date of Delivery and otherwise to the same effect as the opinion
required by Section 5(b) hereof.
(iv) OPINION OF COUNSEL FOR THE SELLING SHAREHOLDERS. The
favorable opinion of counsel for each Selling Shareholder, in form and
substance satisfactory to counsel for the Underwriters, dated such Date
of Delivery, relating to the Option Securities to be
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purchased on such Date of Delivery and otherwise to the same effect as
the opinion required by Section 5(c) hereof.
(v) OPINION OF COUNSEL FOR UNDERWRITERS. The favorable opinion
of Willkie Farr & Gallagher, counsel for the Underwriters, dated such
Date of Delivery, relating to the Option Securities to be purchased on
such Date of Delivery and otherwise to the same effect as the opinion
required by Section 5(d) hereof.
(vi) BRING-DOWN COMFORT LETTER. A letter from Ernst & Young
LLP, in form and substance satisfactory to the Representatives and
dated such Date of Delivery, substantially in the same form and
substance as the letter furnished to the Representatives pursuant to
Section 5(f) hereof, except that the "specified date" in the letter
furnished pursuant to this paragraph shall be a date not more than five
days prior to such Date of Delivery.
(m) ADDITIONAL DOCUMENTS. At Closing Time and at each Date of Delivery,
counsel for the Underwriters shall have been furnished with such documents and
opinions as they may require for the purpose of enabling them to pass upon the
issuance and sale of the Securities as herein contemplated, or in order to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company and the Selling Shareholders in connection with the
issuance and sale of the Securities as herein contemplated shall be satisfactory
in form and substance to the Representatives and counsel for the Underwriters.
(n) TERMINATION OF AGREEMENT. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled, this
Agreement, or, in the case of any condition to the purchase of Option
Securities, on a Date of Delivery which is after the Closing Time, the
obligations of the several Underwriters to purchase the relevant Option
Securities, may be terminated by the Representatives by notice to the Company at
any time at or prior to Closing Time or such Date of Delivery, as the case may
be, and such termination shall be without liability of any party to any other
party except as provided in Section 4 and except that Sections 1, 6, 7 and 8
shall survive any such termination and remain in full force and effect.
SECTION 6. INDEMNIFICATION.
(a) INDEMNIFICATION OF UNDERWRITER. The Company and the Selling
Shareholders, jointly and severally, agree to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act to the
extent and in the manner set forth in clauses (i), (ii), (iii) and (iv) below.
In addition, each Selling Shareholder, severally and not jointly, agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the
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Rule 430A Information and the Rule 434 Information, if applicable, or
the omission or alleged omission therefrom of a material fact required
to be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact included in any preliminary prospectus or
the Prospectus (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, notmisleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of (A) the violation of
any applicable laws or regulations of foreign jurisdictions where
Reserved Securities have been offered and (B) any untrue statement or
alleged untrue statement of a material fact included in the supplement
or prospectus wrapper material distributed in __________ in connection
with the reservation and sale of the Reserved Securities eligible
employees and ______________ of the Company or the omission or alleged
omission therefrom of a material fact necessary to make the statements
therein, when considered in conjunction with the Prospectus or
preliminary prospectus, not misleading;
(iii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission or in
connection with any violation of the nature referred to in Section
6(a)(ii)(A) hereof; provided that (subject to Section 6(d) below) any
such settlement is effected with the written consent of the Company and
the Selling Shareholders; and
(iv) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Merrill
Lynch), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission or in connection with any
violation of the nature referred to in Section 6(a)(ii)(A) hereof, to
the extent that any such expense is not paid under (i), (ii) or (iii)
above;
PROVIDED, HOWEVER, that this indemnity agreement shall not
apply to any loss, liability, claim, damage or expense to the extent
arising out of any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with
written information furnished to the Company by any Underwriter through
Merrill Lynch expressly for use in the Registration Statement (or any
amendment thereto), including the Rule 430A Information and the Rule
434 Information, if applicable, or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto); and PROVIDED,
FURTHER, that with respect to each Selling Shareholder, (x) this
indemnity agreement shall apply only to any loss, liability, claim,
damage or expense arising out of any act, failure to act or omission of
such Selling Shareholder in its
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individual capacity or breach by such Selling Stockholder of its
representations and warranties made pursuant to Section 1(c) of this
Agreement and (y) such Selling Shareholder's obligation to indemnify
pursuant to this Agreement shall be limited to the amount of the net
proceeds from the sale of Option Securities which such Selling
Shareholder is entitled to sell pursuant to this Agreement.
(b) INDEMNIFICATION OF COMPANY, DIRECTORS, OFFICERS AND SELLING
SHAREHOLDERS. Each Underwriter severally agrees to indemnify and hold harmless
the Company, its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act, and each Selling
Shareholder, and each person, if any, who controls any Selling Shareholder
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
against any and all loss, liability, claim, damage and expense described in the
indemnity contained in subsection (a) of this Section, as incurred, but only
with respect to untrue statements or omissions, or alleged untrue statements or
omissions, made in the Registration Statement (or any amendment thereto),
including the Rule 430A Information and the Rule 434 Information, if applicable,
or any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written information furnished
to the Company by such Underwriter through Merrill Lynch expressly for use in
the Registration Statement (or any amendment thereto) or such preliminary
prospectus or the Prospectus (or any amendment or supplement thereto).
(c) ACTIONS AGAINST PARTIES; NOTIFICATION. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by Merrill Lynch, and, in
the case of parties indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by the Company and the Selling
Shareholders. An indemnifying party may participate at its own expense in the
defense of any such action; provided, however, that counsel to the indemnifying
party shall not (except with the consent of the indemnified party) also be
counsel to the indemnified party. In no event shall the indemnifying parties be
liable for fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
No indemnifying party shall, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 6 or Section 7 hereof (whether or not the indemnified parties
are actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim and
(ii) does not include
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a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
(d) SETTLEMENT WITHOUT CONSENT IF FAILURE TO REIMBURSE. If at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(iii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
(e) INDEMNIFICATION FOR RESERVED SECURITIES. In connection with the
offer and sale of the Reserved Securities, the Company agrees, promptly upon a
request in writing, to indemnify and hold harmless the Underwriters from and
against any and all losses, liabilities, claims, damages and expenses incurred
by them as a result of the failure of eligible employees and _________________
of the Company to pay for and accept delivery of Reserved Securities which, by
the end of the first business day following the date of this Agreement, were
subject to a properly confirmed agreement to purchase.
Section 7. CONTRIBUTION. If the indemnification provided for in Section
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Selling Shareholders on the one hand and the Underwriters on the other hand from
the offering of the Securities pursuant to this Agreement or (ii) if the
allocation provided by clause (i) 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 the Company and the
Selling Shareholders on the one hand and of the Underwriters on the other hand
in connection with the statements or omissions, or in connection with any
violation of the nature referred to in Section 6(a)(ii)(A) hereof, which
resulted in such losses, liabilities, claims, damages or expenses, as well as
any other relevant equitable considerations.
The relative benefits received by the Company and the Selling
Shareholders on the one hand and the Underwriters on the other hand in
connection with the offering of the Securities pursuant to this Agreement shall
be deemed to be in the same respective proportions as the total net proceeds
from the offering of the Securities pursuant to this Agreement (before deducting
expenses) received by the Company and the Selling Shareholders and the total
underwriting discount received by the Underwriters, in each case as set forth on
the cover of the Prospectus, or, if Rule 434 is used, the corresponding location
on the Term Sheet, bear to the aggregate initial public offering price of the
Securities as set forth on such cover.
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The relative fault of the Company and the Selling Shareholders on the
one hand and the Underwriters on the other hand shall be determined by reference
to, among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company and the Selling Shareholders or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission or any
violation of the nature referred to in Section 6(a)(ii)(A) hereof.
The Company, the Selling Shareholders and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section 7
were 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 account of the equitable considerations referred to above in this Section
7. The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 7 shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company or any
Selling Shareholder within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act shall have the same rights to contribution as the Company or
such Selling Shareholder, as the case may be. The Underwriters' respective
obligations to contribute pursuant to this Section 7 are several in proportion
to the number of Initial Securities set forth opposite their respective names in
Schedule A hereto and not joint.
The provisions of this Section shall not affect any agreement among the
Company and the Selling Shareholders with respect to contribution.
SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or any of its
subsidiaries submitted pursuant hereto, shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of any
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Underwriter or controlling person, or by or on behalf of the Company, and shall
survive delivery of the Securities to the Underwriters.
SECTION 9. TERMINATION OF AGREEMENT.
(a) TERMINATION; GENERAL. The Representatives may terminate this
Agreement, by notice to the Company and the Selling Shareholders, at any time at
or prior to the Closing Time (i) if there has been, since the time of execution
of this Agreement or since the respective dates as of which information is given
in the Prospectus, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, or (ii) if there has occurred any
material adverse change in the financial markets in the United States or the
international financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or economic
conditions, in each case the effect of which is such as to make it, in the
judgment of the Representatives, impracticable to market the Securities or to
enforce contracts for the sale of the Securities, or (iii) if trading in any
securities of the Company has been suspended or materially limited by the
Commission or the Nasdaq National Market, or if trading generally on the
American Stock Exchange or the New York Stock Exchange or in the Nasdaq National
Market has been suspended or materially limited, or minimum or maximum prices
for trading have been fixed, or maximum ranges for prices have been required, by
any of said exchanges or by such system or by order of the Commission, the
National Association of Securities Dealers, Inc. or any other governmental
authority, or (iv) if a banking moratorium has been declared by either Federal,
New York or Georgia authorities.
(b) LIABILITIES. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6, 7 and 8 shall survive such termination and remain in full force and
effect.
SECTION 10. DEFAULT BY ONE OR MORE OF THE UNDERWRITERS. If one or more
of the Underwriters shall fail at Closing Time or a Date of Delivery to purchase
the Securities which it or they are obligated to purchase under this Agreement
(the "Defaulted Securities"), the Representatives shall have the right, within
24 hours thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the Representatives shall not have
completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10%
of the number of Securities to be purchased on such date, each of the
non-defaulting Underwriters shall be obligated, severally and not
jointly, to purchase the full amount thereof in the proportions that
their respective underwriting obligations hereunder bear to the
underwriting obligations of all non-defaulting Underwriters, or
25
<PAGE>
(b) if the number of Defaulted Securities exceeds 10% of the
number of Securities to be purchased on such date, this Agreement or,
with respect to any Date of Delivery which occurs after the Closing
Time, the obligation of the Underwriters to purchase and of the Company
to sell the Option Securities to be purchased and sold on such Date of
Delivery shall terminate without liability on the part of any
non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination
of this Agreement or, in the case of a Date of Delivery which is after the
Closing Time, which does not result in a termination of the obligation of the
Underwriters to purchase and the Company and the Selling Shareholders to sell
the relevant Option Securities, as the case may be, either the Representatives,
the Company or any Selling Shareholder shall have the right to postpone Closing
Time or the relevant Date of Delivery, as the case may be, for a period not
exceeding seven days in order to effect any required changes in the Registration
Statement or Prospectus or in any other documents or arrangements. As used
herein, the term "Underwriter" includes any person substituted for an
Underwriter under this Section 10.
SECTION 11. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representatives at North Tower, World
Financial Center, New York, New York 10281-1201, attention of ______________;
and notices to the Company shall be directed to it at ___________, attention of
__________________.
SECTION 12. PARTIES. This Agreement shall each inure to the benefit of
and be binding upon the Underwriters, the Company and the Selling Shareholders
and their respective successors. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person, firm or
corporation, other than the Underwriters, the Company and the Selling
Shareholder and their respective successors and the controlling persons and
officers and directors referred to in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the Underwriters, the Company and the Selling Shareholders
and their respective successors, and said controlling persons and officers and
directors and their heirs and legal representatives, and for the benefit of no
other person, firm or corporation. No purchaser of Securities from any
Underwriter shall be deemed to be a successor by reason merely of such purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EXCEPT AS
OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
26
<PAGE>
SECTION 14. EFFECT OF HEADINGS. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
27
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Underwriters and the Company in accordance with its terms.
Very truly yours,
OPTIO SOFTWARE,
INC.
By
-----------------------------
Title:
ATTORNEY IN FACT
By
-----------------------------
As Attorney-in-Fact acting on behalf of
the Selling Shareholder(s) named in
Schedule D hereto
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
BEAR, STEARNS & CO., INC.
THE ROBINSON-HUMPHREY COMPANY, LLC
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By
----------------------------------
Authorized Signatory
For themselves and as Representatives of the other Underwriters named
in Schedule A hereto.
28
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Name of Underwriter Initial Securities
------------------- ------------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................
Bear, Stearns & Co, Inc..........................................
SoundView Technology Group
---------
Total............................................................
---------
---------
</TABLE>
A-1
<PAGE>
SCHEDULE B
OPTIO SOFTWARE, INC.
____ Shares of Common Stock
(No Par Value Per Share)
1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $___________.
2. The purchase price per share for the Securities to be paid by the
several Underwriters shall be $___________, being an amount equal to the initial
public offering price set forth above less $___________ per share; provided that
the purchase price per share for any Option Securities purchased upon the
exercise of the over-allotment option described in Section 2(b) shall be reduced
by an amount per share equal to any dividends or distributions declared by the
Company and payable on the Initial Securities but not payable on the Option
Securities.
B-1
<PAGE>
SCHEDULE C
List of persons and entities
subject to lock-up
C-1
<PAGE>
SCHEDULE D
<TABLE>
<CAPTION>
Number of Initial Maximum Number of Option
Securities to be Sold Securities to be Sold
--------------------- ---------------------
<S> <C> <C>
Total...............................
</TABLE>
Annex A-1
<PAGE>
Exhibit A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)(1)
I. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Georgia.
II. The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the Purchase
Agreement.
III. The Company is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
IV. The authorized, issued and outstanding capital stock of the Company
is as set forth in the Prospectus in the column entitled "Actual" under the
caption "Capitalization" (except for subsequent issuances, if any, pursuant to
the Purchase Agreement or pursuant to reservations, agreements or employee
benefit plans referred to in the Prospectus or pursuant to the exercise of
convertible securities or options referred to in the Prospectus); the shares of
issued and outstanding capital stock of the Company have been duly authorized
and validly issued and are fully paid and non-assessable; and none of the
outstanding shares of capital stock of the Company was issued in violation of
the preemptive or other similar rights of any securityholder of the Company.
V. The Securities have been duly authorized for issuance and sale to
the Underwriters pursuant to the Purchase Agreement and, when issued and
delivered by the Company pursuant to the Purchase Agreement against payment of
the consideration set forth in the Purchase Agreement, will be validly issued
and fully paid and non-assessable and no holder of the Securities is or will be
subject to personal liability by reason of being such a holder.
VI. The issuance of the Securities is not subject to preemptive or
other similar rights of any securityholder of the Company.
Exh B-1
<PAGE>
VII. Each Subsidiary has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus and is
duly qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required, whether
by reason of the ownership or leasing of property or the conduct of business,
except where the failure so to qualify or to be in good standing would not
result in a Material Adverse Effect; except as otherwise disclosed in the
Registration Statement, all of the issued and outstanding capital stock of each
Subsidiary has been duly authorized and validly issued, is fully paid and
non-assessable and, to the best of our knowledge, is owned by the Company,
directly or through subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity; none of the outstanding
shares of capital stock of any Subsidiary was issued in violation of the
preemptive or similar rights of any securityholder of such Subsidiary.
VIII. The Purchase Agreement has been duly authorized, executed and
delivered by the Company.
IX. The Registration Statement, including any Rule 462(b) Registration
Statement, has been declared effective under the 1933 Act; any required filing
of the Prospectus pursuant to Rule 424(b) has been made in the manner and within
the time period required by Rule 424(b); and, to the best of our knowledge, no
stop order suspending the effectiveness of the Registration Statement or any
Rule 462(b) Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or threatened
by the Commission.
X. The Registration Statement, including any Rule 462(b) Registration
Statement, the Rule 430A Information and the Rule 434 Information, as
applicable, the Prospectus and each amendment or supplement to the Registration
Statement and Prospectus as of their respective effective or issue dates (other
than the financial statements and supporting schedules included therein or
omitted therefrom, as to which we need express no opinion) complied as to form
in all material respects with the requirements of the 1933 Act and the 1933 Act
Regulations.
XI. If Rule 434 has been relied upon, the Prospectus was not
"materially different," as such term is used in Rule 434, from the prospectus
included in the Registration Statement at the time it became effective.
XII. The form of certificate used to evidence the Common Stock complies
in all material respects with all applicable statutory requirements, with any
applicable requirements of the charter and by-laws of the Company and the
requirements of the Nasdaq National Market.
XIII. To the best of our knowledge, there is not pending or threatened
any action, suit, proceeding, inquiry or investigation, to which the Company or
any subsidiary is a party, or to which the property of the Company or any
subsidiary is subject, before or brought by any court or governmental agency or
body, domestic or foreign, which might reasonably be expected to result in a
Material Adverse Effect, or which might reasonably be expected to materially and
adversely
Annex A-2
<PAGE>
affect the properties or assets thereof or the consummation of the transactions
contemplated in the Purchase Agreement or the performance by the Company of its
obligations thereunder.
XIV. The information in the Prospectus under, "Business--Facilities,"
"Business--Legal Proceedings," "Management--Stock Option and Other Compensation
Plans," "Management--Limitation of Liability and Indemnification of Officers and
Directors," "Certain Transactions--Related Party Transactions," "Description of
Capital Stock--Common Stock," "Description of Capital Stock--Preferred Stock,"
"Description of Capital Stock--Antitakeover Provisions of our Articles of
Incorporation, Bylaws and Georgia Law" and "Certain Transactions" and in the
Registration Statement under Item 14, to the extent that it constitutes matters
of law, summaries of legal matters, the Company's charter and bylaws or legal
proceedings, or legal conclusions, has been reviewed by us and is correct in all
material respects.
XV. To the best of our knowledge, there are no statutes or regulations
that are required to be described in the Prospectus that are not described as
required.
XVI. All descriptions in the Registration Statement of contracts and
other documents to which the Company or its subsidiaries are a party are
accurate in all material respects; to the best of our knowledge, there are no
franchises, contracts, indentures, mortgages, loan agreements, notes, leases or
other instruments required to be described or referred to in the Registration
Statement or to be filed as exhibits thereto other than those described or
referred to therein or filed or incorporated by reference as exhibits thereto,
and the descriptions thereof or references thereto are correct in all material
respects.
XVII. To the best of our knowledge, neither the Company nor any
subsidiary is in violation of its charter or by-laws and no default by the
Company or any subsidiary exists in the due performance or observance of any
material obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument that is described or referred to in the Registration Statement or the
Prospectus or filed or incorporated by reference as an exhibit to the
Registration Statement.
XVIII. No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign (other than under the 1933 Act and the
1933 Act Regulations, which have been obtained, or as may be required under the
securities or blue sky laws of the various states, as to which we need express
no opinion) is necessary or required in connection with the due authorization,
execution and delivery of the Purchase Agreement or for the offering, issuance
or sale of the Securities.
XIX. The execution, delivery and performance of the Purchase Agreement
and the consummation of the transactions contemplated in the Purchase Agreement
and in the Registration Statement (including the issuance and sale of the
Securities and the use of the proceeds from the sale of the Securities as
described in the Prospectus under the caption "Use Of Proceeds") and compliance
by the Company with its obligations under the Purchase Agreement do not and will
not, whether with or without the giving of notice or lapse of time or both,
conflict with or constitute a breach of, or default or Repayment Event (as
defined in Section 1(a)(x) of the Purchase Agreement) under or result in the
creation or imposition of any lien, charge or
Annex A-3
<PAGE>
encumbrance upon any property or assets of the Company or any subsidiary
pursuant to any contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or any other agreement or instrument, known to us, to
which the Company or any subsidiary is a party or by which it or any of them may
be bound, or to which any of the property or assets of the Company or any
subsidiary is subject (except for such conflicts, breaches or defaults or liens,
charges or encumbrances that would not have a Material Adverse Effect), nor will
such action result in any violation of the provisions of the charter or by-laws
of the Company or any subsidiary, or any applicable law, statute, rule,
regulation, judgment, order, writ or decree, known to us, of any government,
government instrumentality or court, domestic or foreign, having jurisdiction
over the Company or any subsidiary or any of their respective properties, assets
or operations.
XX. To the best of our knowledge, there are no persons with
registration rights or other similar rights to have any securities registered
pursuant to the Registration Statement or otherwise registered by the Company
under the 1933 Act.
XXI. The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the 1940
Act.
XXII. With respect to the release and the covent not to sue of the
Dissenting Shareholders (as defined below) contained in the Settlement Agreement
and Mutual Release, dated December 23, 1998 (the "Settlement Agreement"),
between the Company and certain former shareholders of the Company named in the
Prospectus (the "Dissenting Shareholders"), and based solely on our examination
of the Settlement Agreement and the documents contemplated thereby or executed
in connection therewith, the Settlement Agreement is valid, binding and
enforceable in accordance with its terms. To our knowledge, the Company has not
received any claim, threatened or otherwise, regarding the validity or the
enforceability of the Settlement Agreement or regarding any other matter from
the Dissenting Shareholders.
Nothing has come to our attention that would lead us to believe that
the Registration Statement or any amendment thereto, including the Rule 430A
Information and Rule 434 Information (if applicable), (except for financial
statements and schedules and other financial data included therein or omitted
therefrom, as to which we need make no statement), at the time such Registration
Statement or any such amendment became effective, contained an 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 or any amendment or supplement thereto (except for financial
statements and schedules and other financial data included therein or omitted
therefrom, as to which we need make no statement), at the time the Prospectus
was issued, at the time any such amended or supplemented prospectus was issued
or at the Closing Time, included or includes an untrue statement of a material
fact or omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
In rendering such opinion, such counsel may rely, as to matters of fact
(but not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the Company and public officials. Such
opinion shall not state that it is to be governed or qualified by, or that it is
otherwise subject to, any treatise, written policy or other document relating to
legal opinions, including, without limitation, the Legal Opinion Accord of the
ABA Section of Business Law (1991).
Annex A-4
<PAGE>
FORM OF LOCK-UP FROM DIRECTORS, OFFICERS OR OTHER SHAREHOLDERS PURSUANT TO
SECTION 5(K)
Exhibit B
_____________, 1999
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
Bear, Stearns & Co.
The Robinson-Humphrey Company, LLC
as Representatives of the several
Underwriters to be named in the
within-mentioned Purchase Agreement
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Re: PROPOSED PUBLIC OFFERING BY OPTIO SOFTWARE, INC.
Dear Sirs:
The undersigned, a shareholder, officer and/or director of Optio
Software, Inc., a Georgia corporation (the "Company"), understands that Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch"), Bear, Stearns & Co. and The Robinson-Humphrey Company, LLC propose to
enter into a Purchase Agreement (the "Purchase Agreement") with the Company
providing for the public offering of shares (the "Securities") of the Company's
common stock, no par value per share (the "Common Stock"). In recognition of the
benefit that such an offering will confer upon the undersigned as a shareholder,
officer and/or director of the Company, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
undersigned agrees with each underwriter to be named in the Purchase Agreement
that, during a period of 180 days from the date of the Purchase Agreement, the
undersigned will not, without the prior written consent of Merrill Lynch,
directly or indirectly, (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant for the sale of, or otherwise dispose of or
transfer any shares of the Company's Common Stock or any securities convertible
into or exchangeable or exercisable for Common Stock, whether now owned or
hereafter acquired by the undersigned or with respect to which the undersigned
has or hereafter acquires the power of disposition, or file any registration
statement under the Securities
Annex A-5
<PAGE>
Act of 1933, as amended, with respect to any of the foregoing or (ii) enter into
any swap or any other agreement or any transaction that transfers, in whole or
in part, directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or transaction is to be settled by delivery
of Common Stock or other securities, in cash or otherwise.
Very truly yours,
Signature:
---------------------------
Print Name:
---------------------------
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
OPTIO SOFTWARE, INC.
Pursuant to Sections 14-2-1001 and 14-2-1003 of the Georgia Business
Corporation Code, Optio Software, Inc. hereby amends and restates its Articles
of Incorporation in their entirety and substitutes the following in lieu
thereof:
The Amended and Restated Articles of Incorporation were adopted by the
Board of Directors and Shareholders on October 8, 1999.
ARTICLE ONE
NAME
The name of the corporation is Optio Software, Inc..
ARTICLE TWO
CAPITALIZATION
The corporation shall have authority, exercisable by its Board of
Directors, to issue up to 100,000,000 shares of common stock, no par value per
share (the "COMMON STOCK"), and 20,000,000 shares of preferred stock, no par
value per share ("PREFERRED STOCK"), any part or all of which shares of
Preferred Stock may be established and designated from time to time by the Board
of Directors, in such series and with such preferences, limitations, and
relative rights as may be determined by the Board of Directors.
ARTICLE THREE
LIMITATION ON DIRECTOR LIABILITY
No director of the corporation shall be personally liable to the
corporation or its shareholders for monetary damages for breach of the duty of
care or any other duty as a director, except that such liability shall not be
eliminated for:
(i) any appropriation, in violation of the director's duties,
of any business opportunity of the corporation;
(ii) acts or omissions that involve intentional misconduct or
a knowing violation of law;
(iii) liability under Section 14-2-832 (or any successor
provision or redesignation thereof) of the Georgia Business Corporation
Code (the "CODE"); and
(iv) any transaction from which the director received an
improper personal benefit.
If at any time the Code shall have been amended to authorize the
further elimination or limitation of the liability of a director, then the
liability of each director of the corporation shall be eliminated or limited to
the fullest extent permitted by the Code, as so amended, without further action
by the shareholders, unless the provisions of the Code, as amended, require
further action by the shareholders.
Any repeal or modification of the foregoing provisions of this Article
Three shall not adversely affect the elimination or limitation of liability or
alleged liability pursuant hereto of any director of the
<PAGE>
corporation for or with respect to any alleged act or omission of the director
occurring prior to such a repeal or modification.
ARTICLE FOUR
SHAREHOLDER ACTION WITHOUT
MEETING BY LESS THAN UNANIMOUS CONSENT
The shareholders, without a meeting, may take any action required or
permitted to be taken at a meeting of the shareholders, if written consent
setting forth the action to be taken is signed by those persons who would be
entitled to vote at a meeting those shares having voting power to cast not less
than the minimum number (or numbers, in the case of voting by classes) of votes
that would be necessary to authorize or take the action at a meeting at which
all shares entitled to vote were present and voted. An action by less than
unanimous consent may not be taken with respect to any election of directors as
to which shareholders would be entitled to cumulative voting.
ARTICLE FIVE
CONSIDERATION OF INTERESTS OF
NON-SHAREHOLDER CONSTITUENCIES
The Board of Directors, any committee of the Board of Directors and any
individual Director, in discharging the duties of their respective positions and
in determining what is believed to be in the best interest of the Corporation,
may in their sole discretion consider the interests of the employees, customers,
suppliers and creditors of the Corporation and its subsidiaries, the communities
in which offices or other establishments of the Corporation and its subsidiaries
are located, and all other factors such Directors consider pertinent, in
addition to considering the effects of any action on the Corporation and its
shareholders. Notwithstanding the foregoing, this Article Five shall not be
deemed to provide any of the foregoing constituencies any right to be considered
in any such discharging of duties or determination.
ARTICLE SIX
STAGGERED BOARD OF DIRECTORS
The Board of Directors shall be divided into three classes to be known
as Class I, Class II and Class III, which shall be as nearly equal in number as
possible. Except in 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 2000 annual meeting of shareholders; each initial Director in
Class II shall hold office until the 2001 annual meeting of shareholders; and
each initial Director in Class III shall hold office until the 2002 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 so that the three classes remain as nearly equal in size as
possible; PROVIDED, HOWEVER, that there shall be no classification of additional
Directors elected by the Board of Directors until the next meeting of
shareholders called for the purposes of electing Directors, at which meeting the
terms of all such additional Directors shall expire, and such additional
Director positions, if they are to be continued, shall be apportioned among the
classes of Directors, and nominees therefor shall be submitted to the
shareholders for their vote.
-2-
<PAGE>
ARTICLE SEVEN
REMOVAL OF DIRECTORS
A Director of the Corporation may be removed from office only for
cause, and then only upon the affirmative vote of the holders of at least 66
2/3% of the outstanding shares of capital stock of the Corporation entitled to
vote at an election of Directors.
ARTICLE EIGHT
AMENDMENTS
Notwithstanding any other provision of these Amended and Restated
Articles of Incorporation, the Corporation's Bylaws or law, neither Articles
Three, Four, Five, Six or Seven hereof nor this Article Eight may be amended or
repealed except upon the affirmative vote of holders of at least 66-2/3% of the
total number of votes of the then outstanding shares of capital stock of the
Company that are entitled to vote generally in the election of Directors, voting
together as a single class.
IN WITNESS WHEREOF, the undersigned executes these Amended and Restated
Articles of Incorporation on October 8, 1999.
----------------------------
C. Wayne Cape
Chairman, President and Chief
Executive Officer
<PAGE>
EXHIBIT 3.2
SECOND AMENDED AND RESTATED BYLAWS
OF
OPTIO SOFTWARE, INC.
EFFECTIVE OCTOBER __, 1999
<PAGE>
SECOND AMENDED AND RESTATED BYLAWS
OF
OPTIO SOFTWARE, INC.
- --------------------------------------------------------------------------------
References in these Second Amended and Restated Bylaws (these "BYLAWS")
to "Articles of Incorporation" are to the Articles of Incorporation of OPTIO
SOFTWARE, INC., a Georgia corporation (the "CORPORATION"), as amended and
restated from time to time.
All of these Bylaws are subject to contrary provisions, if any, of the
Articles of Incorporation (including provisions designating the preferences,
limitations, and relative rights of any class or series of shares), the Georgia
Business Corporation Code (the "CODE"), and other applicable law, as in effect
on and after the effective date of these Bylaws. References in these Bylaws to
"Sections" shall refer to sections of the Bylaws, unless otherwise indicated.
- --------------------------------------------------------------------------------
ARTICLE ONE
OFFICE
1.1 REGISTERED OFFICE AND AGENT. The Corporation shall maintain a
registered office and shall have a registered agent whose business office is the
same as the registered office.
1.2 PRINCIPAL OFFICE. The principal office of the Corporation shall be
at the place designated in the Corporation's annual registration with the
Georgia Secretary of State.
1.3 OTHER OFFICES. In addition to its registered office and principal
office, the Corporation may have offices at other locations either in or outside
the State of Georgia.
ARTICLE TWO
SHAREHOLDERS' MEETINGS
2.1 PLACE OF MEETINGS.
Meetings of the Corporation's shareholders may be held at any location
inside or outside the State of Georgia designated by the Board of Directors or
any other person or persons who properly call the meeting, or if the Board of
Directors or such other person or persons do not specify a location, at the
Corporation's principal office.
2.2 ANNUAL MEETINGS. The Corporation shall hold an annual meeting of
shareholders, at a time determined by the Board of Directors, to elect directors
and to transact any business that properly may come before the meeting. The
annual meeting may be combined with any other meeting of shareholders, whether
annual or special.
<PAGE>
2.3 SPECIAL MEETINGS.
Special meetings of shareholders of one or more classes or series of
the Corporation's shares may be called at any time by the Board of Directors,
the Chairman of the Board, the Chief Executive Officer or the President, and
shall be called by the Corporation upon the written request (in compliance with
applicable requirements of the Code) of the holders of shares representing not
less than fifty percent (50%) or more of the votes entitled to be cast on each
issue proposed to be considered at the special meeting. The business that may be
transacted at any special meeting of shareholders shall be limited to that
proposed in the notice of the special meeting given in accordance with Section
2.4 (including related or incidental matters that may be necessary or
appropriate to effectuate the proposed business).
2.4 NOTICE OF MEETINGS. In accordance with Section 9.5 and subject to
waiver by a shareholder pursuant to Section 2.5, the Corporation shall give
written notice of the date, time and place of each annual and special
shareholders' meeting no fewer than 10 days nor more than 60 days before the
meeting date to each shareholder of record entitled to vote at the meeting. The
notice of an annual meeting need not state the purpose of the meeting unless
these Bylaws require otherwise. The notice of a special meeting shall state the
purpose for which the meeting is called. If an annual or special shareholders'
meeting is adjourned to a different date, time, or location, the Corporation
shall give shareholders notice of the new date, time, or location of the
adjourned meeting, unless a quorum of shareholders was present at the meeting
and information regarding the adjournment was announced before the meeting was
adjourned; PROVIDED, HOWEVER, that if a new record date is or must be fixed in
accordance with Section 7.6, the Corporation must give notice of the adjourned
meeting to all shareholders of record as of the new record date who are entitled
to vote at the adjourned meeting.
2.5 WAIVER OF NOTICE.
A shareholder may waive any notice required by the Code, the Articles
of Incorporation, or these Bylaws, before or after the date and time of the
matter to which the notice relates, by delivering to the Corporation a written
waiver of notice signed by the shareholder entitled to the notice. In addition,
a shareholder's attendance at a meeting shall be (a) a waiver of objection to
lack of notice or defective notice of the meeting unless the shareholder at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting, and (b) a waiver of objection to consideration of a particular
matter at the meeting that is not within the purpose stated in the meeting
notice, unless the shareholder objects to considering the matter when it is
presented. Except as otherwise required by the Code, neither the purpose of nor
the business transacted at the meeting need be specified in any waiver.
2.6 VOTING GROUP; QUORUM; VOTE REQUIRED TO ACT.
(a) Unless otherwise required by the Code or the Articles of
Incorporation, all classes or series of the Corporation's shares entitled to
vote generally on a matter shall for that purpose be considered a single voting
group (a "VOTING GROUP"). If either the Articles of Incorporation or the Code
requires separate voting by two or more Voting Groups on a matter, action on
that matter is taken only when voted upon by each such Voting Group separately.
At all meetings of shareholders, any Voting Group entitled to vote on a matter
may take action on the matter only if a quorum of that Voting Group exists at
the meeting, and if a quorum exists, the Voting Group may take action on the
matter notwithstanding the absence of a quorum of any other Voting Group that
may be entitled to vote separately on the matter. Unless the Articles of
Incorporation, these Bylaws, or the Code provides otherwise, the presence (in
person or by proxy) of shares representing a majority of votes entitled to be
cast on a matter by a Voting Group shall constitute a quorum of that Voting
Group with regard to that
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matter. Once a share is present at any meeting other than solely to object to
holding the meeting or transacting business at the meeting, the share shall be
deemed present for quorum purposes for the remainder of the meeting and for any
adjournments of that meeting, unless a new record date for the adjourned meeting
is or must be set pursuant to Section 7.6 of these Bylaws.
(b) Except as provided in Section 3.4, if a quorum exists, action on a
matter by a Voting Group is approved by that Voting Group if the votes cast
within the Voting Group favoring the action exceed the votes cast opposing the
action, unless the Articles of Incorporation, a provision of these Bylaws that
has been adopted pursuant to Section 14-2-1021 of the Code (or any successor
provision), or the Code requires a greater number of affirmative votes.
2.7 VOTING OF SHARES. Unless otherwise required by the Code or the
Articles of Incorporation, each outstanding share of any class or series having
voting rights shall be entitled to one vote on each matter that is submitted to
a vote of shareholders.
2.8 PROXIES. A shareholder entitled to vote on a matter may vote in
person or by proxy pursuant to an appointment executed in writing by the
shareholder or by his or her attorney-in-fact. An appointment of a proxy shall
be valid for 11 months from the date of its execution, unless a longer or
shorter period is expressly stated in the proxy.
2.9 PRESIDING OFFICER. Except as otherwise provided in this Section
2.9, the Chairman of the Board, and in his or her absence or disability the
Chief Executive Officer, and in his or her absence or disability the President,
shall preside at every shareholders' meeting (and any adjournment thereof) as
its chairman, if either of them is present and willing to serve. If neither the
Chairman of the Board, nor the Chief Executive Officer nor the President is
present and willing to serve as chairman of the meeting, and if the Chairman of
the Board has not designated another person who is present and willing to serve,
then a majority of the Corporation's directors present at the meeting shall be
entitled to designate a person to serve as chairman. If no director of the
Corporation is present at the meeting or if a majority of the directors who are
present cannot be established, then a chairman of the meeting shall be selected
by a majority vote of (a) the shares present at the meeting that would be
entitled to vote in an election of directors, or (b) if no such shares are
present at the meeting, then the shares present at the meeting comprising the
Voting Group with the largest number of shares present at the meeting and
entitled to vote on a matter properly proposed to be considered at the meeting.
The chairman of the meeting may designate other persons to assist with the
meeting.
2.10 ADJOURNMENTS.
At any meeting of shareholders (including an adjourned meeting), a
majority of shares of any Voting Group present and entitled to vote at the
meeting (whether or not those shares constitute a quorum) may adjourn the
meeting, but only with respect to that Voting Group, to reconvene at a specific
time and place. If more than one Voting Group is present and entitled to vote on
a matter at the meeting, then the meeting may be continued with respect to any
such Voting Group that does not vote to adjourn as provided above, and such
Voting Group may proceed to vote on any matter to which it is otherwise entitled
to do so; PROVIDED, HOWEVER, that if (a) more than one Voting Group is required
to take action on a matter at the meeting and (b) any one of those Voting Groups
votes to adjourn the meeting (in accordance with the preceding sentence), then
the action shall not be deemed to have been taken until the requisite vote of
any adjourned Voting Group is obtained at its reconvened meeting. The only
business that may be transacted at any reconvened meeting is business that could
have been transacted at the meeting that was adjourned, unless further notice of
the adjourned meeting has been given in compliance
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with the requirements for a special meeting that specifies the additional
purpose or purposes for which the meeting is called. Nothing contained in this
Section 2.10 shall be deemed or otherwise construed to limit any lawful
authority of the chairman of a meeting to adjourn the meeting.
2.11 CONDUCT OF THE MEETING.
At any meeting of shareholders, the chairman of the meeting shall be
entitled to establish the rules of order governing the conduct of business at
the meeting.
2.12 ACTION OF SHAREHOLDERS WITHOUT A MEETING.
Action required or permitted to be taken at a meeting of shareholders
may be taken without a meeting if the action is taken by all shareholders
entitled to vote on the action or, if permitted by the Articles of
Incorporation, by persons who would be entitled to vote at a meeting shares
having voting power to cast the requisite number of votes (or numbers, in the
case of voting by groups) that would be necessary to authorize or take the
action at a meeting at which all shareholders entitled to vote were present and
voted. The action must be evidenced by one or more written consents describing
the action taken, signed by shareholders entitled to take action without a
meeting, and delivered to the Corporation for inclusion in the minutes or filing
with the corporate records. Where required by Section 14-2-704 or other
applicable provision of the Code, the Corporation shall provide shareholders
with written notice of actions taken without a meeting.
2.13 MATTERS CONSIDERED AT ANNUAL MEETINGS.
Notwithstanding anything to the contrary in these Bylaws, the only
business that may be conducted at an annual meeting of shareholders shall be
business brought before the meeting (a) by or at the direction of the Board of
Directors prior to the meeting, (b) by or at the direction of the Chairman of
the Board, the Chief Executive Officer or the President, or (c) by a shareholder
of the Corporation who is entitled to vote with respect to the business and who
complies with the notice procedures set forth in this Section 2.13. For business
to be brought properly before an annual meeting by a shareholder, the
shareholder must have given timely notice of the business in writing to the
Secretary of the Corporation. To be timely, a shareholder's notice must be
delivered or mailed to and received at the principal offices of the Corporation,
not less than 60 days before the date of the meeting at which the director(s)
are to be elected or the proposal is to be considered; however, if less than 70
days notice or prior public disclosure of the date of the scheduled meeting is
given or made, notice by the shareholder, to be timely, must be delivered or
received not later than the close of business on the tenth day following the
earlier of the day on which notice of the date of the meeting is mailed to
shareholders or public disclosure of the date of such meeting is made. A
shareholder's notice to the Secretary shall set forth a brief description of
each matter of business the shareholder proposes to bring before the meeting and
the reasons for conducting that business at the meeting; the name, as it appears
on the Corporation's books, and address of the shareholder proposing the
business; the series or class and number of shares of the Corporation's capital
stock that are beneficially owned by the shareholder; and any material interest
of the shareholder in the proposed business. The chairman of the meeting shall
have the discretion to declare to the meeting that any business proposed by a
shareholder to be considered at the meeting is out of order and that such
business shall not be transacted at the meeting IF (i) the chairman concludes
that the matter has been proposed in a manner inconsistent with this Section
2.13 or (ii) the chairman concludes that the subject matter of the proposed
business is inappropriate for consideration by the shareholders at the meeting.
ARTICLE THREE
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BOARD OF DIRECTORS
3.1 GENERAL POWERS.
All corporate powers shall be exercised by or under the authority of,
and the business and affairs of the Corporation shall be managed by, the Board
of Directors, subject to any limitation set forth in the Articles of
Incorporation, in bylaws approved by the shareholders, or in agreements among
all the shareholders that are otherwise lawful.
3.2 NUMBER, ELECTION AND TERM OF OFFICE. The number of directors of the
Corporation shall be fixed by resolution of the Board of Directors or of the
shareholders from time to time and, until otherwise determined, shall be two
(2); PROVIDED, HOWEVER, that no decrease in the number of directors shall have
the effect of shortening the term of an incumbent director. Except as provided
in the Articles of Incorporation or elsewhere in this Section 3.2 and in Section
3.4, the directors shall be elected at each annual meeting of shareholders, or
at a special meeting of shareholders called for purposes that include the
election of directors, by a plurality of the votes cast by the shares entitled
to vote and present at the meeting. Despite the expiration of a director's term,
he or she shall continue to serve until his or her successor, if there is to be
any, has been elected and has qualified.
3.3 REMOVAL OF DIRECTORS. The entire Board of Directors or any
individual director may be removed by the shareholders, only for cause, and then
only by the affirmative vote of the holders of at least 66 2/3% of the
outstanding capital stock of the Corporation entitled to vote at an election of
Directors, provided that Directors elected by a particular Voting Group may be
removed only by the shareholders in that Voting Group. Removal action may be
taken only at a shareholder's meeting for which notice of the removal action has
been given. A removed director's successor, if any, may be elected at the same
meeting to serve the unexpired term.
3.4 VACANCIES. A vacancy occurring in the Board of Directors may be
filled for the unexpired term, unless the shareholders have elected a successor,
by the affirmative vote of a majority of the remaining directors, whether or not
the remaining directors constitute a quorum; PROVIDED, HOWEVER, that if the
vacant office was held by a director elected by a particular Voting Group, only
the holders of shares of that Voting Group or the remaining directors elected by
that Voting Group shall be entitled to fill the vacancy; PROVIDED FURTHER,
HOWEVER, that if the vacant office was held by a director elected by a
particular Voting Group AND there is no remaining director elected by that
Voting Group, the other remaining directors or director (elected by another
Voting Group or Groups) may fill the vacancy during an interim period before the
shareholders of the vacated director's Voting Group act to fill the vacancy. A
vacancy or vacancies in the Board of Directors may result from the death,
resignation, disqualification, or removal of any director, or from an increase
in the number of directors.
3.5 COMPENSATION. Directors may receive such compensation for their
services as directors as may be fixed by the Board of Directors from time to
time. A director may also serve the Corporation in one or more capacities other
than that of director and receive compensation for services rendered in those
other capacities.
3.6 COMMITTEES OF THE BOARD OF DIRECTORS. The Board of Directors may
designate from among its members an executive committee or one or more other
standing or ad hoc committees, each consisting of one or more directors, who
serve at the pleasure of the Board of Directors. Subject to the limitations
imposed by the Code, each committee shall have the authority set forth in the
resolution
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establishing the committee or in any other resolution of the Board of Directors
specifying, enlarging, or limiting the authority of the committee.
3.7 QUALIFICATION OF DIRECTORS. No person elected to serve as a
director of the Corporation shall assume office and begin serving unless and
until duly qualified to serve, as determined by reference to the Code, the
Articles of Incorporation, and any further eligibility requirements established
in these Bylaws.
3.8 CERTAIN NOMINATION REQUIREMENTS. No person may be nominated for
election as a director at any annual or special meeting of shareholders unless
(a) the nomination has been or is being made pursuant to a recommendation or
approval of the Board of Directors of the Corporation or a properly constituted
committee of the Board of Directors previously delegated authority to recommend
or approve nominees for director; (b) the person is nominated by a shareholder
of the Corporation who is entitled to vote for the election of the nominee at
the subject meeting, and the nominating shareholder has furnished written notice
to the Secretary of the Corporation, at the Corporation's principal office, not
less than 60 days before the date of the meeting at which the director(s) are to
be elected or the proposal is to be considered; however, if less than 70 days
notice or prior public disclosure of the date of the scheduled meeting is given
or made, notice by the shareholder, to be timely, must be delivered or received
not later than the close of business on the tenth day following the earlier of
the day on which notice of the date of the meeting is mailed to shareholders or
public disclosure of the date of such meeting is made and the notice (i) sets
forth with respect to the person to be nominated his or her name, age, business
and residence addresses, principal business or occupation during the past five
years, any affiliation with or material interest in the Corporation or any
transaction involving the Corporation, and any affiliation with or material
interest in any person or entity having an interest materially adverse to the
Corporation, and (ii) is accompanied by the sworn or certified statement of the
shareholder that the nominee has consented to being nominated and that the
shareholder believes the nominee will stand for election and will serve if
elected; or (c) (i) the person is nominated to replace a person previously
identified as a proposed nominee (in accordance with the provisions of subpart
(b) of this Section 3.8) who has since become unable or unwilling to be
nominated or to serve if elected, (ii) the shareholder who furnished such
previous identification makes the replacement nomination and delivers to the
Secretary of the Corporation (at the time of or prior to making the replacement
nomination) an affidavit or other sworn statement affirming that the shareholder
had no reason to believe the original nominee would be so unable or unwilling,
and (iii) such shareholder also furnishes in writing to the Secretary of the
Corporation (at the time of or prior to making the replacement nomination) the
same type of information about the replacement nominee as required by subpart
(b) of this Section 3.8 to have been furnished about the original nominee. The
chairman of any meeting of shareholders at which one or more directors are to be
elected, for good cause shown and with proper regard for the orderly conduct of
business at the meeting, may waive in whole or in part the operation of this
Section 3.8.
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ARTICLE FOUR
MEETINGS OF THE BOARD OF DIRECTORS
4.1 REGULAR MEETINGS.
A regular meeting of the Board of Directors shall be held in
conjunction with each annual meeting of shareholders. In addition, the Board of
Directors may, by prior resolution, hold regular meetings at other times.
4.2 SPECIAL MEETINGS. Special meetings of the Board of Directors may be
called by or at the request of the Chairman of the Board, the Chief Executive
Officer, the President, or any director in office at that time.
4.3 PLACE OF MEETINGS. Directors may hold their meetings at any place
in or outside the State of Georgia that the Board of Directors may establish
from time to time.
4.4 NOTICE OF MEETINGS. Directors need not be provided with notice of
any regular meeting of the Board of Directors. Unless waived in accordance with
Section 4.10, the Corporation shall give at least two days' notice to each
director of the date, time, and place of each special meeting. Notice of a
meeting shall be deemed to have been given to any director in attendance at any
prior meeting at which the date, time, and place of the subsequent meeting was
announced.
4.5 QUORUM. At meetings of the Board of Directors, the greater of (a) a
majority of the directors then in office, or (b) one-third of the number of
directors fixed in accordance with these Bylaws shall constitute a quorum for
the transaction of business.
4.6 VOTE REQUIRED FOR ACTION. If a quorum is present when a vote is
taken, the vote of a majority of the directors present at the time of the vote
will be the act of the Board of Directors, unless the vote of a greater number
is required by the Code, the Articles of Incorporation, or these Bylaws. A
director who is present at a meeting of the Board of Directors when corporate
action is taken is deemed to have assented to the action taken unless (a) he or
she objects at the beginning of the meeting (or promptly upon his or her
arrival) to holding the meeting or transacting business at it; (b) his or her
dissent or abstention from the action taken is entered in the minutes of the
meeting; or (c) he or she delivers written notice of dissent or abstention to
the presiding officer of the meeting before its adjournment or to the
Corporation immediately after adjournment of the meeting. The right of dissent
or abstention is not available to a director who votes in favor of the action
taken.
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4.7 PARTICIPATION BY CONFERENCE TELEPHONE. Members of the Board of
Directors may participate in a meeting of the Board by means of conference
telephone or similar communications equipment through which all persons
participating may hear and speak to each other. Participation in a meeting
pursuant to this Section 4.7 shall constitute presence in person at the meeting.
4.8 ACTION BY DIRECTORS WITHOUT A MEETING. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if a written consent, describing the action taken, is signed
by each director and delivered to the Corporation for inclusion in the minutes
or filing with the corporate records. The consent may be executed in
counterpart, and shall have the same force and effect as a unanimous vote of the
Board of Directors at a duly convened meeting.
4.9 ADJOURNMENTS. A meeting of the Board of Directors, whether or not a
quorum is present, may be adjourned by a majority of the directors present to
reconvene at a specific time and place. It shall not be necessary to give notice
to the directors of the reconvened meeting or of the business to be transacted,
other than by announcement at the meeting that was adjourned, unless a quorum
was not present at the meeting that was adjourned, in which case notice shall be
given to directors in the same manner as for a special meeting. At any such
reconvened meeting at which a quorum is present, any business may be transacted
that could have been transacted at the meeting that was adjourned.
4.10 WAIVER OF NOTICE. A director may waive any notice required by the
Code, the Articles of Incorporation, or these Bylaws before or after the date
and time of the matter to which the notice relates, by a written waiver signed
by the director and delivered to the Corporation for inclusion in the minutes or
filing with the corporate records. Attendance by a director at a meeting shall
constitute waiver of notice of the meeting, except where a director at the
beginning of the meeting (or promptly upon his or her arrival) objects to
holding the meeting or to transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting.
ARTICLE FIVE
OFFICERS
5.1 OFFICES. The officers of the Corporation shall consist of a
President, a Secretary, and a Treasurer, and may include a Chief Executive
Officer separate from the President, each of whom shall be elected or appointed
by the Board of Directors. The Board of Directors may also elect a Chairman of
the Board from among its members. The Board of Directors from time to time may,
or may authorize the Chief Executive Officer or the President to, create and
establish the duties of other offices and may, or may authorize the Chief
Executive Officer or the President to, elect or appoint, or authorize specific
senior officers to appoint, the persons who shall hold such other offices,
including one or more Vice Presidents (including Executive Vice Presidents,
Senior Vice Presidents, Assistant Vice Presidents, and the like), one or more
Assistant Secretaries, and one or more Assistant Treasurers. Whether or not so
provided by the Board of Directors, the Chairman of the Board, the Chief
Executive Officer or the President may appoint one or more Assistant
Secretaries, and one or more Assistant Treasurers. Any two or more offices may
be held by the same person.
5.2 TERM. Each officer shall serve at the pleasure of the Board of
Directors (or, if appointed by the Chief Executive Officer, the President, or a
senior officer pursuant to this Article Five, at the pleasure of the Board of
Directors, the Chief Executive Officer, the President, or the senior officer
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authorized to have appointed the officer) until his or her death, resignation,
or removal, or until his or her replacement is elected or appointed in
accordance with this Article Five.
5.3 COMPENSATION. The compensation of all officers of the Corporation
shall be fixed by the Board of Directors or by a committee or officer appointed
by the Board of Directors. Officers may serve without compensation.
5.4 REMOVAL. All officers (regardless of how elected or appointed) may
be removed, with or without cause, by the Board of Directors, and any officer
appointed by the Chief Executive Officer, the President, or another senior
officer may also be removed, with or without cause, by the Chief Executive
Officer, the President, or by any senior officer authorized to have appointed
the officer to be removed. Removal will be without prejudice to the contract
rights, if any, of the person removed, but shall be effective notwithstanding
any damage claim that may result from infringement of such contract rights.
5.5 CHAIRMAN OF THE BOARD. The Chairman of the Board (if there be one)
shall preside at and serve as chairman of meetings of the shareholders and of
the Board of Directors (unless another person is selected under Section 2.9 to
act as chairman). The Chairman of the Board shall perform other duties and have
other authority as may from time to time be delegated by the Board of Directors.
5.6 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall be
charged with the general and active management of the Corporation, shall see
that all orders and resolutions of the Board of Directors are carried into
effect, shall have the authority to select and appoint employees and agents of
the Corporation, and shall, in the absence or disability of the Chairman of the
Board, perform the duties and exercise the powers of the Chairman of the Board.
The Chief Executive Officer shall perform any other duties and have any other
authority as may be delegated from time to time by the Board of Directors, and
shall be subject to the limitations fixed from time to time by the Board of
Directors.
5.7 PRESIDENT. If there shall be no separate Chief Executive Officer of
the Corporation, then the President shall be the chief executive officer of the
Corporation and shall have all the duties and authority given under these Bylaws
to the Chief Executive Officer. The President shall otherwise be the chief
operating officer of the Corporation and shall, subject to the authority of the
Chief Executive Officer, have responsibility for the conduct and general
supervision of the business operations of the Corporation. The President shall
perform such other duties and have such other authority as may from time to time
be delegated by the Board of Directors or the Chief Executive Officer. In the
absence or disability of the Chief Executive Officer, the President shall
perform the duties and exercise the powers of the Chief Executive Officer.
5.8 VICE PRESIDENTS. The Vice President (if there be one) shall, in the
absence or disability of the President, perform the duties and exercise the
powers of the President, whether the duties and powers are specified in these
Bylaws or otherwise. If the Corporation has more than one Vice President, the
one designated by the Board of Directors or the Chief Executive Officer (in that
order of precedence) shall act in the event of the absence or disability of the
President. Vice Presidents shall perform any other duties and have any other
authority as from time to time may be delegated by the Board of Directors, the
Chief Executive Officer, or the President.
5.9 SECRETARY. The Secretary shall be responsible for preparing minutes
of the meetings of shareholders, directors, and committees of directors and for
authenticating records of the Corporation. The Secretary or any Assistant
Secretary shall have authority to give all notices required by law or these
Bylaws. The Secretary shall be responsible for the custody of the corporate
books, records, contracts,
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and other documents. The Secretary or any Assistant Secretary may affix the
corporate seal to any lawfully executed documents requiring it, may attest to
the signature of any officer of the Corporation, and shall sign any instrument
that requires the Secretary's signature. The Secretary or any Assistant
Secretary shall perform any other duties and have any other authority as from
time to time may be delegated by the Board of Directors, the Chief Executive
Officer, or the President.
5.10 TREASURER. Unless otherwise provided by the Board of Directors,
the Treasurer shall be responsible for the custody of all funds and securities
belonging to the Corporation and for the receipt, deposit, or disbursement of
these funds and securities under the direction of the Board of Directors. The
Treasurer shall cause full and true accounts of all receipts and disbursements
to be maintained and shall make reports of these receipts and disbursements to
the Board of Directors, the Chief Executive Officer and President upon request.
The Treasurer or Assistant Treasurer shall perform any other duties and have any
other authority as from time to time may be delegated by the Board of Directors,
the Chief Executive Officer, or the President.
ARTICLE SIX
DISTRIBUTIONS AND DIVIDENDS
Unless the Articles of Incorporation provide otherwise, the Board of
Directors, from time to time in its discretion, may authorize or declare
distributions or share dividends in accordance with the Code.
ARTICLE SEVEN
SHARES
7.1 SHARE CERTIFICATES. The interest of each shareholder in the
Corporation shall be evidenced by a certificate or certificates representing
shares of the Corporation, which shall be in such form as the Board of Directors
from time to time may adopt in accordance with the Code. Share certificates
shall be in registered form and shall indicate the date of issue, the name of
the Corporation, that the Corporation is organized under the laws of the State
of Georgia, the name of the shareholder, and the number and class of shares and
designation of the series, if any, represented by the certificate. Each
certificate shall be signed by the President or a Vice President (or in lieu
thereof, by the Chairman of the Board or Chief Executive Officer, if there be
one) and may be signed by the Secretary or an Assistant Secretary; PROVIDED,
HOWEVER, that where the certificate is signed (either manually or by facsimile)
by a transfer agent, or registered by a registrar, the signatures of those
officers may be facsimiles.
7.2 RIGHTS OF CORPORATION WITH RESPECT TO REGISTERED OWNERS. Prior to
due presentation for transfer of registration of its shares, the Corporation may
treat the registered owner of the shares (or the beneficial owner of the shares
to the extent of any rights granted by a nominee certificate on file with the
Corporation pursuant to any procedure that may be established by the Corporation
in accordance with the Code) as the person exclusively entitled to vote the
shares, to receive any dividend or other distribution with respect to the
shares, and for all other purposes; and the Corporation shall not be bound to
recognize any equitable or other claim to or interest in the shares on the part
of any other person, whether or not it has express or other notice of such a
claim or interest, except as otherwise provided by law.
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7.3 TRANSFERS OF SHARES. Transfers of shares shall be made upon the
books of the Corporation kept by the Corporation or by the transfer agent
designated to transfer the shares, only upon direction of the person named in
the certificate or by an attorney lawfully constituted in writing. Before a new
certificate is issued, the old certificate shall be surrendered for cancellation
or, in the case of a certificate alleged to have been lost, stolen, or
destroyed, the provisions of Section 7.5 of these Bylaws shall have been
complied with.
7.4 DUTY OF CORPORATION TO REGISTER TRANSFER. Notwithstanding any of
the provisions of Section 7.3 of these Bylaws, the Corporation is under a duty
to register the transfer of its shares only if: (a) the share certificate is
endorsed by the appropriate person or persons; (b) reasonable assurance is given
that each required endorsement is genuine and effective; (c) the Corporation has
no duty to inquire into adverse claims or has discharged any such duty; (d) any
applicable law relating to the collection of taxes has been complied with; (e)
the transfer is in fact rightful or is to a bona fide purchaser; and (f) the
transfer is in compliance with applicable provisions of any transfer
restrictions of which the Corporation shall have notice.
7.5 LOST, STOLEN, OR DESTROYED CERTIFICATES. Any person claiming a
share certificate to be lost, stolen, or destroyed shall make an affidavit or
affirmation of this claim in such a manner as the Corporation may require and
shall, if the Corporation requires, give the Corporation a bond of indemnity in
form and amount, and with one or more sureties satisfactory to the Corporation,
as the Corporation may require, whereupon an appropriate new certificate may be
issued in lieu of the one alleged to have been lost, stolen or destroyed.
7.6 FIXING OF RECORD DATE. For the purpose of determining shareholders
(a) entitled to notice of or to vote at any meeting of shareholders or, if
necessary, any adjournment thereof, (b) entitled to receive payment of any
distribution or dividend, or (c) for any other proper purpose, the Board of
Directors may fix in advance a date as the record date. The record date may not
be more than 70 days (and, in the case of a notice to shareholders of a
shareholders' meeting, not less than 10 days) prior to the date on which the
particular action, requiring the determination of shareholders, is to be taken.
A separate record date may be established for each Voting Group entitled to vote
separately on a matter at a meeting. A determination of shareholders of record
entitled to notice of or to vote at a meeting of shareholders shall apply to any
adjournment of the meeting, unless the Board of Directors shall fix a new record
date for the reconvened meeting, which it must do if the meeting is adjourned to
a date more than 120 days after the date fixed for the original meeting.
7.7 RECORD DATE IF NONE FIXED. If no record date is fixed as provided
in Section 7.6, then the record date for any determination of shareholders that
may be proper or required by law shall be, as appropriate, the date on which
notice of a shareholders' meeting is mailed, the date on which the Board of
Directors adopts a resolution declaring a dividend or authorizing a
distribution, or the date on which any other action is taken that requires a
determination of shareholders.
ARTICLE EIGHT
INDEMNIFICATION
8.1 INDEMNIFICATION OF DIRECTORS. The Corporation shall indemnify and
hold harmless any director of the Corporation (an "INDEMNIFIED PERSON") who was
or is a party, or is threatened to be made a party, to any threatened, pending
or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, whether formal or informal, including any
action or suit by or in the right
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<PAGE>
of the Corporation (for purposes of this Article Eight, collectively, a
"PROCEEDING") because he or she is or was a director, officer, employee, or
agent of the Corporation, against any judgment, settlement, penalty, fine, or
reasonable expenses (including, but not limited to, attorneys' fees and
disbursements, court costs, and expert witness fees) incurred with respect to
the Proceeding (for purposes of this Article Eight, a "LIABILITY"); PROVIDED,
HOWEVER, that no indemnification shall be made for: (a) any appropriation by a
director, in violation of the director's duties, of any business opportunity of
the corporation; (b) any acts or omissions of a director that involve
intentional misconduct or a knowing violation of law; (c) the types of liability
set forth in Code Section 14-2-832; or (d) any transaction from which the
director received an improper personal benefit.
8.2 INDEMNIFICATION OF OTHERS. The Board of Directors shall have the
power to cause the Corporation to provide to officers, employees, and agents of
the Corporation all or any part of the right to indemnification permitted for
such persons by appropriate provisions of the Code. Persons to be indemnified
may be identified by position or name, and the right of indemnification may be
different for each of the persons identified. Each officer, employee, or agent
of the Corporation so identified shall be an "Indemnified Person" for purposes
of the provisions of this Article Eight.
8.3 OTHER ORGANIZATIONS. The Corporation shall provide to each
director, and the Board of Directors shall have the power to cause the
Corporation to provide to any officer, employee, or agent, of the Corporation
who is or was serving at the Corporation's request as a director, officer,
partner, trustee, employee, or agent of another corporation, partnership, joint
venture, trust, employee benefit plan, or other enterprise all or any part of
the right to indemnification and other rights of the type provided under
Sections 8.1, 8.2, 8.4, and 8.10 of this Article Eight (subject to the
conditions, limitations, and obligations specified in those Sections) permitted
for such persons by appropriate provisions of the Code. Persons to be
indemnified may be identified by position or name, and the right of
indemnification may be different for each of the persons identified. Each person
so identified shall be an "Indemnified Person" for purposes of the provisions of
this Article Eight.
8.4 ADVANCES. Expenses (including, but not limited to, attorneys' fees
and disbursements, court costs, and expert witness fees) incurred by an
Indemnified Person in defending any Proceeding of the kind described in Sections
8.1 or 8.3, as to an Indemnified Person who is a director of the Corporation, or
in Sections 8.2 or 8.3, as to other Indemnified Persons, if the Board of
Directors has specified that advancement of expenses be made available to any
such Indemnified Person, shall be paid by the Corporation in advance of the
final disposition of such Proceeding as set forth herein. The Corporation shall
promptly pay the amount of such expenses to the Indemnified Person, but in no
event later than 10 days following the Indemnified Person's delivery to the
Corporation of a written request for an advance pursuant to this Section 8.4,
together with a reasonable accounting of such expenses; PROVIDED, HOWEVER, that
the Indemnified Person shall furnish the Corporation a written affirmation of
his or her good faith belief that he or she has met the applicable standard of
conduct and a written undertaking and agreement to repay to the Corporation any
advances made pursuant to this Section 8.4 if it shall be determined that the
Indemnified Person is not entitled to be indemnified by the Corporation for such
amounts. The Corporation may make the advances contemplated by this Section 8.4
regardless of the Indemnified Person's financial ability to make repayment. Any
advances and undertakings to repay pursuant to this Section 8.4 may be unsecured
and interest-free.
8.5 NON-EXCLUSIVITY. Subject to any applicable limitation imposed by
the Code or the Articles of Incorporation, the indemnification and advancement
of expenses provided by or granted pursuant to this Article Eight shall not be
exclusive of any other rights to which a person seeking indemnification or
advancement of expenses may be entitled under any provision of the Articles of
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Incorporation, or any Bylaw, resolution, or agreement specifically or in general
terms approved or ratified by the affirmative vote of holders of a majority of
the shares entitled to be voted thereon.
8.6 INSURANCE. The Corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee, or agent of the Corporation, or who, while serving in such a capacity,
is also or was also serving at the request of the Corporation as a director,
officer, trustee, partner, employee, or agent of any corporation, partnership,
joint venture, trust, employee benefit plan, or other enterprise, against any
Liability that may be asserted against or incurred by him or her in any such
capacity, or arising out of his or her status as such, whether or not the
Corporation would have the power to indemnify him or her against such liability
under the provisions of this Article Eight.
8.7 NOTICE. If the Corporation indemnifies or advances expenses to a
director under any of Sections 14-2-851 through 14-2-854 of the Code in
connection with a Proceeding by or in the right of the Corporation, the
Corporation shall, to the extent required by Section 14-2-1621 or any other
applicable provision of the Code, report the indemnification or advance in
writing to the shareholders with or before the notice of the next shareholders'
meeting.
8.8 SECURITY. The Corporation may designate certain of its assets as
collateral, provide self-insurance, establish one or more indemnification
trusts, or otherwise secure or facilitate its ability to meet its obligations
under this Article Eight, or under any indemnification agreement or plan of
indemnification adopted and entered into in accordance with the provisions of
this Article Eight, as the Board of Directors deems appropriate.
8.9 AMENDMENT. Any amendment to this Article Eight that limits or
otherwise adversely affects the right of indemnification, advancement of
expenses, or other rights of any Indemnified Person hereunder shall, as to such
Indemnified Person, apply only to Proceedings based on actions, events, or
omissions occurring after such amendment and after delivery of notice of such
amendment to the Indemnified Person so affected (collectively, "POST AMENDMENT
EVENTS"). Any Indemnified Person shall, as to any Proceeding based on actions,
events, or omissions occurring prior to the date of receipt of such notice, be
entitled to the right of indemnification, advancement of expenses, and other
rights under this Article Eight to the same extent as if such provisions had
continued as part of the Bylaws of the Corporation without such amendment. This
Section 8.9 cannot be altered, amended, or repealed in a manner effective as to
any Indemnified Person (except as to Post Amendment Events) without the prior
written consent of such Indemnified Person.
8.10 AGREEMENTS. The provisions of this Article Eight shall be deemed
to constitute an agreement between the Corporation and each Indemnified Person
hereunder. In addition to the rights provided in this Article Eight, the
Corporation shall have the power, upon authorization by the Board of Directors,
to enter into an agreement or agreements providing to any Indemnified Person
indemnification rights substantially similar to those provided in this Article
Eight.
8.11 CONTINUING BENEFITS. The rights of indemnification and advancement
of expenses permitted or authorized by this Article Eight shall, unless
otherwise provided when such rights are granted or conferred, continue as to a
person who has ceased to be a director, officer, employee, or agent and shall
inure to the benefit of the heirs, executors, and administrators of such person.
8.12 SUCCESSORS. For purposes of this Article Eight, the term
"Corporation" shall include any corporation, joint venture, trust, partnership,
or unincorporated business association that is the successor
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<PAGE>
to all or substantially all of the business or assets of this Corporation, as a
result of merger, consolidation, sale, liquidation, or otherwise, and any such
successor shall be liable to the persons indemnified under this Article Eight on
the same terms and conditions and to the same extent as this Corporation.
8.13 SEVERABILITY. Each of the Sections of this Article Eight, and each
of the clauses set forth herein, shall be deemed separate and independent, and
should any part of any such Section or clause be declared invalid or
unenforceable by any court of competent jurisdiction, such invalidity or
unenforceability shall in no way render invalid or unenforceable any other part
thereof or any separate Section or clause of this Article Eight that is not
declared invalid or unenforceable.
8.14 ADDITIONAL INDEMNIFICATION. In addition to the specific
indemnification rights set forth herein, the Corporation shall indemnify each of
its directors and such of its officers as have been designated by the Board of
Directors to the full extent permitted by action of the Board of Directors
without shareholder approval under the Code or other laws of the State of
Georgia as in effect from time to time.
ARTICLE NINE
MISCELLANEOUS
9.1 INSPECTION OF BOOKS AND RECORDS. The Board of Directors shall have
the power to determine which accounts, books, and records of the Corporation
shall be available for shareholders to inspect or copy, except for those books
and records required by the Code to be made available upon compliance by a
shareholder with applicable requirements, and shall have the power to fix
reasonable rules and regulations (including confidentiality restrictions and
procedures) not in conflict with applicable law for the inspection and copying
of accounts, books, and records that by law or by determination of the Board of
Directors are made available. Unless required by the Code or otherwise provided
by the Board of Directors, a shareholder of the Corporation holding less than
two percent of the total shares of the Corporation then outstanding shall have
no right to inspect the books and records of the Corporation.
9.2 FISCAL YEAR. The Board of Directors is authorized to fix the fiscal
year of the Corporation and to change the fiscal year from time to time as it
deems appropriate.
9.3 CORPORATE SEAL. The corporate seal will be in such form as the
Board of Directors may from time to time determine. The Board of Directors may
authorize the use of one or more facsimile forms of the corporate seal. The
corporate seal need not be used unless its use is required by law, by these
Bylaws, or by the Articles of Incorporation.
9.4 ANNUAL STATEMENTS. Not later than four months after the close of
each fiscal year, and in any case prior to the next annual meeting of
shareholders, the Corporation shall prepare (a) a balance sheet showing in
reasonable detail the financial condition of the Corporation as of the close of
its fiscal year, and (b) a profit and loss statement showing the results of its
operations during its fiscal year. Upon receipt of written request, the
Corporation promptly shall mail to any shareholder of record a copy of the most
recent such balance sheet and profit and loss statement, in such form and with
such information as the Code may require.
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9.5 NOTICE. (a) Whenever these Bylaws require notice to be given to any
shareholder or to any director, the notice may be given by mail, in person, by
courier delivery, by telephone, or by telecopier, telegraph, or similar
electronic means. Whenever notice is given to a shareholder or director by mail,
the notice shall be sent by depositing the notice in a post office or letter box
in a postage-prepaid, sealed envelope addressed to the shareholder or director
at his or her address as it appears on the books of the Corporation. Any such
written notice given by mail shall be effective: (i) if given to shareholders,
at the time the same is deposited in the United States mail; and (ii) in all
other cases, at the earliest of (x) when received or when delivered, properly
addressed, to the addressee's last known principal place of business or
residence, (y) five days after its deposit in the mail, as evidenced by the
postmark, if mailed with first-class postage prepaid and correctly addressed, or
(z) on the date shown on the return receipt, if sent by registered or certified
mail, return receipt requested, and the receipt is signed by or on behalf of the
addressee. Whenever notice is given to a shareholder or director by any means
other than mail, the notice shall be deemed given when received.
(b) In calculating time periods for notice, when a period of time
measured in days, weeks, months, years, or other measurement of time is
prescribed for the exercise of any privilege or the discharge of any duty,
the first day shall not be counted but the last day shall be counted.
9.6 ELECTION OF "FAIR PRICE" STATUTE. The provisions of Sections
14-2-1110 through 14-2-1113 of the Code, as they may be amended from time to
time, shall apply to the Corporation, to the extent permitted.
9.7 ELECTION OF "BUSINESS COMBINATION" STATUTE. The provisions of
Section 14-2-1131 through 14-2-1133 of the Code, as they may be amended from
time to time, shall apply to the Corporation, to the extent permitted.
ARTICLE TEN
AMENDMENTS
Except as otherwise provided below or under the Code, the Board of
Directors shall have the power to alter, amend, or repeal these Bylaws or adopt
new Bylaws. Notwithstanding any other provision of these Bylaws, the
Corporation's Articles of Incorporation or law, neither Section 2.3, 2.13 or
3.8, nor Article Eight hereof nor this Article Ten may be amended or repealed
except upon the affirmative vote of holders of at least a majority of the total
number of votes of the then outstanding shares of capital stock of the Company
that are entitled to vote generally in the election of directors, voting
together as a single class. Any Bylaws adopted by the Board of Directors may be
altered, amended, or repealed, and new Bylaws adopted, by the shareholders. The
shareholders may prescribe in adopting any Bylaw or Bylaws that the Bylaw or
Bylaws so adopted shall not be altered, amended, or repealed by the Board of
Directors.
Dated: October __, 1999.
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SECOND AMENDED AND RESTATED BYLAWS
OF
OPTIO SOFTWARE, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1.1 Registered Office and Agent............................................................1
1.2 Principal Office.......................................................................1
1.3 Other Offices..........................................................................1
2.1 Place of Meetings......................................................................1
2.2 Annual Meetings........................................................................2
2.3 Special Meetings.......................................................................2
2.4 Notice of Meetings.....................................................................2
2.5 Waiver of Notice.......................................................................2
2.6 Voting Group; Quorum; Vote Required to Act.............................................2
2.7 Voting of Shares.......................................................................3
2.8 Proxies................................................................................3
2.9 Presiding Officer......................................................................3
2.10 Adjournments...........................................................................4
2.11 Conduct of the Meeting.................................................................4
2.12 Action of Shareholders Without a Meeting...............................................4
2.13 Matters Considered at Annual Meetings..................................................4
3.1 General Powers.........................................................................5
3.2 Number, Election and Term of Office....................................................5
3.3 Removal of Directors...................................................................5
3.4 Vacancies..............................................................................6
3.5 Compensation...........................................................................6
3.6 Committees of the Board of Directors...................................................6
3.7 Qualification of Directors.............................................................6
3.8 Certain Nomination Requirements........................................................6
4.1 Regular Meetings.......................................................................8
4.2 Special Meetings.......................................................................8
4.3 Place of Meetings......................................................................8
4.4 Notice of Meetings.....................................................................8
4.5 Quorum.................................................................................8
4.6 Vote Required for Action...............................................................8
4.7 Participation by Conference Telephone..................................................9
4.8 Action by Directors Without a Meeting..................................................9
4.9 Adjournments...........................................................................9
4.10 Waiver of Notice.......................................................................9
5.1 Offices................................................................................9
5.2 Term..................................................................................10
5.3 Compensation..........................................................................10
5.4 Removal...............................................................................10
5.5 Chairman of the Board.................................................................10
</TABLE>
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<TABLE>
<S> <C> <C>
5.6 Chief Executive Officer...............................................................10
5.7 President.............................................................................10
5.8 Vice Presidents.......................................................................11
5.9 Secretary.............................................................................11
5.10 Treasurer.............................................................................11
7.1 Share Certificates....................................................................12
7.2 Rights of Corporation with Respect to Registered Owners...............................12
7.3 Transfers of Shares...................................................................12
7.4 Duty of Corporation to Register Transfer..............................................12
7.5 Lost, Stolen, or Destroyed Certificates...............................................12
7.6 Fixing of Record Date.................................................................13
7.7 Record Date if None Fixed.............................................................13
8.1 Indemnification of Directors..........................................................13
8.2 Indemnification of Others.............................................................13
8.3 Other Organizations...................................................................14
8.4 Advances..............................................................................14
8.5 Non-Exclusivity.......................................................................14
8.6 Insurance.............................................................................14
8.7 Notice................................................................................15
8.8 Security..............................................................................15
8.9 Amendment.............................................................................15
8.10 Agreements............................................................................15
8.11 Continuing Benefits...................................................................15
8.12 Successors............................................................................16
8.13 Severability..........................................................................16
8.14 Additional Indemnification............................................................16
9.1 Inspection of Books and Records.......................................................16
9.2 Fiscal Year...........................................................................16
9.3 Corporate Seal........................................................................17
9.4 Annual Statements.....................................................................17
9.5 Notice................................................................................17
9.6 Election of "Fair Price" Statute......................................................17
9.7 Election of "Business Combination" Statute............................................17
</TABLE>
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Exhibit 4.2
SEE TRANSFER RESTRICTIONS ON REVERSE SIDE.
00 00
OPTIO SOFTWARE, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF GEORGIA
AUTHORIZED COMMON SHARES, 100,000,000 SHARES NO PAR VALUE
SPECIMEN
Zero And No/100 (0)
OF THE COMMON STOCK OF OPTIO SOFTWARE, INC. WHICH ARE FULLY PAID AND
NON-ASSESSABLE AND WHICH ARE
##th SEPTEMBER 99
____________________________________ _______________________________
SECRETARY PRESIDENT
<PAGE>
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") OR UNDER ANY STATE
SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, OR HYPOTHECATED
UNLESS (1) THERE IS AN EFFECTIVE REGISTRATION UNDER THE 1933 ACT AND UNDER
SUCH STATE LAW COVERING SUCH SECURITIES, (2) THE TRANSFER IS MADE IN
COMPLIANCE WITH RULE 144 PROMULGATED UNDER THE 1933 ACT AND UNDER SUCH STATE
LAWS, OR (3) THE ISSUER RECEIVES AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT
AND UNDER SUCH STATE LAWS.
2
<PAGE>
EXHIBIT 10.1
OPTIO SOFTWARE, INC.
STOCK INCENTIVE PLAN
SECTION 1.
PURPOSE
The purpose of this Plan is to promote the interests of the Company by
providing the opportunity to purchase Shares or to receive compensation which is
based upon appreciation in the value of Shares to Employees and Key Persons in
order to attract and retain Employees and Key Persons by providing an incentive
to work to increase the value of Shares and a stake in the future of the Company
which corresponds to the stake of each of the Company's shareholders. The Plan
provides for the grant of Incentive Stock Options, Non-Qualified Stock Options,
Restricted Stock Awards and Stock Appreciation Rights to aid the Company in
obtaining these goals.
SECTION 2.
DEFINITIONS
Each term set forth in this Section shall have the meaning set forth
opposite such term for purposes of this Plan and, for purposes of such
definitions, the singular shall include the plural and the plural shall include
the singular, and reference to one gender shall include the other gender.
2.1 BOARD means the Board of Directors of the Company.
2.2 CODE means the Internal Revenue Code of 1986, as amended.
2.3 COMMON STOCK means the common stock of the Company, having no par
value.
2.4 COMPANY means Optio Software, Inc., a Georgia corporation, and any
successor to such organization.
2.5 EMPLOYEE means an employee of the Company, a Subsidiary or a Parent.
2.6 EXCHANGE ACT means the Securities Exchange Act of 1934, as amended.
2.7 EXERCISE PRICE means the price which shall be paid to purchase one (1)
Share upon the exercise of an Option granted under this Plan.
2.8 FAIR MARKET VALUE means the price at which the Board, acting in good
faith, determines through any reasonable valuation method that a Share might
change hands between a willing buyer and a willing seller, neither being under
any compulsion to buy or to sell and both having reasonable knowledge of the
relevant facts.
2.9 ISO means an option granted under this Plan to purchase Shares which
is intended by the Company to satisfy the requirements of Code Section 422 as an
incentive stock option.
2.10 KEY PERSON means (i) a member of the Board who is not an Employee,
(ii) a consultant, distributor or other person who has rendered valuable
services to the Company, a Subsidiary or a Parent, (iii) a person who has
incurred, or is willing to incur, financial risk in the form of guaranteeing or
acting as co-obligor with respect to debts or other obligations of the Company,
or (iv) a person who has extended credit to the
<PAGE>
Company. Key Persons are not limited to individuals and, subject to the
preceding definition, may include corporations, partnerships, associations and
other entities.
2.11 NON-ISO means an option granted under this Plan to purchase Shares
which is not intended by the Company to satisfy the requirements of Code Section
422.
2.12 OPTION means an ISO or a Non-ISO.
2.13 PARENT means any corporation which is a parent of the Company (within
the meaning of Code Section 424(e)).
2.14 PARTICIPANT means an individual or entity receiving a Stock Incentive
hereunder.
2.15 PLAN means the Optio Software, Inc. Stock Incentive Plan, as amended
from time to time.
2.16 RESTRICTED STOCK AWARD means the grant of Shares by the Company to
Participants referenced in Section 7.4.
2.17 SHARE means a share of the Common Stock of the Company.
2.18 STOCK APPRECIATION RIGHT means the grant of certain rights from the
Company to a Participant as described in Section 7.3.
2.19 STOCK INCENTIVE means an ISO, a Non-ISO, a Restricted Stock Award or a
Stock Appreciation Right.
2.20 STOCK INCENTIVE AGREEMENT means an agreement between the Company and a
Participant evidencing an award of a Stock Incentive.
2.21 SUBSIDIARY means any corporation which is a subsidiary of the Company
(within the meaning of Code Section 424(f)).
2.22 SURRENDERED SHARES means the Shares described in Section 8.2 which (in
lieu of being purchased) are surrendered for cash or Shares, or for a
combination of cash and Shares, in accordance with Section 8.
2.23 TEN PERCENT SHAREHOLDER means a person who owns (after taking into
account the attribution rules of Code Section 424(d)) more than ten percent
(10%) of the total combined voting power of all classes of shares of either the
Company, a Subsidiary or a Parent.
2.24 TERMINATED FOR CAUSE means that the Employee's or Key Person's
employment or other relationship with the Company has been terminated due to the
Employee's or Key Person's (a) plea of guilty or no contest to, or conviction
of, a count or allegation of a felony; (b) failure to follow the reasonable
direction of the Company's Chief Executive Officer or President; (c) intentional
injury or attempted injury to the Company by the Employee or Key Person; (d)
willful dishonesty towards the Company; or (e) voluntary resignation; provided,
however, that when an Employee or Kay Employee dies, becomes permanently or
totally disabled (as such term is defined in Section 22(e) of the Code, and as
determined by the Board in its sole judgment), or retires (at an age permitted
by the Company's policies relating to commencement of retirement benefits, if
any, or at an age which permits the commencement of Social Security retirement
benefits), his or her employment or other relationship with the Company shall
not be deemed to have been Terminated for Cause.
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SECTION 3.
SHARES SUBJECT TO STOCK INCENTIVES
The total number of Shares that may be issued pursuant to Stock Incentives
under this Plan shall not exceed Two Million Five-Hundred Thousand (2,500,000),
as adjusted pursuant to Section 11. Such Shares shall be reserved, to the extent
that the Company deems appropriate, from authorized but unissued Shares, and
from Shares which have been reacquired by the Company. Furthermore, any Shares
subject to a Stock Incentive which remain after the cancellation, expiration or
exchange of such Stock Incentive thereafter shall again become available for use
under this Plan, but any Surrendered Shares which remain after the surrender of
an ISO or a Non-ISO under Section 8 shall not again become available for use
under this Plan.
SECTION 4.
EFFECTIVE DATE
The effective date of this Plan shall be the date it is adopted by the
Board, provided the shareholders of the Company approve this Plan within twelve
(12) months after such effective date. If such effective date comes before such
shareholder approval, any Stock Incentives granted under this Plan before the
date of such approval automatically shall be granted subject to such approval.
SECTION 5.
ADMINISTRATION
This Plan shall be administered by the Board. The Board, acting in its
absolute discretion, shall exercise such powers and take such action as
expressly called for under this Plan. The Board shall have the power to
interpret this Plan and, subject to Section 13, to take such other action in the
administration and operation of the Plan as it deems equitable under the
circumstances. The Board's actions shall be binding on the Company, on each
affected Employee or Key Person, and on each other person directly or indirectly
affected by such actions.
SECTION 6.
ELIGIBILITY
Except as provided below, only Employees shall be eligible for the grant of
Stock Incentives under this Plan, but no Employee shall have the right to be
granted a Stock Incentive under this Plan merely as a result of his or her
status as an Employee. Key Persons may be eligible, subject to written approval
by the Board, for the grant of Stock Incentives under this Plan, but only if the
Key Person has served on the Board as a Director or otherwise provided valuable
services to the Company, a Subsidiary or a Parent, and only if the Stock
Incentive is not an ISO.
SECTION 7
TERMS OF STOCK INCENTIVES
7.1 TERMS AND CONDITIONS OF ALL STOCK INCENTIVES
(a) The Board, in its absolute discretion, shall grant Stock
Incentives under this Plan from time to time and shall have the right to grant
new Stock Incentives in exchange for outstanding Stock Incentives. Stock
Incentives shall be granted to Employees or Key Persons selected by the Board,
and the Board shall be under no obligation whatsoever to grant Stock Incentives
to all Employees or Key Persons, or to grant all Stock Incentives subject to the
same terms and conditions. Each grant of a Stock Incentive shall be evidenced by
a Stock Incentive Agreement.
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<PAGE>
(b) The number of Shares as to which a Stock Incentive shall be
granted shall be determined by the Board in its sole discretion, subject to the
provisions of Section 3 as to the total number of shares available for grants
under the Plan.
(c) Each Stock Incentive shall be evidenced by a Stock Incentive
Agreement executed by the Company and the Participant, which shall be in such
form and contain such terms and conditions as the Board in its discretion may,
subject to the provisions of the Plan, from time to time determine.
(d) The date a Stock Incentive is granted shall be the date on which
the Board has approved the terms and conditions of the Stock Incentive Agreement
and has determined the recipient of the Stock Incentive and the number of Shares
covered by the Stock Incentive and has taken all such other action necessary to
complete the grant of the Stock Incentive.
(e) In the event that an Employee's or Key Person's employment (or
other contractual or business relationship, in the case of a Key Person) with
the Company is Terminated for Cause, the Company shall have the right to
repurchase each Share held by the Employee or Key Person as the result of the
exercise or award of any Stock Incentive under the Plan, at a repurchase price
equal to (1) the Exercise Price paid by the Employee or Key Person for each such
Share pursuant to the exercise of an ISO or Non-ISO, or (2) in the case of
Restricted Stock, the Fair Market Value of the Restricted Stock as of the date
of its initial award to the Employee or Key Person. In the event the Employee's
or Key Person's employment or other relationship with the Company ends but is
not Terminated for Cause, the Company shall have the right to repurchase each
Share held by the Employee or Key Person as a result of the exercise or award of
any Stock Incentive under the Plan, at a repurchase price equal to the Fair
Market Value of such Shares, computed as of the date of termination of the
employment of the Employee or Key Person. The date of termination of employment
shall be determined solely by the Board. The repurchase price shall be paid to
the Employee or Key Person by the Company within 90 days following the date of
termination of employment. The repurchase rights set forth herein shall also be
made provisions of the Stock Incentive Agreement and any exercise and
shareholder agreement by which Shares are purchased or awarded pursuant to a
Stock Incentive.
7.2 TERMS AND CONDITIONS OF OPTIONS. Each grant of an Option shall be
evidenced by a Stock Incentive Agreement which shall:
(I) specify whether the Option is an ISO or Non-ISO; and
(II) incorporate such other terms and conditions as the Board, acting
in its absolute discretion, deems consistent with the terms of this Plan,
including (without limitation) a restriction on the number of Shares subject to
the Option which first become exercisable or subject to surrender during any
calendar year.
In determining Employees or Key Persons to whom Options shall be
granted and the number of Shares to be covered by such Options, the Board may
take into account the recommendations of the President of the Company and its
other officers, the duties of the Employee or Key Person, the present and
potential contributions of the Employee or Key Person to the success of the
Company, the anticipated number of years of service remaining before the
attainment by the Employee of retirement age, and other factors deemed relevant
by the Board, in its sole discretion, in connection with accomplishing the
purpose of this Plan. An Employee or Key Person who has been granted an Option
to purchase Shares, whether under this Plan or otherwise, may be granted one or
more additional Options.
If the Board grants an ISO and a Non-ISO to an Employee on the same
date, the right of the Employee to exercise or surrender one such Option shall
not be conditioned on his or her failure to exercise or surrender the other such
Option.
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(a) EXERCISE PRICE. Subject to adjustment in accordance with Section
11 and the other provisions of this Section, the Exercise Price shall be as set
forth in the applicable Stock Incentive Agreement. With respect to each grant of
an ISO to a Participant who is not a Ten Percent Shareholder, the Exercise Price
shall not be less than the Fair Market Value on the date the ISO is granted.
With respect to each grant of an ISO to a Participant who is a Ten Percent
Shareholder, a Ten Percent Shareholder shall not be less than one hundred ten
percent (110%) of the Fair Market Value on the date the ISO is granted. If a
Stock Incentive is a Non-ISO, the Exercise Price for each Share shall be
determined by the Board but shall be no less than the minimum price required by
applicable state law, or by the Company's governing instrument, or $0.01,
whichever price is greater. The Exercise Price for a Non-ISO may be less than
the Fair Market Value of a Share as of the date of the Option grant.
(b) OPTION TERM. Each Option granted under this Plan shall be
exercisable in whole or in part at such time or times as set forth in the
related Stock Incentive Agreement, but no Stock Incentive Agreement shall:
(i) make an Option exercisable before the date such Option is
granted; or
(ii) make an Option exercisable after the earlier of the:
(A) the date such Option is exercised in full, or
(B) the date which is the tenth (10th) anniversary of the
date such Option is granted, if such Option is a
Non-ISO or an ISO granted to a non-Ten Percent
Shareholder, or the date which is the fifth (5th)
anniversary of the date such Option is granted, if such
Option is an ISO granted to a Ten Percent Shareholder.
A Stock Incentive Agreement may provide for the exercise of an Option
after the employment of an Employee has terminated for any reason whatsoever,
including death or disability.
(c) PAYMENT. Payment for all shares of Stock purchased pursuant to
exercise of an Option shall be made in cash or, if the Stock Incentive Agreement
provides, by delivery to the Company of a number of Shares which have been owned
by the holder for at least six (6) months prior to the date of exercise having
an aggregate Fair Market Value of not less than the product of the Exercise
Price multiplied by the number of Shares the Participant intends to purchase
upon exercise of the Option on the date of delivery. In addition, the Stock
Incentive Agreement may provide for cashless exercise through a brokerage
transaction following registration of the Company's equity securities under
Section 12 of the Securities Exchange Act of 1934. Except as provided in
subparagraph (f) below, payment shall be made at the time that the Option or any
part thereof is exercised, and no Shares shall be issued or delivered upon
exercise of an Option until full payment has been made by the Participant. The
holder of an Option, as such, shall have none of the rights of a stockholder.
Notwithstanding the above, and in the sole discretion of the Board, an
Option may be exercised as to a portion or all (as determined by the Board) of
the number of Shares specified in the Stock Incentive Agreement by delivery to
the Company of a promissory note, such promissory note to be executed by the
Participant and which shall include, with such other terms and conditions as the
Board shall determine, provisions in a form approved by the Board under which:
(i) the balance of the aggregate purchase price shall be payable in equal
installments over such period and shall bear interest at such rate (which shall
not be less than the prime bank loan rate as determined by the Board) as the
Board shall approve, and (ii) the Participant shall be personally liable for
payment of the unpaid principal balance and all accrued but unpaid interest.
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(d) CONDITIONS TO EXERCISE OF AN OPTION. Each Option granted under
the Plan shall be exercisable at such time or times, or upon the occurrence of
such event or events, and in such amounts, as the Board shall specify in the
Stock Incentive Agreement; provided, however, that subsequent to the grant of an
Option, the Board, at any time before complete termination of such Option, may
accelerate the time or times at which such Option may be exercised in whole or
in part.
(e) NONTRANSFERABILITY OF OPTIONS. Except as provided in subparagraph
(f) below, an Option shall not be transferable or assignable except by will or
by the laws of descent and distribution and shall be exercisable, during the
Participant's lifetime, only by the Participant, or in the event of the
disability of the Participant, by the legal representative of the Participant,
and in any event, only to the extent that such Option is vested.
(f) SPECIAL PROVISIONS FOR CERTAIN SUBSTITUTE OPTIONS.
Notwithstanding anything to the contrary in this Section, any Option in
substitution for a stock option previously issued by another entity, which
substitution occurs in connection with a transaction to which Code Section
424(a) is applicable, may provide for an exercise price computed in accordance
with such Code Section and the regulations thereunder and may contain such other
terms and conditions as the Board may prescribe to cause such substitute Option
to contain as nearly as possible the same terms and conditions (including the
applicable vesting and termination provisions) as those contained in the
previously issued stock option being replaced thereby.
7.3 TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS. A Stock
Appreciation Right may be granted in connection with all or any portion of a
previously or contemporaneously granted Option or not in connection with an
Option. A Stock Appreciation Right shall entitle the Participant to receive upon
exercise or payment the excess of: (I) the Fair Market Value of a specified
number of Shares at the time of exercise, over (II) a specified price which
shall not be less than the Exercise Price for that number of Shares in the case
of a Stock Appreciation Right granted in connection with a previously or
contemporaneously granted Option, or in the case of any other Stock Appreciation
Right not less than one hundred percent (100%) of the Fair Market Value of that
number of Shares at the time the Stock Appreciation Right was granted. A Stock
Appreciation Right granted in connection with an Option may only be exercised to
the extent that the related Option has not been exercised. The exercise of a
Stock Appreciation Right shall result in a pro rata surrender of the related
Option to the extent the Stock Appreciation Right has been exercised.
(a) PAYMENT. Upon exercise or payment of a Stock Appreciation Right,
the Company shall pay to the Participant the appreciation in cash or Shares (at
the aggregate Fair Market Value on the date of payment or exercise) as provided
in the Stock Incentive Agreement or, in the absence of such provision, as the
Board may determine.
(b) CONDITIONS TO EXERCISE. Each Stock Appreciation Right granted
under the Plan shall be exercisable at such time or times, or upon the
occurrence of such event or events, and in such amounts, as the Board shall
specify in the Stock Incentive Agreement; provided, however, that subsequent to
the grant of a Stock Appreciation Right, the Board, at any time before complete
termination of such Stock Appreciation Right, may accelerate the time or times
at which such Stock Appreciation Right may be exercised in whole or in part.
(c) NONTRANSFERABILITY OF STOCK APPRECIATION RIGHT. A Stock
Appreciation Right shall not be transferable or assignable except by will or by
the laws of descent and distribution and shall be exercisable, during the
Participant's lifetime, only by the Participant, or in the event of the
disability of the Participant, by the legal representative of the Participant.
7.4 TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS. Shares awarded
pursuant to Restricted Stock Awards shall be subject to restrictions for periods
determined by the Board. The Board shall have the
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power to permit, in its discretion, an acceleration of the expiration of the
applicable restriction period with respect to any part or all of the Shares
awarded to a Participant. The Board may require a cash payment from the
Participant in an amount no greater than the aggregate Fair Market Value of the
Shares awarded determined at the date of grant in exchange for the grant of a
Restricted Stock Award or may grant a Restricted Stock Award without the
requirement of a cash payment.
SECTION 8.
SURRENDER OF OPTIONS
8.1 GENERAL RULE. The Board, acting in its absolute discretion, may
incorporate a provision in a Stock Incentive Agreement to allow an Employee or
Key Person to surrender his or her Option in whole or in part in lieu of the
exercise in whole or in part of that Option on any date that:
(a) the Fair Market Value of the Shares subject to such Option
exceeds the Exercise Price for such Shares, and
(b) the Option to purchase such Shares is otherwise exercisable.
8.2 PROCEDURE. The surrender of an Option in whole or in part shall be
effected by the delivery of the Stock Incentive Agreement to the Board, together
with a statement signed by the Participant which specifies the number of Shares
("Surrendered Shares") as to which the Participant surrenders his or her Option
and how he or she desires payment be made for such Surrendered Shares.
8.3 PAYMENT. A Participant in exchange for his or her Surrendered Shares
shall receive a payment in cash or in Shares, or in a combination of cash and
Shares, equal in amount on the date such surrender is effected to the excess of
the Fair Market Value of the Surrendered Shares on such date over the Exercise
Price for the Surrendered Shares. The Board, acting in its absolute discretion,
can approve or disapprove a Participant's request for payment in whole or in
part in cash and can make that payment in cash or in such combination of cash
and Shares as the Board deems appropriate. A request for payment only in Shares
shall be approved and made in Shares to the extent payment can be made in whole
shares of Shares and (at the Board's discretion) in cash in lieu of any
fractional Shares.
8.4 RESTRICTIONS. Any Stock Incentive Agreement which incorporates a
provision to allow a Participant to surrender his or her Option in whole or in
part also shall incorporate such additional restrictions on the exercise or
surrender of such Option as the Board deems necessary to satisfy the conditions
to the exemption under Rule 16b-3 (or any successor exemption) to Section 16(b)
of the Exchange Act.
SECTION 9.
SECURITIES REGULATION
Each Stock Incentive Agreement may provide that, upon the receipt of Shares
as a result of the surrender or exercise of a Stock Incentive, the Participant
shall, if so requested by the Company, hold such Shares for investment and not
with a view of resale or distribution to the public and, if so requested by the
Company, shall deliver to the Company a written statement satisfactory to the
Company to that effect. Each Stock Incentive Agreement may also provide that, if
so requested by the Company, the Participant shall make a written representation
to the Company that he or she will not sell or offer to sell any of such Shares
unless a registration statement shall be in effect with respect to such Shares
under the Securities Act of 1933, as amended ("1933 Act"), and any applicable
state securities law or, unless he or she shall have furnished to the Company an
opinion, in form and substance satisfactory to the Company, of legal counsel
acceptable to the Company, that such registration is not required. Certificates
representing the Shares transferred upon the exercise or surrender of a Stock
Incentive granted under this Plan may at the discretion of the Company bear a
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legend to the effect that such Shares have not been registered under the 1933
Act or any applicable state securities law and that such Shares may not be sold
or offered for sale in the absence of an effective registration statement as to
such Shares under the 1933 Act and any applicable state securities law or an
opinion, in form and substance satisfactory to the Company, of legal counsel
acceptable to the Company, that such registration is not required.
SECTION 10.
LIFE OF PLAN
No Stock Incentive shall be granted under this Plan on or after the earlier
of:
(a) the tenth (10th) anniversary of the effective date of this Plan (as
determined under Section 4 of this Plan), in which event this Plan otherwise
thereafter shall continue in effect until all outstanding Stock Incentives have
been surrendered or exercised in full or no longer are exercisable, or
(b) the date on which all of the Shares reserved under Section 3 of this
Plan have (as a result of the surrender or exercise of Stock Incentives granted
under this Plan) been issued or no longer are available for use under this Plan,
in which event this Plan also shall terminate on such date.
SECTION 11.
ADJUSTMENT
The number of Shares reserved under Section 3 of this Plan, and the number
of Shares subject to Stock Incentives granted under this Plan, and the Exercise
Price of any Options, shall be adjusted by the Board in an equitable manner to
reflect any change in the capitalization of the Company, including, but not
limited to, such changes as stock dividends or stock splits. Furthermore, the
Board shall have the right to adjust (in a manner which satisfies the
requirements of Code Section 424(a)) the number of Shares reserved under Section
3, and the number of Shares subject to Stock Incentives granted under this Plan,
and the Exercise Price of any Options in the event of any corporate transaction
described in Code Section 424(a) which provides for the substitution or
assumption of such Stock Incentives. If any adjustment under this Section
creates a fractional Share or a right to acquire a fractional Share, such
fractional Share shall be disregarded, and the number of Shares reserved under
this Plan and the number subject to any Stock Incentives granted under this Plan
shall be the next lower number of Shares, rounding all fractions downward. An
adjustment made under this Section by the Board shall be conclusive and binding
on all affected persons and, further, shall not constitute an increase in the
number of Shares reserved under Section 3.
SECTION 12.
SALE OR MERGER OF THE COMPANY
If the Company agrees to sell substantially all of its assets for cash or
property, or for a combination of cash and property, or agrees to any merger,
consolidation, reorganization, division or other transaction in which Shares are
converted into another security or into the right to receive securities or
property and such agreement does not provide for the assumption or substitution
of the Stock Incentives granted under this Plan, each Stock Incentive at the
direction and discretion of the Board, or as is otherwise provided in the Stock
Incentive Agreements, may be canceled unilaterally by the Company in exchange
for the whole Shares (or, subject to satisfying the conditions to the exemption
under Rule 16b-3 or any successor exemption to Section 16(b) of the Exchange
Act, for the whole Shares and the cash in lieu of a fractional Share) which each
Participant otherwise would receive if he or she had the right to surrender or
exercise his or her outstanding Stock Incentive in full and he or she exercised
that right exclusively for Shares on a date fixed by the Board which comes
before such sale or other corporate transaction.
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SECTION 13.
AMENDMENT OR TERMINATION
This Plan may be amended by the Board from time to time to the extent that
the Board deems necessary or appropriate; provided, however, no such amendment
shall be made absent the approval of the shareholders of the Company: (a) to
increase the number of Shares reserved under Section 3, except as set forth in
Section 11, (b) to extend the maximum life of the Plan under Section 10 or the
maximum exercise period under Section 7, (c) to decrease the minimum Exercise
Price under Section 7, or (d) to change the designation of Employees or Key
Persons eligible for Stock Incentives under Section 6. The Board also may
suspend the granting of Stock Incentives under this Plan at any time and may
terminate this Plan at any time; provided, however, the Company shall not have
the right to modify, amend or cancel any Stock Incentive granted before such
suspension or termination unless: (I) the Participant consents in writing to
such modification, amendment or cancellation, or (II) there is a dissolution or
liquidation of the Company or a transaction described in Section 11 or Section
12.
SECTION 14.
MISCELLANEOUS
14.1 SHAREHOLDER RIGHTS. No Participant shall have any rights as a
shareholder of the Company as a result of the grant of a Stock Incentive to him
or to her under this Plan or his or her exercise or surrender of such Stock
Incentive pending the actual delivery of Shares subject to such Stock Incentive
to such Participant.
14.2 NO GUARANTEE OF CONTINUED RELATIONSHIP. The grant of a Stock Incentive
to a Participant under this Plan shall not constitute a contract of employment
and shall not confer on a Participant any rights upon his or her termination of
employment or relationship with the Company in addition to those rights, if any,
expressly set forth in the Stock Incentive Agreement which evidences his or her
Stock Incentive.
14.3 WITHHOLDING. The exercise or surrender of any Stock Incentive granted
under this Plan shall constitute a Participant's full and complete consent to
whatever action the Board directs to satisfy the federal and state tax
withholding requirements, if any, which the Board in its discretion deems
applicable to such exercise or surrender.
14.4 TRANSFER. The transfer of an Employee between or among the Company, a
Subsidiary or a Parent shall not be treated as a termination of his or her
employment under this Plan.
14.5 CONSTRUCTION. This Plan shall be construed under the laws of the State
of Georgia.
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Exhibit 10.2
OPTIO SOFTWARE, INC.
DIRECTORS' STOCK OPTION PLAN
SECTION 1.
PURPOSE
The purpose of this Plan is to promote the interests of the Company by
providing the opportunity to purchase Shares to Directors who are not Employee
in order to attract and retain such Directors by providing an incentive to work
to increase the value of Shares and a stake in the future of the Company which
corresponds to the stake of each of the Company's shareholders. The Plan
provides for the grant of Non-Qualified Stock Options to aid the Company in
obtaining these goals.
SECTION 2.
DEFINITIONS
Each term set forth in this Section shall have the meaning set forth
opposite such term for purposes of this Plan and, for purposes of such
definitions, the singular shall include the plural and the plural shall include
the singular, and reference to one gender shall include the other gender.
2.1 BOARD means the Board of Directors of the Company.
2.2 CODE means the Internal Revenue Code of 1986, as amended.
2.3 COMMITTEE means the Compensation Committee of the Board.
2.4 COMMON STOCK means the common stock, no par value per share,
of the Company.
2.5 COMPANY means Optio Software, Inc., a Georgia corporation,
and any successor to such organization.
2.6 DIRECTOR means a member of the Board.
2.7 ELIGIBLE DIRECTOR means a Director who is not an Employee.
2.8 EMPLOYEE means an employee of the Company, a Subsidiary or a
Parent.
2.9 EXCHANGE ACT means the Securities Exchange Act of 1934, as
amended.
2.10 EXERCISE PRICE means the price which shall be paid to
purchase one (1) Share upon the exercise of an Option granted under this Plan.
2.11 FAIR MARKET VALUE of each Share on any date means the price
determined below on the last business day immediately preceding the date of
valuation:
(a) 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 Board deems reliable; or
<PAGE>
(b) 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 intermeddler quotation system of the
National Association of Securities Dealers, Inc. on the date of such
determination; or
(c) 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.
2.12 INSIDER means an individual who is, on the relevant date,
an officer, Director or ten percent (10%) beneficial owner of any class of
the Company's equity securities that is registered pursuant to Section 12 of
the Exchange Act, all as defined under Section 16 of the Exchange Act.
2.13 NQSO means an option granted under this Plan to purchase
Shares.
2.14 OPTION means a NQSO.
2.15 PARENT means any corporation which is a parent of the
Company (within the meaning of Code ss.424).
2.16 PARTICIPANT means an individual who receives a NQSO hereunder.
2.17 PLAN means this Optio Software, Inc. Directors' Stock
Option Plan, as amended from time to time.
2.18 SHARE means a share of the Common Stock of the Company.
2.19 STOCK OPTION AGREEMENT means an agreement between the
Company and a Participant evidencing an award of a NQSO.
2.20 SUBSIDIARY means any corporation which is a subsidiary of
the Company (within the meaning of Code ss.424(f)).
SECTION 3.
SHARES SUBJECT TO STOCK OPTIONS
The total number of Shares that may be issued pursuant to Stock Options
under this Plan shall not exceed 300,000, as adjusted pursuant to Section 10.
Such Shares shall be reserved, to the extent that the Company deems appropriate,
from authorized but unissued Shares, and from Shares which have been reacquired
by the Company. Furthermore, any Shares subject to a Stock Option which remain
after the cancellation, expiration or exchange of such Stock Option thereafter
shall again become available for use under this Plan.
SECTION 4.
EFFECTIVE DATE
The effective date of this Plan, as amended and restated herein, shall
be the date it is adopted by the Board.
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SECTION 5.
ADMINISTRATION
5.1 GENERAL ADMINISTRATION. This Plan shall be administered by the
Board. The Board, acting in its absolute discretion, shall exercise such powers
and take such action as expressly called for under this Plan. The Board shall
have the power to interpret this Plan and, subject to Section 12 to take such
other action in the administration and operation of the Plan as it deems
equitable under the circumstances. The Board's actions shall be binding on the
Company, on each affected Director, and on each other person directly or
indirectly affected by such actions.
5.2 DELEGATION OF AUTHORITY. The Board may delegate its authority under
the Plan, in whole or in part, to a Committee appointed by the Board consisting
of not less than two (2) Directors. The members of the Committee shall serve at
the discretion of the Board. The Committee (if appointed) shall act according to
the policies and procedures set forth in the Plan and to those policies and
procedures established by the Board, and the Committee shall have such powers
and responsibilities as are set forth by the Board. Reference to the Board in
this Plan shall specifically include reference to the Committee where the Board
has delegated it authority to the Committee, and any action by the Committee
pursuant to a delegation of authority by the Board shall be deemed an action by
the Board under the Plan. Notwithstanding the above, the Board may assume the
powers and responsibilities granted to the Committee at any time, in whole or in
part.
5.3 DECISIONS BINDING. All determinations and decisions made by the
Board (or its delegate) pursuant to the provisions of this Plan and all related
orders and resolutions of the Board shall be final, conclusive and binding on
all persons, including the Company, its stockholders, Directors, Participants,
and their estates and beneficiaries.
SECTION 6.
ELIGIBILITY AND GRANTS OF OPTIONS
6.1 INDIVIDUALS ELIGIBLE FOR GRANTS OF OPTIONS. Only Eligible Directors
shall be eligible for the grant of Stock Options under this Plan. Eligible
Directors shall receive Options hereunder in accordance with the provisions of
Section 6.2 below.
6.2 GRANT OF OPTIONS. Options shall be granted to Eligible Directors in
accordance with the following formulas:
(a) OPTIONS UPON INITIALLY BECOMING A DIRECTOR. Upon initially
becoming an Eligible Director after the effective date, an individual shall be
granted an Option to purchase 10,000 Shares, with such Option subject to the
provisions of Section 7 below, and with such grant occurring on the date on
which the individual becomes an Eligible Director. Options granted under this
subsection (a) shall not be granted to a Director who has previously served as a
Director and who is again becoming a Director, but shall only be granted upon an
individual's initially becoming an eligible Director.
(b) OPTIONS AFTER EACH YEAR OF SERVICE. As of the end of each
completed year of service as an Eligible Director after the effective date, an
individual shall be granted an Option to purchase 5,000 Shares, with such Option
subject to the provisions of Section 7 below.
(c) TRANSITIONAL RULE. Except as provided in this subsection
(c), no individual who is serving as an Eligible Director as of the effective
date of this Plan shall be entitled to any Options under subsections (a) or (b)
above of this Plan until the expiration of his current term. Each Eligible
Director as of the effective date shall be granted Options under the terms and
provisions of subsection (a) above as of the effective date as if such Director
had initially become an Eligible Director on the effective date. Each Eligible
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Director as of the effective date shall be granted Options under the terms and
provisions of subsection (b) as if such Director had completed a single fiscal
year of service as of the date on which his current term is set to expire.
(d) YEARS OF SERVICE. A year of service as a director shall be
measured from the date of an annual meeting of shareholders of the Company to
the date of the next succeeding annual meeting. The Committee shall have
complete power to interpret the provisions of this Section 6.2, including the
power to determine whether an individual has completed a year of service.
SECTION 7
TERMS OF STOCK OPTIONS
7.1 TERMS AND CONDITIONS OF ALL STOCK OPTIONS
(a) Each Stock Option shall be evidenced by a Stock Option
Agreement executed by the Company and the Participant, which shall be in such
form and contain such terms and conditions as the Committee in its discretion
may, subject to the provisions of the Plan, from time to time determine.
(d) Options issued under this Plan shall be immediately vested
upon grant.
7.2 TERMS AND CONDITIONS OF OPTIONS.
(a) EXERCISE PRICE. Subject to adjustment in accordance with
Section 10 and the other provisions of this Section, the Exercise Price shall be
set forth in the applicable Stock Option Agreement, and shall be equal to the
Fair Market Value of a Share determined as of the date of grant of the Option.
(b) OPTION TERM. Each Option granted under this Plan shall be
exercisable in whole or in part as of the date of grant, but no Stock Option
Agreement shall (i) make an Option exercisable before the date such Option is
granted; or (ii) make an Option exercisable after the earlier of (A) the date
such Option is exercised in full, or (B) the date which is the tenth (10th)
anniversary of the date such Option is granted.
(c) PAYMENT. Options shall be exercised by the delivery of a
written notice of exercise to the Company, setting forth the number of Shares
with respect to which the Option is to be exercised accompanied by full payment
for the Shares. Payment for all shares of Stock purchased pursuant to exercise
of an Option shall be made in cash or, if the Stock Option Agreement provides,
by delivery to the Company of a number of Shares which have been owned by the
holder for at least six (6) months prior to the date of exercise having an
aggregate Fair Market Value equal to the amount to be tendered, or a combination
thereof. In addition, if the Stock Option Agreement so provides, the Option may
be exercised through a brokerage transaction following registration of the
Company's equity securities under Section 12 of the Securities Exchange Act of
1934 as permitted under the provisions of Regulation T applicable to cashless
exercises promulgated by the Federal Reserve Board. However, notwithstanding the
foregoing, with respect to any Option recipient who is an Insider, a tender of
shares or a cashless exercise must (1) have met the requirements of an exemption
under Rule 16b-3 promulgated under the Exchange Act, or (2) be a subsequent
transaction the terms of which were provided for in a transaction initially
meeting the requirements of an exemption under Rule 16b-3 promulgated under the
Exchange Act. Payment shall be made at the time that the Option or any part
thereof is exercised, and no Shares shall be issued or delivered upon exercise
of an Option until full payment has been made by the Participant. The holder of
an Option, as such, shall have none of the rights of a stockholder.
Notwithstanding the preceding, and in the sole discretion of the Committee, an
Option may be exercised as to a portion or all (as determined by the Committee)
of the number of Shares specified in the Stock Option Agreement by delivery to
the Company of a promissory note, such promissory note to be executed by the
Participant and which shall include, with such other terms and conditions as the
Committee shall determine,
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provisions in a form approved by the Committee under which: (i) the balance of
the aggregate purchase price shall be payable in equal installments over such
period and shall bear interest at such rate (which shall not be less than the
prime bank loan rate as determined by the Committee) as the Committee shall
approve, and (ii) the Participant shall be personally liable for payment of the
unpaid principal balance and all accrued but unpaid interest.
(d) CONDITIONS ON SHARES PURCHASED WITH OPTION. The Board may
impose such restrictions on any Shares acquired pursuant to the exercise of an
Option as it may deem advisable, including, without limitation, restrictions
under applicable federal securities laws, under the requirements of any stock
exchange or market upon which such Shares are then listed and/or traded, and
under any blue sky or state securities laws applicable to such Shares.
(e) NONTRANSFERABILITY OF OPTIONS. An Option shall not be
transferable or assignable except by will or by the laws of descent and
distribution and shall be exercisable, during the Participant's lifetime, only
by the Participant; provided, however, that in the event the Participant is
incapacitated and unable to exercise his or her Option, such Option may be
exercised by such Participant's legal guardian, legal representative, or other
representative whom the Committee deems appropriate based on applicable facts
and circumstances. The determination of incapacity of a Participant and the
determination of the appropriate representative of the Participant who shall be
able to exercise the Option if the Participant is incapacitated shall be
determine by the Committee in its sole and absolute discretion.
SECTION 8.
SECURITIES REGULATION
Each Stock Option Agreement may provide that, upon the receipt of
Shares as a result of the surrender or exercise of a Stock Option, the
Participant shall, if so requested by the Company, hold such Shares for
investment and not with a view of resale or distribution to the public and, if
so requested by the Company, shall deliver to the Company a written statement
satisfactory to the Company to that effect. Each Stock Option Agreement may also
provide that, if so requested by the Company, the Participant shall make a
written representation to the Company that he or she will not sell or offer to
sell any of such Shares unless a registration statement shall be in effect with
respect to such Shares under the Securities Act of 1933, as amended ("1933
Act"), and any applicable state securities law or, unless he or she shall have
furnished to the Company an opinion, in form and substance satisfactory to the
Company, of legal counsel acceptable to the Company, that such registration is
not required. Certificates representing the Shares transferred upon the exercise
or surrender of a Stock Option granted under this Plan may at the discretion of
the Company bear a legend to the effect that such Shares have not been
registered under the 1933 Act or any applicable state securities law and that
such Shares may not be sold or offered for sale in the absence of an effective
registration statement as to such Shares under the 1933 Act and any applicable
state securities law or an opinion, in form and substance satisfactory to the
Company, of legal counsel acceptable to the Company, that such registration is
not required.
SECTION 9.
LIFE OF PLAN
No Stock Option shall be granted under this Plan on or after the
earlier of:
(a) the tenth (10th) anniversary of the effective date of this Plan (as
determined under Section 4 of this Plan), in which event this Plan otherwise
thereafter shall continue in effect until all outstanding Stock Options have
been surrendered or exercised in full or no longer are exercisable, or
Page 5 of 7
<PAGE>
(b) the date on which all of the Shares reserved under Section 3 of
this Plan have (as a result of the exercise of Stock Options granted under this
Plan) been issued or no longer are available for use under this Plan.
SECTION 10.
ADJUSTMENT
The number of Shares reserved under Section 3 of this Plan, and the
number of Shares subject to Stock Options granted under this Plan, and the
Exercise Price of any Options, shall be adjusted by the Committee in an
equitable manner to reflect any change in the capitalization of the Company,
including, but not limited to, such changes as stock dividends or stock splits.
Furthermore, the Committee shall have the right to adjust (in a manner which
satisfies the requirements of Code ss.424(a)) the number of Shares reserved
under Section 3, the number of Shares and Exercise Price of Options to be
granted under Section 6, and the number of Shares subject to Stock Options
granted under this Plan, and the Exercise Price of any Options in the event of
any corporate transaction described in Code ss.424(a) which provides for the
substitution or assumption of such Stock Options. If any adjustment under this
Section creates a fractional Share or a right to acquire a fractional Share,
such fractional Share shall be disregarded, and the number of Shares reserved
under this Plan and the number subject to any Stock Options granted under this
Plan shall be the next lower number of Shares, rounding all fractions downward.
An adjustment made under this Section by the Committee shall be conclusive and
binding on all affected persons and, further, shall not constitute an increase
in the number of Shares reserved under Section 3.
SECTION 11.
SALE OR MERGER OF THE COMPANY
If the Company agrees to sell substantially all of its assets for cash or
property, or for a combination of cash and property, or agrees to any merger,
consolidation, reorganization, division or other transaction in which Shares are
converted into another security or into the right to receive securities or
property, and such agreement does not provide for the assumption or substitution
of the Stock Options granted under this Plan, each Stock at the direction and
discretion of the Committee or the Board, or as is otherwise provided in the
Stock Option Agreements (i) may be deemed to be fully vested and/or exercisable,
or (ii) may be canceled unilaterally by the Company in exchange for (a) whole
Shares and, at the Committee's direction and discretion, cash in lieu of any
fractional Share which each Participant would otherwise receive if he or she had
the right to exercise his or her outstanding Stock Option in full and he or she
exercised that right exclusively for Shares on a date fixed by the Committee
which comes before such sale or other corporate transaction, or (b) cash or
other property equivalent in value, as determined by the Board in its sole
discretion, to the Shares described in (a). Any such Stock Option which is not
assumed or substituted as provided above and which the Company does not elect to
cancel prior to a sale or other corporate transaction as described in this
Section shall become fully vested and immediately exercisable just prior to the
closing of such transaction.
SECTION 12.
AMENDMENT OR TERMINATION
This Plan may be amended by the Board from time to time to the extent
that the Board deems necessary or appropriate. The Board also may suspend the
granting of Stock Options under this Plan at any time and may terminate this
Plan at any time; provided, however, the Company shall not have the right to
modify, amend or cancel any Stock Option granted before such suspension or
termination unless (a) the Participant consents in writing to such modification,
amendment or cancellation, or (b) there is a dissolution or liquidation of the
Company or a transaction described in Section 10 or Section 11.
Page 6 of 7
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SECTION 13.
MISCELLANEOUS
13.1 SHAREHOLDER RIGHTS. No Participant shall have any rights as a
shareholder of the Company as a result of the grant of a Stock Option to him or
to her under this Plan or his or her exercise or surrender of such Stock Option
pending the actual delivery of Shares subject to such Stock Option to such
Participant.
13.2 NO GUARANTEE OF CONTINUED RELATIONSHIP. The grant of a Stock
Option to a Participant under this Plan shall not constitute a contract for
services and shall not confer on a Participant any rights upon his or her
termination of service or relationship with the Company in addition to those
rights, if any, expressly set forth in the Stock Option Agreement which
evidences his or her Stock Option.
13.3 CONSTRUCTION. This Plan shall be construed under the laws of the
State of Georgia.
Page 7 of 7
<PAGE>
Exhibit 10-3
COVER PAGE
The capitalized terms in this Lease shall have the meanings ascribed to
them below, and each reference to such term in the Lease shall incorporate such
meaning therein as if fully set forth therein.
LANDLORD: WEEKS REALTY, L.P., a Georgia limited partnership, with its
principal office located at 4497 Park Drive, Norcross,
Georgia 30093
TENANT: X-POINT CORPORATION, a corporation duly organized and
existing under the laws of the State of Georgia.
LEASED
PREMISES: (a) Address: 4800 River Green Parkway
Duluth, GA 30136
(b) Suite: N/A
(c) Rentable Area: 25,538 square feet
(d) Pro Rata Share: 100%
(e) Project: River Green
TERM: Three (3) years
COMMENCEMENT DATE: December 1, 1996
TERMINATION DATE November 30,1999
BASE RENT
(FIRST YEAR): $210,688.50
BASE YEAR: 191
SECURITY DEPOSIT: $17,557.37
TENANT'S AGENT: Steve Schwartz
Corporate Property Advisors
Jim Bob Taylor
Lavista Associates, Inc.
<PAGE>
X-POINT CORPORATION
LEASE AGREEMENT
TABLE OF CONTENTS
SECTION PAGE
1.01 LEASED PREMISES...................................................4
2.01 TERM..............................................................4
3.01 RENTAL............................................................4
4.01 DELAY IN DELIVERY OF POSSESSION...................................5
5.01 USE OF LEASED PREMISES............................................5
6.01 UTILITIES.........................................................6
7.01 ACCEPTANCE OF LEASED PREMISES.....................................6
8.01 ALTERATIONS, NIECHANICS'LIENS.....................................7
9.01 QUIET CONDUCT/QUIET ENJOYNENT.....................................7
10.1 FIRE INSURANCE, HAZARDS...........................................7
11.1 LIABILITY INSURANCE...............................................8
12.1 INDENIPMCATION BY TENANT..........................................8
13.1 WAIVEROFCLAIMS....................................................9
14.1 REPAIRS...........................................................9
15.1 SIGNS, LANDSCAPING...............................................10
16.1 ENTRY BY LANDLORD................................................10
17.1 TAXES AND INSURANCE INCREASE.....................................10
18.1 ABANDONNIENT.....................................................11
19.1 DESTRUCTION......................................................12
20.1 ASSIGNMENT AND SUBLETTING........................................12
21.1 INSOLVENCY OF TENANT.............................................13
22.1 BREACH BY TENANT.................................................13
23.1 ATTORNEY'S FEES..................................................14
24.1 CONDEMNATION.....................................................15
24.1 NOTICES..........................................................15
25.1 WAIVER...........................................................16
26.1 EFFECT OF HOLDING OVER...........................................16
27.1 SUBORDINATION....................................................16
28.1 ESTOPPEL CERTIFICATE.............................................16
29.1 PARKING..........................................................17
30.1 MORTGAGEE PROTECTION.............................................17
31.1 PROTECITVE COVENANTS.............................................17
32.1 RELOCATION.......................................................17
33.1 BROKERAGE COMMISSIONS............................................17
34.1 MISCELLANEOUS PROVISIONS.........................................18
EXHIBITS:
EXHIBIT "A" SITE PLAN
EXHIBIT "B" FLOOR PLAN OF THE LEASE PREMISES
EXHIBIT "C" TENANT'S ACCEPTANCE OF PREMISES
EXHIBIT "D" SUBORDINATION, NON-DISTURBANCE AND
ATTORNMENT AGREEMENT
EXHIBIT "E" SPECIAL STIPULATIONS
EXHIBIT "F" GUARANTY
<PAGE>
STATE OF GEORGIA
GWINNETT COUNTY
This Lease Agreement is made this 18th day of March, 1996, by and
between WEEKS REALTY, L.P., a Georgia limited partnership, hereinafter referred
to as "Landlord", and X-POINT CORPORATION, hereinafter referred to as "Tenant".
LEASED PREMISES
1.01 Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, the property hereinafter referred to as the LEASED PREMISES, described
as approximately 25,538 rentable square feet of office/warehouse at 4800 River
Green Parkway, Duluth, Georgia 30136, Gwinnett County, in River Green, as shown
on the plan attached hereto as Exhibit "A" and by reference incorporated herein.
The building in which the Leased Premises are located is herein referred to, as
the "Building"; and the real property on which the building is situated is
herein referred to as the "Land".
TERM
2.01 TO HAVE AND TO HOLD said Leased Premises for a term of three (3)
years, commencing on December 1, 1996, and continuing until midnight on November
30, 1999.
RENTAL
3.01 As rental for the Leased Premises, Tenant agrees to pay to
Landlord, without offset or abatement, the base rental as set forth below:
Year 1 $17,557.37/month $210,688.50/ year
Year 2 $18,089.41/ month $217,073.00/ year
Year 3 $18,621.45/month $223,457.50/ year
due on or before the first day of each calendar month as set forth above and
thereafter for the remainder of the term, together with any other additional
rental as hereinafter set forth. Tenant shall pay interest at a rate of twelve
percent (12%) per annum on all rental payments not received by Landlord within
five (5) calendar days of the due date thereof. If the Lease shall commence on
any date other than the first day of a calendar month, or end on any date,
other, than the last day of a calendar month, rent for such month shall be
prorated. Tenant has deposited with Landlord, upon delivery of this Lease
Agreement, an amount equal to Seventeen Thousand Five Hundred Fifty Seven and
37/100 ($17,557.37) Dollars to be applied as first month's rental. At
Commencement Date, Tenant shall deposit an amount equal to Seventeen Thousand
Five Hundred Fifty Seven and 37/100 ($17,557.37) Dollars to be held as a
refundable security deposit.
3.02 Tenant accepts the Leased Premises AS IS and WHERE IS except
however for latent defects and damages other than reasonable wear and tear.
3.03 (a) In addition to the base rental, Tenant agrees to pay Landlord
as additional rental, the amounts described in subparagraph (b) below. Each year
during the term hereof,
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Landlord shall give Tenant written notice of its estimate of the amount of
common area maintenance charges and common area utility charges for the
Leased Premises and its pro rata share of common area assessments for the
Project for the calendar year (collectively "Charges"). Tenant shall,
thereafter, during that calendar year, pay to Landlord the amount set forth
in said statement at such time as its monthly installments of base rental
hereunder are due and payable. At such time as Landlord is able to determine
the actual Charges for such calendar year, Landlord shall deliver to Tenant a
statement thereof and in the event the estimated Charges differ from the
actual Charges, any adjustment necessary shall be made to additional rental
payments next con-ting due under this paragraph. Notwithstanding the
provisions of this Section 3.03, in no event shall any increase in the CAM
Charges exceed ten percent (10%) over CAM Charges for the preceding year.
(b) Landlord agrees to maintain those areas around the Building
including parking areas, planted areas, signs and landscaped areas which are
from time to time designated by Landlord. In addition, the Development Review
Commission under the Protective Covenants (hereinafter defined) shall maintain
the common areas of the Project in good repair and in a dean condition. Tenant
agrees to pay to Landlord as additional rental all ground maintenance charges
and other common area charges and expenses for the Building and the Land, and
its pro rata share of common area assessments for the Project ("CAM Charges").
The term "grounds maintenance" shall include, without limitation, all
landscaping, planting, lawn and grounds care, irrigation costs, all repairs and
maintenance to the grounds, signs and other common areas around the Budding and
in the Project and to all sidewalks, driveways, loading areas and parking areas.
CAM Charges shall not include items of a capital nature.
3.04 Tenant agrees to pay as additional rent to Landlord, upon demand,
any utility surcharges, or any other costs levied, assessed or imposed by, or at
the direction of, or. resulting from statutes or regulations, or interpretations
thereof, promulgated by any Federal, State, Municipal or local governmental
authorities in connection with the use or occupancy of the Leased Premises.
DELAY IN DELIVERY OF POSSESSION
4.01 Intentionally Deleted.
USE OF LEASED PREMISES
5.01 The Leased Premises may be used and occupied only for general
manufacturing and assembly, testing, warehousing and distribution, showroom and
offices and for no other purpose or purposes, without Landlords prior written
consent. Tenant shall promptly comply at its sole expense with all laws,
ordinances, orders, and regulations affecting the Leased Premises and their
cleanliness, safety, occupation and use. Tenant shall not do or permit anything
to be done in or about the Leased Premises that will in any way increase the
fire insurance upon the building. Tenant will not perform any act or carry on
any practices that may injure the building or be a nuisance or menace to tenants
of adjoining premises, Tenant shall not cause, maintain or permit any outside
storage on or about the Leased Premises, including pallets or other refuse. The
rear loading areas of the Tenant's unit must be dean and unobstructed. On or
before the Commencement Date, Tenant shall take possession of, and, thereafter,
continuously occupy the
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<PAGE>
Leased Premises during the term of this Lease, and operate thereon the normal
business operations of Tenant.
5.02 Tenant shall, at Tenant's sole cost and expense, comply fully with
all environmental laws and regulations, and all other legal requirements,
applicable to Tenant's operations at, on or within, or to Tenant's use and
occupancy of, the Leased Premises. Tenant shall not (either with or without
negligence) cause or permit the escape, disposal or release of any biologically
or chemically active or other hazardous substances, or materials. Tenant shall
not allow the storage or use of such substances or materials in any manner not
sanctioned by law or by the highest standards prevailing in the industry for the
storage and use of such substances or materials, nor allow to be brought into
the Project any such materials or substances except to use in the ordinary
course of Tenant's business, and then only after written notice is given to
Landlord of the identity of such substances or materials. Without limitation,
hazardous substances and materials shall include those described in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Section 9601 et seq., the Resource Conservation and Recovery
Act, as amended, 42 U.S.C. Section 6901 et seq., any applicable state or local
laws and the regulations adopted under these acts. If any lender or governmental
agency shall ever require testing to ascertain whether or not there has been any
release of hazardous materials then the reasonable costs thereof shall be
reimbursed by Tenant to Landlord upon demand as additional charges if such
requirement applies to the Leased Premises. In addition, Tenant shall execute
affidavits, representations and the like from time to time at Landlord's request
concerning Tenant's best knowledge and belief regarding the presence of
hazardous substances or materials on the Leased Premises. In all events, Tenant
shall indemnify Landlord in the manner elsewhere provided in this lease from any
release of hazardous materials on the Leased Premises occurring while Tenant is
in possession, or elsewhere if caused by Tenant or persons acting under Tenant.
The within covenants shall survive the expiration or earlier termination of the
lease term.
UTILITIES
6.01 Landlord shall not be liable in the event of any interruption in
the supply of any utilities. Tenant agrees that it will not install any
equipment which will exceed or overload the capacity of any utility facilities
and that if any equipment installed by Tenant shall require additional utility
facilities, the same shall be installed by Tenant at Tenant's expense in
accordance with plans and specifications approved in writing by Landlord. Tenant
shall be solely responsible for and shall pay all charges for use or consumption
of sanitary sewer, water, gas, electricity, garbage collection and any other
utility services. In the event Landlord determines that it is advisable to
separately meter any utility services provided to the Leased Premises, Landlord
shall have the right to install a sub-meter and bill Tenant for the actual cost
thereof, which shall be paid to Landlord within fifteen (15) days following
billing.
ACCEPTANCE OF LEASED PREMISES
7.01 By entry hereunder, except for latent defects and damages other
than reasonable wear and tear, Tenant acknowledges that it has examined the
Leased Premises and accepts the same as being in the condition called for by
this Lease, and as suited for the uses intended by Tenant. Upon delivery of
possession of the Leased Premises to Tenant, Tenant agrees to execute
6
<PAGE>
and deliver to Landlord a Tenant's Acceptance of Premises, in the form
attached hereto as Exhibit "C".
ALTERATIONS, MECHANICS' LIENS
8.01 Alterations may not be made to the Leased Premises without prior
written consent of Landlord, and any alterations of the Leased Premises
excepting movable furniture and trade fixtures shall at Landlord's option become
part of the realty and belong to Landlord.
8.02 Should Tenant desire to alter the Leased Premises and Landlord
gives written consent to such alterations, at Landlord's option, Tenant shall
contract with a contractor approved by Landlord for the construction of such
alterations.
8.03 Notwithstanding anything in paragraph 8.02 above, Tenant may, upon
written consent of Landlord, install trade fixtures, machinery or other trade
equipment in conformance with all applicable laws, statutes, ordinances, rules,
regulations, and the same may be removed upon the termination of this Lease
provided Tenant shall not be in default under any of the terms and conditions of
this Lease, and the Leased Premises are not damaged by' such removal. Tenant
shall return the Leased Premises on the termination of this Lease in the same
condition as when rented to Tenant, reasonable wear and tear only excepted.
Tenant shall keep the Leased Premises, the building and property in which the
Leased Premises are situated free from any hens arising out of any work
performed for, materials furnished to, or obligations incurred by Tenant. All
such work provided for above, shall be done at such times and in such manner as
Landlord may from time to time designate. Tenant shall give Landlord written
notice five (5) days prior to employing any laborer or contractor to perform
work resulting in an alteration of the Leased Premises so that Landlord may post
a notice of non-responsibility.
QUIET CONDUCT/QUIET ENJOYmENT
9.01 Tenant shall not commit, or suffer any waste upon the Leased
Premises, or any nuisance, or other act or thing which may disturb the quiet
enjoyment of any other tenant in the Building or any building in the project in
which the Leased Premises are located.
9.02 So long as Tenant is not in default in the payment of rent, or
other charges or in the performance of any of the other terms, covenants, or
conditions of the Lease, Tenant shall not be disturbed by Landlord or anyone
claiming by, through or under Landlord in Tenant's possession, enjoyment, use
and occupancy of the Leased Premises during the 'original or any renewal term of
the Lease or any extension or modification thereof.
FIRE INSURANCE, HAZARDS
10.01 No use shall be made or permitted to be made of the Leased
Premises, nor acts done which might increase the existing rate of insurance upon
the building or cause the cancellation of any insurance policy covering the
building or any part thereof, nor shall Tenant sell, or permit to be kept, used
or sold, in or about the Leased Premises, any article which may be prohibited by
the Standard form of fire insurance policies. Tenant shall, at its sole cost and
expense, comply with any and all requirements pertaining to the Leased Premises,
of any
7
<PAGE>
insurance organization or company, necessary for the maintenance of
reasonable fire and public liability insurance, covering the Leased Premises,
building and appurtenances.
10.02 Tenant shall maintain in full force and effect on all of its
inventory, fixtures and equipment in the Leased Premises a policy or policies of
fire and extended coverage insurance with standard coverage endorsement to the
extent of at least eighty percent (80%) of their insurable value. During the
term of this Lease the proceeds from any such policy or policies of insurance
shall be used for the repair or replacement of the fixtures, and Landlord will
sign all documents necessary or proper in connection with the settlement of any
claim or loss by Tenant. Landlord will not carry insurance on Tenant's
possessions. Tenant shall furnish Landlord with a certificate of such policy
within thirty (30) days of the commencement of this Lease, and whenever
required, shall satisfy Landlord that such policy is in full force and effect.
LIABILITY INSURANCE
11.01 Tenant, at its own expense, shall provide and keep in force with
companies acceptable to Landlord public liability insurance for the benefit of
Landlord and Tenant jointly against liability for bodily injury and property
damage in the amount of not less than One Million Dollars ($1,000,000.00) in
respect to injuries to or death of more than one person in any one occurrence,
in the amount of not less than One Million Dollars ($1,000,000.00) in respect to
injuries to or death of any one person, and in the amount of not less than Fifty
Thousand Dollars ($50,000.00) per occurrence in respect to damage to property,
such limits to be for any greater amounts as may be reasonably indicated by
circumstances from fame to time existing. Tenant shall furnish Landlord with a
certificate of such policy (which certificate shall contain the insurer's waiver
of subrogation rights exercisable against the Landlord) within thirty (30) days
of the commencement date of this Lease and whenever required shall satisfy
Landlord that such policy is in full force and effect Such policy shall name
Landlord as an additional insured and shall be primary and non-contributing with
any insurance carried by Landlord. The policy shall contain a contractual
liability endorsement. The policy shall further provide that it shall not be
canceled or altered without twenty (20) days prior written notice to Landlord.
INDEMNIFICATION BY TENANT
12.01 Tenant shall indemnify and hold harmless Landlord against and
from any and all claims arising from Tenant's use of the Leased Premises (other
than those arising solely from negligence of Landlord or its agents or
employees), or the conduct of its business or from any activity, work, or thing
done, permitted or suffered by the Tenant in or about the Leased Premises, and
shall further indemnify and hold harmless Landlord against and from any and all
claims arising from any breach or default in the performance of any obligation
on Tenant's part to be performed under the terms of this Lease, or arising from
any act, neglect, fault or omission of the Tenant, or of its agents or
employees, and from and against all costs, attorney's fees, expenses and
liabilities incurred in or about such claim or any action or proceeding brought
relative thereto and in case any action or proceeding be brought against
Landlord by reason of any such claim, Tenant upon notice from Landlord shall
defend the same at Tenant's expense by counsel, chosen by Tenant and who is
reasonably acceptable to Landlord. Tenant, as a material part of the
consideration to Landlord, hereby assumes all risk of damage to property or
injury to persons in or about the Leased Premises from any cause whatsoever
except that which is caused by the
8
<PAGE>
failure of Landlord to observe any of the terms and conditions of this Lease
where such failure has persisted for an unreasonable period of time after
written notice of such failure, or those arising from negligence of Landlord
or its employees or agents, and Tenant hereby waives all claims in respect
thereof against Landlord.
12.02 Landlord shall indemnify and hold harmless Tenant against and
from any and all claims for bodily injury, death or property damage, to the
extent caused by Landlord's negligence or misconduct, or arising from the
conduct of its business or from any activity, work or thing done by the Landlord
within the Building or on the Land.
12.03 The obligations of Landlord and Tenant under this paragraph
arising by reason of any occurrence taking place during the term of this Lease
shall survive the termination or expiration of this Lease.
WAIVER OF CLAIMS
13.01 Tenant, as a material part of the consideration to be rendered to
Landlord, hereby waives all claims against Landlord for damages to goods, wares
and merchandise in, upon or about the Leased Premises and for injury to Tenant,
its agents, employees, invitees, or third persons in or about the Leased
Premises from any cause arising at any time.
REPAIRS
14.01 Tenant shall, at its sole cost, keep and maintain the Leased
Premises and appurtenances and every part thereof (excepting exterior walls and
roofs Which Landlord agrees to repair) including by way of illustration and not
by way of limitation all windows, and skylights, doors, any store front and the
interior of the Leased Premises, including all plumbing heating, air
conditioning, sewer, electrical systems and all fixtures and all other similar
equipment serving the Leased Premises in good and sanitary order, condition, and
repair. Tenant shall be responsible for all pest control within the Leased
Premises, including but not limited to the eradication of any ants or termites
should infestation be observed during the ten-n of the Lease. Landlord agrees to
provide to Tenant at the commencement date of the Lease, a letter certifying
that there are no termites present in the Building or that the Building has been
treated for termites. Tenant shall, at its sole cost, keep and maintain all
utilities, fixtures and mechanical equipment used by Tenant in good order,
condition, and repair. All windows shall be kept reasonably clean. In the event
Tenant fails to maintain the Leased Premises as required herein or fails to
commence repairs (requested by Landlord in writing) within thirty (30) days
after such request, or fails diligently to proceed thereafter to complete such
repairs, Landlord shall have the right in order to preserve the Leased Premises
or portion thereof, and/or the appearance thereof, to make such repairs or have
a contractor make such repairs and charge Tenant for the cost thereof as
additional rent, together with interest at the rate of twelve percent (12%) per
annum from the date of making such payments.
14.02 Landlord agrees to keep in good repair the roof, foundations, and
exterior walls of the Leased Premises except repairs rendered necessary by the
negligence of Tenant, its agents, employees or invitees. Landlord gives to
Tenant exclusive control of Leased Premises and shall be under no obligations to
inspect said Leased Premises. Tenant shall promptly report in writing
9
<PAGE>
to Landlord any defective condition known to it which Landlord is required to
repair, and Landlord shall move with reasonable diligence to repair such
item. Failure to report such defects shall make Tenant responsible to
Landlord for any liability incurred by Landlord by reason of such defects.
14.03 Tenant shall obtain upon occupancy and keep current during the
lease term a service maintenance contract on the heating, ventilation and air
conditioning (HVAC) equipment serving the Leased Premises. The contract shall be
between Tenant and a dealer-authorized company acceptable to Landlord, and shall
at a minimum provide for an equipment check and tune-up service each spring and
fall, and filter and lubrication service every three months. A copy of said
contract shall be provided to Landlord, as well as any modification, extension,
renewal or replacement thereof. At Landlord's sole expense, Landlord agrees to
inspect the HVAC system in the Leased Premises at Lease commencement to insure
it is in good working order and will provide Tenant with a copy of such
inspection report.
SIGNS, LANDSCAPING
15.01 Landlord shall have the right to control landscaping and Tenant
shall make no alterations or additions to the landscaping. Landlord shall have
the right to approve the placing of signs and the size and quality of the same.
Tenant shall place no exterior signs on the Leased Premises without the prior
written consent of Landlord. Any signs not in conformity with the Lease may be
immediately removed by Landlord. Landlord shall provide, at its cost and
expense, building standard signage.
ENTRY BY LANDLORD
16.01 Tenant shall permit Landlord and Landlord's agents to enter the
Leased Premises at all reasonable times for the purpose of inspecting the same
or for the purpose of maintaining the building, or for the purpose of making
repairs, alterations, or additions to any portion of the building, including the
erection and maintenance of such scaffolding, canopies, fences and props as may
be required, or for the purpose of posting notices of non-responsibility for
alterations, additions, or repairs, or for the purpose of showing the Leased
Premises to prospective tenants, or placing upon the building any usual or
ordinary "for sale" signs, without any rebate of rent and without any liability
to Tenant for any loss of occupation or quiet enjoyment of the Leased Premises
thereby occasioned; and shall permit Landlord at any time within six (6) months
prior to the expiration of this Lease, to place upon the Leased Premises any
usual or ordinary "to let" or "to lease" signs. For each of the aforesaid
purposes, Landlord shall at all times have and retain a key with which to unlock
all of the exterior doors about the Leased Premises. Landlord shall maintain
confidentiality of any information it discovers during its entry into the Leased
Premises.
TAXES AND INSURANCE INCREASE
17.01 Tenant shall pay before delinquency any and all taxes,
assessments, license fees, and public charges levied, assessed, or imposed and
which become payable during the Lease upon Tenant's fixtures, furniture,
appliances and personal property installed or located in the Leased Premises.
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17.02 Tenant shall pay, as additional rental during the term of this
Lease and any extension or renewal thereof, the amount by which all taxes (as
herein defined) for each tax year exceeds all taxes for 1997. The term "taxes"
shall include all ad valorem taxes, special assessments, and governmental
charges assessed against the Building or the Land; and such term shall also
include any reasonable expenses, including fees and disbursements of attorneys,
tax consultants, arbitrators, appraisers, experts and other witnesses, incurred
by Landlord in contesting any taxes or the assessed valuation of all or any part
of the Building or the Land. If the final year of the lease term fails to
coincide with the tax year, then any excess for the tax year during which the
term ends shall be reduced by the pro rata part of such tax year beyond the
lease term. The agent's commission shall not apply to any such additional rental
resulting from the provisions of this paragraph.
17.03 Tenant agrees to pay the amount for all taxes levied upon or
measured by the rent payable hereunder, whether as a so called sales tax,
transaction privilege tax, excise tax, or otherwise (but no income taxes of
Landlord shall be payable by Tenant). Such taxes shall be due and payable at the
same time as and in addition to each payment of rent.
17.04 Commencing in the year 1998 and during each remaining year of the
lease term or any extension or renewal thereof, in the event that the insurance
premiums payable by the Landlord for insurance coverage on the property are
increased, whether such increase is due to an increase in the valuation of the
building, or in the applicable rate of insurance, then Tenant agrees to pay
Landlord as additional rental, the increase in said insurance premiums over the
base amount paid in the year 1997. The term "insurance" shall include all fire
and extended coverage insurance on the Building and all liability insurance
coverage on the common areas of the Building, and the grounds, sidewalks,
driveways and parking areas on the Land, together with such other insurance
coverages, including, but not limited to, rent interruption insurance, as are
from time to time obtained by Landlord. If during the final year of the Lease,
or any extension or renewal thereof, the term does not coincide with the year
upon which the insurance rate is determined, the increase in premiums for the
portion of that year shall be prorated according to the number of months during
which Tenant is in possession of the Leased Premises.
17.05 On or about January 1 of each calendar year during the term of
this Lease, Landlord shall provide Tenant with a good faith estimate of the
amount by which taxes and insurance will exceed the base amounts during such
calendar year. Tenant shall thereafter pay one-twelfth (1/12) of such increase
at such time as its monthly installments of base rental hereunder are due and
payable. When the actual bills have been received by Landlord, Landlord shall
notify Tenant of the actual taxes and insurance for such calendar year. If
Tenant has paid more than it would have paid had the actual bills been known,
Landlord shall credit such excess against the next additional rent payments
coming due; if Tenant has not paid enough, Tenant shall pay the remainder to
Landlord within fifteen (15) days following receipt of a statement from
Landlord.
17.06 The provisions of paragraphs 17.01, 17.02, 17.03, 17.04
and 17.05 hereof shall survive the expiration or earlier termination of
this Lease.
ABANDONNIENT
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18.01 Tenant shall not vacate nor abandon the Leased Premises at any
time during the term of this Lease, and if Tenant shall abandon, vacate or
surrender the Leased Premises, or be dispossessed by process of law, or
otherwise, any personal property belonging to Tenant and left -on the Leased
Premises shall, at the option of the Landlord, be deemed abandoned and be and
become the property of Landlord.
DESTRUCTION
19.01 If the Leased Premises or any portion thereof are destroyed by
storm, fire, lightning, earthquake or other casualty, Tenant shall immediately
notify Landlord. In the event the Leased Premises cannot, in Landlord's
judgment, be restored within one hundred eighty (180) days of the date of such
damage or destruction, this Lease shall terminate as of the date of such
destruction, and all rent and other sums payable by Tenant hereunder shall be
accounted for as between Landlord and Tenant as of that date. Landlord shall
notify Tenant within thirty (30) days of the date of the damage or destruction
whether the Leased Premises can be restored within one hundred eighty (180)
days. If this Lease is not terminated as provided in this Paragraph, Landlord
shall, to the extent insurance proceeds payable on account of such damage or
destruction are available to Landlord (with the excess proceeds belonging to
Landlord), within a reasonable time, repair, restore, rebuild, reconstruct or
replace the damaged or destroyed portion of the Leased Premises to a condition
substantially similar to the condition which existed prior to the damage or
destruction. Provided, however, Landlord shall only be required to repair,
restore, rebuild, reconstruct and replace the Landlord's Work shown on Exhibit
"B", and Tenant shall, at its sole cost and expense, upon completion of the
Landlord's Work, repair, restore, rebuild, reconstruct and replace, as required,
any and all improvements installed in the Leased Premises by Tenant and all
trade fixtures, personal property, inventory, signs and other contents in the
Leased Premises, and all other repairs not specifically required of Landlord
hereunder, in a manner and to at least the condition existing prior to the
damage. Tenant's obligation to pay Base Rent shall abate until Landlord has
repaired, restored, rebuilt, reconstructed or replaced the Leased Premises, as
required herein, in proportion to the part of the Leased Premises which are
unusable by Tenant. If the damage or destruction is due to the act, neglect,
fault or omission of Tenant, there shall be no rent abatement except to the
extent of rent loss insurance. In the event of any dispute between Landlord and
Tenant relative to the provisions of this paragraph, they may each select an
arbitrator, the two arbitrators so selected shall select a third arbitrator and
the three arbitrators so selected shall hear and determine the controversy and
their decision thereon shall be final and binding on both Landlord and Tenant
who shall bear the cost of such arbitration equally between them. Landlord shall
not be required to repair any property installed in the Leased Premises by
Tenant. Tenant waives any right under applicable laws inconsistent with the
terms of this paragraph and in the event of a destruction agrees to accept any
offer by Landlord to provide Tenant with comparable space within the project in
which the Leased Premises are located on the same terms as this Lease.
Notwithstanding the provisions of this paragraph, if any such damage or
destruction occurs within the final two (2) years of the term hereof, then
Landlord, in its sole discretion, may, without regard to the aforesaid 180-day
period, terminate this Lease by written notice, to Tenant.
ASSIGNMENT AND SUBLETTING
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20.01 Landlord shall have the right to transfer and assign, in whole or
in part its rights and obligations in the building and property that are the
subject of this Lease. Tenant shall not assign this Lease or sublet all or any
part of the Leased Premises without the prior written consent of the Landlord.
In the event of any assignment or subletting, Tenant shall nevertheless at all
times, remain fully responsible and liable for the payment of the rent and for
compliance with all of its other obligations under the terms, provisions and
covenants of this Lease. If all or any part of the Leased Premises are then
assigned or sublet, Landlord, in addition to any other remedies provided by this
Lease or provided by law, may at its option, collect directly from the assignee
or subtenant all rents becoming due to Tenant by reason of the assignment or
sublease, and Landlord shall have a security interest in all properties on the
Leased Premises to secure payment of such sums. Any collection directly by
Landlord from the assignee or subtenant shall not be construed to constitute a
novation or a release of Tenant from the further performance of its obligations
under this Lease. In the event that Tenant sublets the Leased Premises or any
part thereof, or assigns this Lease and at any time receives rent and/or other
consideration which exceeds that which Tenant would at that time be obligated to
pay to Landlord, Tenant shall pay to Landlord 100% of the gross excess in such
rent less reasonable costs of subleasing as such rent is received by Tenant and
100% of any other consideration received by Tenant from such subtenant in
connection with such sublease or, in the case of any assignment of this Lease by
Tenant, Landlord shall. receive 100% of any consideration paid to Tenant by such
assignee in connection with such assignment. In addition, should Landlord agree
to an assignment or sublease agreement, Tenant will pay to Landlord on demand
the sum of $500.00 to partially reimburse Landlord for its costs, including
reasonable attorneys' fees, incurred in connection with processing such
assignment or subletting request.
INSOLVENCY OF TENANT
21.01 Either (a) the appointment of a trustee to take possession of all
or substantially all of the assets of Tenant, or (b) a general assignment by
Tenant for the benefit of creditors, or (c) any action taken or suffered by
Tenant under any insolvency or bankruptcy act shall, if any such appointments,
assignments or action. continues for a period of thirty (30) days, constitute a
breach of this Lease by Tenant, and Landlord may at its election without notice,
terminate this Lease and in that event be entitled to immediate possession of
the Leased Premises and damages as provided below.
BREACH BY TENANT
22.01 In the event (i) Tenant shall default in the payment of Base Rent
or any other payment to be made by Tenant hereunder and Tenant shall not cure
such failure within ten (10) days after Landlord gives Tenant written notice the
thereof, or (ii) Tenant shall violate or breach, or shall fail fully and
completely to observe, keep, satisfy, perform and comply with, any agreement,
term, covenant, condition, requirement, restriction or provision of this Lease
(other than payment of Base Rent or any other payment to be made by Tenant), and
shall not cure such failure within thirty (30) days after Landlord gives Tenant
written notice thereof, Landlord in addition to any and all other rights or
remedies that it may have hereunder, at law or in equity shall have the right to
either terminate this Lease or from time to time without terminating this Lease
relet the Leased Premises or any part thereof for the account and in the name of
Tenant or otherwise, for any such term or terms and conditions as Landlord in
its sole discretion may deem
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advisable with the right to make reasonable alterations and repairs to the
Leased Premises. Tenant shall pay to Landlord, as soon as ascertained, the
costs and expenses incurred by Landlord in such reletting or in making such
reasonable alterations and repairs. Should such rentals received from time to
time from such reletting during any month be less than that agreed to be paid
during that month by Tenant hereunder, the Tenant shall pay such deficiency
to Landlord. Such deficiency shall be calculated and paid monthly.
22.02 Notwithstanding any language contained in Section 22.01 or
elsewhere in the Lease to the contrary, Landlord agrees that in the event of a
default by Tenant, Landlord's rights with regard to the reletting of the
premises shall be to repair the premises to their original condition less normal
wear and tear. There shall be expressly excluded any costs for altering the
premises which costs will include leasehold improvements and/or tenant
allowances as well as concessions of free rent to a new tenant.
22.03 No such reletting of the Leased Premises by Landlord shall be
construed as an election on its part to terminate this Lease unless a notice of
such intention be given to Tenant or unless the termination thereof be decreed
by a court of competent jurisdiction. Notwithstanding any such reletting without
termination, Landlord may immediately or at any time thereafter terminate this
Lease, and this Lease shall be deemed to have been terminated upon receipt by
Tenant of notice of such termination; upon such termination Landlord shall
recover from Tenant all damages that Landlord may suffer by reason of such
termination including without limitation, all arrearages in rentals, costs,
charges, additional rentals, and reimbursements, the cost (including court costs
and attorneys' fees actually incurred) of recovering possession of the Leased
Premises, the actual or estimated (as reasonably estimated by Landlord) cost of
any alteration of or repair to the Leased Premises which is necessary or proper
to prepare the same for reletting and, in addition thereto, Landlord shall have
and recover from Tenant the difference between the present value (discounted at
a rate per annum equal to the discount rate of the Federal Reserve Bank of
Atlanta at the time the Event of Default occurs) of the rental to be paid by
Tenant for the remainder of the lease term, and the present value (discounted at
the same rate) of the rental for the Leased Premises for the remainder of the
lease term, taking into account the cost, time and other factors necessary to
relet the Leased Premises, provided, however that such payment shall not
constitute a penalty or forfeiture, but shall constitute full liquidated damages
due to Landlord as a result of Tenant's default. Landlord and Tenant acknowledge
that Landlord's actual damages in the event of a default by Tenant under this
Lease will be difficult to ascertain, and that the liquidated damages provided
above represent the parties' best estimate of such damages. The parties
expressly acknowledge that the foregoing liquidated damages are intended not as
a penalty, but as fun liquidated damages, as permitted by Section 13-6-7 of the
Official Code of Ga. Annotated.
ATTORNEY's FEES
23.01 If Landlord and Tenant litigate any provision of this Lease or
the subject matter of this Lease, the unsuccessful litigant will pay to the
successful litigant all costs and expenses, including reasonable attorneys' fees
and court costs, incurred by the successful litigant at trial and on any appeal.
If, without fault, either Landlord or Tenant is made a party to any litigation
instituted by or against the other, the other will indemnify the faultless one
against all loss,
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liability, and expense, including reasonable attorneys' fees and court costs,
incurred by it in connection with such litigation.
CONDEMNATION
24.01 If, at any time during the term of this Lease, title to the
entire Leased Premises should become vested in a public or quasi-public
authority by virtue of the exercise of expropriation, appropriation,
condemnation or other power in the nature of eminent domain, or by voluntary
transfer from the owner of the Leased Premises under threat of such a taking
then this Lease shall terminate as of the time of such vesting of title, after
which neither party shall be further obligated to the other except for
occurrence antedating such biking. The same results shall follow if less than
the entire Leased Premises be thus taken, or transferred in lieu of such a
taking but to such extent that it would be legally and commercially impossible
for Tenant to occupy the portion of the Leased Premises remaining, and
impossible for Tenant to reasonably conduct his trade or business therein.
24.02 Should there be such a partial taking or transfer in lieu
thereof, but not to such an extent as. to make such continued occupancy and
operation by Tenant an impossibility, then this Lease shall continue on all of
its same terms and conditions subject only to an equitable reduction in rent
proportionate to such taking.
24.03 In the event of any such taking or transfer, whether of the
entire Leased Premises, or a portion thereof, it is expressly agreed and
understood that all sums awarded, allowed or received in connection therewith
shall belong to Landlord, and any. rights otherwise vested in Tenant are hereby
assigned to Landlord, and Tenant shall have no interest in or claim to any such
sums or any portion thereof, whether the same be for the taking of the property
or for damages, or otherwise. Nothing herein shall be construed, however, to
preclude Tenant from prosecuting any claim directly against the condemning
authority for loss of business, moving expenses, damage to, and cost of, trade
fixtures, furniture and other personal property belonging to Tenant; provided,
however, that Tenant shall make no claim which shall diminish or adversely
affect any award claimed or received by Landlord.
NOTICES
25.01 All notices, statements, demands, requests, consents, approvals,
authorization, offers, agreements, appointments, or designations under this
Lease by either party to the other shall be in writing and shall be sufficiently
given and served upon the other party, (i) by depositing same in the United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested; (ii) by recognized
overnight, third party prepaid courier service (such as Federal Express),
requiring signed receipt; (iii) by delivering the same in person to such party;
or (iv) by prepaid telegram, telecopy or telex with delivery of an original copy
of any such notice delivered pursuant to (ii) or (iii) above to be received no
later than the next business day. Notice personally delivered or sent by courier
service, telegram, telecopy or telex shall be effective upon receipt. Any notice
mailed in the foregoing manner shall be effective three (3) business days after
its deposit in the United States mail. Either party may change its address for
notices by giving notice to the other as provided above. For purposes of notice,
the addresses of the parties shall be as follows:
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(a) To Tenant at the Leased Premises at 4800 River Green Parkway,
Duluth, Georgia 30136; with a copy to John Yates, Morris
Manning & Martin at 1600 Atlanta Financial Center, 3343
Peachtree Road, N.E., Atlanta, Georgia 30326
(b) To Landlord, addressed to Landlord at 4497 Park Drive,
Norcross, Georgia 30093, with a copy to such other place as
Landlord may from time to time designate by notice to Tenant.
WAIVER
26.01 The waiver by Landlord of any breach of any term, covenant, or
condition herein contained shall not be deemed to be a waiver of such term,
covenant, or condition or any subsequent breach of the same or any other term,
covenant, or condition herein contained. The subsequent acceptance of rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding breach
by Tenant of any term, covenant, or condition of this Lease, other than the
failure of Tenant to pay the particular rental so accepted, regardless of
Landlords knowledge of such preceding breach at the time of acceptance of such
rent.
EFFECT OF HOLDING OVER
27.01 If Tenant should remain in possession of the Leased Premises
after the expiration of the lease term and without executing a new lease, then
such holding over shall be construed as a tenancy from month to month, subject
to all the conditions, provisions, and obligations of this Lease insofar as the
same are applicable to a month to month tenancy, except that the rent payable
pursuant to subparagraph 3.01 hereof shall be 150% of the rent payable pursuant
to subparagraph 3.01.
SUBORDINATION
28.01 This Lease, at Landlord's option, shall be subordinate to any
ground lease, first priority mortgage, first priority deed of trust, or first
priority security deed now or hereafter placed upon the real property of which
the Leased Premises are a part and to any and all advances made on the security
thereof and to all renewals, modifications, consolidations, replacements and
extensions thereof.
28.02 Tenant agrees to execute any documents required to effectuate
such subordination or to make this Lease prior to the lien of any such ground
lease, mortgage, deed of trust, or security deed, as the case may be, including
specifically a subordination, non-disturbance and attornment agreement in the
form hereto attached as Exhibit "D", and failing to do so within ten (10) days
after written. demand, does hereby make, constitute and irrevocably appoint
Landlord as Tenant's attorney in fact and in Tenant's name, place and stead, to
do so. If requested to do so, Tenant agrees to attorn to any person or other
entity that acquires title to the real property encompassing the Leased
Premises, whether through judicial foreclosure, sale under power, or otherwise,
and to any assignee of such person or other entity.
ESTOPPEL CERTIFICATE
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29.01 Upon ten (10) days notice from Landlord to Tenant, Tenant shall
deliver a certificate dated as of the first day of the calendar month in which
such notice is received, executed by an appropriate officer, partner or
individual, in the form as Landlord may require and stating but not limited to
the following: (i) the commencement date of this Lease; (ii) the space occupied
by Tenant hereunder; (iii) the expiration date hereof; (iv) a description of any
renewal or expansion options; (v) the amount of rental currently and actually
paid by Tenant under this Lease, (vi) the nature of any default or claimed
default hereunder by Landlord and (vii) that Tenant is not in default hereunder
nor has any event occurred which with the passage of time, or the giving of
notice would become a default by Tenant hereunder.
PARKING
30.01 Tenant agrees to park all Tenant's trucks in the parking spaces
provided at the rear of the building. "Parking" as used herein means the use by
Tenant's employees, its visitors, invitees, and customers for the parking of
motor vehicles for such periods of time as are reasonably necessary in
connection with use of and/or visits to the Leased Premises. No vehicle may be
repaired or serviced in the parking area and any vehicle deemed abandoned by
Landlord will be towed from the project and all costs therein shall be borne by
the Tenant. No area outside of the Leased Premises shall be used by Tenant for
storage without Landlord's prior written permission. There shall be no parking
permitted on any of the streets or roadways located in River Green.
MORTGAGEE PROTECTION
31.01 In the event of any default on the part of Landlord, Tenant will
give notice by registered or certified mail to any beneficiary of a deed or
trust or holder of a security deed or mortgage covering the Leased Premises
whose address shall have been furnished it, and shall offer such beneficiary or
holder a reasonable opportunity to cure the default, including time to obtain
possession of the Leased Premises by power of sale or a judicial foreclosure, if
such should prove necessary to effect a cure.
PROTECTIVE COVENANTS
32.01 This Lease is subject to the Protective Covenants (the
"Protective Covenants") of River Green, and to such rules and regulations as may
hereafter be adopted and promulgated. In addition, Tenant shall comply with all
covenants, restrictions and other matters of record in the deed records of the
county in which the Leased Premises are located which affect or encumber the
Leased Premises, the Building or the Land.
RELOCATION
33.01 Intentionally Deleted.
BROKERAGE COMMISSIONS
34.01 Tenant's Agent (collectively, "Agent") shall be entitled to
receive a commission from Landlord in the amounts, and upon the terms and
conditions, contained in a commission agreement between Landlord and such
parties.
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34.02 Tenant warrants and represents to Landlord that, other than
Agent, no other party is entitled, as a result of the actions of Tenant, to a
comn-tission or other fee resulting from the execution of this Lease; Landlord
warrants and represents to Tenant that, except as set forth above, no other
party is entitled, as a result, of the actions of Landlord, to a commission or
other fee resulting from the execution of this Lease. Landlord and Tenant agree
to indemnify and hold each other harmless from any loss, cost, damage or expense
(including reasonable attorneys' fees) incurred by the nonindemnifying party as
a result of the untruth or incorrectness of the foregoing warranty and
representation, or failure to comply with the provisions of this subparagraph.
34.03 Tenant's Agent is representing Tenant in connection with this
Lease, and is not representing Landlord. Landlord's Agent, or employees of
Landlord or its affiliates, are representing Landlord and are not representing
Tenant.
34.04 The parties acknowledge that certain officers, directors,
shareholders, or partners of Landlord or its general partner(s), are licensed
real estate brokers and/or salesmen under the laws of the State of Georgia.
Tenant consents to such parties acting in such dual capacities.
MISCELLANEOUS PROVISIONS
A. Whenever the singular number is used in this Lease and when required
by the context, the same shall include the plural, and the masculine gender
shall include the feminine and neuter genders, and the word "person" shall
include corporation, firm or association. If there be more than one tenant, the
obligations imposed upon Tenant under this Lease shall be joint and several.
B. The headings or titles to paragraphs of this Lease are for
convenience only and shall have no effect upon the construction or
interpretation of any part of this Lease.
C. This instrument contains all of the agreements and conditions made
between the parties to this Lease and may not be modified orally or in any other
manner than by agreement in writing signed by all parties to this Lease.
D. Where the consent of a party is required, such consent will not be
unreasonably withheld or delayed.
E. This Lease shall create the relationship of Landlord and Tenant
between Landlord and Tenant; no estate shall pass out of Landlord; Tenant has
only a usufruct, not subject to levy and/or sale and not assignable by Tenant
except as provided in paragraph 20.01 hereof.
F. Except as otherwise expressly stated, each payment required to be
made by Tenant shall be in addition to and not in substitution for other
payments to be made by Tenant.
G. All covenants and agreements to be performed by Tenant under any of
the terms of this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any abatement of rent.
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H. No payment by Tenant or receipt by Landlord of a lesser amount than
any installment or, payment of rent due shall be deemed to be other than on
account of the amount due, and no endorsement or statement on any check or
payment of rent shall be deemed an accord and satisfaction. Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of such installment or payment of rent, or pursue any other remedies
available to Landlord.
I. Subject to paragraph 20, the terms and provisions of this Lease
shall be binding upon and inure to the benefit of the heirs, executors,
administrators, successors, and assigns of Landlord and Tenant. In the event of
any conveyance by Landlord of its interest in and to the Leased Premises, the
Building or the Land, all obligations under this Lease of the conveying party
shall cease and Tenant shall thereafter look solely to the party to whom the
Leased Premises were conveyed for performance of all of Landlords duties and
obligations under this Lease.
J. Tenant acknowledges and agrees that Landlord shall not provide
guards or other security protection for the Leased Premises and that any and all
security protection shall be the sole responsibility of Tenant.
K. This Lease shall be governed by Georgia law.
L. Time is of the essence of each term and provision of this Lease.
M. Tenant shall not record this Lease or a memorandum thereof without
the written consent of Landlord. Upon the request of Landlord, Tenant shall join
in the execution of a memorandum or so-called "short form" of this Lease for the
purpose of recordation. Said memorandum or short form of this Lease shall
describe the parties, the Leased Premises and the lease term, and shall
incorporate this Lease by reference.
N. Landlord's liability for performance of its obligations under the
terms of this Lease shall be limited to its interest in the Building.
IN WITNESS WHEREOF, the parties hereto who are individuals have set
their hands and seals, and the parties who are corporations have caused this
instrument to be duly executed by its proper officers and its corporate seal to
be affixed, as of the day and year first above written.
Signed, sealed and delivered LANDLORD:
as to Landlord, in the
presence of: WEEKS REALTY, L.P.,
a Georgia limited partnership
________________________ By: Weeks Corporation
a Georgia corporation,
its sole general partner
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___________________________ By: ___________________________
Notary Public Name: ___________________________
Its: ___________________________
Signed, sealed and delivered TENANT:
as to Landlord, in the
presence of: X-POINT CORPORATION
___________________________ By: ___________________________
Name: ___________________________
Its: ___________________________
___________________________
Notary Public
ATTEST:
By: ___________________________
Name: ___________________________
Its: ___________________________
[Corporate Seal]
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EX. 10.4
SUBLEASE
This sublease is made this ______ day of March, 1999 by and between HBO &
Company of georgia, a Georgia corporation ("Sublandlord"), and OPTIO SOFTWARE,
INC., a Georgia corporation ("Subtenant").
WITNESSETH:
1. RECITALS. This Sublease is made with reference to the following facts:
1.1. CK Windward #2, LLC, as landlord, predecessor in interest to
Gateway Windward, Inc., a Delaware corporation ("Master Landlord") and IMNET
Systems, Inc., predecessor in interest to Sublandlord, as tenant, entered into
that certain Office Lease Agreement dated April 3, 1996 (established pursuant to
that certain estoppel letter dated April 8, 1998 executed by Imnet Systems, Inc.
in favor of Gateway Windward, Inc.), as amended by that certain First Amendment
to Lease dated August 26, 1996, as further amended by that certain Second
Amendment to Lease dated July 1, 1997, copies of which are attached hereto as
EXHIBIT "A" (collectively, the "Master Lease") containing approximately 118,144
rentable square feet (the "Master Premises") located at Windward Parkway,
Alpharetta, GA, and commonly known as Windward Fairways II (the "Building").
1.2. Sublandlord desires to sublease to Subtenant and Subtenant
desires to sublease from Sublandlord the premises described in Paragraph 2.2 of
this Sublease (the "Subleased Premises") on the terms and conditions contained
in this Sublease.
2. BASIC SUBLEASE PROVISIONS.
2.1. SUBLEASED PREMISES: 61,921 rentable square feet ("rsf") of the
Building, as described below and as more particularly shown on EXHIBIT "B"
attached hereto.
First Floor 10,866 rsf
First Floor 1,079 rsf
Second Floor 24,988 rsf
Sixth Floor 24,988 rsf
Total 61,921 rsf
2.2. SUBTENANT'S PROPORTIONATE SHARE: The term "Subtenant's Proportionate
Share" shall mean and refer to a fraction, the numerator of which is the number
of square feet of rentable area in the Subleased Premises and the denominator of
which is the number of square feet of rentable area in the Building. Subtenant's
Proportionate Share is 45.88% on the date of this Sublease.
2.3. COMMENCEMENT DATE: November 1, 1999
2.4. EXPIRATION DATE: December 31, 2006
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2.5. MONUMENT SIGNS: Sublandlord agrees that for so long as Subtenant
leases and occupies at least one full floor in the Building, Subtenant shall
have the right, at Subtenant's sole cost and expense, but at no additional
rental, to place identification signage on the existing monument sign at or near
the main entrance to the parking area for the Building which is located on
Windward Parkway. Such signage shall allow Subtenant to have its identification
at the top of the monument sign. Subtenant shall also have the right to sole use
of the monument sign immediately adjacent to the building. All signage shall be
subject to the prior approval of Master Landlord in accordance with the terms
contained herein and shall comply with all applicable governmental and
association regulations governing signage.
2.6. RENT:
(a) BASIC MONTHLY RENT. Basic Monthly Rent shall be payable as follows:
<TABLE>
<CAPTION>
Period $/S.F. Annually Monthly
------ ------ -------- ---------
<S> <C> <C> <C>
November 1, 1999 - October 31, 2000 $ 18.00 $ 1,114,578.00 $ 92,881.50
November 1, 2000 - October 31, 2001 $ 18.25 $ 1,130,058.25 $ 94,171.52
November 1, 2001 - October 31, 2002 $ 18.54 $ 1,148,015.34 $ 95,667.95
November 1, 2002 - October 31, 2003 $ 18.77 $ 1,162,257.17 $ 96,854.76
November 1, 2003 - October 31, 2004 $ 19.04 $ 1,178,975.84 $ 98,247.99
November 1, 2004 - October 31, 2005 $ 19.31 $ 1,195,694.51 $ 99,641.21
November 1, 2005 - October 31, 2006 $ 19.59 $ 1,213,032.39 $ 101,086.03
November 1, 2006 - December 31, 2006 $ 19.87 $ 1,230,370.27 $ 102,530.86
</TABLE>
All rent shall be paid without demand, deduction set-off or
counterclaim, in advance of the first (1st) day of each calendar month during
the term of this Sublease, and in the event of a partial rental month, rent
shall be prorated on the basis of a thirty (30) day month.
(b) ADDITIONAL RENT. Subtenant shall pay as additional rent to
Sublandlord with the next installment of rent due after Subtenant's receipt of
written demand therefor, the following:
(i) Subtenant agrees to pay all Direct Operating Expenses
attributable to the Subleased Premises based upon Subtenant's
Proportionate Share (as defined above) in excess of $5.39 per rentable
square feet per annum ("Base Year"). Subtenant acknowledges that
Sublandlord's Base Year (as defined in the Master Lease) is $5.21 per
rentable square feet per annum. Sublandlord and Subtenant agree to
make adjustments and reconcile the Direct Operating Expenses in
accordance with the terms of Section 2(c) of the Master Lease.
(ii) All other amounts payable by Sublandlord under the Master
Lease (other than Sublandlord's obligations to pay basic rental,
Direct Operating Expenses) which are attributable to the Subleased
Premises under this Sublease or attributable to Subtenant, its agents,
employees, customers or invitees. By way of example and not by way of
limitation, costs incurred by Sublandlord or Master Landlord in
repairing damage to
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the Building caused by an employee of Subtenant, increased insurance
premiums due as a result of Subtenant's use of the Subleased Premises,
and amounts expended or incurred by Sublandlord or Master Landlord on
account of any default by Subtenant which gives rise to a default
under the Master Lease would be amounts payable by Subtenant pursuant
to this section.
2.7. PERMITTED USE: General Office uses and no other. Subtenant shall not
use or permit the use of the Subleased Premises for any use prohibited by or
under the Master Lease.
2.8. LATE CHARGES: The parties agree that late payments by Subtenant to
Sublandlord of rent will cause Sublandlord to incur costs not contemplated by
this Sublease, the amount of which is extremely difficult to ascertain.
Therefore, the parties agree that if any installment of rent is not received by
Sublandlord within five (5) days after rent is due, Subtenant will pay to
Sublandlord a sum equal to 5% of the monthly rent as a late charge.
2.9. DELIVERY OF SUBLEASED PREMISES.
(a) ACCEPTANCE OF SUBLEASED PREMISES: Except as otherwise expressly
provided herein to the contrary, Subtenant agrees to accept the Subleased
Premises in an "as is" condition. Sublandlord covenants and agrees that the
Subleased Premises shall be in substantially the same condition on the
Commencement Date as it is on the Execution Date, subject to normal wear and
tear and further subject to construction of the Tenant Improvements as set forth
below. Subtenant shall, prior to delivery of possession of the Subleased
Premises, inspect the Subleased Premises and become thoroughly acquainted with
their condition, and acknowledges that the taking of possession of the Subleased
Premises by Subtenant shall be conclusive evidence that the Subleased Premises
were in good and satisfactory condition at the time such possession was so
taken. Subtenant specifically agrees that Sublandlord has no duty to make any
disclosures concerning the condition of the Building and the Subleased Premises
and/or the fitness of the Building and the Subleased Premises for Subtenant's
intended use and the Subtenant expressly waives any duty which Sublandlord might
have to make any such disclosures. Subtenant shall comply with all laws and
regulations relating to the use or occupancy of the Subleased Premises,
including, without limitation, making structural alterations or providing
auxiliary aide and services to the Subleased Premises as required by the
Americans with Disabilities Act of 1990, 42 U.S.C. ss. 12101 ET SEQ. (the
"ADA").
(b) SECURITY SYSTEM. Sublandlord agrees to leave the existing card
readers used in connection with the Sublandlord's security system (the "Card
Readers") in the Premises. Subtenant, at its sole cost and expense, shall be
solely responsible for causing the partitioning of the Card Readers from
Sublandlord's existing security system, activating the Card Readers for use by
Subtenant, and any related work required for Subtenant to utilize the Card
Readers without effecting the security of the Remaining Space (as hereinafter
defined).
2.10. SUBTENANT ALLOWANCE.
(a) SUBLANDLORD'S WORK/SUBTENANT ALLOWANCE. Sublandlord shall
deliver the Subleased Premises to Subtenant with the demising walls constructed,
new carpet installed, alterations and improvements, but excluding furniture and
furnishings or other personal property
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(the "Improvements") as set forth in the plans and specifications attached
hereto as EXHIBIT "C" and incorporated herein by this reference (the "Plans and
Specifications") and in accordance with that certain work letter attached hereto
as EXHIBIT "D" ("Work Letter"), subject to Sublandlord's obtaining all required
approvals therefor (said construction being hereinafter defined as
"Sublandlord's Work"). Sublandlord shall provide Subtenant with an improvement
allowance of up to $170,000.00 and an architectural and engineering allowance in
the amount of up to $35,500 (collectively referred to herein as the "Subtenant
Allowance") to be applied to the Sublandlord's Work. Any and all excess amount
of the Subtenant Allowance remaining after completion of the Sublandlord's Work
shall be the sole property of Sublandlord and Subtenant shall have no claim
thereto. In the event that the cost of Sublandlord's Work exceeds the amount of
the Subtenant Allowance, Subtenant shall pay to Sublandlord, within ten (10)
days after receipt of written demand from Sublandlord, the amount by which the
cost of Sublandlord's Work exceeded the Subtenant Allowance (the "Cost
Differential"), which demand shall be accompanied by an invoice or invoices from
the contractor(s) performing the work showing the total amount due for
Sublandlord's Work. Pursuant to the Bid (as hereinafter defined), the Cost
Differential shall be $37,243.00, subject to any increases arising from
Subtenant's requested change orders. The Cost Differential shall be due and
owing to Sublandlord as Additional Rent.
The Sublease shall be contingent upon Sublandlord entering into a
construction contract with Sherwood & Associates, Inc. ("Contractor") based upon
the construction bid dated March 16, 1999 attached hereto as EXHIBIT "E" (the
"Bid") which is hereby approved by Sublandlord and Subtenant.
2.11. NOTICES. Address for payment of rent and notices:
Sublandlord: Subtenant:
HBO & Company of Georgia Optio Software, Inc.
301 Perimeter Center North 4800 River Green Parkway
Atlanta, Georgia 30346 Duluth, GA 30096
Attn: Tom LaDue Attn: Barron Hughes
Phone: 770/399-2643 Phone: 770/283-8504
Facsimile: 770/393-6092 Facsimile: 770/283-8699
Notices shall be deemed properly delivered and received (i) the same
day when personally delivered; or (ii) one day after deposit with Federal
Express or other nationally recognized overnight courier; or (iii) the same day
when sent by confirmed facsimile with a copy sent by Federal Express or other
nationally recognized overnight courier.
2.12. SECURITY DEPOSIT: Upon Subtenant's execution hereof, Subtenant shall
deposit with Sublandlord a security deposit in the amount of Ninety One Thousand
Two Hundred Sixty Three and 00/100 Dollars ($91,263.00) ("Security Deposit"), as
security for Subtenant's faithful performance of Subtenant's obligations
hereunder. If Subtenant fails to pay rent or other charges due hereunder, or
otherwise defaults with respect to any provision of this Sublease, Sublandlord
may use, apply or retain all or any portion of the Security Deposit for the
payment of any rent or other charge in default or for the payment of any other
sum which Sublandlord incurs by reason of Subtenant's default, or to compensate
Sublandlord for any loss or damage which Sublandlord
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<PAGE>
may suffer thereby. If Sublandlord uses or applies all or any portion of the
Security Deposit, Subtenant shall within ten (10) days after written demand
therefore deposit cash with Sublandlord in an amount sufficient to restore the
Security Deposit to its full amount and Subtenant's failure to do so shall be a
material breach of this Sublease. Sublandlord shall not be required to keep the
Security Deposit separate from its general accounts. If Subtenant performs all
of Subtenant's obligations hereunder, the Security Deposit, or so much thereof
as has not been used or applied by Sublandlord, shall be returned, to Subtenant
(or at Subtenant's option, to the last assignee, if any, of Subtenant's interest
hereunder) at the expiration of the term hereof, and after Subtenant has vacated
the Subleased Premises. No trust relationship is created herein between
Sublandlord and Subtenant with respect to the Security Deposit. Any deposit
under the Master Lease which may be returned by the Master Landlord shall be the
property of Sublandlord.
2.13. BROKER: Cushman & Wakefield is being paid a commission by Sublandlord
pursuant to a separate written agreement.
3. MASTER LEASE. All of the Paragraphs of the Master Lease are incorporated into
this Sublease as if fully set forth in this Sublease as they apply to the
Subleased Premises. All capitalized terms not otherwise defined herein shall
have the meaning given to such terms in the Master Lease.
3.1. CONFLICTS. If any provisions of this Sublease conflict with any
portion of the Master Lease as incorporated herein, the terms of this Sublease
shall govern.
3.2. ASSUMPTION. Subtenant hereby assumes, agrees to and shall perform in
favor of Sublandlord all obligations of Sublandlord as Tenant under the Master
Lease with respect to the Subleased Premises (as defined in this Sublease),
except for (i) Sublandlord's obligation to pay basic rental, (ii) Sublandlord's
obligation to pay its share of Direct Operating Expenses.
3.3. NO VIOLATIONS. Subtenant shall not do or permit to be done anything
which would constitute a violation or breach of any of the terms, conditions or
provisions of the Master Lease or which would cause the Master Lease to be
terminated or forfeited by virtue of any risks of termination or forfeiture
reserved by or vested in Master Landlord, and Subtenant acknowledges and agrees
that it shall comply with the Master Lease to the extent that all provisions
therein apply to the Subleased Premises and Subtenant's conduct and operating of
business with the Subleased Premises.
3.4. TERMINATION OF MASTER LEASE. If the Master Lease terminates, this
Sublease shall terminate and the parties shall be relieved from all liabilities
and obligations under this Sublease; except that if this Sublease terminates as
a result of a default of one of the parties under this Sublease or the Master
Lease, the defaulting party shall be liable to the non-defaulting party for all
damage suffered by the non-defaulting party as a result of the termination.
3.5. MASTER LEASE/SUBLANDLORD DUTIES. Sublandlord shall not do or permit to
be done anything which would constitute a violation or breach of any of the
terms, conditions or provisions of the Master Lease as it applies to the
Premises or which would cause the Master Lease, as it applies to the Premises,
to be terminated or forfeited by virtue of any risks of termination or
forfeiture reserved by or vested in Master Landlord. With respect to work,
7
<PAGE>
services, repairs and restoration or the performance of other obligations
required of Master Landlord under the Master Lease, Sublandlord, upon written
request from Subtenant, shall use diligent efforts to enforce Landlord's
obligations under the Master Lease; it being acknowledged and agreed by
Sublandlord that diligent efforts shall include, among other things, litigation
filed against Master Landlord at the sole cost and expense of Subtenant if,
following Sublandlord's attempts to enforce Master Landlord's obligations
through other means, Master Landlord has failed to honor its obligations.
Sublandlord agrees that it will commence litigation against Master Landlord upon
notice from Subtenant that Master Landlord has failed to cure a default within
thirty (30) days after written notice of same. Subtenant shall cooperate with
Sublandlord as may be required to obtain from Master Landlord any such work,
services, repairs, restoration, the provision of utilities, elevator or HVAC
services, or the performance of any of Master Landlord's other obligations under
the Master Lease. Provided that Sublandlord has used such diligent efforts,
Sublandlord shall not be liable in damages, nor shall rent abate hereunder
(except to the extent of rent abatement under the Master Lease), for or on
account of any failure by Master Landlord to perform the obligations and duties
imposed on it under the Master Lease so long as such failure is not a result of
any action or inaction of Sublandlord. Notwithstanding the foregoing,
Sublandlord shall be liable for actual damages to Subtenant in the event that
Sublandlord has failed to use diligent efforts as required in this Section 3.5.
3.6. SERVICES. With respect to work, services, repairs, repainting,
restoration, the provision of utilities, elevator or HVAC services, or the
performance of other obligations required by Master Landlord under the Master
Lease, Sublandlord's sole obligation with respect thereto shall be to request
the same, on request in writing by Subtenant, and to use reasonable efforts to
obtain the same from Master Landlord. Subtenant shall cooperate with Sublandlord
as may be required to obtain from Master Landlord any such work, services,
repairs, repainting, restoration, the provision of utilities, elevator or HVAC
services, or the performance of any of Master Landlord's other obligations under
the Master Lease.
4. SUBTENANT'S PERFORMANCE UNDER MASTER LEASE. At any time and on reasonable
prior notice to Subtenant, Sublandlord can elect to require Subtenant to, and
Subtenant shall, perform its obligations under this Sublease directly to Master
Landlord. Subtenant shall send to Sublandlord, within five (5) days of receipt,
or sending copies of all notices and other communications it shall send to and
receive from Master Landlord.
5. COVENANT OF QUIET ENJOYMENT. Sublandlord represents that the Master Lease is
in full force and effect and that there are no defaults on Sublandlord's part
under it as of the Commencement Date set forth in Paragraph 2.3 above. Subject
to this Sublease terminating as provided in the Master Lease, Sublandlord
represents that if Subtenant performs all the provisions in this Sublease to be
performed by Subtenant, Subtenant shall have and enjoy throughout the term of
this Sublease the quiet and undisturbed possession of the Subleased Premises.
Sublandlord shall have the right to enter the Subleased Premises at any time, in
the case of an emergency, and otherwise at reasonable times, for the purpose of
inspecting the condition of the Subleased Premises and for verifying compliance
by Subtenant with this Sublease and the Master Lease and to permit Sublandlord
to perform its obligations under this Sublease and the Master Lease.
6. WAIVER OF CLAIMS AND INDEMNITY.
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<PAGE>
(a) Subtenant hereby releases and waives any and all claims against
Sublandlord its respective officers, directors, partners, agents and employees
for injury or damage to person, property or business sustained in or about the
Building or the Subleased Premises by Subtenant other than by reason of the
negligence or willful misconduct of Sublandlord, its agents, employees or
contractors, and except in any case which would render this release and waiver
void under law.
(b) Subtenant agrees to indemnify, defend and hold harmless Landlord and
Sublandlord and each of their respective officers, directors, partners, agents
and employees, from and against any and all claims, demands, costs and expenses
of every kind and nature, including attorneys' fees and litigation expenses,
arising from Subtenant's use or occupancy of the Subleased Premises, Subtenant's
construction of any leasehold improvements in the Subleased Premises or from any
breach or default on the part of Subtenant in the performance of any agreement
or covenant of Subtenant to be performed or performed under this Sublease or
pursuant to the terms of this Sublease, or from any act or neglect of Subtenant
or its agents, officers, employees, guests, servants, invitees or customers in
or about the Subleased Premises. In case any such proceeding is brought against
any of the indemnified parties, Subtenant covenants, if requested by
Sublandlord, to defend such proceeding at its sole cost and expense by legal
counsel reasonably satisfactory to Sublandlord.
(c) Sublandlord hereby agrees to indemnify, defend and hold harmless
Subtenant, its officers, directors, partners, agents and employees, from and
against any and all claims, demands, costs and expenses of every kind and
nature, including attorneys' fees and litigation expenses, arising from any
breach or default on the part of Sublandlord in the performance of any agreement
or covenant of Sublandlord to be performed or performed under this Sublease or
pursuant to the terms of this Sublease, or from any act or neglect of
Sublandlord or its agents, officers, employees, guests, servants, invitees or
customers, if any, in or about the Premises. In case any such proceeding is
brought against Subtenant, Sublandlord covenants, if requested by Subtenant, to
defend such proceeding at its sole cost and expense by legal counsel reasonably
satisfactory to Subtenant.
7. ATTORNEYS' FEES. If there is any legal action or proceeding between
Sublandlord and Subtenant to enforce any provision of this Sublease or to
protect or establish any right or remedy of either Sublandlord or Subtenant
hereunder, the unsuccessful party to such action or proceeding will pay to the
prevailing party all costs and expenses, including reasonable attorneys' fees
(including allocated costs of Sublandlord's in-house attorneys) incurred by such
prevailing party in such action or proceeding and in any appearance in
connection therewith, and if such prevailing party recovers a judgment in any
such action, proceeding or appeal, such costs, expenses and attorneys' fees will
be determined by the court handling the proceeding and will be included in and
as a part of such judgment.
8. NO ENCUMBRANCE. Subtenant shall not voluntarily or by operation of law
mortgage or otherwise encumber all or any part of Subtenant's interest in the
Sublease or the Subleased Premises.
9. ASSIGNMENT AND SUBLETTING.
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9.1. Subtenant shall not voluntarily or by operation of law assign this
Sublease or any interest therein and shall not sublet the Subleased Premises or
any part thereof, or any right or privilege appurtenant thereto, without first
obtaining the written consent of Sublandlord and Master Landlord, which consents
may not be unreasonably withheld.
9.2. Any attempted assignment or subletting, without both Sublandlord's and
Master Landlord's consent shall be null and void and of no effect. No permitted
assignment or subletting of Subtenant's interest in this Sublease, shall relieve
Subtenant of its obligations to pay the rent and to perform all the other
obligations to be performed by Subtenant hereunder. The acceptance of rent by
Sublandlord from any other person shall not be deemed to be waiver by
Sublandlord of any provision of this Sublease or to be a consent to any
subletting or assignment. Consent to one sublease or assignment shall not be
deemed to constitute consent to any subsequent attempted subletting or
assignment.
10. MAINTENANCE AND REPAIRS. Subtenant acknowledges that the Subleased Premises
are in good order and repair. At all times during the term of this Sublease,
Subtenant, at its sole cost and expense, will maintain the Subleased Premises
and every part thereof and all equipment, fixtures and improvements therein in
good condition and repair. At the end of the term of this Sublease, Subtenant
will surrender the Subleased Premises in the same condition as received, normal
wear and tear excepted. Within the Subleased Premises, Subtenant shall be
responsible for all repairs required to be performed by the Tenant under the
Master Lease.
11. INSURANCE. At all times during the term of this Sublease, Subtenant shall,
at its sole expense, procure and maintain the following types of insurance
coverage (but in no event shall such insurance be of lesser types or in lesser
amounts than required by the Master Lease):
11.1. Comprehensive general liability insurance against any and all damages
and liability, including attorneys' fees on account or arising out of injuries
to or the death of any person or damage to property, however occasioned, in, on
or about the Subleased Premises with at least a single combined liability and
property damage limit of $1,000,000. Said policy shall name Sublandlord and
Master Landlord as additional insured.
11.2. Insurance adequate in amount to cover damage to the Subleased
Premises including, without limitation, leasehold improvements, trade fixtures,
furnishings, equipment, goods and inventory.
11.3. Employer's liability insurance and worker's compensation insurance as
required by applicable law.
11.4. WAIVER OF SUBROGATION. All such insurance shall be in a form
satisfactory to Sublandlord and Master Landlord and carried with companies
reasonably acceptable to Sublandlord and Master Landlord. Subtenants shall
provide Sublandlord with a certificate of insurance showing Sublandlord and
Master Landlord as additional insured. The certificate shall provide for a
thirty-day prior written notice to Sublandlord in the event of cancellation or
material change of coverage.
11.5. Sublandlord and Subtenant shall each obtain from their respective
insurers under all policies of fire, theft, public liability, workers'
compensation and other insurance maintained
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by either of them at any time during the term hereof insuring or covering the
Subleased Premises, a waiver of all rights of subrogation which the insurer of
one party might otherwise have, if at all, against the other party.
12. EVENTS OF DEFAULT. If one or more of the following events ("Event of
Default") occurs, such occurrence constitutes a breach of this Sublease by
Subtenant:
12.1. Subtenant abandons or vacates the Subleased Premises; or
12.2. Subtenant fails to pay any monthly Basic Monthly Rent or Operating
Expenses and Taxes, if applicable, as and when the same become due and payable,
and such failure continues for more than ten (10) days after such amount is due
to Sublandlord; PROVIDED, HOWEVER, the first such failure during any twelve (12)
month period shall not constitute a default by Subtenant so long as Subtenant
makes each such payment within five (5) days after Sublandlord gives written
notice of such failure, it being acknowledged and agreed that any subsequent
failure during such twelve (12) month period to make payment of Rent when due
shall immediately constitute a default by Subtenant without notice or an
opportunity to cure.
12.3. Subtenant fails to pay any other sum or charge payable by Subtenant
hereunder as and when the same becomes due and payable, and such failure
continues for more than ten (10) days after Sublandlord gives written notice
thereof to Subtenant; or
12.4. Subtenant fails to perform or observe any other agreement, covenant,
condition or provision of this Sublease to be performed or observed by Subtenant
as and when performance or observance is due, and such failure continues for
more than thirty (30) days after Sublandlord gives written notice thereof to
Subtenant, or if the default cannot be cured within said thirty (30) day period
and Subtenant fails within said period to commence with due diligence and
dispatch the curing of such default or, having so commenced, thereafter fails to
prosecute or complete with due diligence and dispatch the curing of such
default; or
12.5. Subtenant (a) files or consents by answer or otherwise to the filing
against it of a petition for relief or reorganization or arrangement or any
other petition in bankruptcy or liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction; (b) makes an assignment for
the benefit of its creditors; (c) consents to the appointment of a custodian,
receiver, trustee or other officer with similar powers of itself or of any
substantial part of its property; or (d) takes action for the purpose of any of
the foregoing; or
12.6. A court or governmental authority of competent jurisdiction, without
consent by Subtenant, enters an order appointing a custodian, receiver, trustee
or other officer with similar powers with respect to it or with respect to any
substantial power of its property, or constituting an order for relief or
approving a petition for relief or reorganization or any other petition in
bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution,
winding up or liquidation of Subtenant, or if any such petition is filed against
Subtenant and such petition is not dismissed within ninety (90) days; or
12.7. This Sublease or any estate of Subtenant hereunder is levied upon
under any attachments or execution and such attachment or execution is not
vacated within ninety (90) days.
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13. REMEDIES OF SUBLANDLORD ON DEFAULT.
13.1. In the event of any breach of this Sublease by Subtenant, Sublandlord
may, in addition to any or all, or any combination of the remedies afforded
Master Landlord under the Master Lease, terminate the Sublease and recover from
Subtenant (a) the worth at the time of award of the unpaid rent which was earned
at the time of termination; (b) the worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination until the
time of the award exceeds the amount of such rental loss that the Subtenant
proves could have been reasonably avoided; (c) the worth at the time of award of
the amount by which the unpaid rent for the balance of the term after the time
of award exceeds the amount of each rental loss that Subtenant proves could be
reasonably avoided; and (d) any other amount necessary to compensate Sublandlord
for all detriment proximately caused by Subtenant's failure to perform this
obligation under the Lease or which in the ordinary course of things would be
likely to result therefrom.
13.2. Sublandlord may, in the alternative, continue this Sublease in
effect, as long as Sublandlord does not terminate Subtenant's right to
possession, and Sublandlord may enforce all his rights and remedies under the
Sublease, including the right to recover the rent as it becomes due under the
Sublease. If said breach of the Sublease continues, Sublandlord may, at any time
thereafter, elect to terminate this Sublease. Nothing contained herein shall be
deemed to limit any other rights or remedies which Sublandlord may have.
14. ESTOPPEL CERTIFICATES.
14.1. Subtenant shall at any time upon not less than ten (10) days' prior
written notice from Sublandlord execute, acknowledge and deliver to Sublandlord
a statement in writing (i) certifying that this Sublease is unmodified and in
full force and effect (or, if modified, stating the nature of such modifications
and certifying that this Sublease, as so modified, is in full force and effect),
the amount of any security deposit, and the date to which the rent and other
charges are paid in advance, if any, and (ii) acknowledging that there are not,
to Subtenant's knowledge, any uncured defaults on the part of Sublandlord
hereunder, or specifying such defaults if any are claimed. Any such statement
may be conclusively relied upon by any prospective purchaser or encumbrancer of
the Subleased Premises.
14.2. At Sublandlord's option, Subtenant's failure to deliver such
statement within such time shall be conclusive upon Subtenant (i) that this
Sublease is in full force and effect, without modification except as may be
represented by Sublandlord, (ii) that there are no uncured defaults in
Sublandlord's performance, and (iii) that not more than one month's rent has
been paid in advance.
14.3. If the Master Landlord desires to finance, refinance, or sell the
Subleased Premises, or an part thereof, Subtenant hereby agrees to deliver to
any lender or purchaser designated by Master Landlord such financial statements
of Subtenants as may be reasonably required by such lender or purchaser. Such
statements shall include the past three (3) years' financial statements of
Subtenant.
14.4. Upon ten (20) days' prior written notice from Subtenant (but not more
than frequently than annually, unless in connection with a proposed assignment,
sublease or financing
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transaction by Subtenant), Sublandlord shall execute and deliver to Subtenant in
the form attached hereto as EXHIBIT "F" in which any and all blanks shall be
completed by Subtenant prior to submitting same to Sublandlord.
15. SUBLANDLORD'S CERTIFICATIONS: Sublandlord hereby certifies that to the best
of its knowledge:
(a) Annexed hereto as EXHIBIT "A" is a true and correct copy of the Master
Lease, as amended, there are no other amendments or modifications to the Master
Landlord.
(b) The Master Lease is in full force and effect and, neither Master
Landlord nor Sublandlord is in default under the Master Lease and no event has
occurred and no condition exists which, with the giving of notice or with the
passage of time, or both, will constitute a default under the terms of the
Master Lease.
16. REAL ESTATE BROKERS. Each party warrants to the other that there are no
brokerage commissions or fees payable in connection with this Sublease except to
the brokers set forth herein. Each party further agrees to indemnify and hold
the other party harmless, from any cost, liability and expense (including
attorney's fees) which the other party may incur as the result of any breach of
this Paragraph.
17. CORPORATE AUTHORITY
If Subtenant signs as a corporation, each of the persons executing this
Sublease on behalf of Subtenant does hereby covenant and warrant that Subtenant
is a duly authorized and existing corporation, that Subtenant has and is
qualified to do business in Georgia, that the corporation has full right and
authority to enter into this Sublease, and that the person(s) signing on behalf
of the corporation were authorized to do so. Upon Sublandlord's request,
Subtenant shall provide Sublandlord with evidence reasonably satisfactory to
Sublandlord confirming the forgoing covenants and warranties. If Subtenant signs
as any other legal entity, Subtenant shall provide Sublandlord with reasonable
evidence of authority.
18. MASTER LANDLORD DEFAULT; CONSENTS. Notwithstanding any provision of this
Sublease to the contrary, (a) Sublandlord shall not be liable or responsible in
any way for any loss, damage, costs, expense, obligation or liability suffered
by Subtenant by reason or as the result of any breach, default or failure to
perform by the Master Landlord under the Master Lease, and (b) whenever the
consent or approval of Sublandlord and Master Landlord is required for a
particular act, event or transaction (i) any such consent or approval by
Sublandlord shall be subject to the consent or approval of Master Landlord, and
(ii) should Master Landlord refuse to grant such consent or approval, under all
circumstances, Sublandlord shall be released from any obligation to grant its
consent or approval.
19. MASTER LANDLORD'S CONSENT. This Sublease is expressly conditioned upon
receipt of the written consent of Master Landlord to this Sublease Agreement in
the form attached hereto as EXHIBIT "G" within thirty (30) days from the date of
this Sublease. The Sublease is further conditioned upon written consent of the
Master Landlord of the Sublandlord's Work (which shall include the express
approval of the Contractor, the Plans and Specifications and the Construction
Documents).
13
<PAGE>
20. RIGHT OF FIRST OFFER. Provided this Sublease is then in full force and
effect and Subtenant is in full compliance with the terms and conditions of this
Sublease, and there is no further sublease of any portion of the Subleased
Premises or assignment of any of Subtenant's interest in the Sublease, Subtenant
shall have a right of first offer on the Master Premises, on the following terms
and conditions:
Sublandlord, or Sublandlord's agent, shall give notice to Subtenant
of Sublandlord's desire to lease the remaining portion of the Master Premises or
any portion thereof ("Remaining Space") to a third-party.
Sublandlord, or its agent, shall furnish to Subtenant a copy of any
sublease proposals sent to prospective subtenants for the Remaining Space
("Sublandlord's Notice"). The Sublandlord's Notice shall be a copy of the
sublease proposal containing the basic deal terms, however, any information
identifying the prospective subtenant will be redacted.
Subtenant shall have five (5) business days after Sublandlord's
Notice to respond as to whether or not Subtenant desires to lease such Remaining
Space on the same terms as set forth in Sublandlord's Notice. If Subtenant
elects not to lease the Remaining Space or fails to respond within the five (5)
business day period, the Subtenant shall have no further right to lease the
Remaining Space unless Sublandlord does not lease the Remaining Space to such
prospective subtenant(s).
The Rent for the Remaining space shall commence on the earlier to
occur of (i) the commencement date contained in Sublandlord's Notice or (ii) the
date the Subtenant first occupies the Remaining Space.
Except as expressly set forth to the contrary herein, all other
terms and conditions of this Lease shall apply to the Remaining Space, and from
and after the date Subtenant elects to lease the Remaining Space, the Remaining
Space shall be and shall be deemed to be a part of the Subleased Premises.
14
<PAGE>
IN WITNESS WHEREOF, Sublandlord and Subtenant have executed this Sublease
as of the day and year first above written.
SUBLANDLORD:
HBO & COMPANY OF GEORGIA, a Georgia
corporation
By:
---------------------------
Name:
---------------------------
Title:
---------------------------
SUBTENANT:
OPTIO SOFTWARE, INC., a Georgia
corporation
By:
---------------------------
Name:
---------------------------
Title:
---------------------------
15
<PAGE>
<TABLE>
<CAPTION>
LIST OF EXHIBITS
<S> <C>
Exhibit A Master Lease
Exhibit B Subleased Premises
Exhibit C Plans and Specifications
Exhibit D Work Letter
Exhibit E Bid
Exhibit F Sublandlord's Letter
Exhibit G Master Landlord's Consent
</TABLE>
16
<PAGE>
EXHIBIT A
MASTER LEASE
SECOND AMENDMENT TO LEASE
THIS Agreement, made and entered into this 1st day of July, _____ by and
between CK Windward #2, LLC (hereinafter "Landlord") and IMNET System, Inc.
(hereinafter "Tenant").
WITNESSETH:
THAT:
WHEREAS, Landlord and Tenant merged into a certain Lease Agreement dated April
3, 1996 as amended by the First Amendment to Lease dated August 26,
1996(hereinafter "Lease") containing approximately 96,281 square feet
(hereinafter "Premises") located at Windward Parkway, Alpharetta, GA. and
commonly known as Windward Fairways II (the "Building");
WHEREAS, Landlord and Tenant desire to amend the Lease as hereinafter
set forth;
NOW THEREFORE, in consideration of the mutual agreements of the undersigned
and other good and valuable considerations, the Lease is hereby amended
effective the date hereof, as follows:
1. The "Premises" paragraph of page 1 of the Lease is deleted in its
entirety and replaced with the following:
Premises: On the first, second, third and sixth floors of the Building
as outlined in red in Exhibits "D-1" through "D-4" attached hereto and
made a part of this Lease and a portion of the fourth and fifth floors
of the Building as outlined in red in Exhibits "D-5" and "D-6" attached
hereto and made a part of this Lease. The rentable area of the Premises
for all purposes of this Lease is 118,144 rentable square feet.
2. The areas outlined in Exhibits "D-5" and "D-6" containing
approximately 21_____ rentable square feet shall hereinafter be
referred to a the "Expansion Premises".
3a The Expansion Premises shall be added to the Premises on the
Expansion Commencement Date (as hereinafter defined). The Expansion
Commencement Date shall be the earlier of: (1) occupancy of the
Expansion Premises by Tenant; (2) the date the Expansion Premises have
been substantially completed; or (3) October 1, 1997 except for delays
caused by Landlord which will serve to postpone the Expansion
Commencement Date on a day for day basis.
3b. Landlord agrees to perform. the work according to the Plans as
defined in Paragraph 1 of Exhibit "B-1" to this Lease with diligence,
subject to events and delays due to causes beyond its reasonable
control. The Premises shall be deemed substantially completed and
possession delivered when Landlord has substantially completed the work
to be
17
<PAGE>
constructed or installed pursuant to the provisions of the Office
Lease Improvement Agreement, subject only to the completion of items
on the punch list as reasonably determined by landlord and Tenant (and
exclusive of the installation of all telephone and other
communications facilities and equipment and other finish work to be
performed by or for Tenant).
The taking of possession by Tenant shall be deemed conclusively to
establish that the Expansion Premises has been completed in accordance
with the plans and specifications and are in good and satisfactory
condition as of when possession was so taken.
4. The monthly rental for the Expansion Premises shall be as follows:
MONTHS AMOUNT
------ ------
Expansion Commencement Date
through and including month 60 $36,438
month 61 through and including 120 $40,082
so that, on and as of the Expansion Commencement Date, Paragraph 2(a)
is deleted in its entirety and replaced with the following:
Tenant shall pay to Landlord throughout the term of this Lease monthly
rental as follows:
The base rental rates for the premises shall be as follows:
MONTHS AMOUNT
------ ------
Expansion Commencement Date
Through month 60 $172,836
month 60 through 120 $191,725
payable in equal monthly rental installments, payable in advance on the
first day of each month during every year of the term hereby demised in
lawful money of the United States, without deduction or offset
whatsoever except as specifically set forth herein to the contrary, to
landlord or to such other firm as Landlord may from time to time
designate in writing. Said rental is subject to adjustments as provided
herein. If the Expansion Commencement Date is on a day other than the
first day of a calendar month, the monthly rental for the fractional
month shall be appropriately prorated.
5. Paragraph 3(a) of Exhibit "E", Special Stipulations of the Lease
is hereby deleted and replaced with the following:
3. Landlord agrees to grant to Tenant the option to expand
into either or both of the spaces outlined in red on
Exhibits D7 and D8, attached hereto and made a part of this
lease under the following terms and conditions:
18
<PAGE>
The area outlined in red on Exhibit D7, hereinafter referred
to as the First Expansion Option Area, containing a rentable
area of approximately 5,671 square feet, is currently leased
to a tenant whose lease is scheduled to expire on July 31,
2002. Tenant shall have the right to expend into the Entire
First Expansion Option Area, upon such lease expiration, by
providing written notice to Landlord no later than October
1, 2001.
The area outlined in red on Exhibit D8, hereinafter referred
to as the Second Expansion Option Area, containing a
rentable area of approximately 5,161 square feet is
currently leased to a tenant whose lease is scheduled to
expire on May 31, 2002. Tenant shall have the right to
________________ Landlord no later than August 1, 2001.
The terms and conditions for such Expansion shall be the
same as the then current terms and conditions of the Lease
for the remainder of the Premises, except that the Base
Rental Rate for such First or Second Expansion Option Areas
during months one (1) through sixty (60) of the primary
Lease term, will be $20.00 per rentable square feet with a
Base Year expense stop, and the Base Rental Rate for such
Expansion Space during months sixty-one (61) through one
hundred and twenty (120) of the primary Lease term, will be
$22 per rentable square feet with a Base Year expense Stop
(hereinafter referred to as the "Expansion Rate"). Tenant
will receive an Improvement Allowance equal to the amount
determined by multiplying (x) the net rentable area of the
Expansion Option Area taken by Tenant by (y) $10.00 per net
rentable square foot.
IN WITNESS WHEREOF, the Second Amendment to Lease has been executed as of
the date and year first above written.
LANDLORD:
CK Windward #2, LLC
BY:
------------------------------
ITS:
------------------------------
TENANT:
IMNET
BY:
------------------------------
ITS:
------------------------------
19
<PAGE>
Exhibit 10.5
PROMISSORY NOTE
Date: January __, 1999
FOR VALUE RECEIVED, the undersigned (hereafter referred to as "Maker"),
promises to pay to the order of PREMIER LENDING CORPORATION, a Georgia
corporation (hereafter referred to as "Payee"; Payee, and any subsequent
holder(s) hereof, being hereafter referred to collectively as "Holder"), at
the office of payee at 63 Barrett Parkway, Marietta, Georgia 30066, or at
such other place as Holder may designate to Maker in writing from time to
time, the principal sum of TWO MILLION DOLLARS ($2,000,000.00), or so much
thereof as may be disbursed hereunder, together with interest on so much
thereof as is from time to time outstanding and unpaid, from the date of each
advance of principal, at the rates hereinafter set forth, lawful money of
the United States of America, such principal being due and payable on
January 31, 2001, and said interest to be paid in the following manner:
From and after the date hereof (until maturity, whether by
acceleration or otherwise) interest on the outstanding principal
indebtedness evidenced hereby shall accrue at the rate of one
percent (1.00%) per annum in excess of the Prime Rate, and shall be
computed on the daily outstanding principal balance hereunder if
the average daily outstanding principal balance is greater than
$1,000,000. If the average daily outstanding principal balance is
$1,000,000 or less, then interest shall accrue at the rate of two
percent (2.00%) per annum in excess of the Prime Rate. For purposes
of this Note the term "Prime Rate" shall mean the interest rate
established by Premier Bank ("Bank") from time to time in its sole
discretion as its prime rate. The Prime Rate may not be the lowest
rate available from Bank. Loans from Bank may be priced at, above
or below the Prime Rate. The Prime Rate as of the date hereof is
seven and three-fourths percent (7.75%) per annum; accordingly, the
interest rate herein expressed in simple interest terms as of the
date hereof is Eight and three-fourths percent (8.75%) per annum if
the average daily outstanding principal balance is greater than
$1,000,000. The interest rate herein expressed in simple interest
terms as of the date hereof is Nine and three-fourths (9.75%) per
annum if the average daily outstanding principal balance is
$1,000,000 or less. If at any time or from time to time the Prime
Rate increases or decreases, then the rate of interest set forth
above shall be correspondingly increased or decreased effective on
the day on which any such increase or decrease of the Prime Rate is
publicly announced. In the event that Bank, during the term hereof,
shall abolish or abandon the practice of publishing a prime rate,
or should the same become unascertainable, Holder shall designate a
comparable reference rate which shall be deemed to be the Prime
Rate hereunder. Interest shall be computed on a 360-day year simple
interest basis.
All accrued and unpaid interest at said rate shall be due and
payable monthly, commencing on the first (1st) day of the first
(1st) month after the date hereof and continuing on the same day of
each month thereafter until the entire principal balance hereof,
together with all accrued but unpaid interest, has been paid in
full.
<PAGE>
This Note may be prepaid in whole or part without premium or penalty,
but no such prepayment shall be deemed an early termination by the
undersigned of any agreement between the undersigned and Payee relating to
the assignment of accounts receivable ("Financing Agreement"), which may be
terminated only in accordance with its terms and only upon the undersigned's
payment to Holder of the early termination fee required thereunder.
It is hereby expressly agreed that should any default be made in the
payment of principal or interest as stipulated above, or should any default
be made in the performance of any of the covenants or conditions contained
in the "Loan Documents" (as defined herein), or any of them, then if the
default has not been cured within ten days after written notice from holder,
and in such event, the principal indebtedness evidenced hereby, and any other
sums advanced hereunder or under the Loan Documents (as defined herein), or
any of them, together with all unpaid interest accrued thereon, shall, at the
option of Holder and without further notice or demand to Maker, at once
become due and payable and may be collected forthwith, regardless of the
stipulated date of maturity. Interest shall accrue on the outstanding
principal balance of this Note from the date of any default hereunder in the
performance of any covenants or conditions contained in the Loan Documents
(as defined herein) and for so long as such default continues, regardless of
whether or not there has been an acceleration of the indebtedness evidenced
hereby as set forty herein, at the rate equal to the greater of two percent
(2.0%) per annum in excess of the otherwise applicable interest rate at the
time such default. Time is of the essence of this Note. Maker agrees to pay
all costs of collection including, but not limited to, fifteen percent (15%)
of the entire unpaid principal and interest as attorneys' fees, if collected
by or through an attorney-at-law.
Presentment for payment, demand, protest and notice of demand, dishonor,
protest and non-payment and all other notices are hereby waived. No failure
to accelerate the debt evidenced hereby by reason of default, acceptance of
a past due installment, or indulgences granted from time to time shall be
construed (i) as a novation of this Note or as a reinstatement of the
indebtedness evidenced hereby or as a waiver of such right of acceleration or
of the right of Holder thereafter to insist upon strict compliance with the
terms of this Note, or (ii) to prevent the exercise of such right of
acceleration or any other right _________________________ ____________ State
of Georgia; and Maker hereby expressly waives the benefit of any statute or
rule of law or equity now provided; or which may hereafter be provided, which
would produce a result contrary to or in conflict with the foregoing. No
extension of the time ______ the payment of this Note or any installment due
hereunder, made by agreement with any person now or hereafter liable for the
payment of this Note, shall operate to release, discharge, modify, change of
affect the original liability of Maker under this Note, either in whole or in
part, unless Holder agrees otherwise in writing. This Note may not be changed
orally, but only by an agreement in writing signed by the party against whom
enforcement of any waiver, change, modification or discharge is sought.
This Note is to evidence loans now being made by Payee to Maker and/or
additional loans to Maker which may be made from time to time by Payee in the
future in accordance with the Financing Agreement. All such loans, to the
extent not evidenced by other notes, shall be evidenced by this Note and
shall be subject to its terms. The principal sum
-2-
<PAGE>
evidenced by this Note may be reduced from time to time by payments
thereunder and may be increased from time to time by additional loans;
provided, however, that the principal sum evidenced by this Note shall not
exceed the principal sum shown above. The indebtedness evidenced by this Note
and the obligations created hereby are secured by, among other things, a
security interest in Maker's accounts and other property, pursuant to the
Financing Agreement and certain other agreements, assignments, and other
documents (said agreements and assignments, together with all other documents
evidencing or securing or in any way relating to the indebtedness evidenced
hereby herein referred to collectively as the "Loan Documents"), some of
which Loan Documents were filed for record or are to be filed for record on
or about the date hereof in the appropriate public records.
This Note is intended as a contract under and shall be construed and
enforceable in accordance with the laws of the State of Georgia.
If from any circumstances whatsoever, fulfillment of any provision of
this Note or of any other instrument evidencing or securing the indebtedness
evidenced hereby, at the time performance of such provision shall be due,
shall involve transcending the limit of validity presently prescribed by any
applicable usury statute or any other applicable law with regard to
obligations of like character and amount, then, ipso facto, the obligation to
be fulfilled shall be reduced to the limit of such validity, so that in no
event shall any exaction be possible under this Note or under any other
instrument evidencing or securing the indebtedness evidenced hereby that is
in excess of the current limit of such validity, but such obligation shall be
fulfilled to the limit of such validity.
As used herein, the terms "Maker" and "Holder" shall be deemed to
include their respective heirs, successors, legal representatives and
assigns, whether by voluntary action of the parties or by operation of law.
In the event that more than one person, firm or entity executes this Note,
then all references to "Maker" shall be deemed to refer equally to each of
said persons, firms, or entities, all of whom shall be jointly and severally
liable for all of the obligations of Maker hereunder.
IN WITNESS WHEREOF, Maker has executed this Note under seal on the date
first above written.
Optio Software, Inc.
Attest:
By: _______________________________
_____________________________ Its: ___________________________
Secretary
(Corporate Seal)
-3-
<PAGE>
SECURITY AGREEMENT
(Equipment)
FOR VALUE RECEIVED, Optic Software, Inc., a Georgia corporation, with its
principal place of business and chief executive offices located at 4800 River
Green Parkway, Duluth, Georgia 30096 (together with its successors and
assigns, "Debtor"), agrees with PREMIER LENDING CORPORATION, a Georgia
corporation with offices located in Atlanta, Georgia (together with its
successors and assigns, "Secured Party"), as follows:
I. Definitions. When used in this Agreement:
A. "Liabilities" shall mean all obligations of Debtor hereunder, all
obligations of Debtor arising out of any agreement with regard to the
assignment of accounts receivable between Secured Party and Debtor,
heretofore, now, or hereafter effective (including any loans, advances, and
over-advances made thereunder), all obligations of Debtor to Secured Party
under any note, all contracts of suretyship, guaranty, or accommodation, and
all other obligations of Debtor to Secured Party, however, and whenever
created, arising or evidenced, whether direct or indirect, absolute,
contingent or otherwise, whether originally to Secured Party or assigned to
Secured Party, now or hereafter existing, or due or to become due.
B. "Collateral" shall mean the following personal property:
(a) all of Debtor's presently existing and hereafter acquired
equipment, wherever located, including without limitation machinery,
fixtures, appliances, furniture, and motor vehicles, and all
additions, replacements, and accessions to the foregoing
("Equipment");
(b) all books and records pertaining to the foregoing; and
(c) all proceeds and products of the foregoing.
C. "Default" shall mean the occurrence of any of the following events.,
(1) nonpayment when due of any amount payable an any of the Liabilities or
failure to perform any agreement or meet any obligation of Debtor contained
herein or in any agreement out of which any of the Liabilities arose; (2) any
statement, representation or warranty of Debtor made orally or in writing
herein or in any other writing or statement at any time furnished or made by
Debtor to Secured Party is untrue in any material respect as of the date
furnished or made; (3) suspension of the operation of Debtor's present
business; (4) Debtor becomes insolvent or unable to pay debts as they mature,
or admits in writing to such affect, makes a conveyance fraudulent as to
creditors under any state or federal law, makes an assignment for the benefit
of creditors, or a proceeding is instituted by or against Debtor alleging
that Debtor is insolvent or unable to pay debts as they mature, or a petition
under any chapter of the Bankruptcy code, an amended, is brought by or
against Debtor; (5) entry of any judgment against Debtor or creation,
assertion or filing of any lien against the property of Debtor (6)
dissolution, merger, or consolidation of Debtor; (7) transfer of a
substantial part of the property of Debtor; (8) sale, transfer or exchange,
<PAGE>
either directly or indirectly, of a controlling stock interest of Debtor, it
Debtor is a corporation; (9) appointment of a receiver for the Collateral or
for any property in which Debtor has an interest; (10) seizure of the
Collateral by any third party; or (11) Secured Party in good faith feels
insecure.
II. GRANT OF SECURITY INTEREST. As security for the full payment and
performance of the Liabilities, Debtor hereby grants to Secured Party a
security interest in and security title to the Collateral.
III. DEBTORS REPRESENTATIONS, WARRANTIES AND COVENANTS. Debtor hereby
warrants, represents, and covenants that;
A. The execution, delivery and performance of this Agreement are within
Debtor's legal power, have been duly authorized, are not in violation of law,
or, if Debtor is a corporation, the terms of Debtor's Articles of
Incorporation, By-Laws or other incorporation papers, or in any event of any
indenture agreement or undertaking to which Debtor is a party or by which
Debtor is bound;
B. Debtor has full and absolute title TO the Collateral presently
existing, free of all security interests, liens and claims whatsoever, Debtor
will obtain full and absolute title to Collateral hereafter acquired
immediately upon or prior to receiving possession thereof, and Debtor will at
all times hereafter keep the Collateral free of all security interests,
liens, and claims whatsoever, other than the security interest granted herein;
C. No financing statement, mortgage, notice of lien, dead of trust,
security agreement or any other agreement or instrument creating or giving
notice of an encumbrance or charge against any of the Collateral is in
existence, or on file in any public office;
D. Debtor shall insure the Collateral until Secured Party's Security
interest is terminated against all risks to which it is exposed, including
loss, damage, fire, theft, and all other such risks, in such amounts, with
such companies, under such policies and in such form as shall be satisfactory
to Secured Party, which policies shall provide that loss thereunder shall, be
payable to Secured Party as its interests may appear (upon a New York
standard mortgage clause (long form), and Secured Party may apply any
proceeds of such insurance which may be received by it for payment of the
Liabilities, whether or not due, in such order of application as Secured
Party may determine, and such policies or certificates thereon or duplicates
thereof shall immediately be deposited with Secured Party;
E. Debtor will from time to time, on request of Secured Party, execute
such financing statements, notices and other documents, and pay the cost of
filing or recording the same in all public offices deemed necessary by
Secured Party and do such other acts as Secured Party may request to
establish and maintain a valid security interest in and
-2-
<PAGE>
Collateral, including, without limitation, delivery to Secured Party of any
Certificate of Title issuable with respect: to any of the Collateral and
notation thereon of the security interest and title hereunder;
E. Debtor will not sell, transfer, pledge, abandon, or otherwise dispose
of any of the Collateral or any interest therein;
G. Debtor shall account fully and faithfully for and promptly pay or turn
over to Secured Party proceeds in whatever form received in disposition in
any manner of any of the Collateral, but nothing in this Agreement shall be
deemed to authorize any such disposition;
H. The Equipment is and shall be maintained as personal property and
shall not, by reason of attachment or connection to any realty, either become
or be deemed to be a fixture or appurtenant to such realty and shall at all
times be severable therefrom without material damage to the realty; and
I. The Equipment will be kept at the address or addresses set forth
below, unless Secured Party gives its prior written consent.
IV. SECURED PARTY'S RIGHTS EXCLUSIVE OF DEBTOR'S DEFAULT. Secured Party, from
time to time, at its option, may perform any agreement of Debtor hereunder
which Debtor shall fail to perform and take any other action Which Secured
Party deems necessary for the maintenance or preservation of any of the
Collateral or its interest therein, and Debtor agrees to reimburse forthwith
Secured Party for all expenses of Secured Party in connection with the
foregoing, together with interest thereon at the rate of fifteen percent
(15%) per annum from the date incurred until reimbursed by Debtor. Debtor
hereby constitutes Secured Party or its designee as Debtor's attorney in
fact: to endorse Debtor's name upon any notes, acceptances, checks, drafts,
money orders or other evidences of payment that may come into Secured Party's
possession as proceeds of Collateral; to sign Debtor's name an any invoice or
bill of lading relating to the Collateral, drafts against customers, and to
do all other acts and things necessary to carry cut this Agreement. Debtor
hereby waives notice of presentment, protest and dishonor of any instrument
so endorsed by Secured Party. All acts of said attorney-in-fact or designee
are hereby authorized and ratified and said attorney-in-fact or designee
shall not be liable for any acts of omission or commission, nor for any error
of judgment or mistake of fact or law; this power being coupled with an
interest is irrevocable while any of the Liabilities remain unpaid.
V. SECURED PART'S RIGHTS AND REMEDIES UPON DEBTOR'S DEFAULT. Upon Default, at
the option of Secured Party, Liabilities, notwithstanding any provisions
thereof, without demand or notice of any kind, thereupon immediately shall
become due and payable; and Secured Party may exercise from time to time any
rights and remedies available to it under the Uniform Commercial Code and
other applicable law in the State of Georgia, Debtor agrees to pay all costs
of Secured Party of collection of the Liabilities, and enforcement of rights
hereunder, including, without limitation, fifteen percent (15%) of the
principal and interest of the Liabilities as attorneys' fees, if collected by
or through an attorney, and also other legal and court expenses and expenses
of any repairs to any realty or other personal property occasioned by the
removal of any Collateral.
-3-
<PAGE>
VI. NOTICE. If any notification of intended disposition of the Collateral or
of any other act by Secured Party is required by law and a specific time
period is not stated therein, such notification, if mailed by first class
shall at least ten days before such disposition or act, postage prepaid,
addressed to Debtor at the address shown below, shall be deemed reasonably
and properly given.
VII. NON-WAIVER OF RIGHTS AND REMEDIES. No delay or failure an the part of
Secured Party in the exercise of any right or remedy shall operate as a
waiver thereof or of the exercise of any other right or remedy. Time is of
the essence of this Agreement.
VIII. CONSTRUCTION. This Agreement shall be governed by and construed in and
enforced in Accordance with the laws of the State of Georgia. The terms
"secured interest" and "security title," as used herein shall include, and
Secured Party shall have, all the rights, interests, title, liens, claims and
privileges that maybe derived hereunder and under the applicable law of the
various states of the United States. Wherever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but it any provision of this Agreement shall be
prohibited by or invalid under applicable law, said provision shall be in
effect only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
IX. BENEFIT. The rights and privileges of Secured Party hereunder shall Inure
to the benefit of its successors and assigns.
IN WITNESS WHEREOF, Debtor has executed this instrument and affixed its seal
this _______ day of January, 1999.
Attest: OpticSoftware, Inc.
_____________________________ By: __________________________
Secretary
Its: _________________________
(Corporate Seal)
ADDRESSES WHERE EQUIPMENT IS
LOCATED
4800 River Green Parkway
Duluth, Georgia 30096
1166 Triton Drive
Suite 200
Foster City, California 94404
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<PAGE>
Exhibit 10.7
SECURITY AGREEMENT
(Inventory)
FOR VALUE RECEIVED, OptioSoftware, Inc., a Georgia corporation with its
principal place of business and chief executive offices located at 4800 River
Green Parkway, Duluth, Georgia 30096 together with its successors and
assigns, "Debtor"), agrees with PREMIER LENDING CORPORATION, a Georgia
corporation with offices located in Atlanta, Georgia (together with its
successors and assigns, "Secured Party") as follows:
I. DEFINITIONS. When used in this Agreement;
A. "Liabilities" shall mean all obligations of Debtor hereunder, all
obligations of Debtor arising out of any agreement with regard to the
assignment of accounts receivable between Secured Party and Debtor,
heretofore, now or thereafter effective (including any loans, advances or
over-advances made thereunder), all obligations of Debtor to Secured Party
under any note, all contracts of suretyship, guaranty, or accommodation, and
all other obligations of Debtor to Secured Party, however, and whenever
created, arising or evidenced, whether direct or indirect, absolute,
contingent or otherwise, whether originally to Secured Party or assigned to
Secured Party, now or hereafter existing, or due or to become due.
B. "Collateral" shall mean the following personal property:
(a) all of Debtor's presently existing and hereafter acquired
inventory, wherever located, including without limitation, supplies,
raw materials, work in process and finished goods, and all warehouse
receipts and other documents of title issued for such goods
("Inventory");
(b) all books and records pertaining to the foregoing; and
(c) all proceeds and products of the foregoing.
C. "Default" shall mean the Occurrence of any of the following events:
(1) nonpayment when due of any amount payable an any of the Liabilities or
failure to perform any agreement or meet any obligation of Debtor contained
herein or-in any agreement out of which any of the liabilities arose, (2) any
statement representation or warranty of Debtor made orally or in writing
herein or in any other writing or statement at any time furnished or made by
Debtor to Secured Party is untrue in any material respect as of the date
furnished or made; (3) suspension of the operation of Debtor's present
business; (4) Debtor becomes insolvent or unable to pay debts as they mature
or admits in writing to such effect, makes a conveyance fraudulent as to
creditors under any state or federal law, makes an assignment for the benefit
of creditors, or a proceeding is instituted by or against Debtor alleging
that Debtor is insolvent or unable to pay debts as they mature, or a petition
under any chapter of the Bankruptcy Code, as amended, is brought by or
against Debtor; (5) entry of any judgment against Debtor or creation,
assertion or filing of any lien against the property of Debtor; (6)
dissolution, merger, or consolidation of
<PAGE>
Debtor; (7) transfer of a substantial part of the property of Debtor; (8)
sale, transfer or exchange, either directly or indirectly, of a controlling
stock interest of Debtor, if Debtor is a corporation; (9) appointment of a
receiver for the Collateral or for any property in which Debtor has an
interest; (10) seizure of the Collateral by any third party; or (11) Secured
Party in good faith feels insecure.
II. GRANT OF SECURITY INTEREST. As security for the full payment and
performance of the Liabilities, Debtor hereby grants to Secure Party a
security interest in and security title to the Collateral.
III. DEBTOR'S REPRESENTATIONS, WARRANTIES AND COVENANTS. Debtor hereby
warrants, represents, and covenants that;
A. The execution, delivery and performance of this Agreement are
within Debtor's legal power, have been duly authorized, are not in violation
of law or, if Debtor is a corporation, the terms of Debtor's Articles of
Incorporation, By-Laws or other incorporation papers, or in any event of any
indenture, agreement or undertaking to which Debtor is a party or by which
Debtor is bound;
B. Debtor has full and absolute title to the Collateral Presently
existing, free of all security interests, liens and claims whatsoever, Debtor
will obtain full and absolute title to Collateral hereafter acquired
immediately upon or prior to receiving possession thereof, and Debtor will at
all times hereafter keep the Collateral free of all security interests,
liens, and claims whatsoever, other than the security interest granted herein;
C. No financing statement, mortgage, notice of lien, deed of trust,
security agreement or any other agreement or instrument creating or giving
notice of an encumbrance or charge against any of the Collateral Is in
existence or on file In any public office;
D. Debtor shall inure the Collateral until Secured Party's security
interest is terminated against all risks to which it is exposed, including
loss, damage, fire, theft, and all other such risks, in such amounts, with
such companies, under such policies and in such form as shall be satisfactory
to Secured Party, which policies shall provide that lose thereunder shall be
payable to Secured Party as its Interests may appear upon a New York standard
mortgage clause (long form), and Secured Party may apply any proceeds of such
insurance which may be received by it for payment of the Liabilities, whether
or not due, in such order of application as Secured Party may determine, and
such policies or certificates thereon or duplicates thereof shall immediately
be deposited with Secured Party;
E. Debtor will from time to time, or request of Secured Party,
execute such financing statements, notices and other documents, and pay the
cost of filing or recording the sale in all public offices deemed necessary
by Secured Party and do such other acts as Secured Party may request to
establish and Maintain a valid security; interest_____________________________
-2-
<PAGE>
with respect to any of the Collateral and notation thereon or the security
interest and title hereunder;
F. Debtor will not sell, transfer, lease pledge, abandon or otherwise
dispose of any of the Collateral or any interest therein, except for
Inventory, which Debtor may sell in the ordinary course of business;
G. Debtor shall account fully and faithfully for and promptly pay or
turn over to Secured Party proceeds in whatever form received in disposition
in any manner of any of the Collateral, but nothing in this Agreement shall
be deemed to authorize any such disposition, except for the sale of Inventory
pursuant to Subparagraph F; and
H. The Inventory will be kept at the address or addresses set forth
below, unless Secured Party gives its prior written consent.
IV. SECURED PARTY'S-RIGHTS EXCLUSIVE OF DEBTOR'S DEFAULT. Secured Party,
from time to time at its option, may perform any agreement of Debtor
hereunder which Debtor shall fail to perform and take any other action which
Secured Party deems necessary for the maintenance of preservation of any of
the Collateral or its interest therein and Debtor agrees to reimburse
forthwith 'Secured Party for all expenses of Secured Party in connection with
tile foregoing, together with interest thereon at the rate of fifteen percent
(15%) per annum from the date incurred until reimbursed by Debtor. Debtor
hereby constitutes Secured Party or its designee as Debtor's attorney-in-fact
to endorse Debtor's name upon any notes, acceptances, checks, drafts, money
orders or other evidences of payment that may come into Secured Party's
possession as proceeds of Collateral; to sign Debtor's name on any invoice or
bill of lading relating to the Collateral, drafts against customers, and to
do all other acts and things necessary to carry out this Agreement. Debtor
hereby waives notice of presentment, protest and dishonor of any instrument
so endorsed by Secured Party. All acts of said attorney-in-fact or designee
are hereby authorized and ratified and said attorney in fact or designee
shall not be liable for spy acts of omission or commission, nor for any error
of Judgment or mistake of fact or law; this power being coupled with an
interest is irrevocable while any of the Liabilities remain unpaid.
V. SECURED PARTY'S RIGHTS AND REMEDIES UPON DEBTOR'S DEFAULT. Upon
Default, at the option of Secured Party, the Liabilities, notwithstanding any
provisions thereof, without demand or notice of any kind, thereupon
immediately shall become due and payable; and Secured Party may exercise from
time to time any rights and remedies available to it under the Uniform
Commercial Code and other applicable law in the State of Georgia. Debtor
agrees to pay all costs of Secured Party of collection of the Liabilities,
and enforcement of rights hereunder, including, without limitation, fifteen
percent (15%) of the entire principal and interest of the Liabilities as
attorneys' fees, if collected by or through an attorney, and also other legal
and court expenses and expenses of any repairs to any realty or other
personal property occasioned by the removal of any Collateral.
VI. NOTICE. If any notification of intended disposition of the Collateral
or of any other act by Secured Party is required by law and a specific time
period is not stated therein, such
-3-
<PAGE>
notification, if mailed by first class mail at least ten days before such
disposition or act, postage prepaid, addressed to Debtor at the address shown
below, shall be deemed reasonably and properly given.
VII. NON-WAIVER OF RIGHTS AND REMEDIES. No delay or failure on the part of
Secured Party in the exercise of any right or remedy shall operate as a
waiver thereof or of the exercise of any other right or remedy. Time is of the
essence of this Agreement.
VIII. CONSTRUCTION. This Agreement shall be governed by and Construed in and
enforced in accordance with the laws of the State of Georgia. The terms
"security interest" and "security title," as used herein shall include, and
Secured Party shall have, all the rights, interests, title, lions, claims and
privileges that may be derived hereunder and under the applicable law of the
various states of the United States. 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, said provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
IX. BENEFIT. The rights and privileges of Secured Party hereunder shall
inure to the benefit of its successors and assigns.
has executed this instrument and affixed
- ------------------------- -----------
this day of January, 1999.
------
Attest: OptioSoftware, Inc.
By:
- -------------------------------- ------------------------------
Secretary
(Corporate Seal) Its:
------------------------------
ADDRESS WHERE INVENTORY IS LOCATED:
4800 River Green Parkway
Duluth, Georgia 30096
-4-
<PAGE>
Exhibit 10.8
GUARANTY
Date: JANUARY, 1999
Premier Lending Corporation
63 Barrett Parkway
Marietta, Georgia 30066
Gentlemen:
For value received, and in order to induce you now or hereafter TO make loans
or advances, to extend financial accommodations to, or otherwise extend
credit to OPTIC SOFTWARE, INC. (hereafter together with is successors and
assigns called "Borrower"), the undersigned hereby absolutely and
unconditionally guarantees to you the continuing performance and the full and
prompt payment of maturity of all obligations of Borrower arising out of any
such loans, advances, extension of financial accommodations, extension of
credit, and all other obligations of Borrower to you, however and whenever
incurred or evidenced, whether direct or indirect, originally to to you or
assigned to you, absolute or contingent, or due or to become due (hereafter
the "Obligations"), as such Obligations are evidenced by your records, the
accuracy of which records is hereby expressly stipulated to be conclusive
upon the undersigned; provided, however, that immediately upon the insolvency
or dissolution of Borrower or the undersigned, appointment of a receiver for
the assets of Borrower or the undersigned, filing by or against Borrower or
the undersigned of any proceeding under the Federal Bankruptcy Code, as
amended, assignment for the benefit of creditors by Borrower or the
undersigned, or breach or default by Borrower of the undersigned as to any
term of any agreement between Borrower or the undersigned and you (whether
originally to you or assigned to you), all Obligations shall be deemed to be
immediately due and payable hereunder regardless of whether matured or
unmatured in accordance with their terms at such time.
The undersigned waives notice of creation of any of the Obligations, notice of
nonpayment or default by Borrower under Any of the Obligations or any
agreement now or hereafter existing between Borrower and you, presentment,
demand, notice of dishonor, protest, and any other notices whatever. Without
limiting the generality of the foregoing, the undersigned waives notice of
and consents to any modification of any of the Obligations, any waiver, any
extension, renewal, or indulgence for any period or periods, whether or not
longer than the original period, any settlement, compromise, surrender, or
substitution or release of Borrower or any other person directly or
indirectly liable for any of the Obligations or any collateral or security
given by Borrower or any other person, and agrees that no action, nor any
failure to exercise due diligence in collection, shall release the
undersigned from any of the indebtedness than accrued or thereafter to accrue
on this agreement or any part hereof. The undersigned waives the right to
require you to take action against Borrower as provided for in O.C.G.A
section 10-7-24. The undersigned further agrees to pay to you, as attorneys'
fees, 15% of the sum of such indebtedness which shall become due to you by
reason of this agreement, in the event any claim hereunder is
<PAGE>
referred to an attorney for collection, together with all expenses incurred
in collecting the Obligations and in enforcing this agreement.
The undersigned hereby waives to the fullest extent permitted by law any and
all rights, whether at law, in equity, by agreement or otherwise, to
subrogation, indemnity, reimbursement, contribution, or any other claims
cause of action, right or remedy in favor of the undersigned against Borrower
or any other person or entity primarily, contingently, secondarily, directly
or indirectly liable on all or any part of the Obligations, or against any
collateral or other security for the Obligations, that otherwise would arise
out of or result from any payment by the undersigned to you under or pursuant
to this Guaranty, notwithstanding the manner or nature of such payment,
including but not limited to (a) direct payment by the undersigned to you,
(b) set-off by you against any liability or deposit owed by you to the
undersigned, (c) recovery by you against the undersigned or any property of the
undersigned as the result of any security interest judgment, judgment lien
or legal process, (d) application of the proceeds of any disposition of all or
any part of any collateral pledged by the undersigned to the payment of all
or any part of the Obligations, or (a) conveyance of all or any part of any
such collateral to you in satisfaction of all or any part of the Obligations.
The waivers set forth herein are intended by both the undersigned and you to
be for the benefit of Borrower, and such waivers shall be enforceable by
Borrower or any other person or entity primarily, contingently, secondarily,
directly or indirectly liable an all or any part of the Obligations, or their
respective successors or assigns, and shall be an absolute defense to any
action by the undersigned against or any other party or to any recourse
against any of their assets which arises out of or results from any payment
by the undersigned TO you under or pursuant to this Guaranty.
The undersigned's liability hereunder may be considered by you either as a
guaranty or agreement of surety, Any claim or demand may be made or suit
filed against the undersigned before taking any action with regard to any
collateral or security given to you by Borrower or any other person and
before making any demand, or filing any suit, or taking any other action
against Borrower or any other obligor on any of the Obligations and whether
or not you shall have proceeded against any other guarantor/surety thereof.
Payment of any sum or sums due to you hereunder will be made by the
undersigned immediately upon demand by you.
This agreement shall bind the undersigned, his/its heirs, legal
representatives, executors, administrators, successors and assigns, and shall
inure to you, your successors and assigns as to all Obligations arising from
transactions having their inception prior to termination; provided, however,
that termination may be _________ only by written notice by the undersigned
to you by certified mail of the intention of the undersigned to terminate this
agreement and provided further that such termination shall apply on AS to the
Obligations arising subsequent to the receipt of such notice of termination.
The undersigned waives notice of acceptance hereof and agrees that no
delay or failure on your part in the exercise of any right or remedy shall
preclude other or further exercises thereof or the exercise of any other
right or remedy. Time is of the essence of this agreement.
-2-
<PAGE>
This agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Georgia. Wherever possible each
provision of this agreement shall be interpreted in such manner as to be
affective 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 provision or the
remaining provisions of this agreement.
IN WITNESS WHEREOF, the undersigned has signed and sealed this
agreement, this _________ day of January, 1999
Witness: C. Wayne Cape
(SEAL)
----------------------------------
ACCEPTANCE
The foregoing Guaranty is accepted in Atlanta, Georgia, this _______ day
of January, 1999.
PREMIER LENDING CORPORATION
By:
-----------------------------------
Its: SENIOR VICE PRESIDENT
-3-
<PAGE>
EXHIBIT 21.1
List of Optio Software, Inc. Subsidiaries
1. Optio Software Europe, SA
2. Optio Software, LTD
3. Optio Software, Asia-Pacific
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 19, 1999, except for Note 15, as to which the date
is October 14, 1999, in the Registration Statement (Form S-1 No. 333- )
and related Prospectus of Optio Software, Inc. dated October 15, 1999.
Ernst & Young LLP
Atlanta, Georgia
October 15, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C> <C> <C>
<C>
<PERIOD-TYPE> 6-MOS 6-MOS YEAR YEAR
YEAR
<FISCAL-YEAR-END> JAN-31-2000 JAN-31-1999 JAN-31-1999 JAN-31-1998
JAN-31-1997
<PERIOD-START> FEB-01-1999 FEB-01-1998 FEB-01-1998 FEB-01-1997
FEB-01-1996
<PERIOD-END> JUL-31-1999 JUL-31-1998 JAN-31-1999 JAN-31-1998
JAN-31-1997
<CASH> 1,489,000 2,048,000 1,129,000 1,507,000
1,646,000
<SECURITIES> 314,000 122,000 372,000 74,000
64,000
<RECEIVABLES> 5,709,000 3,467,000 5,809,000 3,155,000
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<ALLOWANCES> (159,000) (108,000) (118,000) (89,000)
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<INVENTORY> 10,000 13,000 5,000 17,000
75,000
<CURRENT-ASSETS> 7,846,000 5,814,000 7,777,000 4,919,000
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<PP&E> 2,370,000 1,437,000 1,886,000 1,266,000
905,000
<DEPRECIATION> (1,203,000) (573,000) (833,000) (378,000)
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<CURRENT-LIABILITIES> (9,203,000) (5,595,000) (9,427,000) (5,072,000)
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<BONDS> 0 0 0 0
0
0 0 0 0
0
0 0 0 0
0
<COMMON> 1,310,000 704,000 1,033,000 704,000
404,000
<OTHER-SE> (585,000) 1,151,000 (1,058,000) 920,000
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<CGS> (3,976,000) (2,116,000) (5,002,000) (3,302,000)
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<TOTAL-COSTS> (13,215,000) (7,782,000) (18,925,000) (13,446,000)
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<OTHER-EXPENSES> (7,000) 6,000 (46,000) 8,000
0
<LOSS-PROVISION> (383,000) (91,000) (227,000) (373,000)
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<INTEREST-EXPENSE> (8,000) 2,000 (153,000) (45,000)
29,000
<INCOME-PRETAX> 1,327,000 346,000 415,000 86,000
723,000
<INCOME-TAX> (576,000) (83,000) (99,000) (64,000)
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419,000
<DISCONTINUED> 0 0 0 0
0
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<NET-INCOME> 751,000 763,000 316,000 22,000
419,000
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0.03
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